NEW YORK - Stocks sold off once again today as the investor led sell off continues. However the sell off makes little sense as does the share price of many American multi-national corporations.
The market is having a difficult time getting anything right. On one hand U.S. debt was an issue for the market and without passage there would be true economic calamity. This of course is true and at the same time U.S. Treasuries are hitting record low prices. The yield on a two year treasury is 0.26% indicating that the U.S. Government can essentially borrow now into the future for free. The yield on a 30 year note has fallen to 3.66%.
All of this should be excellent news for the market. The U.S. congress which announced spending cuts said they do not expect these spending cuts to take place until 2013. Again excellent news for the economy in general as this gives time for the U.S. to right its ship.
Currently the world economy and companies around the world are beginning to show excellent growth and even greater profitability. General Motors today said profit doubled as they made $2.5 billion.
Yet stock prices which were already incredibly undervalued have continued to fall. There are two things which causes investors to sell. The first one is uncertainty. Macro-economics is a great way to scare investors. Since macro-economics is to complex to graph on a sheet of paper anyone can make their own opinion known and the person with a dark opinion in a dark market will win it. The second is fear. Fear is when investors trade because their stock went lower.
The smart investor will ignore the forecasts as he would have done in 2009. In 2009 there were frightening forecasts and albeit frightening numbers but to a much lesser extent. In 2011 we see corporate profits at a record and some stocks trading at half tangible book and ridiculous prices to their intrinsic value.
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