Word: downdrafter
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...have devised a market for blood that allows a bat to call on other bats when they find themselves with a temporary liquidity crisis. By contrast, when investors faced margin calls during the market free fall on Tuesday, brokers dumped customers' stocks, inflicting pain on clients and accelerating the downdraft. The vampire-bat comparison may be comical, but it points to a vulnerability of today's markets that should give pause to investors who play the market swings...
...margin requirement or dump stocks you already own to raise the money. If you don't, the broker can sell your securities--and will he ever!--without notifying you. Given the historic level of margin debt out there, a wave of forced selling could lead to a violent downdraft in prices and possibly end the nine-year economic expansion...
...trick, then, is to keep enough money in the safest high-grade bonds (and in cash) so that you can live off that money--along with your Social Security and pension--during any five-year downdraft in the stock market. That way you're unlikely to be forced to sell your stocks when their price is down. Any money you won't need for at least five years should be invested in a diversified portfolio of stocks or actively managed stock mutual funds...
There have been exceptions to the downdraft, including corporate spin-offs such as Lucent Technology, AT&T's renamed manufacturing division, launched in April for a record $2.7 billion, or $27 per share. Investors pushed the price to $30.63 the first day of trading and have remained bullish on it ever since. It closed last Friday...
Until VORTEX, the competing hypotheses about tornado formation could not be rigorously tested. The downdraft theory, for example, was bolstered by storm chasers' sightings. Observes Erik Rasmussen, field coordinator for VORTEX: "What storm chasers see first is a big dark cloud, then a bright spiral slicing into the base." The problem is that the flow of air within a big storm is so complex that what the eye sees cannot always be trusted. Hence the need for measurements...