For anyone picking up this post from a feed or content aggregator the word catharsis in the title is struck out as the current action is neither cathartic nor cleansing, at least not right now.
As I type this the SPX is down 40 points which isn't even the largest point decline this month. Maybe my thinking is off but the issue I am trying to raise is that the decline today after Lehman's failure may not be large enough for people to freak out, I'm talking about people that don't follow the market as closely as someone inclined to read a blog.
If I am wrong then ok but people have seen declines of today's magnitude several times this year. I'm not sure that yet another 3% drop triggers panic..
Wikinvest Wire
16 comments:
We've all got to hold our nerve. We will come out of this, and there won't be a recession, let alone a Great Depression like some doomsayers are predicting.
i'm far from a gloomy gus but no recession?
You had to jinx it with the "only down 40"?? ;)
lol,
tomorrow's post will try to follow up on this tomorrow
Roger, I know you're not gloomy. Okay, maybe there will be a light recession, but it will not be the end of the world. Some people in the media seem to be getting off on predicting disaster.
I agree with you Roger. We're not done yet.
I doubt that we are done yet, as I am still looking for a "normal" bear decline, here.
Sentiment is frequently an excellent gauge of market bottoms, but there is this little thing called solvency the law requires of financial institutions.
The sky will not fall and we will get through this but it will take a lot longer to work out all these bad debts. It does not matter how much worse sentiment gets we will also need the bad debts to be worked out as well.
Roger, your "only 40 down" post gave me a big chuckle - reminded me of a Rocky movie "Is that all you got? Is that all you got???"
I think we might have reached a short term freak out level today but my sentiment indicators haven't reached an intermediate term freak out yet.
It's past nine Atlantic time and the guy interviewed on the radio termed this the most serious crisis ever, including that of 1929. AIG is next and CitiGroup appears to be next on the horizon. I understand Bush has refused to hand over twenty-five million in the severance package the heads of Fammymae and Freddymac were seeking. Good for him! Willy
Roger,
I am and will remain a long time reader. I think that your post today is on point - yes, there was a sell off towards the end of the session, but I think the forward VIX is telling us that the market is already anticipating the worst to end sometime in this 3rd quarter.
(Which ironically could be a strong signal that this is not the catharsis/capitulation that everyone seems to think will be a leading indicator of "all clear.")
But that search for a tried and true signal does point out something of the "art" of financial commentary: some shibboleths persist (the need for a cathartic selloff), while some historical references are thought to be less meaningful ("times have changed since 1932").
In fact, everyone's right, and no one's right. Retail investors now have tools at their fingertips that were beyond even the professionals in 1987, and which do the work in real time that was otherwise overnight crunching in '99. Things/tools/information access HAVE changed. Emotion has not.
But my point, and my critical perpsective on what can occasionally come across as "titanic-captaining" ("everything's under control... seen this before... we're a [newfangled ship] and what's a little iceberg [systemic interconnectedness and ubiquitous exposures that undermine the meaning of diversification]") is that lumping some of the causes of the current "normal" market volatility in with their historical precedents, ultimately defeats the premise of the thesis that "things have changed from 1932."
You see, I think things have changed, but I don't think we will see (except in hindsight) how the changes have failed to insulate us from the problems that are causing the truly unprecedented events in this market environment. There was no FNM/FRE in 1932, nor were there credit default swaps or CDOs that directly linked school districts in Wisconsin to Saudi investors dabbling in derivative products. Etc, etc etc.
I may have failed to express my appreciation (this time or in my last post) for the constancy and rational common sense that you consistently bring to your observations and analysis. My apologies. I have, in the time that I've been reading this blog, evolved from an investor into more of a trader. I do recognize it is unfair/inappropriate for me to bring criticisms borne of a active trader's mentality to your views (which I consider to be valuable investment advice).
You've never postured as a cheerleader, and I intended no such criticism. I think, however, that working through these problems will take the financial sector (which is by no means the entire market) a good deal longer than what might be implied/inferred by the term "normal bear market". This is, for the financial services industry (and certainly for the individuals, like myself, who've worked therein) far closer to a depression/paradigm shift than something that can be graphed and dismissed at a particular percentage.
Just my thoughts.
Keep up the "steady eddie" singing, it may get us through this Krystalnacht yet.
All the best,
R in NY
Rick thanks for the good stuff and the kind word.
A rhetorical question; does that fact that the first time SPX closed at 1192 was in Nov 1998.Is it possible that the magnitude of the rotten round trip in the last ten years addresses a lot of the problems we have which could spare us from from SPX 700 or whatever?
Hopefully I have been clear that I don't care about being right, i think that the way I am positioned will be effective no matter where it goes. I have an opinion and I share it but that is far from important.
yes Roger I think I am also right, but, how long will it take this time to prove we were right?
One should also keep an eye on the geo-political fallout of the present situation. By not directly intervening in the Lehman and Merrill Lynch situation, it sets the stage for AIG and a few other companies with a large international presence to go belly up. The United States can withstand this situation, as can almost all allied countries, but look at our two main adversaries, Russia and China. Chaos.
I would be willing to bet that someone in the White House knows the wrath of major economic failings have stopped both economies and to a certain extent their expansionist foreign adventures dead in their tracks.The political decision of which entities to prop up or fail
has more of an international power politics agenda than is suspected by those focusing on the financials alone.
T
The S&P minis are trading at session lows, off 19 pts (-1.6%) from the close of trading in NY. Nikkei is down 5.5% at 10p NYT as they were closed Monday.
And Moody's kicked over the last can for AIG, with a downgrade. AIG may be done, and the great unwind that follows that will cause some hair pulling.
If we have another 500-700 pt down DOW day, we might actually see Roger's 1095 SPX before the end of the week. I suspect a lot of what will be done in the next 4 days is sector rotation as funds seek and find that with the least financial exposure.
Got any ideas for well capitalized, mostly debt free midsized (nimble) companies that are at least tangentially related to the green revolution?
R in NY
"...The political decision of which entities to prop up or fail..."
I would hope the current administration is not using this time of economic turmoil to pursue its' political objectives. However, in light of decisions made in the past 8 yrs, this may be another of their ill-advised moves to the demise of the American populace. Ideology anyone?
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