Feb

13

 Despite the fact we're in the market "that doesn't seem to go down" the issue remains whether or how new affects markets. There are several alternatives: 1. Positive news pushes markets up. and vice verse. 2. News does not affect markets. 3. The reaction to the news is usually a) right, or b) wrong. My theory is 3(b), the reaction tends to be wrong. Last week news of Egypt occurred at a time when the markets were pushing to new recent highs. The market has been rather new hungry and reactive since the massive government meddling with the financial system and probably rightly so. But I am not sure why the news from Egypt is good for equities in the US. Sure its a bell for freedom and all, but it brings much uncertainty to many markets.

The second theory is the Teenage Ninja Turtle theory such that when I go out of town for a few days the market drops. Do you remember the classic scene "What if, What if??". It did last month. I'll be out of town later this week. What if?

Rocky Humbert writes:

It's not new information per se to which markets may react. Rather, it's new information versus current perception(s) that may cause prices to move. This phenomenon operates at many different levels– including the purely psychological– which can then cause feedback effects which amplify the change.

Since Mr. Sogi chose the "news" from Egypt to elucidate his point, it seems apt to reference the stock "Blue Nile" (ticker=NILE) Despite the "good" news from its namesake, this stock dropped about 12% on Friday because of disappointing quarterly results. Who said that a rising tide (or in this case, "river"), lifts all boats???


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