State Street (STT) remains down about 50% today after warning on earnings and raising concerns about serious damage to its balance sheet. But today aside, let’s go back to last November when, seemingly out of nowhere, the stock fell below $30, beforre quickly rebounding to the mid-$40s. At the time, everyone thought the market was crazy. That there was no way there could be anything wrong with State Street — a boring old investment services company.
Well, turns out, only the talking heads were wrong. The stock market nailed it, only it didn’t punish the companyt hard enough, since now State Street is at about $19.
This is important to remember everytime you hear anyone complaining about how market prices are temporarily irrational and that they know better. This isn’t to say that sometimes the herd can push too far in a given direction. That happens all the time. But on balance, you should be inclined to trust the market more than an individual who swears the market is wrong.
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