Friday’s Markets: “YEEESH! That was fun…"
In a nutshell, we are witnessing the corrective nature of the markets when it needs to expel a poison. Aggressive lending practices and a general disregard for risk has forced it to occur in a violent manner. It is a cleansing process that allows for the cream to rise and the crud to fall. More importantly though, it is a salient reminder to regularly look beyond what is happening today to what may happen in the future.
Here (in a somewhat prioritized order) are what seems to be the biggest issues facing the markets and why we should see continued volatility during the next several weeks:
1 ) Sub Prime Worries and illiquidity of the markets
2 ) Lack of significant advanced intervention by FED
3 ) Sloppy business practices by corporations looking to boost earnings at all cost
4 ) Record share Buyback programs artificially boosting earnings
5 ) Buy on the dip mentality – that kept pushing the markets regardless of poor fundamentals
6 ) Once again thinking that “this time it will be different”
7 ) Historically weak dollar that screams to increase, thereby forcing foreigners to cash out
8 ) Oil prices above $70 per barrel
9) Over-credited consumer with illiquidity due to irresponsibility
10 ) Allowing for 1929 to occur again -
a. 1929 – Lenders gave our money without regard to ability to pay as stock market would keep going up forever
b. 2007 – Lender save out money without regard to ability to repay as housing market would going up forever
c. BUT this time the stakes are much higher – More leverage in real $$$$
11) Hedge Funds which are highly leverage and therefore accentuate returns, forcing losses to multiply and intensifies selling pressure in down markets
12) Market Cheerleading and Badgering by Bloggers, Television and other writers
13) GREED AGAIN – What’s new?
14) Repeal of the short sell “uptick” rule (should this be #1?)