Market 08/18 – 08/22

The rest of the week the market went sideways while volume was dropping. Friday ran up, but on low volume. No big deal.

chart 3

Wednesday:

The market continued in a downtrend, even though it ended with a gain it is on the edge of a downtrend. The volume eased however, which would be a good sign. I cannot say whether the market would continue down or turns back up.

Tuesday:

On Tuesday the market probably lost the steam to continue on its rally. The volume rose when compared to previous day and the index dropped below its support, see the chart. If the market won’t turn the next coming days, which I do not believe it will, the rally will be over. It definitely means no new positions.

Funny thing is that Fannie Mae successfully issued the new emission of bonds, but the market is freaking out over those firms (Fannie Mae & Freddie Mac). Who bought those bonds though? The same investors who are selling their stocks?

The stocks in my portfolio hold well, so I am going to hold them.

Monday:

So Monday’s trading was as I expected. Actually it went the same way as past couple months. The Street was concerned over the future of Freddie Mac and Fannie Mae. I am concerned and surprised how the Street can be concerned over those banks. We all know they (financial institutions, not only these two banks) screwed the financial sector because they didn’t respect warnings and concerns of their own people and rules. I don’t know what people responsible for banks’ businesses thought they were doing, but I consider this as their fault and they should be called for full responsibility. And FED shouldn’t bail them. I have read that Freddie Mac’s CEO Richard F. Syron ignored internal warnings of his risk management chief and explained it as “he had to balance the demands of shareholders and Congress.” (The New York Times, August 5, 2008). I don’t care who bribed him so he had to balance someone else’s demands. He knew that his “balancing” was driving the company into the financial hell. He should act to protect the firm, not others demands. If I do the same in my own business, I would be fully responsible for my own acting and if my own business bankrupts, it will be fully my own problem. How come that these guys are now calling for bailout? Who would bailout a common entrepreneur for his own errors? Those banks deserve bankruptcy, not bailout.

I have heard the opinion that letting banks going bankrupt would have a negative impact to the entire banking system of the country. Maybe. However take a look at emerging markets and post-communist countries. They went through many bankruptcies in 90’s and survived. I think, this economy would survive couple irresponsible bankrupted bankers too.

Well, however the market reacts on these news and concerns about financial companies like a hooker who just found out she is pregnant, we have to deal with this volatility.





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