Death Spiral

Sorry I have not been typing the last few days. I have actually been working (imagine that). With stocks at these levels and going lower I am spending tons of time reading k's and conference calls. So far it has been pass after pass but there are things that look interesting which really hasn't been the case for months. The market the last two days returned to its death spiral. In a sicko sort of way I am actually getting excited. I have said for awhile that the market prices in a severe recession around 7000 to 7500. I would love to see a 12% ish move down in the next two weeks. If that is the case I will be buying. A depression is still a real possibility but it won't happen tomorrow and the risk reward scenario finally looks semi appealing over the next year with a Dow below 7500. You have to focus on balance sheets and not earnings because your guess on earnings will be a fools guess just like everyone else's guess. It is interesting to me that this is the first earnings season going back five earnings seasons (since a year ago August when we first started going down) that the market is not rallying on earnings. Leon Cooperman at the Value Investing Congress I think had it wrong. He said one thing that he has not seen that has been discouraging is that when earnings are released stocks don't go up meaning that all the bad news is priced in. First, I don't know where has been the last few earnings seasons because those were all the huge counter trend rallies. Secondly, I want to see the opposite. I want to see the stocks get slaughtered because I see it as capitulation. The last earnings season investors were buying hope. Buying what they believed was the worst was finally behind us. Now you are not getting that. Instead you are seeing in some cases massive selling. To me this is capitulation that the worst is not behind us, it is ahead of us.

Today sell off is rumored to be because of several things. Supposedly a large fund of funds was liquidating. Also supposedly a quant fund was blowing up. Basically once again forced selling by hedge funds that are out of the market. Also heard that alot of funds are working their way up the capital structure as corporate debt is stupid cheap while equity is just cheap.

Anyway I would love to see a blow off down to the 7000 to 7500 level. It still may not be the absolute bottom over the next three years but I think alot of bad news will be priced in and that things can be bought.