Saturday, Apr 19, 2008
Bad news causes share prices to rise; why?
Guardian: Banks are top risers despite RBS rights issue
The City decided to look on the bright side yesterday despite the prospect of yet more bad news in the banking sector. Banks ended among the top risers yesterday, recovering from earlier losses after traders fretted over reports of a possible £12bn rights issue from Royal Bank of Scotland. Can somebody please why the worst news causes the share price to rise. I cannot believe that the banks have told us all their bad news!
Posted by who stole my pension? @ 05:45 AM (1080 views) Add Comment
19 Comments
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1. hpwatcher said...
But the current crises is caused largley by the American subprime. With unsecured debt in the UK running at 1.3 trillion - more than the rest of Europe put together - you just wait for the wave of UK subprime to hit! It will be massive.
2. techieman said...
....because we are in a bear market rally, and short term sentiment has turned to the upside !!! You boyz - will you ever learn?
3. stillthinking said...
Possibly their share prices rose because they are about to sell 50 billion of debt, quite a triumph considering that nobody thinks its worth 50 billion.
The taxpayer will soon be backing 150,000,000,000 pounds of mortgage debt.
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2008/02/13/ndarling413.xml
So now the total goes up another 50,000,000,000 to make a total government debt of
* 700, 000, 000, 000 *
Or to put it another way, in the same scam as one third of council tax going straight to public sector pensions NOT council services, our tax is increasing being diverted to government debt costs NOT public services. As this trend is set to continue, -expect public services to receive less funding while taxes rise- !
You can't even argue that we borrowed this money from ourselves, because we didn't, we borrowed the cash from abroad. So we have to give 31,000,000,000 abroad every year.
While its very difficult to decide how things work out, its obvious that whichever financial description ends up happening, the end outcome is pretty bleak.
Are pension funds capable of just buying up 50 billion of gov.debt anyway? 50 billion of gov.debt and 12 billion for a third of RBS. Hmm. Somebody out there is loaded.
4. techieman said...
clue...news DOESNT cause markets to rise or fall, its the ANTICIPATION of what the news will be followed by the REACTION to the news that causes markets to rise or fall. Buy on the rumour sell on the fact - innit!
5. handle_it said...
This has stopped being funny. The government is buying junk from banks even before they go tits-up. Hardly surprising their share price rose but in the end the share value is relative. Money is being phased out ?
6. who stole my pension? said...
In summary the tanks are empty and we are flying on the vapours. Wow these vapours are lasting a long time but the crash will come.
7. Mike Large said...
The market bears were incredibly short before yesterday - indeed they have been for some while. So - it was not millions of investors seeng some new bright light/promised land to come - but a few thousand short investors getting trampled on as the "Headline" Citigroup news was not as bad as it possibly could have been.
But - as those with credit card debt/mortgage debt know - the devil is "always" in the detail. So allow the weekend and the time to digest the detail and then re-assess what is happening middle/end of next week.
AND - always bear in mind that any and every solution to the Credit Crunch proposed thus far - deal only (and in part) with some of the symptoms - and most certainly not the cause. And as a result they can only prolong the inevitable pain.
8. renting2 said...
I'm a numpty when it comes to the way all this high level finance etc works (like 99.999999% of people), but even I can see that this is scandalously BBAAAAADDDDD!!!
WTF is going on?
9. Orwell said...
Or to put it another way, in the same scam as one third of council tax going straight to public sector pensions NOT council services..
Still thinking. Where do these figures come from?
10. James Taylor said...
I think techieman has a point. However, I also think there is now an inbuilt expectation that bad news means more taxpayer-funded bailouts from the treasury. The worse the news, the more government backed debt is going to be raised to solve the problem.
11. sold 2 rent 1 said...
handle_it
"Money is being phased out ?"
THE END OF MONEY
http://www.financialsense.com/fsu/editorials/martenson/2007/0108.html
techieman,
Stocks bear downleg to continue in May/June? What do you reckon?
12. Student Actuary said...
The reason why the share prices rose after the bad news was that the market expected the news to be even worse than it was and had priced the shares lower for that. Of course this rise looks silly in the context of a downturn but the stock market is a funny thing prices don't move smoothly!
13. Lloyd said...
Rose tinted glasses anyone? The media and city have now been drafted in to stop the DEPRESSION of 2008. you can fool some of the people some of the time but you can't foll all the people all of the time! For all intent and purpose RBS is bust! yet the city seem to think that a huge loss and cash call is good news. I am suprised that there were no large queues outside RBS branches. I have already move my cash out of Nat West. The rest of the public need to wake up.The country is now reliant on printing money now earning it anymore, London has lost it undeserved claim as financial capital. Can't wait for those city boys to start losing jobs wholesale!
14. plato said...
s2r1:
I've a busy day today,but I took the time to read the link.
Totally confirms my thoughts.
Can't Thanyou,Thankyou,Thankyou, enough.
15. indiablue19 said...
Sold 2....yes, really interesting link. Common sense actually, but not thought of in the least by a globe full of lemmings who follow blindly in the same tracks time after time. And perhaps an explanation for why at the last ditch the final layer of loans before the inevitable crash, are being made on phenomenally stupid [suicidal] terms to FTBs who are desperate to get a foot in their own door,and bus drivers who think they've finally found a way out of endless poverty through BTLing. And then the crash and the greedy grubbing thieves get to do it to everybody all over again. No, instead, lets have an End of Money. good.
16. Rjb said...
I think some Buffetology is needed. Risk-free real interest rates are low, so people feel compelled to buy equities. People will come up with a million and one reasons to justify their behaviour (e.g. buying bank shares because of reasons X,Y and Z), but it comes down to the gravity-like effects of interest rates. Anyway, inflation will spike, economies will falter, governments will fall, sense will eventually prevail, and interest rates will sky-rocket. At that point equities will be about as popular as paedophiles, and there's your time to buy.
17. Mercury said...
Good link......which seemingly points to hyperinflation in the not too distant future. so let's keep stoking the inflationary fires until the masses cotton on to the fact that that the currency is worthless, their savings are worthless, pensioners starving.....only then will it be fashionable to allow the Keynesian style crash which is surely inevitable. Of course no politician wants to admit to this level of foresight... so let's doctor CPI let's swap bonds let's do anthing to keep this show on the road. Let's face it there's still plenty of room for a few more zeros on our £20 notes!!!!
18. techieman said...
s2r1 - am long of dax at the moment (long Wednesday am - so thurs was disapointing but Friday was good) so looking for a sharp rise which will either be "C" or "3". Where to? My guess is around 7000-7100, which will be consistent with FTSE 6200 ish and perhaps higher....After that well im standing aside, so at that time i might try calling the top to this bear market rally, which may be consistent with your timescale but im erring on at least June rather than May. Quite a brave call considering we have had some apocolyptical bloggers here for some time.
However arent you of the opinion now that the Armstrong cycle analysis should be followed - which would (i seem to remember) indicate a bull until early 2009? Or does the "5th night" overwealm that?
19. techieman said...
JT (nice voice by the way) I do and at the same time dont have a point! I will explain. I am not really interested in individual shares but really more in the market indexes. Individual shares have silly things like changes in governance and things that can have a fundamental impact on the price whereas indicies tend to even those out, so the technicals become more important. It just does get me a bit when people always have to have a reason for shares going up or down and they always want to pin that on some piece of news. As my first boss used to say with a wink when I asked him why prices were going up, its because there are more buyers than sellers! At first i thought he was taking the p*ss but actually the more you think about it......