Hoping Is A Totally Rational Investment Strategy

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So shares of UBS moved up after the Swiss banking giant announcedginormous write-downs related to bad debt exposure and admitted it has another $15 billion in subprime exposure. Deutsche Bank raced in with its own write-downs, driving up its shares as well.
We called around to ask people why write-downs equal better share prices, and we were told that people feel that the write-down was large enough that many investors believe they now have written down everything they will need to. "The worst is behind us," they say. Really? That's a line we've been hearing since last fall, but apparently it still works.
Oddly enough, the second place answer is that the write-downs were smaller than expected so people who were massively short the stocks are now covering. This explanation totally undermines "the worst is behind us" rationale but never mind. We're done with trying to figure out why write-downs mean bid ups.

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