Posted: 3:30 am
July 22, 2008
SO, did you enjoy the summer rally last week?
Maybe you've been doing a little bottom fishing when stocks got pummeled over the past few months, or dollar-cost averaged your way into the market waiting for, at the very least, a dead-cat bounce or a tradable rally.
Ah, the clichés!
I haven't heard these lame excuses that Wall Street uses for investing in stocks for many months. And I really just wanted to be the first person to use them in 2008.
Now for the real explanation of what's going on.
Let's start with the obvious: despite last week's improvement, the stock market is hurtin'. And for good reason.
The US economy is in a recession (official announcement or not) and worse, the financial system is in such a precarious state that everyone from President Bush to Treasury Secretary Hank Paulson to top executives of the lowliest American corporations feels the need to reassure us - on a regular schedule.
Last week's 396 point, 3.57 percent, rally in the Dow Jones industrial average - including two triple-digit gains - felt really good. But it wasn't all that it seemed.
First off, this was one of those options expiration weeks. I don't want to get into all the details here since you can go to nypost.com to see my past columns, but stocks often have tri-digit gains in weeks like this for technical reasons.
But last week's gains weren't only trader hocus pocus.
When the government announced that it would crack down on a practice referred to as "naked-short selling" - something that's a whole less sexy that it sounds - professional investors got their shorts squeezed (which is also much less exciting than it would seem.)
Essentially traders were told they'd have to actually borrow stock before selling it short, which is a way to make money when share prices fall.
This apparently caught everyone by surprise, even though naked short selling is already illegal, and forced short sellers to buy financial stocks to comply with the new edict.
A huge drop in the price of oil also helped stocks.
Not much changed in the world over the weekend, but stocks couldn't continue their rally yesterday.
And there's a good reason for that - the economy and corporate profits are still in trouble.
So far, 93 of the 500 companies that make up Standard & Poor's main index have reported their quarterly results and profits are down 34.6 percent.
