No. of Recommendations: 6

Dow's Worst Week Comes to an End

*Wall Street Journal, OCTOBER 10, 2008, 4:38 P.M. ET


Stocks closed a volatile week with the widest intraday swing on record, in a fitting end to one of the most turbulent five-day periods in financial history.

For the first time in its 112-year existence, the Dow Jones Industrial Average swung in a range of more than one thousand points on an intraday basis. ...

Despite the late turnaround, the Dow tumbled 18% this week, worst in its 112-year history. The industrials also shed more points in a week -- 1874.19 -- than they ever had previously. The Nasdaq dropped 15% and the S&P 500 declined 18% on the week.... CDS paper has become ever more difficult to value -- or fallen in value in cases where a price can be set amid doubts that the sellers of the insurance-like contracts can make good on their commitments -- many [hedge] funds have been forced to raise cash to meet margin calls. To do that, they sell stock, which is easy to unload on a public exchange compared to opaque, privately negotiated CDS trades....

"As all this is going on, you have average Joe investors who are getting more nervous as they watch on the sidelines, they don't quite understand the trade, and so they just pile on and sell their stock as well," intensifying the market's slide...
[end quote]

If forced sales and herd behavior are depressing stock prices of fundamentally solid companies, it's a completely different situation than company fundamentals crumbling, and stock prices following.

As a conservative investor, I only want to buy quality. If the quality is still good, and the price behavior is due to non-fundamental factors, it's a true buying opportunity.

Not to say that prices couldn't go lower...

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