Some are still scratching their heads at the reaction of the market on Monday after Meredith’s call & again today at 2pm at Nouriel’s comments. Psst..stories move markets...
There is now more than ever a greater focus on the new branch of finance, known as behavioral finance, which essentially recognizes the "humanness" of market participants that adversely affects their decision-making (as opposed to standard finance that assumes a "rational" investor).
These analysts/economists offer nothing more than stories. And these stories are far more remote to the stock market than financial number anchors. Public reaction to them account in good measure for the change in market psychology.
Similarly, in individual stocks, it appears attitudes toward a company tend to change when there is a story attached and events like online remarks can precipitate such changes.
I accept the fact that some tend to ridicule the idea of connecting and rearranging information online. Jeez…they say…how can views expressed by a single analyst or online - by members on message boards or blogs - be a factor in price movement?
However laughable an idea as it may seem, in my mind, this makes a lot of sense. What recourse do I have if I desire to get a perspective on whether the market or a stock might be currently overvalued or undervalued?
Whether I am a financial advisor or an individual investor I need to know why I should recommend or decide to invest in a company. I’ve read all the financial statements, I’ve done my DD, but let’s face it, reading opinions by other market participants helps me think through the scenarios that might make stocks a good buy or not.
Furthermore, a single company statement each quarter by the CEO doesn’t cut it anymore. We need more opinions coming out from within the company’s workforce.