Definitely, the market is often clueless, therefore I don’t believe in efficient markets theory. For a recent example, just look at H&R Block; the day the Option One news came out, the stock dropped 9%. The market was clueless about the risk that Option One was taking on. If the market was smart, then H&R Block would have been discounted long before the news came out. The same thing happened with Toll Bros; it only started falling at the same time the RE market fell, not before.
I can understand a stock falling on unexpected news, i.e. a new lawsuit, a drug with bad test results. But when a stock falls because of an EXPECTED earnings shortfall, what else can one assume other than the market is clueless? We on piggington certainly expected this type of loss, even if we didn’t put money on it. Certainly none of us are buying bank or lender stocks now.
One thing I do agree on with both of you: I have no chance going against the insiders or the big traders. I’m no trader, and only a half-ass investor, better at knowing when to get out of the way, than figuring out where to jump in.
I appreciate the input on WaMu, but I wonder if they can maintain their income, when 20% of it is unpaid interest. In the mortgage industry, that is considered a sign of a stretched borrower. Since 20% of their net income is unpaid but earned neg-am income, so if even half of that has to be written off, WaMu will certainly take a fall in its stock. Another weakness for WaMu is its credit card acquisition (Providian). I expect to see a lot more credit card defaults in 07 and 08, as consumers file for bankruptcy.
