Thursday Outlook: Commodities, Emerging Markets

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Like I said, by the time I got to the end of this post there’s already more breaking news. This time it’s a story/rumor Morgan (MS) and Wachovia (WB) are having merger talks and that WaMu (WM) has put itself up for sale. When we wake-up Monday we may have a completely different financial landscape. Lots of good people will lose their jobs in consolidations and perhaps more bankruptcies. But financial firms are in full panic mode.

This week isn’t even over and there are more thrills and spills yet to come.

One thing I’m not seeing yet is complete capitulation. That may still happen. We’re getting close and are deeply oversold.

There’s nothing wrong with carrying large cash positions. We’re nearly 80% in cash with the balance in short positions. Some days you wish you had more of the latter and others not. You either trade this market in very short time periods, or with conviction and lots of courage.

Just remember, the biggest mouth on Wall Street and on TV is not permitted by his contract to short. He and his sponsors want you to “buy, buy, buy!”

Let’s see what happens next.

Have a pleasant day.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in SDS, QID, SMN, SIJ SDP, IEF, TLT, EEM, EEV, EFA, EFU and FXI.

Comments

[Winston Smi...:]

If you are hoping to see complete capitulation, wait for your large cash positions drop below a dollar per share. If money markets go, we are in big trouble.
Someone tell Chris Cox to go investigate Mr. BUY, BUY, BUY!

2008 Sep 18 08:46 AM

[Internet2k4:]

There are going to be a lot of wrong calls about equity market capitulation, when we haven't seen the housing market capitulate yet. Of course there might be some more extended tradeable rallies, like last summer's. Any mark to market accounting right now is just an exercise in hallucinatory seller optimism or buyer pessimism, Three or four months of Case Shiller uptrend might tell us this is over, and even that might be misleading if it's only due to another wave of Treasury deficit "stimulus" from a Democrat Congress.

2008 Sep 18 09:08 AM

[bbowen7:]

This Chinese article is very significant. As McCain and Obama call for new regulation, the winner will not be able to do it alone. The global dominance of our currency would seem to be over.

2008 Sep 18 12:04 PM

[davemcc3300:]

McCain is right: dump Chris Cox !

2008 Sep 18 12:48 PM

[Emerald:]

McCain is very late to the party!

2008 Sep 18 01:47 PM

[Yankee Runn...:]

I have been enjoying this post since March. The comments seem to fit into my way of seeing the world, very refreshing. Enough of the intro, I'll cut to the chase.. I'll ask three questions

You brought up a very interesting "incident" with CNY. It dropped from about 36 to 30 in one hour with no movement on the Yuan. Is this the result of some derivatives gone bad or one of the financial backers choking on its own black hole?

One of the money market funds is now at 97 cents. Is this more derivatives going down a hole... With so much cash in money market funds, do you think they are at risk?

TIP is slowly going down hill. I bought some in Feb at 107 and have been pleasantly surprised with the yield. In seven months of monthly dividends, the annual yield is at 7.78%. Not bad for AAA gov bonds. Maybe somewhere in the government data banks, there is a real number on inflation?

Yankee Running Dog

2008 Sep 18 02:10 PM

[pchris:]

David, thank you for your time and effort in posting your charts along with your insightful comments-- great visual guides during this period of chaos in the markets. Looking forward to learning more from you in your webcast with Proshares next week. Keep up the good work.

2008 Sep 18 02:34 PM

[L Moore:]

Capitulation came today but not in the markets. In DC the politicians are ready to go into recess early. "We don't know what to do" Reid said..

Maybe they should show some leadership skills, stay in secession and come up with some ideas.

2008 Sep 18 05:20 PM