"Stocks plunge on fears of global turmoil." So says a banner New York TImes headline on its web site.
Um, here's an idea for the world's stock markets. Why don't you hold off on crashing 4-5% in a single day, like you did today, until there really is global turmoil?
Because you're producing the global turmoil that you're afraid of when the S&P 500 drops 4.8%, and other markets act similarly.
So tomorrow investors will be even more afraid of the global turmoil that their fear today helped create, likely leading to more maket declines.
Whatever economist came up with the notion of "rational actors"... please seek another profession.
Equities are purchased and sold on the basis of anticipated future value. If future turmoil is anticipated then it will be expressed by turmoil in the markets in the present.
Posted by: tucson | August 12, 2011 at 02:21 PM