More Pain on The Way
A 500 point drop and solidly below the psychologically critical threshold 11,000.
What's next?
The basic trend is down - corporate profits are slowing. The pace of fall will be driven a lot by the dollar & interest rates. The Fed would like to keep the economy ticking away with more interest rate cuts. And easing commodity prices give them much needed latitude to do just that.
A problem is that lower interest rates tend to weaken the dollar. That's a problem only insofar as the Fed needs other countries to buy Treasury notes. It's hard to entice buyers to stock up on even more eroding assets.
In fact, I suspect that Lehman Brothers was allowed to fail because China and others signalled that they wouldn't put up the money.
On the other hand, the volatility and expected market crash is driving a flight to quality - back to Treasuries.
In addition to the dollar question, the major issue now is a scramble for cash. Hedge funds in particular are net sellers of equities. This will push the markets down even further.
We are positioned awkwardly.
The positives - The Ultrashorts, QID and DUG
The mixed: ETFC dropped below $3, but I am not worried. This is a long term play.
The bad: MUR and the calls.
The calls could breakeven if one or two rally. BIG, for example.
But the Puts are the big problem. With 4 months until expiration, I am more than a little concerned. I am counting on this quarter to put some fear into retail stocks.
The puts aren't performing at all. I am amazed that HOG won't crash despite the obvious
What's next?
The basic trend is down - corporate profits are slowing. The pace of fall will be driven a lot by the dollar & interest rates. The Fed would like to keep the economy ticking away with more interest rate cuts. And easing commodity prices give them much needed latitude to do just that.
A problem is that lower interest rates tend to weaken the dollar. That's a problem only insofar as the Fed needs other countries to buy Treasury notes. It's hard to entice buyers to stock up on even more eroding assets.
In fact, I suspect that Lehman Brothers was allowed to fail because China and others signalled that they wouldn't put up the money.
On the other hand, the volatility and expected market crash is driving a flight to quality - back to Treasuries.
In addition to the dollar question, the major issue now is a scramble for cash. Hedge funds in particular are net sellers of equities. This will push the markets down even further.
We are positioned awkwardly.
The positives - The Ultrashorts, QID and DUG
The mixed: ETFC dropped below $3, but I am not worried. This is a long term play.
The bad: MUR and the calls.
The calls could breakeven if one or two rally. BIG, for example.
But the Puts are the big problem. With 4 months until expiration, I am more than a little concerned. I am counting on this quarter to put some fear into retail stocks.
The puts aren't performing at all. I am amazed that HOG won't crash despite the obvious
posted by Andrew at
8:47 PM
1 Comments:
Fed injecting billions to the market .This swap arrangements to last till January 2009.
With interest rate at 4.0 per cent. Commercial banks can borrow the dollars by using their own financial assets as security. So this is going to be a repeat of July ? Commodity prices will raise and dollar week?
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