Buy the Rumor, Sell the News (a market note for political folks)

[Kurt_and_Hunter]

In case anyone who doesn't follow the market closely most of the time is puzzled about the negative market action today...

There is a Wall Street maxim "Buy the rumor, sell the news." The passage of the bill was mostly priced into the market last week. They don't wait for things to happen... they try to anticipate. So the eventual passage of the bill is not a market moving event in and of itself. (Non-passage would be a surprise, and that would be a once-in-a-lifetime market mover in the negative.)

And there is no reason to expect things in the markets to be good going forward. The bill is like chemotherapy or amputating a rotting limb. (Neither one of which makes the patient feel particularly good.)

The rescue plan will pass AND credit will remain tight AND the market will drift downward. The bill is only intended to prevent credit from disappearing altogether, and to prevent the market from crashing.

Even the best case scenario is pretty grim.

[scheming daemons]

1. Exactly.... Bailout = bad (recession).... No Bailout = REALLY bad (depression)

[blondeatlast]

2. That last sentence needs to be shouted from the rooftops. There's no magic bullet here;

the infection just has to be stopped in the RIGHT arm before it spreads through the body and the RIGHT arm will likely have to go to do it.

[msallied]

4. Ha... or more aptly, the RIGHT arm. ;)

[blondeatlast]

5. Good point--I'll fix it! nt

[msallied]

3. Great point. And I am recommending this post.

People need to realize that no one believes this bailout is going to make it all better. It's making a serious problem a little less serious. Your analogy of cutting off a rotting limb is very apt.

[Teaser]

6. Recs for sanity

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[Kurt_and_Hunter]

7. Much appreciated from you. thanks