26
2008
Swaying the Market
Want to affect the market for a day? It’s easy, just report something going on.
Becoming more and more interested in the market, I’ve been watching it on a daily basis. In general, I’ve found that most stocks move up and down together. Clearly a lot more can be written on what’s wrong with that statement (because of stocks that follow the economic cycle and stocks that are independent of economic cycles, for example), but we can agree that there are always trends that the majority of stocks follow on a given day.
But what causes these short-term trends? In short, reports.
Today is probably not the best day to use as an example because there were several “conflicting” reports (meaning some positive, some negative), but let’s take a look at one of them.
There was a report today that said that consumer confidence was been better-than-expected in July. (The ‘expecting’ is done by Wall Street analysts.) Alright, so it’s one of hundreds of reports that have come out in the past few months; it can’t single-handedly change what traders think of the economy and the value of stocks, right? Wrong.
Traders are the most pendant group of people I have ever seen. It’s like the state of the economy and predicting its future is based on only the most recent report issued. Good report, stocks go up; bad report, stocks go down.
What about putting it in perspective? What about looking at the general trend of the reports and anticipating what is going to happen with the economy? That just doesn’t happen.
For some reason, whenever I get worked up about this, I picture a fat guy sitting in his chair with a stained wife-beater shirt eating a turkey leg. He is watching the news and he hears a positive report about consumer spending; he picks up his cell phone, calls someone and just says “buy buy buy”. Then, two minutes later, he hears a negative report about the value of the dollar on the news, picks up his phone, and says “sell sell sell”.
I just don’t get it. What am I missing?
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