- The Bailout Blues: A Lesson on Expectations

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The Bailout Blues: A Lesson on Expectations

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The Bailout Blues: A Lesson on Expectations

Wednesday, 01 October 2008

By Charles Delvalle
After Congress failed to pass a $700 billion rescue package on Monday, the market nosedived 777 points. It’s suffering a case of the “Bailout Blues” and it shows you a lot about expectations.
In this case, an expectation wasn’t met and a huge emotional reaction followed as investors let fear overtake logic. They thought that we might end up in a crisis as bad as “The Great Depression”. The market sold off in a huge way as a result.

But here’s the thing: emotional decisions can inevitably lead to big swings in any given stock or market. That means there are big opportunities for you to make money.

The lesson here is clear. While it’s important to know the fundamentals of a market or a given company, it’s equally as important to figure out what the markets expect. So the next time you’re looking at a company, try to see what the market expects from them. Then determine what would happen if the company failed to meet those expectations.

If you have a good answer to both of these scenarios, then you should be well positioned to profit regardless of what happens.

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