Friday, September 9, 2011
Greece is looking more and more like it will have to default (which they should have done this summer or earlier) and Germany & other nations are becoming more and more restricted by their courts and legislative bodies to continue giving their national treasure to prop up Greece and other economically collapsing nations. The market also reacted to a board member of the ECB announcing his resignation, showing clear cut differences on how to deal with all the economic problems facing the EU.
For those who don't follow Europe at all, this is 'news'. To professional investors and market junkies, this should Not be, and thus the market reaction is quite exaggerated. But then again I've said often, the market is not based on any reality.
Among the many articles I've read today, one sentence in one article stuck out at me the most, irritating me much like a splinter in the finger: "The Dow Jones Industrial Average plunged sharply to close around the psychologically-important 11,000 level..." (CNBC)
In the current Federal Reserve manipulated con-game which is the stock market, 11k is as psychologically important a level as the ability of a person to count to 10 or tie one's shoes. The number 11,000 has no real meaning to anyone who is involved in the market. Case in point-- In 3 months, between June 9th and today, September 9th, the Dow has dropped below the "magic" 11k mark on Five occasions, and if the number was so "important", it wouldn't have spiked up soon after each time the Dow closed under 11k.
I want to close this posting with a comparison that while not exact, I find is close enough to make the point. On August 29, 2008, the Dow closed at 11,543. Three years later, on August 29, 2011, it closed at 11,539.
On September 8, 2008 (this is just before Lehman Bros collapsed), the Dow closed at 11,510. The following day, the 9th, the Dow dropped -280 pts to close at 11,230. Yesterday, September 8, the Dow closed at 11,295, and today, the 9th, the Dow as we said earlier, dropped -303 pts to close at 10,992.
And while the numbers are not perfectly exact, you can see the pattern between 2008 and 2011. If the patterns hold up as I feel they will, this is going to be a very volatile autumn in the market and a Bad time to be invested. But as always, it is your decision-- A&G does not financially benefit either way.
Just never say no one warned you.
Posted by Susquehanna at Friday, September 09, 2011