Smooth sailing unlikely
By John Schroy, on May 20th, 2010 | 
Markets can be inefficient for different reasons and persist for long periods. The transition between one type of inefficient market to the next is usually a period of strife and uncertainty which may last five to fifteen years. Looking back at how the economy emerged from previous transitions, I note that in each new period, equity prices started at reasonable levels. This was true at the beginning of the Roaring Twenties, the Post WW II Period, and the Reagan Era. It is as if markets, recognizing prior inefficiencies ‘reset’ and start over. However, for the current market to ‘reset’, it will be necessary for equity prices to fall considerably, which will have dire consequences.
Commonsense Economics:
By John Schroy, on May 16th, 2010 | 
Eventually, at some point, without an efficient market, common stocks become mere baseball cards.
Sooner or later, some Baby Boomer, pressed to pay his bills in retirement, will find that one can’t live off the dividends of common stock and that when everyone is trying to cash out their holdings at the same time, market prices plunge to levels that seemed inconceivable for generations. But it will simply be the cost of allowing an inefficient market to flourish for so long.
This article discusses the concept of inefficient markets and the practical consequences.
Fat-Finger Thursday:
By John Schroy, on May 10th, 2010 | 
On May 6, 2010, the Dow Jones Stock Index, at about 2:30 PM, fell almost one thousand points, before recovering when traders discovered that there was no real news justifying the crash in prices. The day will forever be know as ‘Fat-Finger Thursday’, in remembrance of the first inclination to blame the crash on supposed mistaken data entry by some trader, somewhere. Later, the authorities came out and declared that there was no “fat finger”, but that the cause for the anomaly was unknown and under investigation.
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