The run on the Bank Syndrome

[DickC]

I fail to understand with the existing national crisis, why the financial exchanges aren't forced to close to avoid the existing panic in the markets. Nothing has changed in the value of the companies and their ability to perform in the future consistent with the past. Today's crisis in the markets is emotional and not based on business practice. Banks were closed in the past melt downs, why not today for the financial markets. The only reason I can think of is that some few are making a bundle and our government is afraid to call the shots. Thanks for letting me VENT.

[Scott_Conger]

Dick

trading has shut down automatically several times already. That would be a closure. I think what you expected to happen in fact happened.

Stocks trade based on their earnings and expected growth. The more potential for growth, the higher buyers are willing to drive the P/E ratio withoug getting heartburn. These new stock valuations simply reflect the dramatically reduced earnings expected, thus driving the price down. I cannot under any circumstance forsee say, Delta Airlines, as having the earnings and profitability this year, that was projected to occur as recently as last month. Missed revenue is missed revenue. Additionally, going forward many businesses will be operating in a significantly damaged mode and/or have to take on large debt jsut to continue operations, that was never planned or factored into the stock price a month ago. Large hit to revenue + fear = panic (and justified) selling. There is nothing occuring which is the least bit mystifying at least to my senses.

So why does it drop quickly but rise slowly? Fear is a bigger motivator than greed...pure and simple.