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Markets Still Inexplicable

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by Felix Salmon
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Nov 01 2007 12:00am EDT

Markets: Still Inexplicable

You may or may not be aware that stocks are down quite a bit this morning, and, as ever, no one really has the foggiest notion why. David Gaffen, in a market round-up headlined "What Is Going On Around Here?", quotes one broker, Bill Frejlich, as saying that "nobody has any idea what’s happening", which rings true to me. But Gaffen still feels compelled to come up with a list of five possible reasons for whatever it is that we're seeing.

At the risk of getting a bit too philosophical here, there is a very good chance that there simply is no reason why the markets are doing whatever it is that they're doing. And in any case causes and effects can be hard to differentiate sometimes: if Crocs stock is down 30% today, is that a reason for the rest of the stock market to fall, or is it simply a symptom of the broader sell-off?

As for the notorious report on Citigroup from CIBC's Meredith Whitney, I think one probably can reasonably say that it caused some if not all of the sell-off in Citi stock. Whitney has focused the spotlight on Citi's damaged equity base, and that's not something which is going to cause the stock to rise. It is however refreshing to note that the markets seem to care much more about Whitney's serious-minded analysis of Citi's financial's than they do about Kate Kelly's muckraking on the subject of what the CEO of Bear Stearns does in his spare time.

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