Talk about a roller coaster ride. The market had its single largest point gain yesterday. It was also the 5th largest gain on a percentage basis. Personally, I don’t trust it.
Do you know when the largest percentage gain was? 1933. Yep, smack dab in the middle of the great depression. In fact, eight of the top 10 all time best days occurred during the depression. Why?
Because emotion runs amok during crisis. People stop investing based on fundamentals like earnings and become traders running withemotion and momentum. It’s like a party barge (bear with me here). One time I was on a lake on one of those 12 person pontoon-boat things and it was full. At one point after a few drinks, people had migrated toward one side and all of a sudden the damn thing seemed in danger of tipping over. People panicked and every one of us rushed to the other side. Well of course now it shifted to tipping on the other side, and it went even further down since everyone was rushing as fast as they could to be safe. It wasn’t until a few stopped in the middle and grabbed others that the boat finally levelled off.
And that pretty much sums up what’s happening in the market. People are rushing from sell to buy and back to sell again. And each index is going up and down like a party barge full of drunken, panicked people.
So am I glad the market bounced so strongly? Sure I am. But do I trust that it’s now going to level off? No way.
Nice writing style. Looking forward to reading more from you.
Chris Moran
That is interesting and good to know. I really dislike the stock market. the fact it is based on people’s whims, rather than actual performance does not sit well with me.
[…] 15, 2008 by digitalseer As I said two days ago, the one-day, record setting bounce in the stock market was not to be trusted. Two days later, it […]