Just before 10:00 a.m. ET yesterday the DJIA had fallen to 10,404 (down 251 points in the first 25 minutes of trading).  The index then muddled along in negative territory until about 3:20 p.m. ET, when it magically began recovering from about 10,425 by about 400 points to end the day 40 minutes later at 10,808, up 153 points from the previous day’s close – see yesterday’s DJIA chart here.

An article this morning titled ‘FT Causes Massive Short Squeeze With Mother Of All End Of Day Rumors’ – reading time 1 minute – claims that a Financial Times story on increased co-ordination among the European Central Bank, the European Banking Authority, and the European Commission to convince the financial markets the Europe’s banks could withstand the current debt crisis was the catalyst that resulted in the late day recovery.  I assume at least one person, being the person that wrote the article believes this.  While it seems incredulous to me, given the way the financial markets are behaving anything seems possible, and the article’s author may have it right.

For me it follows, both given the extent of algorithmic trading (see ‘Algorithmic Trading’ (September 30) – reading time 3 minutes) and what appears to be general financial market instantaneous ‘knee-jerk reactions’ to near-term rumour and innuendo, that financial market fundamentals in a public market context ever more take precedent over logic and long-term outlooks.

Think of it this way.  Suppose the author of the referenced article is right in his assertion with respect to yesterday’s Dow recovery.  A European debt crisis is a European debt crisis, and ‘All the King’s Horses and All the King’s Men can’t put Humpty together again’ by talking increasing their co-ordination in communicating how Humpty is teetering rapidly.  They should instead of take that time to build a ‘wind barrier’ against the ever increasing wind velocity Humpty currently is experiencing.

This commentary is all in aid of very simple message.  I am increasingly of the view that anyone who does not take the time to learn, think about, and actively participate in the management of their own wealth simply ought not to participate in the financial markets.  Would you jump into water that was overpopulated by large and vicious sharks if you didn’t know how to swim and didn’t have with you serious ‘anti-shark cage’, and had to depend on an arm’s length third party to hold you up and protect you from multiple shark attacks?  Enough said.

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