Thursday, February 11, 2010

Psychological Beatdown

If you would have described to me the events that would have transpired this morning I would have told you the market would be down 3% minimum. I have no idea why the market did what it did today. None whatsoever. Psychological this week has taken a chunk out of me. Not really sleeping, trying to handicap the various outcomes, and than to see the market do what it today? Brow beating. Today the S&P only finished up 10 points and the fund was pretty flat (I got rocked in my personal futures account) but it might as well have gone up 100 S&P points and I lost everything with the way I feel. I just need sleep.

Let's review shall we?

Last week Greece is having funding issues. Europe is in a free fall. On Tuesday Europe announces bailout and the market surges to 1180. Over the next few days it falls back as uncertainty builds over the bailout. Today around 6am (I was up for it) Europe announces no plan and basically says they will look at it in March. In March!! So just as I figured a bailout is not something Germany could undertake and despite all the posturing they couldn't come together on an agreement. There is no plan!! Market tanks right? No. It goes sideways while the dollar spike, European stocks plunge losing around 1.5% in less than an hour and Euro plunges. Then the U.S. market surges!! Along with the market surge commodities also surge. Copper was up like 5% today!!!!

No logic. None

Looking forward I don't really know what the short term is. All I know is the fundamentals and I will continue to try to figure a schizo market on when you can actually make money on the fundamentals. The main thing is can we completely take off the table new highs. If I know that, all this other is pretty meaningless as you just ride out the bumps. Fundamentally we are insolvent. Something that hardly got any press coverage today was the governor of New Jersey declared a state of emergency for snow..ACTUALLY NO...declared a fiscal emergency for their budget deficit. From Bloomberg

New Jersey Governor Chris Christie declared a fiscal emergency and said he will withhold $475 million in school aid to help close a $2.2 billion budget deficit with less than five months remaining in the fiscal year.

Christie, 47, a Republican who took office Jan. 19, also said he will reduce funding for hospitals and colleges, delay capital projects, cut subsidies for New Jersey Transit and eliminate state programs that “sounded good in theory but failed in practice.”

That is where we are fundamentally world wide. In the short term I really don't know. It is possible we tank tomorrow (I still the odds are high for that believe it or not) depending on how Europe trades. As I have mentioned this could also be like August 2007 where absolutely nothing is resolved but the market goes to new highs three months later for no reason before dropping 60%over the next 15 months. That is what is so important to figure out.

I could talk about other things like Australia jobs report, China, and the jobless claims. All that stuff was an afterthought as it occurred.

One more thought on today. Warning this is a conspiracy theory but it has happened alot. It occurred around the Long Term Capital Management debacle in 1998. Greenspan did it again in 2001 after September 11th. My thought is that the Fed knew there was no plan, an announcement was going to be negative, and so coordinated with the ECB to flood the market with money with the announcement. This deluge of money props up the market on what would otherwise be a very bad reaction by the market. My main reason for thinking this is once again commodities. The dollar surging like it did earlier in combination with commodities was one of the weirder moves I have ever seen. The higher the beta (like copper) the more juice it got. I have really no idea. It would at least explain something if it were true.

If that is the case, it was a short term boost. The purpose was to prevent a crash for today.


themog said...

Been a frustrating week, but I think we are really close to the bottom falling out. Just gotta stay ready and try not to pull too much hair out in the time being.

Anonymous said...

As for copper, there were a few people out early in the week proclaiming copper would be going way down this year.

For example, see


Someone was on CNBC saying the same.

If there was a surge in new and/or amateur shorting, the conspiracy minded would suggest that the big boys were just squeezing the rubes.

Just a thought.

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