It feels good to be bullish huh?
#1
Posted 17 August 2007 - 07:39 PM
#2
Posted 17 August 2007 - 08:37 PM
But for now, let's party like its 1999.
You mean 1998
#3
Posted 17 August 2007 - 08:44 PM
But for now, let's party like its 1999.
You mean 1998
#4
Posted 17 August 2007 - 08:48 PM
On a serious note...
The Fed has demonstrated its willingness to act. And started with a good move. Plenty of ammo left in the Fed's arsenal. The creative move with the discount rate has really put some confidence back in the market.
Will the banks be willing to lend or not.. no one knows. I'm guessing they will tighten their lending standards and lend to better borrowers for the time being. It will take time for the bad paper to dissolve. Thats for sure. If the banks keep their lending standards reasonable, then the credit quality of the outstanding paper will improve overtime.
Subprime borrowers are out of luck. But some kind of bailout will be engeneered for those with ARMS reseting. Probably through FNM and such.
Sentiment was off the charts negative last few days. As you know, it swings on a dime, so it can go really positive in the next few days. But even with today's move it barely moved in that direction. High put/call, a lot of mistrust and so on.
Sure, problems didn't go away yet. but what does it have to do with the market ? If too many people have been leaning on the short side, they'll get burnt.
Take a look at this one... just one of the examples.
http://www.marketwat.....2C6997DCB220}
Overall what you described is a trading range Fits exactly with what I thought it would look like for the next few month. While the Fed is fighting the subprime menace.
Market nervous > Market hoping for the Fed to do something > Fed does something > Market happy > Something else pops up > Market nervous > Hoping that the Fed will do something > Fed does something > ........ well you get the idea. Not going to be easy.
If we'll have thick bearish sentiment during this wohle process then it will probably end up like 94-95, with a big breakout to the upside.
My strategy of choice here is to buy dividend paying stocks and write calls on them. Since volatility will probably remain high, good premiums, dividends trickling and so on.
Nasdaq will probably out perform though. Just a hunch.
Edited by ogm, 17 August 2007 - 08:50 PM.
#5
Posted 17 August 2007 - 08:57 PM
#6
Posted 17 August 2007 - 09:35 PM
Sorry that 1929 fractal didn't play out
If I thought that fractal would play out, I would've been holding shorts.
I covered all my shorts yesterday, as posted in my blog, and holding only calls since then.
BTW, we're still in the window for that fractal. What small odds it had of occuring, its much less now.
With as much futures short position in the market, its impossible for the market to crash. Ever look at futures position in 1998? Its completely inverse of how it is right now. Thats why I knew it wasn't 1998 either.
But... it could be 1937 still.
#7
Posted 18 August 2007 - 05:47 AM
#8
Posted 18 August 2007 - 09:37 AM
What is the best cure for a credit bubble?
More credit!
Fed lowers discount rate to banks so banks can lend more money
at lower interest rates. And that is good for the credit bubble?
If that won't work, why not Fed issue more repo's ? Surely some more
credit should tide us over?
This is Ponzi scheme in action! Galloping Inflation will be the result.
They tried this cure in other countries. Germany after WW I comes
to mind. We all know how it ended.
This is exactly the same as giving the addict more dope so he can
get over his withdrawal pains.
100% true. This should be nominated for post of the month.