History Must Direct Market Coverage

We'll start with the appropriately cautionary lead: "Stock markets shot higher after two financial firms at the center of investors' worries took steps to shore up their capital and put the credit crisis behind them. But bankers cautioned that the industry isn't out of the woods yet."

And what does history say about why the caution is warranted, despite the stock market's momentary strength? Look at this! We have a whole section marked: "False Dawn," which brings us up to speed on similar days filled with false hope in our recent past:

"Global investors have been fooled by more than one false dawn since the financial crisis began last year. On Oct. 1, shares of Citigroup Inc. gained 2.2% after it announced a $5.9 billion write-down on its subprime-mortgage exposure. On Oct. 5, Merrill Lynch & Co. admitted to a $5.5 billion write-down, sparking a 2.5% rally in its stock. On Nov. 8, shares of Morgan Stanley gained 4.9% after it announced a $3.7 billion loss on subprime exposure. All of those rallies proved premature, as the falling value of mortgage investments forced the banks to take billions of dollars in additional write-downs."

The article also lays out other theories for the stock's movement, including the aforementioned first day of the quarter action and even takeover speculation. And though past is never perfect prelude, when you read about a trading day that bears striking similarity to a few others, you are more likely to believe alternative explanations to the comforting though completely unsubstantiated confidence that this time (no, really) is the last.

Believe it if you must, but remember all the others who have ... right before falling down a well-hole.

Now as I sign off, let me tell you that if you have about an hour's time to digest thoughts on the administration's financial regulation plan from a National Public Radio show with The Wall Street Journal, Brookings Institute and The Business Press Maven, you can go here and scroll to "Overhauling Financial Regulation of Banks" and realize, as always, why they say I have a face for radio.

« Previous Page

1 2

Next Page »