Wednesday, 15 October 2008

What happened to the FTSE rally?

Financial markets have two great phrases to describe the recent FTSE rally. The first is a dead cat bounce. Well, the cat bounced, and it is now heading back to earth.

My favourite description is a sucker rally. The market slides, and naive investors think it is oversold. They jump in, allowing others to jump out by selling on the upswing.

The FTSE is down about 7 percent today. The market is down 27 percent since September 2nd.

6 comments:

Anonymous said...

suckers.

mike said...

It’s been a perfect couple of weeks for those speculators who just made money out of those suckers by selling at the top of the bounce. The trend will be downwards whilst these sorts of powerful speculators are around.

Nick von Mises said...

Now, I'm not one to bang on about the same thing over and over and over again but....

... this is eminently predictable because public sentiment had turned, because crack up booms always collapse, and because every credit crunch in history as been accompanied by massive government bailouts and monetary loosening and it always fails.

That said, don't confuse the stock market being repriced downwards (and cash upwards as the other side of the trade) with the banks still being in trouble. Their shares go down because of the 1-2 of no dividends, a huge decline in their profitable business lines, and suddenly having all these Government preference shares to pay off at a punitive 10% rate.

Even without further writedowns that hurts ordinary shares. Doesn't mean jacksh**t for them FAILING though. The equity window had long since slammed shut.

aSteve said...

The markets for equities are definitely in a lot of trouble. The banks are now able to invest in profitable ventures, but they can't identify them. Sentiment is destroyed and it's a long way down, still.

With the Dow down 7.9% and the S&P down 9%, this has wiped out the euphoric bounce on the recapitalisation news. The Nikkei is down ~10% too, so expect amusement tomorrow.

RenterGirl said...

The more I read about the psuedo-scientific machinations of the Stock Market, the more I resent the control it has over my life.

Nick von Mises said...

The stock market would be fine if the government hadn't been so determined to pump it up over the past 20 years.