The Week in Review: 5.3.10 – 5.7.10
The markets took a beating this week. There is a common perception that the markets’ faltering on Thursday was due to a trading error. This explanation was widely latched on to and used to “explain away” any problems. However, had it been the case that it were merely an error, traders would have moved the market back to an appropriate equilibrium as soon as the error was discovered. Instead, markets continued their plunge on Friday.
The decline may not be any more “real” than any given correction, but it is certainly more real than just some trading error. For the week, the Dow was down 5.71%, the S&P 6.38%, and the Nasdaq 7.95%.
The problems surrounding the “PIGS” zone are more likely to blame for much of the markets’ jitters. The resulting correction may be a buying opportunity- or may be a warning, giving a selling opportunity. It comes down to the question of the Eurozone: can its problems be fixed? Will it be fixed soon?
This week’s factoid: EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, is a favorite measure of analysts. It shows a company’s performance after taking out the effects of accounting and financing. It is also a means by which a junior analyst can make a fool of himself during an investment meeting, and be teased about it indefinitely.