Apr 02, 2008

Here is what financial experts are saying at The Telegraph (March 24):

"Fed chairman Ben Bernanke has moved with breathtaking speed to contain the crisis. Last Sunday night, he resorted to the "nuclear option", invoking a Depression-era clause - Article 13 (3) of the Federal Reserve Act - to be used in "unusual and exigent circumstances".

"The emergency vote by five governors allows the Fed to shoulder $30bn of direct credit risk from the Bear Stearns carcass. By taking this course, the Fed has crossed the Rubicon of central banking."

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/23/ccfed123.xml

This shows how fragile the global economic system of Babylon is today.

Yesterday, a few scraps of good news sent the stock market up nearly 400 points. Today Fed Chairman Ben Bernanke says we will probably go into a recession. The daily news contradictions make it quite confusing for the average person to know what is going on.

My theory is this: the stock brokers listen for either good news or bad news each morning. If news is good, they know it's either a lie or irrelevant to the bigger picture, but they also know that everyone is going to buy stocks AS IF it the economy has now turned the corner and all is well on Wall Street.

So these brokers buy stocks along with everyone, bringing the market up 400 points. But since they know the news is likely to be bad the next day, they are already positioned to sell and take the profits.

Repeat the process each day.

They hope that they can continue making money by predicting which days the news will be good and which days the news will be bad.

It has nothing to do with market fundamentals.

That's my uneducated theory.