It really wasn't a surprise when Wall Street didn't have a big rally after the Paulson plan passed the House earlier today. Wall Street had moved on to the next trading opportunity.
In one of the best-ever Washington-related examples of the common Wall Street saying of "Buy on the rumor, sell on the fact," by the time the legislation was passed, traders had pretty much assumed that it would be approved and were focussing on other issues. Many of the people who had been the bill's most ardent supporters the past two weeks started to talk about what else would be needed, how this bill only dealt with part of the problem, other economic issues.
Traders had traded early in the day on the possibility that the bill would be adopted. When the possibility was high earlier in the day, the Dow was up. Once the possibility was over, that is, when the bill actually was adopted, the Dow moved down and closed lower.
The market will continue to go lower
There is too much uncertainty.
There is a growing consensus that the EESA is too little, too late.
But for me, the biggest reason to stay away from equities markets is the continuing lack of regulation and transparency (naked shorting still allowed, uptick rule has not been reinstated as it should be, and important accounting rules could be changed at a moment's notice to upset the apple cart again).
The game has been rigged against most small investors for years, due to lack of oversight (SEC allowing hedge funds to run over everybody so the rich friends of this administration could get richer by robbing hard-working, ethical, trusting Americans who dutifully put their money into 401Ks every month), and -- until that changes -- confidence cannot be restored in our markets.
Where to Invest?
So where do you put your hard earned money, Minn. Mom?
Argh. Where to put money.
I went to cash 5 weeks ago. That single act has saved us from large losses.
At that time I moved money around to stay under FDIC limits (now banking at 7 different institutions) -- CDs. The one account I can't control completely is husband's 401K, as it is stuck with his employer and they have limited investment directions.
I won't be back in equities markets for a long time. Even when this turns around it will be in fits and starts, and I expect we'll continue to see extreme volatility.
I've lost all trust in equities . . . it began to erode with changes made a year ago (Cox removed uptick rule), and the more analytical members of my investment club immediately saw the damage being done to markets . . . and this of course came with the growing subprime problem and continued naked shorting abuses that SEC refused to police (and still they don't stop it).
The irony is that the deregulation and lack of oversight which the street wanted so badly (and got) was what ultimately killed them. Kind of a "careful what you wish for" scenario.
Now the government has to restore confidence in these markets. Until they make the necessary regulatory changes I won't be back.
Most damaging SEC dereg was removal of leverage limits
http://www.nytimes.com/interactive/2008/09/28/business/20080928-SEC-mult...
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