Behind the Scenes of the 340+ drop on August 16th
Everyone should read this article about why the market dropped 340+ points and then recovered it all right before the closing bell that Thursday afternoon less than three weeks ago. The logic goes something like this:
The market tanked on the news that Countrywide, the #1 mortgage lender in the U.S. and financial behemoth, was on the verge of insolvency (let's call it what it is) and would have to tap into it's $11.5 billion line of emergency "last resort" credit that day. But because the market reacted so violently to the news, the Federal Reserve swooped in and 'leaked' the news that it intended to lower the rate at the discount window (and alter a few rules about what would pass as collateral) the next day to make it possible for those lender banks to Countrywide to effectively pass on their Countrywide debt to the Fed. The market shot right back up in response to the news.
I pretty sure I'm not the only other person in the world who recognized that Thursday afternoon that something was going on behind the scenes. Then when the Fed announced the discount window rate cut the next morning my suspicions were confirmed. With that in mind I ask sincerely:
1.) How many decisions take place in Wall Street's inner sanctum that only profit or protect those members of the inner sanctum?
2.)How, as an individual investor, are we to profit or protect ourselves when we are not privy to insider information in situations such as this?