THOUGHT FOR THURSDAY 19 JUNE 2008
From top share author MALCOLM STACEY
Hello Crazy Gang,
A very miserable result for the Footsie on Wednesday. And after a nice rise on Tuesday, too.
Why do these swings happen? Well, the falling Dow didn't help. But do we really think that these ups and downs anre justified on the day's news?
The news may swing shares a bit. But I hold to my personal theory that the big traders just look for any old excuse to buy or sell huge quantities of shares. After all, if the market hardly moved at all there would be no chance of making any money.
So it's possible that these swings either way are cynically engineered just to be able to buy shares cheap from time to time - and turn the resulting up-swings back into cash later on.
As armchair tycoons we can benefit from these swings. The simplistic way of looking at it is that if shares rise one day, they fall the next. This causes another rise, followed by another fall. Stupidly simple in fact.
But does it work? Because if it does, we can buy shares at the start of an up day and sell them at the end of the same session. Then buy 'em all back when the Footsie plunges the day after that.
It's not quite that simple, because there could be some good news that actually sees an improved Footsie two, or even three days on the trot. But in my experience, the up-one-day-and-down-the-next scenario seems very common.
Any road up, there are bigger swings these days than there used to be, so a daily punt on an up or down market possibly makes more gelt than it used to do. If you'd like to make a few investments on the above theory, please be my guest. But you musn't blame me if it all goes wrong. As it easily could. Rocking on.
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