Expert: Paul Henneman - 2/27/2009

Question
I have a real problem with how people trade the markets these days.  When watching anchors interview people on networks such as CNBC all they talk about is where the bottom of the market is.  So my question is, if everybody who participates in the market can agree on a bottom, wouldn't that in a sense create the bottom?  How can people individually predict a bottom? It doesn't make sense to me.

Answer
Todd,
  Thank you for your question!
Yes, essentially you are correct. If enough people believe in a certain bottom for the markets, then usually it comes to be. However, the problem is that rarely do you get that kind of consensus. I certainly don't see it yet. There are analysts out there who think we have already hit the bottom and to buy everything, while other analysts say that the Dow Jones could get below 6000 before we hit bottom (another 10 to 15% drop).  So while I do agree with what you say in that if everyone agrees, then it should be the case, I disagree that everyone is in agreement regarding the current downside to the markets.
   The media channels often have the same small group of analysts that they call on for their financial news segments, so it can certainly appear that there is a larger consensus than there really is. I would suggest that you seek out as many different sources of information as possible. For example, there are some excellent print publication such as The Economist and The Financial Times.

I hope this helps, please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com