Why did the panic ensue?

In the last post I hinted that I would be talking about this week’s collapse in the stock markets around the world. So what the heck happened? The short and simple answer is a raft of bad news that apparently most people were not expecting. It is my opinion that the biggest selloff happened because of the disappointing G-7 meetings the weekend of February 14-15, 2009. I think that many people were holding out hope that there would be a coordinated effort on the part of the world’s most important economies to work together to resolve The Crisis. Instead, there was a short missive issued from the conference whose tone and tenor was that there would be M.O.T.S., meaning More Of The Same solutions that have been proposed since The Crisis began to accelerate about a year ago. I believe this was deeply disappointing to many investors.

The second piece of bad news, and I feel the more troubling one, that did not trigger a huge move down in the stock markets, was the Federal Reserve Board’s view of the U.S. economy for 2009. In almost all categories possible they see a deepening recession rather than a stabilizing one. The reason that this is troubling is that the Fed is a pretty sober organization. Furthermore, they are fairly apolitical. Interestingly though, the Fed’s observations did not seem to move the markets much. Yet, in my opinion, the Fed’s report was the most troubling piece of news to hit the markets since last fall. Hmmm.

So where do I stand with all of this? I am neither optimistic or pessimistic about the economy and the markets right now. I am in a sober fashion buying select businesses here and there.

Jason