Bear Face Photo


Behavioral Economics 

 Making money in the markets is all about realizing what the stampeding bulls and bears are going to do before they do. Yesterday, the fact that we had to bail out AIG again was not “built into the market.”  The bears, in this case, said “Again, more money for AIG“  and groweled. They did not realize how bad the situation really was and all stocks suffered in a bear stampede. “Again” was not built into investors considerations.

Investors411 has brought you the news from across the pond that the Bank of Scotland has transparently admitted to $722 billion in troubled assets (see yesterday’s blog). We invented credit default swaps and other insurance scams in our deregulated unsupervised supposed “free markets” It’s perfectly reasonable to assume that the bulls and bears don’t yet realize just how large the losses are for any institution that traded these toxic assets. 

As investors wake up to the fact that the hidden losses of almost every company trading toxic debt are bigger than they imagined, stocks are falling. Bank of America, Citigroup, Wells Fargo and at least dozen other major and many minor institution are probably just as bad off as Bank of Scotland.

So far we’ve given AIG $180 billion and the Bank of England has backed over $400 billion in “troubled assets” or toxic debt (see yesterday’s blog) for the Bank of Scotland.  The investing bulls and bears do not seem to get it. There’s a lot more bailouts to come.


Why All Stocks Suffer 

If the banking system collapses or continues to implode loans do not get made. If loans stop so does most commerce. So everything from mom and pop companies to a outperforming tech giant like IBM suffers.


Why All Countries Suffer

Lehman Brothers collapsed and its debt rippled throughout the financial institutions across the world. Countries like Iceland and Latvia are in meltdown politically and economically in part from the Lehman collapse and in part from using the same insurance scams Lehman used.

A whole mess of developing countries bought into this supposed “free market” system.  Cut taxes, cut the regulators, cut government, cut enforcement, cut rules and just let wealthy capitalist do whatever they want.  The system will regulate itself. Baloney! Simply put they stole your money, your future and your kids future. Now those countries who fell for this baloney are living a nightmare.  Almost all of their market have collapsed far more than the 55% drop in the USA.  Remember The Great Depression led toWorld War 2.


On The Right Recovery Track?

If we learn from history and stop believing in the people who dug us into this economic nightmare we will be on the right track. Yes, Obama has crafted an economic plan that moves us forward. But unfortunately is may not yet be bold/big enough to dig us out and its going to need at least a couple of years to get off the ground. Why? –  Because the economic hole we dug is so very very deep. 




Index Percentage % Volume
Dow -4.24% down
NASDQ -3.99% flat
S&P500 -4.66% down
Russell2000 -5.45% -


Technicals & Fundamentals

Rally Ho ?- We had at some sort of capitulation or climax sell off over the last two days. Both the significantly higher volume and the significant price drop (6%+ for major indexes) indicate this.  This means, at least for a while everyone whose going to sell already has.  Today traders with short positions should get forced to cover them and stock should get a technical bounce. 

This was NOT a major capitulation the volume and the loss would have to have been greater. Also, the VIX which measures the amount of fear in the benchmark S&P is not nearly as high as it was in November. Therefore, the level of panic is not as great. See chart

The benchmark S&P 500 closed almost directly on 700 and is 41 points away from its significant resistance level at 741.(see chart on right)  The first step in any budding rally is to get past the broken support level. 

If we do not get some kind of snapback, short covering rally today anyone long stocks is in more deep do do.


Long Term Outlook BEARS RULE


See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more


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