Manage Expectations

Well, the Fed did it!

And the markets went in the exact opposite direction of the Fed's intention.

Why?

One huge part of the movement of the stock market is the management of expectations. When analysts (word means something, not the word "anal") expect a certain action, number, etc. often, investments and trades are made by Wall Street with the expectation of that result. If the result falls short of expectations...anarchy! If the result exceeds the expectations...off to the races!

That is why the markets fell off sharply after the Fed announcement of "only" a .25% cut in rates. Anal-ysts were expecting .50% cuts.

That is also why a company gets taken behind the wood shed a shot by traders if it falls short of earnings by a couple of pennies...even if it is better than last year. In anal-yst/Wall Street world, a better this year than last year is not good enough. It must be a better number than expectations.

Which is why a stock can also actually go up if it loses less than what was expected...it still lost money, just not as much as expected.

Now the smart investor comes in after a stock or the market misses some expectation or other and evaluates if it is a trend that is likely to continue or not. Then acts accordingly. Many values and great returns can be found in buying a stock that misses expectations, but the fundamentals and technicals of the company are still sound. Particularly if it pays a nice dividend while waiting.

Notes From The Underground:

Dow - 13,413.66 -60.24
Gold - 801.50 -12.50
Silver - 14.33 -0.36
Oil - 93.30 -1.09

To Your Investing Success,

Patrick