Fear rules the market

Posted by Tim

August 10, 2007

After yesterday’s drop and earlier today further downward moves I wanted to make a few comments.

I find it very interesting how some problems for a handful of companies can affect the share prices of so much of the market. When I review the stocks I hold, I see companies growing and profitable, with no reason for a large price pull back being dragged down by the market as a whole.

I have taken a look at purchasing some call options on stock I believe have been beaten down unnecessarily. I have not found any that I want to buy due to very high time premium, but it is something to look at if you have some stocks in the same boat.

Speaking of time premium, the call option prices on Thornburg Mortgage (previously written about here, here and here) are sky high. I saw implied volatility in the 160% range vs. in the low 20’s earlier in the year and 36% a month ago.

Bottom line, I will try to sit back and wait for the Buy High-Sell Low crowd to give up and good companies go back to reasonable valuations.

Fear