dan@pyramid.UUCP (Danial Carl Sobotta) (03/26/86)
Jack B. Turner states: >1- Friday's sharp drop was due to arbitrage selling related to the >expiration of stock and stock futures options. It had nothing to do >with the value of any stock, perceived or real, present or future. >I have heard several experts say that prices recover/return to >normal very soon after a sell or buy program is exercised. Not always! Look at last Friday. The market did NOT recover anywhere near 40 points on Monday. In the past, this has been true quite a bit. Besides, there is no such thing as "normal" for a stock price!!!!!!! >2- When we consider the effect of perceived value on the price of stock >keep in mind that *the* buyer of stock is a professional-- usually >the manager of a retirement fund, manager of a mutual fund or >someone of similar training and experience. Thus, it is reasonable >to assume that s(he) has full control of emotions! The majority of stock >is purchased in blocks of 10,000 or more shares-- probably not >triggered by deep emotions. Oh boy, do I disagree (sorry)! Most fund managers have their jobs on the line every minute of every day. They typically are well trained in the textbook theories of the market, but unfortunately, tend to royally screw up in the realities of the market. I mean, is it emotionless trading that makes these managers all jump on the bandwagon at the same time because they are AFRAID of missing the next big move? Like they say, FEAR and GREED rule all markets: always has and always will :-) >3- There can be instantaneous events that could easily change the >present value of a stock or the entire stock market. Such events >might include Paul Volker's resignation, heating up of hostilities >in the Middle East that involves us, or a sharp drop in oil prices ;-) I agree that some events do affect the 'value' of many markets, but I contend that most events have NOTHING to do with any market. Furthermore, there are many factors/events that do affect 'value', but don't seem to change prices. As I have posted before, just seeing people's reactions to a news item vary (like stocks rising then falling on the SAME news) makes me strongly question if the news affects 'value' (no, actually people's reactions (i.e. FEAR and GREED) affect prices). Indeed, usually what happens is the market will move, and then people will search for some news item that 'must' have caused it! It's a natural human desire to make sense out of chaos ... -- 'Out of the inkwell comes Bozo the Clown ...' DISCLAIMER: These opinions are neither mine nor my C-compiler's sun!pyramid!dan