Significance of late market sell-off


Stocks began the day 1.5% higher following a good earnings report from IBM.  As it typical of the whole week, some investors used the opportunity to sell into strength.  Even so, by 2PM, the S&P 500 was close to unchanged.  However, 2PM is normally when the trading desks of mutual funds make sales to recover redemptions, and the market sold off a little further, down less than 1%.  Between 3 and 4PM however, the market collapsed an additional 5.7% - down 7.6% on the day down 21.9% on the month, down 37.0% on the year and down 42.3% from the record high, ironically this date a year ago.

This is ridiculous!  The economy didn't shrink 20% in the last 6 days, or 40% in the last 52 weeks.  Unfortunately, that's irrelevant as the hedge funds once again try to take advantage of the economic crisis.  The SEC removed a three week old ban on short sales for financials this morning.  Someone from the SEC needs to go before Congress to explain why the rule couldn't stay in place until, let's say January. 

As a result, firms like ours that see the current situation as a generational buying opportunity, with good companies like General Electric and Microsoft trading at exceptionally low valuations, are still sitting on the sidelines.  We've said it before and we'll say it again - we're not selling anything!