Tuesday, September 9, 2008

How "Major" Events Affect the Stock Market

Big news over the weekend- The government is taking over Freddie Mac and Fannie Mae. I know it's Tuesday, so why is this breaking news?

It's to prove a point that the stock market is the biggest joke in the world. On Monday morning, when the markets opened, this news affected the market in such a wonderful way. Particularly, the financial companies were boosted by this news. Citibank went from its Friday close of $19 up to $20.50 before settling in a tad lower. BofA went from $32ish to $35ish. Wachovia went from $16.80 to $19.50ish. And all it took was for our government to bail out the biggest backers of mortgages in our country at our expense as taxpayers. What a confidence booster!

So what's the story today? All three of these stocks I mentioned are now BELOW their Friday close. Did you hear me? BELOW their Friday close!

What's the excuse? Oh, Lehman Brothers is in trouble. So the entire sector takes a crap because of this? Let me get this straight. Our goverment privatizes two of the biggest mortgage backers in the country and it's a good thing. One single financial company has bad news and the effect is worse than the benefit of the "good" news. Yeah, that makes sense.

So what will it take for the market to continue to rise? Does the goverment need to privatize a few companies a day? Would that doe the trick?

In a few days the market will rally because of prospective peace and a few days later it will tank because of unease about peace. A few days later, the market will rise due to a hurricane fading away. A week later the market will fall because of another hurricane fading away.

No comments: