LOL. I’ve been hearing that since the market was at 10,000. It is as much bullshit as anything.
Fear. Ben Stein is arguing that it’s a dramatic overreaction (the amount that was in the subprime mortgages is infinitesmal compared to the big picture) and Jim Cramer is arguing that Bernanke is screwing stuff up royally (raise rates. Greenspan did it 17 times and this is an instanec in which the raising of the rates would solve some big problems) and we’re headed for some bad things.
Honestly, I don’t know what to make of it. The market is up for the year, things aren’t too bad (or so it seems to us, the public). Behind closed doors, I get the feeling that there’s some panic going on. There are too many cracks in the facade (Bear Stearns, the French bank, all that cash going into the US markey from the Fed, and Goldman coming out saying exactly what needed to be said to be a calming influence) for this to be “nothing”. To me, the debate is “how much of an impact does/will this have?”
Ignoring the debate over whether it was a crash…
The market has been (unexpectedly) high for a few months. When that happens, everyone wants to stay in and get the ups but bail as soon as there is a turn down.
I am reminded of a herd of zebras all nervously enjoying a drink but all looking around ready to bolt if there is any sign of a predator.
When the collective anxiety is nearly unanimous, you get this kind of volatility, and because it is so cheap to trade stocks and information dispersion is so instantaneous and ubiquitous, I think the market is going to behave like this from here on in. It is a very different market from the days when news was on paper, stocks cost several per cent to swap out a position, and only pros traded online.
This specific bump was triggered by anxiety that there won’t be enough capital for companies to work with–a downstream effect of shaky loans. This creates a ripple effect in the daily sharing of all capital in the financial markets.
Whatever the root cause, the proximate behaviour–everyone selling all at once–is caused by a collective nervousness; everyone in the market is up nicely, worried that they are artificially up, and ready to bail at the first sniff of danger. And we all get the same sniff at once. People like me who have their sell stop losses set to within a couple percent of the current price because they are nervous nellies are pretty common, I’d say.
Well, by “plays” I meant “invests.” He’s always watching the reports and is, I’m sure, always buying and selling, but on what basis I don’t know.
I do know that early in life he had a gambling problem. Then he became a stockbroker – the ideal job; he got to gamble with other people’s money!
In the interest of truth, when I got home from work, I checked my portfolio. As of close of business today, I am down 4.3 percent since last week. I am down a total of 5.4 percent from the 21st of July. (a relative high point for my IRA) I am up only 2.9 percent for the year, which genuinely sucks as an investment.
Over the last six years, I have a total growth of 63.9 percent, which is an annualized rate of 8.58 percent. Most of that growth came from a single small cap stock in the first two years (long since eaten up by big boys, I sold after doubling my investment, could have made a bit more, but I am not a big risk taker.) Also a good portion of the remaining profit came from dividends paid.
While I am certainly less than pleased, it still doesn’t amount to a crash. It could be bad, but selling a whole lot now doesn’t seem to be a wise choice to me.
Tris