A week of butchering bulls has left the hunters craving a change of diet. And geee. all the free ammo they want. These whipsaws are just more evidence that a bunch of people have forgotten just what their jobs are supposed to be. Why do I feel like the responsible son whose little brother with a gambling and substance abuse problem? He is running to mommy who is more than willing to spend all her assets and our potential inhieritance to enable his behavior.
24 comments:
I hate Fridays as you can never tell what they mean.
Most the big boys left last night for the Hamptons, as this is prime time on the beaches. Well except for the 250 that got wacked at BS...
Wait til next week.
I have a hunch the carnage will start again. If not, then right after labor day.
Ben has 2-3 weeks to figure out a long term plan, else the Fed will be reacting instead of leading.
H
Oh yeah, first!
The Fed is actually doing what they are supposed to. Keep the panic out of the market. Now if that is all they do, the market will still decline and work its excesses out. I predict by the end of the day, the market will be back near where it started this morning.
The market will be back to near where it started well before the end of the day. The question is where it will go after that. Market movements that would have happened over a day or a week are now happening within hours, sometimes minutes. This volatility is absolutely crazy, and it makes trading the markets nearly impossible, as you can have a position crushed within a matter of minutes.
The Fed is *not* doing what they're supposed to be doing. Cash injections, and even the rate drop, have not decreased volatility, they have only served as confirmations that something is seriously wrong. Every time the Fed or the ECB has intervened the markets have only become more unglued. The best that the Fed can do at this point is stay out and let the craziness go until things have stabilized.
Imagine the craziness if the Fed did not act at all. It is possible for us to go into a depression if people lose faith our institutions. The cash injections and the rate drop have dramatically decreased volatility. It is just that there is an awful lot of adjustment that still needs to occur.
you are right about the Market hitting its starting point early. It has already dropped 200+ of its 300 point morning gain
Once the curbs went in and the volitility driven program trades were sidetracked the sentiment of the real market took back 200 of the 300 points. If the curbs come off there might be another uptick, This isn't trading, or investing. This is the worldwide central banks giving some players $400 billion in free chips to try and wipe out the real investors.
Seriously, there needs to be trillions in assumed asset valuation and/or liquidity taken out of the system. I calculated $7t from the US residential housing NAV alone.
I disagree on volatility and the Fed. Pull up the VIX chart and put arrows where the Fed and the ECB have intervened; volatility has sharply increased only *after* the Fed interventions.
I do not think that the Fed can change the direction of the market, the only thing they can do is push back the necessary adjustments. They're attempting to do just that, as that's exactly what Wall Street needs--time to unload losing positions onto retail investors. But the more the Fed tries to keep the market afloat, the more unstable it becomes. Even worse, public confidence in the Fed and the markets is disintegrating as the general public starts to see the regulators as serving Wall Street rather than the people and the economy.
Bank run at CFC. All is well, remain calm.
@Rob: "This isn't trading, or investing. This is the worldwide central banks giving some players $400 billion in free chips to try and wipe out the real investors."
You're absolutely right, this is simply market manipulation as the investment banks--with the assistance of the Fed--try to create a window for themselves to get out of difficult positions.
I'm not convinced it's working, however. One of the serious problems Wall Street has is that the retail investors--the intended dumping grounds for bad positions--are still in their vacation season, and while they may be watching the news, I don't get the feeling that they're very actively trading. Foreign investors--the other dumping ground of choice--have their own problems as overseas markets are also in turmoil.
That means that it's short sellers, speculators, and day traders who are holding up the buy end. That's thin support, and it shows, as virtually every rally over the last couple of weeks simply hasn't held. As soon as any buyers at all show up, they're deluged with sell orders from hedge funds desperate to de-leverage.
The big question is how the retail investors will react as they start returning from vacation over the next couple of weeks.
The Feds cannot change the direction of the market. The best they can do is slow it a little. If the public sees the Feds as serving Wall Street instead of the public it is devastating. Where is the VIX chart? The Feds are trying to intervene to stop a market meltdown. I would seriously question and chart that shows volatility would have been less without intervention.
@Rob
The $7t is a reasonable figure. That is around $70K per US household. The only way I see us clearing that up is through inflation. Do you see other routes?
I don't think the retail American investor is going to step in. The investors in my parents age already have their money in conservative investments. The baby boomers would need to be able to pull their money out of real estate to invest.
I do not know about foreign investors they may be able to step in.
PV, we see the same things.
The problem the IB and "institutional investors have is that they've been degrading their own portfolios. They've been selling the good stuff; Apple, Boeing because they don't dare "mark to market" their MBS exposure. They were using that cash to wait for things to get better. They are more than happy to use Fed cash instead. And greed, the pop in the financials yesterday. I mean GMAFB. I used to use Peter Schiff as my personal out-of-bounds marker. If I found myself on his other side I thought I was being overly pessimistic. Now he makes scary center-of-the-fairway sense.
Any more of this nonsense or if the secret of the IB bailout aspect leaks out and the US retail investor is goimg to riot. And understand nothing, absolutely nothing in the market segments can stop that once it starts.
The VIX is the CBOE's volatility indicator; it's not a perfect measure of volatility, but it's heavily used by market analysts. Typically low values are bullish, high values are bearish, since declines tend to be much more disorderly than advances.
VIX 1-Year Chart
Even more interesting is the long view:
VIX 15-Year History
Volatility start moving up late July (as the Bear Stearns funds ran into trouble), but has only spiked in the last few days; it's now approaching highs not seen since post-9/11.
The $7t is a reasonable figure. That is around $70K per US household. The only way I see us clearing that up is through inflation. Do you see other routes?
A little inflation, a little mark to market through foreclosures and short sales, a few consumer shifts in spending patterns, a little confiscatory tax policy.
And it isn't all horrible. I've done my part. Since the peak I've given back about $300,000 in my primary residence. Big whoop. $1.4m to $1.1m. It might go as low as the high $700s if there is the combination of lending, general and local economic factors I forsee. Hey, I live on a golf course in a 4br on 3/4th acre for less than $90 per day. Much, much less.
The point is some of the "evaporation" will come from the 30% of homeowners with no mortgage and long time frames where it will get lost in noise and time. Some like me from imaginary appreciation and some from investors who really were investors and thus braced for losses.
For the people we are focused upon however it will be brutal.
OT, but someone posted on CH.C that Casey is now sending LinkedIn requests, saying that he's currently doing investment and marketing "consulting."
@TJ and Dawg,
The life coach IS still trading his deed. I just got a response from him to my inquiries.
Available "for a very short period of time for trade only."
Yep. He just discovered that he was being scammed by whomsoever made it a done deal. He just "visioned" success and then it was merely a case of waiting for success to come.
"Trade East Bumfuck stuccobox encumbered with 180% LTV for free and clear $100k property."
WTF is this guy smoking?
I think he is smoking "BigWilly" Rob.
As for the market, anyone who doesn't believe that the market is going to crash and burn in the next few months, worse than what we have already seen, probably also didn't see the housing bubble pop coming. Like the housing market, they are just infusing money into the situation as a temporary stop gap, sooner or later, the whole house of cards is gonna fall as the law of supply and demand takes over (ie everyone is gonna try to get out of the market at the same time)
Just take a look at the housing bubble web site, where they say how everyone is trying to take their money out of Countrywide bank at the same time because of fear of bankruptcy..ya think that is helping countrywide any?
What are they gonna do, put a stop on all withdrawals?
Putting a stop on withdrawals is very much in fashion these days, all the hip cool hedge funds are doing it. Let's just not use the words "run" and "bank" in the same sentence, people might get scared and think that there's more going on than a short-term temporary correction.
I cannot wait to see the early reports on hedgie redemption "requests" and even MMF reallocation.
More and more I hear "loan withdrawn" or similar. I guess that sounds better than "Sorry, we don't have the money to lend you."
Is Commercial Paper actually CP when it lent to Countrywide?
In deference to both sides, I present a different view from Ben Stein.
http://money.cnn.com/galleries/2007/fortune/0708/gallery.crisiscounsel.fortune/13.html
I love the phrase:
Bulls make money
Bears make money
Hogs get slaughtered
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