An 11% Swing is Not A Good Thing

My prior article was about how this market's downfall is going to be quite damaging, yet guaranteed to be temporary.

I didn't mean for it to cause an 11.1% increase in the Dow. I'm sorry.

This ridiculously volatile upswing concerns me quite a bit. Any 11% swing demands the markets to be halted - in either direction. If it were up to me, I would've pulled the circuit breaker on the exchange because an upswing like this for no reason will end up in a similar downturn at some point in the next thirty trading sessions. I am not a trader - I look at underlying fundamentals and buy good companies with good balance sheets and good cash flow selling at good prices. I am an investor. I also look at the underlying fundamentals of the broader industry and the broader economy. And what I'm seeing is a gross overreaction to almost no earth shattering news. Across the globe, governments are bailing out the bullet ridden financial sector.

This is good news for the short term (but bad in the long term - see my post here). The effects of the US bailout haven't even surfaced yet - and knee-jerking coffee-drinking gamblers/traders have bid up the price of the markets for no reason. The system is still flawed - and we have no reason to bid up prices this much.

With that said - we are/were undervalued compared to the last ten years or so. So an increase was obviously in order within time, as I explained in my last article. But such volatility with no reason does concern me quite a bit. I'm hearing so-called industry experts talk about how "we are out of murky waters." Based on what? What has fundamentally changed in the last three days beyond celebrating Columbus Day?

Good old Columbus, by the way, was a staggering drunkard who did such a poor job that his own shipmates had to throw him into the on-board jails to control him. This guy did not know the meaning of control! He then missed the boat on the way back to Spain, also in a drunken stupor. Upon his return several months later, he was again thrown in prison again for all the crimes and negligence he committed during that trip. So I don't think Columbus Day was a reason to bid up the prices over 900 points.

So what do we do? Turn OFF the TV. If you can't - then hit the mute button. It's actually quite entertaining to watch a bunch of overpaid monkeys on CNBC make gestures without hearing their banter. Once you turn off the TV, pick up an annual report, or perhaps an economic study of the US or any other country. Use your intelligence, and pick up a good company at a good price, and ignore the day trading Columbus fans.