DSB

News Flash: Major Market Turns Aren't Announced In Advance

Tom/Najdorf,

I agree 100% that you can't simply wait for an "all clear" to call a bottom. At the same time, when there are so many atypical risks to the system, you would need a time machine to make the call you did on Tuesday. I only know one guy with a time machine. Najdorf, "Trying to get ahead of them exposes you to huge market risk and prediction risk" is right on the money.

Tom, in my opinion - the real risk in our markets is unknown. We will know more when we have more data, however, things like WFC extending it's window for delinquent debt before it has to report the loss suggests (to me) that there is a lot that we still don't know about the current rates of defaulting debt. In the last 5 weeks, 4 major financial institutions have warned that the US Banking system is in severe distress (and to take cover). In the last 2 weeks, there has been a ban on short selling certain financial stocks, BAC has decided to allocate $3.6B (of taxpayer money?) to support their share price, and Jamie Dimon has said that prime losses could triple from here. (ap.google.com/article/...)

Your logic is sound in a vacuum, however I feel that you are ignoring several inputs to the equitation that affect your thesis, and that the risks associated with these inputs must be taken into account.

Is the risk/reward tradeoff "worth it" at this point, even if valuations are great & the rate of defaults has slowed down? What about commercial defaults as small/medium businesses leave their spaces?

Have the banks written down enough? That is the Trillion dollar question.