Glimmer

Finally something not as gloomy.

The STI managed to climb back from the negative after lunch amid some positive news. The central banks pumped in more liquidity, and the remaining banks are on their way to mergers. Plus, some markets are putting a temporary halt to short-selling (which drives the share down by selling first and then buying back the shares at a lower price). They could have done all these sooner rather than to allow the market to 'correct' itself. IMO, i don't believe in the invisible hand of market, for there are none. It is driven by "hope, greed and fear".. and with these emotions, nothing will work to models and assumptions.

Excessive long buying will create bubbles where only the greatest fool loses out (the last one to own the stock and finding no other buyers at that price), while excessive shorting spooks the market, and cause others to short even when it is irrational. People are just too afraid of losing than gaining even if the probability is 50/50 (loss aversion under behavioral finance). This makes short selling a very common strategy during times of crisis (when you get a lot of people doing short selling) making it a self-fulfilling prophecy and it is enough to bring an institution down (hence creating all the shockwaves and all the clearing up in years to come). Of coz, there are those who are critical of behavioral finance, but that is IYO (In your opinion).

Maybe the financial market evolved too much that it is very difficult to untangle all the mess now. And the current solution - pump in more money (money comes from tax payers mind you) and let them (the assets) slowly recover.. really slowly, like that of the japan economy will take decades.. just because some of the FIs anyhow lend.. a bit papaya lor.