Perception what an amazing word, and what an amazing effect it has on trading and the markets.
We've talked about perception on this blog before and how important it is in the market. Yesterday was no exception, the guns were out to shoot down AIG and Lehman. Well certainly Lehman was DOA and AIG is certainly front and center and in the gun sights of everyone who is involved in the markets.
Sometimes it's just smart to do nothing but sit back and watch. I think we should all take a collective deep breath and see what is happening to the financial icons of America.
AIG is different.
It is different from Bear Stearns, it is different from Lehman, and is a global concern with assets over $1 trillion. Now that's a lot of money in anyone's book. AIG does business in over 130 countries and has over 100,000 employees worldwide. No matter how you slice it, AIG has a huge footprint in the global financial community.
We are at a crossroads financially in the world, and if AIG goes under and declares bankruptcy it will have colossal ramifications for world trade and the financial system as we know it today.
Now don't get me wrong I believe in free market and I love to trade so what I am about to say may sound like a broken record. I again go back to my point that when the SEC removed the uptick rule it changed the trading world forever. The removal of this rule allowed hedge funds to basically hammer away at any stock that crossed their radar screen. I sincerely believe that the current lack of confidence and meltdown in the markets could have been avoided in many of the markets had this rule remained in place.
The hedge funds of today are just like the robber barons of yesteryear, they just gang up on a market and make it go their way.
Now I'm not a huge fan of regulation, but given the power of hedge funds we need to have some regulation to protect not only companies but also individual investors. If we do not put some checks and balances in place we will all be living in a very different world in the near future.
Okay, I'm getting off my soapbox now.
Perception often trumps commonsense in the marketplace. In the long run commonsense wins the day.