Will this market bounce right back as soon as the bailout is approved?
Best Answer
450 points
SallyG answered 9 months ago …
The so called "rebound" in the stockmarket today, IMHO, is the result of some people taking advantage of prices lower than those of yesterday. Remember, the stock market temporarily was down 770 yesterday, but the ACTUAL DROP OF THE DAY (not reported anywhere that I looked except in a closing bell update on ABC broadcast television in my local NY station, WABC), was 560 out of 11,000. Yesterday's drop didn't even make it into the top 10 in history BY PERCENTAGE, whereas three days between Oct. 28, 1929 and Nov. 6, 1929 did (each at over 11%; if they were cumulative, they totalled over 35%). that would be the equivalent of a 3,508 drop in the next 10 days. The fear-mongering is outpacing the disaster to some extent, IMHO, but we have to shore up fundamentals and regulate trading in derivatives to make the system stable.
Derivate trading is now totally unregulated (thanks to the lobbying of investment banks that we are now discussing pulling out of the fire they created), virtually a "Wild West" in the negative sense. I'd like to see them traded on a new, regulated exchange where their price fluctuations will not affect other investments, and trades restricted to those who hold the underlying securities insured by the derivatives.
The answer to your question: I don't know. I don't care. I'm interested in where we are a month, a year, 10 years, 50 years from now--and I'm no spring chicken. Short-term pain is real, no question, and can have long-term effects. It's how to minimize the long-term effects on those who weren't the risk-takers who endangered the system that interests me, and making sure that those who misused the system and committed fraud are barred from doing so again.
Answers
787 points
DaveDiggz answered 9 months ago …
Definitely, Chuck. This market is in "overreaction" mode. This bailout will obviously get approved, no question. It's only a matter of "when". So as soon as it's announced, voted on and approved, you can bet that this market will take a turn for the better. I'd love to be able to time it perfectly, but today has proven that that will certainly be an impossible task. Better to sit this one out on the sidelines.
Read more from DaveDiggz flag as abuse great answer
3680 points
MNSL answered 9 months ago …
I believed a restructured bailout plan would eventually get the green light from the US Congress. Most probably, Rescue plan will pass on Thursday.
Markets will bounce back. There will be lifetime opportunity in some sectors. I think investors will chase different sectors in addition to some neglected sectors.now.
Current chaos will benefit some banks including local and regional banks, which are not exposure to credit crunch, commodity and real estate Similarity some industrial companies will benefit. Airlines also will benefit.
It is better to invest in companies, banks, sectors that going to benefit most in current market chaos through out the world. Lower oil below $60 will benefit many sectors and eventually there will be recovery in the financial sector toward next financial year.
Investors who invested in the recession proof stocks also will benefit most and they will outperform market in the next 12 months and beyond.
1902 points
alanj answered 9 months ago …
There will be a temporary bounce until the excitement wears off, then the market will continue down for a while. The financial problem didn't happen overnight and any kind of rescue plan is not going to fix the problem overnight. It's going to take several months for any kind of fix to take hold and for this market to find a bottom. It's the financial markets that got us into this bear market, and it's going to take the financial markets to get us out, which is going to take some time. It won't be immediate.
Read more from alanj flag as abuse great answer
952 points
rvilmur answered 9 months ago …
I agree with alanj. The coming bounce will be large but short in duration. Those folks who just couldn't sell near the bottom will sell after a bounce and count themselves as lucky to have gotten out at a better price.
I would not be a buyer here; but a seller of short term naked puts in the amount that represents the cash you would be willing to put into the market since you may end up buying the stock at the strike price of the puts. The advantage here is that you buy the stock cheaper if the market continues to slide. If the market bounces after a bail out bill passes, buy back the now depressed puts and think about buying some puts on weak stocks as the bounce fades away.
