Capitulation!

It's an interesting word that I saw my friend use and with some investigation, here is the defintion from Investopedia.

A military term. Capitulation refers to surrendering or giving up. In the stock market, capitulation is associated with "giving up" any previous gains in stock price as investors sell equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.

This is truly how the market is looking like. Of course, there is always a positive side to every thing. Hence the Chinese concept of crisis (危机), where every danger (危) and there is also opportunity (机). The quote from investopedia continue.

After capitulation selling, it is thought that there are great bargains to be had. The belief is that everyone who wants to get out of a stock, for any reason (including forced selling due to margin calls), has sold. The price should then, theoretically, reverse or bounce off the lows. In other words, some investors believe that true capitulation is the sign of a bottom.

The question to ask however it, where is the bottom? This is a confidence crisis like no other.

It's really anyone's guess but someone will definitely become stronger because of this and make it to Time Magazine some time later as the Man who profited from the fall, be it in real estate or equity.

So what caused this capitulation?

My honest opinion was the American people themselves. In their own self-interest, they had failed to act in the enlightened self-interest of the commuity. They wrote to their House Representatives to boot the first bailout and it worked because of the political pressure they could exert at this time. People's choice over doing the needful thing.

With the failure of the first plan, the psychological effect of the first strike is lost. Then of course when the second plan showed up, it had so many add on and safety caveats, it was like trying to fight a financial "World War" and yet cautionary to avoid causaulties and fearing engagement. Without the empowerment to act, the government was crippled, the faith of the investor's in its ability to save the market is lost and the market melts.

Now with the poor, soon-to-be retirees watching their 401k get pounded, I think I can claim this as a classic case of shooting one's own foot.

Don't blame the Republicans, don't blame the Democrats. It was really your choice.

So what of this election now? I think the winner of the election might just be the biggest loser yet from inheriting this great mess.

Anyhow, sadly I must say that both candidates have absolutely nothing to show for getting things back on track. Although I support and like Obama to be the next president, his policies will likely not help get things on track.

Sigh.