The Great Depression Online




Great Depression Online Archive Issue:

The Law of The Yo-Yo

Great Depression Online
Long Beach, CA
March 21, 2008

Inside This Issue You Will Discover…

*** Market Outburst on Fed Rate Cut
*** The Law of the Yo-Yo
*** A GDO Market Call
*** And More

“Beware the confusion between correctness and intelligibility.” – Nassim Nicholas Taleb

Market Outburst on Fed Rate Cut

We won’t belabor it.  We’ll just report it.

Madlen Read, AP Business Writer, offers the facts on Tuesday’s market outburst…

“The Dow Jones industrial average soared 420 points, its biggest one-day point gain in more than five years.

“The central bank’s benchmark fed funds rate is now at 2.25 percent -- its lowest level since December 2004, and less than half what it was last summer.

“The Dow’s point gain was the largest point jump for the Dow since a 447-point advance on July 29, 2002, when Wall Street was also struggling with a protracted decline.”

There you have it.  The biggest one-day gain in more than five years.  We’re grateful it came.  Not because we made money off it.  But because without this very event, we never would have discovered the law of the yo-yo.

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The Law of The Yo-Yo

Following Tuesday’s market outburst the subject of the stock market came up during a water cooler conversation Wednesday morning.

We listened with anticipation as we’re always hypnotized when a seemingly intelligent person tries to explain their logic for the illogical.

“The stock market went up so much, because it’s been going down too much” the older gentleman declared with the wild eyed conviction of a Baptist Preacher.

“The market’s like a yo-yo…” he added, “…when it goes down, it then goes up.”

This brought a grin to our face.  For we weren’t sure if he wanted us to thank him or pay him for these gifted insights.

We elected to thank him.  And opted not to disclose that it wasn’t for the good acumen, but rather the good amusement.

But, too, we couldn’t argue with him.  Because he was right.  If you look at a chart of the DOW over time, it’s true…when it goes down, it then goes up.  Still we don’t consider this bit of information to warrant such bravado by the imparter.

Like when a stock broker tells you that the most important rule to investing is to ‘buy low and sell high,’ you know to hold on to your wallet tight.  Similarly, when a real estate agent tells you the three most important rules to buying property are ‘location, location, location,’ you know to run the other way.

A GDO Market Call

And by Wednesday afternoon we found out that he’d failed to mention the law of the yo-yo’s reflexive property.

Tim Paradis, AP Business Writer, explains…

“Stocks pulled back sharply Wednesday, erasing most of the previous session's big gains....  The Dow Jones industrial average fell nearly 300 points after rising 420 on Tuesday.”

Just like that.  Here one day, gone the next.

But then by Thursday it was evident…obvious…and unmistakable to all who’d tuned their senses to the law of the yo-yo.  For on Wednesday, the market had gone down too much.  And based on the law of the yo-yo “…when it goes down, it then goes up.”

Tim Paradis now reports on Thursday’s rebound…

“The Dow Jones industrial average rose about 260 points on the day….  The markets are closed for Good Friday.”

Isn’t this fun?  Don’t you see how it works?  The empirical evidence is undeniable.  The market went up too much Thursday. 

By the law of the yo-yo’s reflexive property, the DOW shall drop at least 200 points on Monday.

Just remember you heard it here first.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  Hope you enjoyed the satire.  For we wouldn’t really recommend trading the market based on The Law of the Yo-Yo.  Not when there are real trading strategies out there that really work – like the Price Appreciation Potential (PAP) strategy used by Half-Priced Stocks.  Learn more about this savvy way for making savvy profits here: Half-Priced Stocks.

 

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