Saturday, October 25, 2008

Random Musings


Sorry I've been away the past few days...last few days were jam-packed with way too many interviews and a talk I had to give, so was barely aware of the news or the stock market.

Things I missed that were funny:

1. Will Farrell reprising his role as G W Bush on the Thursday edition of SNL

2. Jon Stewart "Gaffe-in" with funny flubs by our favorite politicians on the left and the right.

Interesting Things:
1. The Fey-Palin effect on real voters: small, but negative

2. Alan Greenspan takes partial blame for the financial crisis, by admitted his mistake in allowing completely unregulated free markets in the banking system. He thought the financial institutions would have looked after the best interests of their shareholders. Listen, capitalism is great, because it allows hard-working people to prosper. However, there is a point of excess, and when billions of dollars are involved, human nature, in general, turns people into greedy and conniving individuals. It's time to watch "Wall Street" again ("Greed is good") and also "American Psycho". Also, read this parable:

Once upon a time in a village, a man appeared and announced to the
villagers that he would buy monkeys for $10 each.

The villagers seeing that there were many monkeys around, went out to
the forest, and started catching them.

The man bought thousands at $10 and as supply started to diminish, the
villagers stopped their effort. He further announced that he would
now buy at $20.

This renewed the efforts of the villagers and they started catching
monkeys again.

Soon the supply diminished even further and people started going back
to their farms.

The offer increased to $25 each and the supply of monkeys became so
little that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50!

However, since he had to go to the city on some business, his
assistant would now buy on his behalf.

In the absence of the man, the assistant told the villagers. 'Look at
all these monkeys in the big cage that the man has collected. I will
sell them to you at $35 and when the man returns from the city, you
can sell them to him for $50 each.'

The villagers rounded up with all their savings and bought all the
monkeys.

Then they never saw the man nor his assistant ever again, only monkeys
everywhere!

Now you have a better understanding of how the stock market works.

3. The rating agencies are just as guilty in this whole financial mess. Read this story...there were memos that they would rate any deal, even if it was "structured by cows". Greed, again.

4. Farts can reduce blood pressure!! Awesome!

5. This one is for Don....a country that has socialist medicine came up with a huge medical breakthrough!!! How can it be?? (Read the story: potential cure for MS).

6. This is the most fair and objective examination I have seen regarding who is responsible for the current economic crisis. Scroll to the bottom to see the no fewer than 11 parties (including home owners themselves) who collectively share responsibility for this mess.

The stock market:

I'll keep this short. Extreme volatility in the markets again. Dow was only down 300 pts on Friday, but futures were "limit down". Vix closed at 79!!! If you understand this indicator, you realize that this is completely outrageous. Bottom line is no matter what the indicators are saying about over-sold conditions (new highs new lows, stocks below 40 day MAs, etc), it doesn't matter this time. In my opinion, there are now 2 major forces in play. First, the triangle I described last week on the 60 min chart has broken to the downside with a classic backtest and fall away.


This is clearly apparent on the daily chart as well.



Finally, we are destined to test the 2003 bear market lows. I would not be surprised to see the Dow down 1000 points (intraday) on Monday or Tuesday. Then, and only then can we start to form a good base and start to trade to the upside more rationally.

3 comments:

Don said...

It is not surprising that one of the freest and most competitive markets in Europe occasionally makes a breakthrough in medicine. The question is whether you prefer the rate of innovation from Europe or the rate of innovation from the US. There really is no contest. Still, bravo to the Brits. I hope they make a lot of money off their innovation.

kath said...

What is up with the tiny toad?

Will said...

I think that tiny toad is part of a psychological experiment Coca is performing on us. I also think that tiny toad wants the Phillies to win tonight.