I have a small personal stock account. I started buying individual stocks in May, probably at the highest point that the Dow hit all year. Such is my luck. I watched my stocks go up and down for a while, and then down, down, down. The last few weeks have been brutal. I picked a bad time to get involved, but it taught me a thing or two, and I have my own theory about why the market is where it is.
I think part of the cause of this credit crisis was market manipulation. I don’t entirely understand how the business world works (yet!) but it seems to me that if you get enough people to predict the collapse of a company, it becomes a self-fulfilling prophecy. First come the rumors, followed by the drop in stock prices, followed by investigations which reveal some legitimate problems, which cause the stock to sink further, which leads to downgrades, which leads to a need for the company to raise capital, which pretty much spells the end. There is a point at which a collapse becomes inevitable, but it didn’t start that way.
The companies that failed were like wounded animals. Their wounds were ugly, but if they could have limped back to their dens to rest and recover, they might have survived. They weren’t given time to heal, though, because the market was full of predators. The predators smelled the weakness and they pounced. There is always money to be made in driving stocks down, buying discounted assets from ailing companies, and riding the stocks back up (if the companies survive).
Even the predators must have known that killing too many companies meant killing the entire market, but they didn’t realize the power of their collective greed, nor would any of them concede a single penny, and that meant playing cutthroat all the way to the end. There are now throats cut everywhere, and this little piggy is wondering if she should have stayed home.