By: musicwhiz Investopedia defines the word "capitulation" as the act of surrendering or giving up in the stock market. Investors try to sell equities in an effort to get out of the market and into less risky investments such as bonds or commodities. True capitulation usually involves extremely high volumes and sharp declines and it a symptom of panic selling. In other words, it can be said that people totally ABANDON hope that they can recover their losses and just painfully sell and take their losses. This kind of behaviour is akin to surrendering yourself to the whims of Mr. Market and totally giving in to his pervasive influence. In the past week, we have seen an upheaval of sorts. The collapse of Lehman Brothers, the bailout of AIG by the Federal Reserve (using US$85 billion) as well as the merging of Merril Lynch into BoA and the subsequent sharp share price declines for both Morgan Stanley and Goldman Sachs; all point to a massive shift in the financial landscape which makes up corporate America, and Wall Street. Once great names, these companies were brought to their knees as a result of years od excesses and re-packaging of "risk", thus creating a bubble of complacency which ultimately led to their financial doom. This issue has probably been debated to death in the financial press and even books have started to be written about the sub-prime crisis, so I shall not delve too much into it myself. In the most recent news, the USA Government has asked Congress to approve a plan to buy up US$700 Billion worth of toxic mortgages, in what is turning out to be the largest financial bailout since the Great Depression era of 1929. Read more...