Monday, April 30, 2007

Market Thoughts

Today was an interesting day in the market, as stocks started up, wavered around mid-day, and crashed in the afternoon. Most indicators suggest that people fear stocks have had a long positive run, and is due for a crash, causing people to begin taking profits. The irony of situation is that if enough people believe that, it could be become a self-fulfilling prophecy.

I pondered the situation today, and I think in the next few months, stocks will still be up. Consider that technology and oil companies, such as Microsoft (MSFT), Google (GOOG), and Exxon Mobile (XOM) recently reported record earnings. While the housing market is slumping, I think the worst is almost over, with subprime mortgage issues clearing and the possibility of a Federal rate cut on the horizon.

Again, while I believe in the efficient market hypothesis, EMH works over the long run, and there is plenty of opportunity for both erratic movements up and down before the market settles down. I think a few more days of negative stock returns would signal a great time to buy into companies such as Microsoft and Google, who are down 3.6% and 2.5% respectively from just a few days ago when earnings were announced.

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