Blair

A Bet Against the Banks

The posting below disappeared from my screen -- I don't know whether or not it was sent out. So, if there is a duplicate posting, I apologize.

I think the crunch time will be this spring, say May - June, when the economy runs out of financing that was put in place 12 or so months ago. Then, there will be a black hole regarding jobs, etc.

Looking at point and figure charts of the principal indices (Dow, S&P 500 & NASDAQ), they all count down to the 2002 bear market low using the May - Dec 2007 top. These lows match the 75 year uptrend from the 1932 low. So, one can make an argument that those numbers should represent a major support point. Of course, don't even talk about the consequences of that level not holding. (There is Blair's (?) axiom that the longer a trend is in effect, the more significant is its breaking.)

The other issue relates to the credit of the US. There was a comment in the Wall Street Journal that with all of the Fed commitments, that Fed bonds would lose their AAA rating if nothing is done about the spending/taxing situation. See the previous paragraph.

On the point of the Fed credit, I think that the credit rating institutions will be intolerant of giving the Fed a bye because of all the criticism of their missing the boat on the sub-prime situation. In other words, they won't give the Fed any benefit of doubt as to cleaning up their act.

It always gets down to when is too low is too low to go into cash. Perhaps this is one of those times that one should just go into a deep hole for a while.