"No terms except unconditional and immediate surrender can be accepted. I propose to move immediately upon your works."
-Letter from Ulysses S. Grant to General Simon Bolivar Buckner
At the Battle of Fort Donelson, General Simon Bolivar Buckner offered his army in an "unconditional surrender," becoming the first Confederate General to do so in the Civil War. Surrender brings conflict to an abrupt halt, and goes by many other names depending on the venue. In the stock market, we call it capitulation. After the Dow gave up 300 points and all the major indices took it on the chin, one would be tempted to say investors capitulated, but I'm just not sure. Obviously, buyers are staying away, but have all would-be sellers dumped...the answer seems to be not yet.
I think we are very close, however.
The mindless concession of our rights to government over the years has put government in a position to dictate so many aspects of our lives. Consequently, this has mitigated the role and responsibility we should still have. For the government, the trick is to look as though the power given up was well worth it, which appears in the form of an easier life. This means we take fewer risks, make fewer investments, but expect less pain and more reward. Toss the Federal Reserve into the mix, and we have a lot of money being moved from one pocket to another, all in a grand scheme to make things look like a better reality.
When the facade falls apart, the reservoir of pain comes gushing out, making us wish we had taken it in smaller doses along the way.
We are in such a scenario now, and yet I can't say investors have offered an unconditional surrender. There were enough investors holding on into the close that might have sold if the sessions had run another thirty minutes. We have to be nearing an exhaustion of sellers in a sane world, but then it gets back to a serious issue of would-be buyers stepping up to the plate. These buyers are smart enough to know they can't turn a free falling market, and are just looking to catch the turn.
Sane World...Insane Outcomes
In the market you want stocks to move up on good news and down on bad news, but after a huge rally last year bad news is magnified in part, because of mounting unanswered questions.
What's going on overseas and what's the real risk to the US economy and stock market?
What's going on with the domestic economy...has it turned the corner?
Did the easy part of the recovery happen already, like autos and home prices coming off significantly oversold positions?