Posted by
Andrews on Tuesday, December 02, 2008 9:29:57 AM
So, apparently people think if economic growth is -0.1% they should sell all their stocks at bargain basement prices, but if it is 0.01%, they are fine going back into the market? How else to explain the sudden drop in the Dow? I know the magic word "recession" makes everyone panic, but why on earth does everyone suddenly shift into the "buy high, sell low" mode and surrender any earnings they may have had in the market?
Ok, if you have really speculative stock, for instance if you sank everything in Alberta tar sand prospecting, you may want to shift that money around, but if you have relatively sound, diversified investments, why on earth would a tick of even half a percent in GDP growth cause you to decide to take a serious loss rather than ride out the storm? It isn't as if this lending "crisis" is going to completely destroy our economy and toss us back into the middle ages (unless Obama pulls a serious FDR in the next two years before we can vote out his supporters in congress). After all, FDR had over a decade to destroy the economy, was given free reign after his court packing threat and we STILL recovered. Why on earth would you suddenly accept such a massive loss with no prospect of recovering even a small part of it?
I know there are those who are hiding gold cons and ammunition under their beds, but they were unlikely to have any investments anyway, so the "the end is nigh, thanks to the NAU" crowd is not to blame. Nor do I think institutional investors are. There may be soem institutional selling to take a loss for tax purposes while the market is down, but generally institutional types wait until closer to the end of the quarter. So, really, it seems that once again, the downward pressure is entirely from inexperienced investors who reentered the market when things turned up (or those who didn't panic sell everything last time) and who are reacting to media scare stories and the word "recession".
Then again, I am receiving dividend checks around this time of year, so maybe a depressed market isn't so bad.
POSTSCRIPT
By the way, will Bush get retroactive credit for keeping the economy out of recession if they adjust Q3 numbers upward in a few months(as adjustment almost always seem to be upward due to the way the numbers are created)? Somehow I doubt it.