Moral Hazards Amok

Are More Big Falls Ahead?

I take it that no one here is playing this little bear market rally? You’re leaving money on the table.

Can’t you just hear the drum beat of clueless commentators stating that the market in undervalued, there’s an incredible amount of cash sitting on the sidelines just waiting to get in, that the Fed’s printing presses are running red hot and so we’re now set up for the biggest bull run ever, etc, etc, …

All this should make for quite a significant bounce. After it sucks in the masses and tops out, then go short.

The Crash of 2008

This article seemed to generalize what’s going around in much of the popular media. More meaningful specifics would have been useful. I’d also like to empathically agree with what ddtuttle said and expand a little there.

3. imho, we have had far too few meltdowns of this severity to reasonably game where this current one will end and a new bull leg will begin, or how high the rally will go. I would think that we would need at least a couple hundred meltdowns to gather statically meaningful trends. Too many people from Cramer to Roubini compare this crisis to 1987 or 1929. Today’s crisis is neither because important dynamics are so different. Sorry to use the overused cliché, but we really are in uncharted waters. Throw away the book on those past episodes when it comes to predicting the current market. They don't apply, imho.

4. It would have been nice to know what specific measures the author was referring to. VIX, Put/Call ratio, magazine covers, newsletter authors, men’s beards? Not all of these indicators are yet at pessimistic extremes. Also, how do we quantify “maximum pessimism”? I would be willing to bet that at the bottom of every economic crisis the population believed that things indeed could get much worse, and guess what, they were right. So how do we know when we’re really at a bottom?

That being said, my technical indicators suggest that we may indeed at a short-term bottom and ready for a good bounce, so late Friday I stuck my toe in the water and bought calls in ABK and IDEV. But I used specific (albeit rule of thumb) quantifiable indicators. We shall see.

The Devastating Week That Was

Excellent insight and commentary, Whidbey. Some of the best I’ve ever seen.

But it’s much more fun just to do a populist tribal dance around the camp fire with our spirit masks and spears and blame all this on Jim Cramer.

Think of These as Short-Term Troubles

If you can keep your wits about you while everyone around you is losing their's…


Perhaps it’s because you’re just not understanding the situation. The great credit superbubble has burst.