Wednesday, August 29, 2007

See I Was Right

Yesterday's sell-off was overdone and just plain odd. The market was down over 280 points based on unsurprising news, which was plain dumb. You saw the offshoot of the stupidity today when the market gained over 247 points. And normalcy has returned right? Uh, no. Why?

1) The market is jittery right now. Bears are taking any piece of bad news and magnifying it to doomsday proportions. Any good news and the bulls are off and running. Everyday is a different story.

2) We are at the summer doldrums for the exchanges. Low trading volumes can cause violent swings in the market.

3) The future is very murky. Do you want to predict how Q3 GDP will look, or Q4 for that matter? How will the retailers fair this holiday season? When will we see the bottom of the housing market? Any guess. Yours is as good as any of the experts. Really, it is.

4) What on earth is the Fed really going to do? Lower rates to avoid possible recession? Keep them steady to fight inflation? Who knows? I don't think anyone really knows until it happens.

These are just 4 reasons we are seeing such volatility in the markets. But definitely look for more days just like the past two: down one day to come up the next.

And just for something stupid. Autonation CEO Mike Jackson calls for the Fed to aggressively cut the Federal Funds rate by 2% to avoid recession. First, can Michael Jackson really be a CEO? Secondly, how did he figure that the Fed would need to cut a full 2% to avoid recession? Seems a bit much to me. I had heard as much as 100 basis points but 200bp? I know car sales are down. But is it the rates/economy or dealerships easing back on all the incentives that were out there over the last few years? I'm guessing a combination of the two but 2% is ridiculous. Car makers need to focus on making cars that are more budget friendly in general (payment, fuel, and insurance). CEO Michael Jackson, please join Angelo Mozilo in the, "Please don't speak anymore this year category". Thanks.

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