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At What Price

July 22, 2011 – 4:56 pm

This morning traders are shying away from the market despite very good corporate earnings reports. Being Friday and having no resolution on the Debt Ceiling issue is the cause. In fact the politicians are not even close to a deal.

The market will remain volatile until they have a deal. There will be a deal after both sides have postured enough. It is the way of our system; it’s messy, difficult and divisive and it is called democracy. You might not like it but it’s the best system there is that protects the rights of everyone involved and you can get involved as much as you like.

The stock market is also very democratic. It goes up and down based on what people want to pay for a stock. You can disagree or agree to an offer to buy or sell a stock at a specific price someone else wants. In the short term prices can have no basis in valuation, the market can be manic in its pricing. It can be manic both overpricing or underpricing a stock because it is individuals deciding on price and they can be influenced by current events. It is in that mispricing wherein lies opportunity. The debt issue has nothing to do with a stock’s value so when prices are pushed down it will be an opportunity.

Of course the risk is that politicians won’t agree on raising the debt ceiling and our debt will not be paid. The chance of that is almost zero. Therein lies the risk, almost zero is not zero. I like the odds therefore I suggest we all be in the stock market, not out.

Good Trading
Steve Peasley

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