Mr. O's two cents on the stock market and also realtor friend Suzanne's opinion on the housing market:
I asked a friend of mine who is just learning about the stock market the following question:
Why did the stock market go up today? (3/10/09)
His answer was..."My understanding is it went up for a few reasons:
1) Citi(group) is profitable or at least rumored to be.
2) It has fallen more than it actually needed to in the past few weeks, so we were due for a minor correction. We hit some resistance/support levels and the downward trend was not strong/bad enough to breakthrough???
I am guessing a bit, but let me know how I did."
Here's my response...
It's actually very basic, and most people over analyze the why... The answer is that there were more buyers than sellers. The sellers have been selling for days and there just were not any sellers left to sell, with more buyers than sellers the market moved up as it moved up some of the sellers (who were sitting on cash from all of the selling) decided to get in on the action and switched sides which added even more buyers to fuel the run.
So your #2 was pretty close and on the right track. As for your #1 not so much... the media and news want to make sense of the market (logic and reasoning) that's a bunch of bull. It's their to make people believe that there is some rhyme and reason for why the market goes up and down and they want to be able to show that they figured it out and report about it. Don't trust the news the market is usually way ahead of it (6 months roughly) and works mostly on basic supply and demand principles.
Suzanne on the housing market:
Now just take that same basic principle and apply it to the housing market and everyone will understand why their home values are falling and will continue to fall until the amount of sellers is equal or less than the amount of buyers. The reason why some areas are losing less value than others is that the housing market is mostly local. Some areas have less sellers than others.
I'm sure that you already know this, just thought I'd throw my 2 cents in. Although the media reports the most recent data they have, it is usually 1-3 months behind what is happening now. When the housing market finally levels, we won't really know that it happened until a few months after. Of course, someone who is working in the market everyday will have a feel for how things are going.
Well said. And now you know.....
the rest of the story.