Wednesday, October 29, 2008

DOW surges 890pts - rally from the bottom?

Late last week I called a bottom on the markets:

Why there could be a bottom in the market for the market today, tomorrow or Friday.

Is this the near term bottom?

This is IT!! US market set for a BLOODBATH!!!

I thought last Friday would the bottom for the DOW. However, there was some "leftover" selling in closing minutes of trading on Monday. While thre will be plenty of explanations for the rally - credit crunch easing, economy not that bad, interest rate cuts, bargain hunting etc. my take they don't pinpoint the real reason for the rally. I have explained that the major reason for the selloff was the loss cause by the collapse of Lehman. Lehman resulted in a "black hole" of about $200B and that causes funds and banks to sell hundreds of billions in assets around the world to raise cash. Jim Jubak explained that most of these losses will become clear on 24 Oct 2008 (it was Jim Jubak who pinpointed this date, not me) as derivatives related to Lehman Bros expire...... that wouldl cause the selloff to abate and a major rebound in the markets.

Like I said I believe this bottom is "near-term" (about a 1 month rally or less?). Markets will probably weaken once the economic numbers show we are headed for a severe recession.


Anonymous said...

Minibonds are now officially worthless. Waiting for your article anxiously.

Anonymous said...

must admit you are rite brother. the research reports i read says to take advantgae of this rebound to SELL as we are no where near the bottom. by now, the pattern has become so predictable, the cfd boys must be waiting to double short the market after their holidays even as the lay offs at the pearl and mekong deltas start to gather steam. by this time next year, millions will be staring at the clouds figuring out how best to pass the time.

Anonymous said...

Hi Lucky

The bottom will only happen when people starts to get arrested. Unfortunately Bush has allowed the crooks time to hire the best lawyers AND prepare their defense.

Lehman is a sideshow.

Lets hope Obama wins AND that he is really for change.

Anonymous said...

in another words vicous traps are being set up for the bears as we speak

AlphavilleSG said...

Alright, I think we all generally agree this is a bear rally, one can only conclude rationally, without precedent no one can gauge the outcome, best action: 'Sell first, Ask Question Later'. Also one should avoid hindsight bias, reinforcing confidence.

The next focus must be on China and its next step, amidst global recession, China is now THE superpower, it is now the main source of capital, and guess what, their vested interest is measured in trillions, via the trade deficits which is fueled US indebtedness, hence wouldn't they be as worried as you? Wouldn't they want to see this crisis end?

If you aren't worried about China's growth, it is maybe reassuring to know half of China's export ends up in Asia, the other half in US/Europe.

What the signs (good and bad) to watch? Asian market leading US/Europe. HK H-Share movements (it being the closest proxy), CSRC regulatory changes, sign of further easing of capital flow outwards (being so insular was a good thing), emerging market finding new best friend, bankruptcies from margin squeeze, impact of bad loans on banks, even civil unrest.

Efficient market hypothesis seems to have inextricably broken down, but shoring it up is the fact that information has become so cheap, if not free. One good thing that came out of the Olympic may be that the freedom of travel accorded to foreign journalist is now permanent.

Anonymous said...

Hi alphaville

There is a saying that if u owe the bank $10k, the bank owns you. If the sum is $10 billion, you OWN the bank. For China the sum is in trillions.

Rite now, US have China by the balls.

Was it "sheer coincidence" that H shares surged (due to short squeeze) the day when the HK gahmen summoned Morgan Stanley to join the committee to "fix" the economy? Hmm...

Asian markets is still dancing to the tune of the US futures even though every1 knows it is a con job. And the US markets? Some1 needs to do a porsche-vw job on the Goldmans and Morgans. Otherwise, we will keep seeing these swings until some1 gets arrested and the bankers starts to toe the line.

See where some of the money is going ->

Anonymous said...

Oh and BDI is still down. -66 to 982.
Unless there is real change, u can cut rate to 0 and throw another trillion and still not fix the problem.

I dun think bribing crooks have ever work in the long term.

AlphavilleSG said...

BTW, FT's John Authers on Short View has a good brief on Porsche-VW short squeeze, amazing what one get to observe in interesting times :)

Anonymous said...

Hi Alphavillesg

Precisely the point. Flush out the manipulators is better in the long run.

The plunge in the last 10mins of trading is hardly normal is it?

The stock market is not a casino. The earlier we see handcuffs the better.