The (Moronic) Thundering Herd
Posted by hyperpat on January 22, 2008
The herd mentality is alive and well. Seems like everyone is stampeding to sell their stocks today. Even as the Fed cuts interest rates by three-quarters of a point, far more than had already been priced into the market. And all the Presidential candidates are talking about some sort of economic stimulus plan.
Now the stock market is supposed to be forward looking, and a drop like today’s seems to be signaling RECESSION. But is that really in the cards? Sure, there’s some pain on the inflation front, mainly due to the steep rise in oil prices last year, and there’s some more pain on the home mortgage front, which can reasonably be expected to lower consumer economic activity, to at least some degree. But what people seem to be forgetting is that most of this pain has already been priced into the market, and most companies outside of the mortgage lending business are reporting very reasonable earnings. Today’s steep sell-off, with the Dow down over 400 and the NASDAQ over a 100, is not justified by the numbers, but is merely a reflection of the lemming-style mentality that sometimes seems to infect trader’s minds.
So what should you do? Don’t be another lemming. Buy! Now’s the time! Use that old adage of ‘buy low, sell high’ to your advantage. This opportunity won’t last long – just while I’ve been writing this post, the DOW has risen 200 points and the NASDAQ 50. Sure, it’s a little scary going against the tide, but the big prizes never go to chickens.