Mr. Market Needs to Chill

Yesterday's market action -- in which the Dow veered between 10,827 and 11,123, a 296-point range -- has me thinking of my favorite Bud Light commercial.

I'm sure you know it. One guy, 14 situations, with a one-word reaction to each: Dude.

Dow down by 200 by 10 a.m.? Dude.

Dow back up over 11,000 by 1 p.m.? Dude!

Dow back under 11,000 at the close? Dude.

No wonder so many of my friends eschew stocks. Mr. Market needs to chill, or perhaps take a vacation. Either way, this behavior has to stop. Check out some of yesterday's most active stocks:

Company

Closing Price

CAPS Rating (5 max)

% Change

Day's Range

Wachovia (NYSE: WB  )

$9.08

*

(7.72%)

$7.80-$10.23

Freddie Mac (NYSE: FRE  )

$5.26

*

(26.02%)

$4.68-$6.34

Citigroup (NYSE: C  )

$14.56

**

(4.34%)

$14.01-$15.74

Wells Fargo (NYSE: WFC  )

$20.51

***

(4.91%)

$20.46-$22.82

Intel (Nasdaq: INTC  )

$20.71

****

1.17%

$20.22-$21.18

Microsoft (Nasdaq: MSFT  )

$26.15

***

3.98%

$24.93-$26.64

Cisco (Nasdaq: CSCO  )

$21.04

****

1.22%

$20.72-$21.43

Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.

To a Foolish investor like me, these swings bespeak long-term opportunity. But I've been investing for a decade. It's easy to watch Mr. Market thrash about like a maniac and decide that he's certifiable.

As CAPS investor ThePriceGuy wrote yesterday:

I participated [in] a stock picking contest the first half of this year. After I made a quick profit from some stock positions, I did not have confidence in the market anymore.... I exited all of my stock holdings and stay holding 100% cash ... Do I really need to hold some stocks to qualify as [a] money manager? Pure cold blood cash does not count?

Sure it does, ThePriceGuy. But history says that now is an excellent time to buy -- maybe. We don't know whether we're at the market bottom, or the beginning of the sort of multiyear bear market that clawed at portfolios in the early '70s. The Dow Jones index fell 45% between January 1973 and December 1974. Stocks ultimately recovered, but an energy crisis, war in Vietnam, unchecked inflation, and a rising adversary in the Soviet Union kept a lid on consumer confidence for much of the ensuing decade. (Former president Jimmy Carter spoke of a "crisis of confidence" in 1979.)

Are the eras comparable? A Web search of the terms "1973 stock market" and "comparable" says so. It's enough to make newbie investors paranoid -- me, too, if I didn't already know that better days were ahead.

What's that, Mr. Market? You're selling again? Dude. Chill.

Intel and Microsoft are Inside Value picks. Try this market-beating service free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned at the time of publication. Tim is a member of the Rule Breakers team. The Motley Fool's disclosure policy is so money.


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