So this morning, for the fourth day in a row, The Wall Street Journal spreads the collapse of major financial institutions across six columns — which, to a guy who used to be a front-page editor, is more alarming than any numbers you might throw at me.
And as if that weren’t enough, a one-column headline below and on the right-hand-side of the page, said "Worst Loss Since ’30s, With No End Yet in Sight." What a way to start the day, huh?
But now I go to the WSJ site and see a grinning trader (one Theodore Weisberg, above), and the headline "Stocks Soar; Banks Lead the Way."
OK, that’s nice. I don’t know why this is happening, and I don’t think it reverses all the bad news, but it’s nice. I’ll resist trying to analyze it. I see it had something to do with an action by the Fed and other central banks, which tempts me react like a history major and say something some thing like, "Nothing like a strong central bank — take that, you Jeffersonians!" But I won’t. I’m aware of how little I actually understand….
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I’m the last person to give any sort of advice on the stock market and the fear and greed of Wall Street, but I’d not be surprised to learn that today’s late bump in the stock market was caused in part by news of Warren Buffet’s buying spree, evidence of faith in specific businesses. His deal to purchase Constellation was announced today.
The coordinated effort by the banks to inject funds is essential but can easily be overcome by herd instincts to charge off the nearest cliff. That won’t staunch the flight of capital to the safest possible harbor. Heck, the interest rate on three-month T-bills came durn close to zero yesterday! Folks are willing to trade interest for security: shades of late 20th Japan.
But when folks see Warren, the dean of value investors with wads of cash in his pockets, opening his change purse to buy some industrial outfits, they gotta figure that he knows something that they don’t.
I’ve happened to follow Constellation merely because it’s a big energy generator with coal and nuclear, and it made headlines when its attempted merger with Florida Light and Power failed a couple of years ago. And it operates in Maryland, not the friendliest of states to business, but one where rates have recently been freed to rise to market levels.
Heck, Warren may save the economy and Marylanders in one fell swoop.
Mr. Buffett could have that effect. Not me, though. If anybody who knew my record with investments had seen ME buying stock that would have been it; they’d have to shut down the NYSE.
But Warren Buffett — yeah, maybe. Sort of like seeing Randolph and Mortimer Duke cornering the market on FCOJ, everybody wants to get in on the action.
Mike, you could be right but I’m going with a bit less complicated answer to yesterday’s late day rally. People were just shopping for bargains. After all the DOW is essentially the same as it was 9 years ago and investors may just believe it’s about to bottom out. Let’s see what happends today.
bud –
The fact that folks were shopping for bargains meant that they believed that there were undervalued companies out there. They had enough faith to forego gold and other commodities to spend their cash to purchase part of industrial and other enterprises.
That’s a marked turnaround that kept the economy away from the cliff. All was not lost as investors realized that there are profitable, productive enterprises out there that have goods and services that folks are willing to buy.
If greed and fear do fuel Wall Street, confidence pushed fear away. I write Friday after the markets closed on record highs.
I have high hopes that adults will step up to establish reasonable rules, dispose of disastrous regulations, and allow the American experiment to run rampant anew.