The fight between the BULLS and the BEARS is contingent upon one key factor!
By Daniel at 1 April, 2009, 3:45 pm
Does the STIMULUS Program(s) work, so as to induce more credit flowing and ultimately increasing the CONSUMPTION of J6P? So far there is no significant improvement in that direction.
In fact Economy continues to contract, no sight in declining values of houses but more in foreclosures, increased unemployment and worse a feeling of impending boom for those who are living from one pay check to the next. The net effect of all news so far is overwhelmingly negative.
If we look at Japan, it has NOT worked so far! The basic psychology of consumer has been CHANGED at least for one or two generations to come. the policy makers of ALL stripe appear to be DEAF, BLIND and of course, DUMB!
There is an increasing ‘DEAD Zone’ between the LENDER and the ‘qualified’ BORROWER! You can flood the banks with printed money but there is no sign in increase in the velocity of money crucial in an active Economy/Commerce. Not all LENDERS are in good shape. There is persistent (trend, not a glitch here and there) declining values of asset backed securities( Home, auto CC-you name anything which has been securitized and sold!)which keeps enlarging the size of holes in the balance sheet. They would be foolish to lend that precious that ‘capital’ out, which is vital for their survival!
The Consumer/Borrower is terrified about her/his job, home and 201K. He gets more sensitive when his neighbor loses his/her job. The big ticket items are way back on the burner! The modern cars can run 10-12 yrs easily. S/he has serious second thoughts about purchasing anything unless it is vital.
But the Mkt keeps on going up, as if the happy days here again, just around the corner. Ultimately PERCEPTION will meet REALITY. Till then PARTY ON! Disconnected market and delusional investors!
‘How long do you think this rally will last?’
Remember the old saying ‘ The market can remain irrational more than you can remain solvent’
I am still market neutral with neg bias, keep raising puts mainly in SPY, DIA, SSO and calls in DDM,SSO. I am getting hit badly today. But that’s the price being contrarian! That’s the reason I only lost less than 2% in 2008.
Patience, discipline and conviction based on informed facts/analysis are very essential. Mainly, protect your capital in these uncertain and unpredictable times.
-Sunny
No comments yet.