Originally Posted by
simpleflyer
Stock markets aren't rational. That was the point I took the poster to be making.
They aren't necessarily indicators of anything except momentary emotional reactions, or computers trading against each other.
OK, we're getting a bit off topic, but as a PhD economist and an institutional investor for over 30 years, I can assure you that the US stock market is a hyper efficient discounting mechanism that isn't a chat among computers, or unsupported emotional reactions. It would be easy to make money on stocks if it was either of those things. It isn't - something that is a trait of a highly efficient market.
The behavior of UA stock today was precisely what one would expect. It fell on substantive news about a potential UAL earnings hit - one coming from potential hits to traffic both here and in Asia. By the market close the company lost about $150M. Not a big drop because when the dust settles, this will likely go the way of most of these things. Munoz is already saying the right things. Despite threats of a boycott, little of substance will likely happen to traffic and the company may even use this as an incentive to improve.
Sure, today's stock movement isn't outside of normal volatility, but it certainly responded directionally to the news and both Delta and AA were up materially - so UAL clearly lost ground to them. That correlation wasn't random. An investor would have made a few bucks shorting UAL and going long any of its competitors.
Sorry, but this kind of event means a lot to pension plans and 401k's even if you want to make light of it. Read Burton Malkiel's "A Random Walk Down Wall Street" (now in its 9th edition) if you really think stock prices just reflects animal spirits.
End of lecture.