"Fact of the market is the Perception of its participants"! there is no better time to explain this statement; now that panic has set in and the market just cant figure out a bottom, least to say a direction in which it should go....
Perception cant be defined in a scientific terminology; its like air ... everybody knows its there however no one can touch or smell it ... no one know where does it come from or where it goes. Recent financials crisis has been no different than a perceptional paradox. Investors are caught in two minds as to what they can do to save their capital. Every one believes there is more weakness in Banks; and therefore everyone shorts them; its like herd's ... contrarians would be punished ... a few people who did well in the last year would be able to drive the sentiment in favour of their positions. No one believes central banks today ... you see wild swings in the currency markets ... suddenly a 0.5% move in EUR for e.g. which was considered to huge about 1.5 years ago seems to be the norm nowadays .. suddenly every asset class is volatile which kind of shows perceptional paradox going around in the markets these days.
At this point in time people who are on the short side are doing marginally better than their counterparts partly because the long guy has no money left to buy new instruments and partly because the perception really is that one can find companies which may go from 100 to 40 in a days time! (I saw the move on Man financials yesterday and coudnt believe my eyes)..
Its a market where every1 has forgotten the fundamentals ... equity analyst are losing their jobs ... portfolio managers now decide to have a long holiday ... CEO's are been thrown out ...best of all Lehman wants to sell itself .. pbbttt.... are we in a shit or are we?! ...
This is sentiment at its best! ....
What results in a change of perceptions; I dont know .. lesson learnt is perception governs all !
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