The Bill to Rob Peter to Pay Paul's Mortgage
10-02-2008, 08:07 AM
#31
Administrator
^ To nitpick further it didn't gain back 66% of what it lost. It went down 8% and then went up 4%. The S&P closed Friday at 1215, closed Monday at 1129 and Tuesday at 1164, a net decline of 51 points or 4% from Friday's close.
It's very difficult to draw a direct relationship. I think the market reacts more to uncertainty than outcome. The market fell Monday from the opening bell onwards not because of the result of the vote but because the vote was going on at all. When you take an event like a $700B capital injection which may or may not happen what you get are people fleeing the scene, taking their money out of harms way.
Market volatility is considered "fear" but in reality it's uncertainty and the price people are willing to pay for insurance (premiums paid for options to hedge positions against loss). The VIX index measures this volatility and it topped 40% on Monday and will probably do the same today, not because of the outcome of the vote but because of the uncertainty such a vote creates.
It's risk management not public opinion.
It's very difficult to draw a direct relationship. I think the market reacts more to uncertainty than outcome. The market fell Monday from the opening bell onwards not because of the result of the vote but because the vote was going on at all. When you take an event like a $700B capital injection which may or may not happen what you get are people fleeing the scene, taking their money out of harms way.
Market volatility is considered "fear" but in reality it's uncertainty and the price people are willing to pay for insurance (premiums paid for options to hedge positions against loss). The VIX index measures this volatility and it topped 40% on Monday and will probably do the same today, not because of the outcome of the vote but because of the uncertainty such a vote creates.
It's risk management not public opinion.
10-03-2008, 07:30 AM
#32
Originally Posted by Elistan,Oct 2 2008, 09:35 AM
Just to nitpick, I find it interesting that this statistic is used a lot to justify why voting the bailout bill down was a bad idea. And yet, the next day, the stock market gained back 2/3 of what it lost. This morning, after the Senate passed their version, the market is going back down again - should we now conclude the bill is a bad idea? Debating the merits of the $700 billion package is great, but I think using stock market movement in that debate is just a red herring.
10-03-2008, 08:36 AM
#33
Registered User
To copy Colbert, the truth I feel in my gut says that the loss I will see in my 401k as a result of the bill PASSING will, ultimately, be greater than it being voted down. Not necessarily over a one day or one week period, rather for several years... 
10-03-2008, 09:44 PM
#34
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[QUOTE=tritium_pie,Oct 1 2008, 03:55 PM] sahtt, respectfully-- they don't need to create some sort of "exchange"... they already did a darn fine job of securitizing these loans into CDOs and selling them around the world.
10-06-2008, 07:45 AM
#37
Community Organizer
Today looks like another stellar day on Fail St. 
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