When I did my column this morning, hospital, nursing and home services stocks were in the pooper. My editor rightly wanted to make mention to Pres Obama's speech on cutting costs since it was germane to the sector.
Considering that I write a technical column, it really was irrelevant. However, we must operate in the real world and not making mention would risk readers thinking we are out of touch. I liked how he added the text for me.
Anyway, in our email exchange I wrote the following:
"You are right - a mention is very appropriate. But it was not the cause (of today's carnage in the sector).
I mentioned (in the column) that the sector peaked June 2 and now ask a serious question - was Obama's speech known at that time? Was there something out there for the public about what would be in the speech?
What I am trying to say is that the sector started to fall two weeks ago. Today's news may have triggered a little panic selling (I do check the news on each stock but there was nothing about the speech) but unless there was something known two weeks ago it was not the cause."
This is a mistake many investors make - thinking that the news drives the stock market. The stock market anticipates the news. Somebody always knows something before anyone else. Someone always reads the tea leaves (and I am not talking about the charts). They act and their footprints are visible in the market for technically oriented Columbos to find and then act in turn.
Don't believe me? Put this in your bong and smoke it:
Why did the stock market peak in October 2007. The fundamentals looked great. Bears Stearns was still in business. Subprime had not exploded. There was not such thing as TARP and Bernie Madoff was just the guy who owned the market maker that kept screwing me on executions.
In short, the world was still in terrific shape - yet stocks started to fall.
The news causes wiggles but the market peaks and troughs before the public gets its firts whiff of the news that matters.