I bumped the SALT wrap up to tomorrow — given the market action today, we need a good thrashing of today’s action — an open thread.

Is this the beginning of a crash? A healthy correction? Something global?


What say ye?

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

114 Responses to “Market Whackage Open Thread”

  1. TakBak04 says:

    BR…Watched the CNBC “Fast Money” thing.. (my fave out of all CNBC) and Gary Kaminski was saying that the SALT Conference was filled with Bears. Caution and Cash!

    Don’t know if you ran into him there. What he says…many times makes sense to me along with others I read who tend to have called the Bad Times correctly way back when the Housing Bubble was beginning.

    Pretty Much what he said. “He’s not a Technical Guy” but says he thinks this is more like when Merrill and Lehman went down ….and way away from March, 09 which was the time to “Load up the Truck.” He was very dire in his predictions and seemed to feel this is what he got from your group at the SALT Conference.

    Wondered if you met any BULLS there at the Conference. If so….what were their reasons for staying Bullish?

  2. I spent some time speaking with Gary — interesting career Neuberger & Berman, then Lehman, then Neuberger again.

    He starts a new show with David Faber soon — Noon to 12:30 — I am curious as to how they are going to set it up. He’s been around the block enough — it sounds like they are trying to do something different and interesting …

  3. insaneclownposse says:

    It looks like the orgy of monetary creation – $1.5T! – had a lot to do with the straight up rally off the March lows. Now that the cash has stopped coming out of the Fed, everything is going straight down. This makes it hard to judge the market action by any type of historical context. I think it might actually be this simple: print money and market goes up. Turn off presses and market goes down.

    I’m interested to see how far equities fall before the Fed freaks and launches round two of QE.

  4. Robespierre says:

    Since it is open thread…

    Synthetic Genome Brings New Life to Bacterium
    Elizabeth Pennisi

    For 15 years, J. Craig Venter has chased a dream: to build a genome from scratch and use it to make synthetic life.


  5. Bud Fox says:

    There seems to be a lot of Bears right now which makes me think about March 09 and how overly bearish people were then, but my gut tells me this is not the time to get involved just yet…..I’m cautious more than Bearish

  6. Myr says:

    It’s the beginning of the long crash. The flash crash doesn’t look like an accident now does it?

  7. JerryC says:

    We sure lost a lot of 200 ma’s today

  8. insaneclownposse says:

    BR – A little while back you mentioned a conference that featured a bearish hedgie (I can’t remember his name) and he said something along the lines of, “long term I don’t want to own any U.S. equities. Short term, I think the market crashes.”

    Was that guy at the SALT shindig? And if so, what does he think is going to happen? Seems like he was pretty spot on in his analysis.

  9. Chief Tomahawk says:

    I like seeing oil go down. Now sub $70 I believe. Too bad we’re still well over $3 a gallon at the pump in Chicago (nighest price in the U.S. the local news told us last week.)

  10. Mannwich says:

    I have no idea, but there’s nothing “healthy” about these markets.

  11. Captain Jack says:

    I think Seth Klarman had the best take. From Reuters:

    Current market conditions remind Klarman of a Hostess Twinkie snack cake because “everything is being manipulated by the government” and appears “artificial.”

    “I’m more worried about the world broadly than I’ve ever been in my whole career,” Klarman said.


    p.s. With that said, I’d be surprised if the bulls don’t put up at least some kind of short term defense here. We’re crazy oversold, and this is a do-or-die weekend for avoiding a full crash.

  12. bram says:

    looks like a healthy correction to me…. perhaps another 5% down yet to go. The EU will get through their probs, maybe a Greek default isn’t such a bad thing. Then everyone will breath easier until we discover that China can’t continue buying US treasuries and defending the euro while Chinese exports drop… offering up another buying op. All in all, the US is positioned well relative to the rest of the world.

  13. franklin411 says:

    Pause that refreshes.

  14. meanisout says:

    I don’t believe anyone has said better than McCulley in his speech, on April 15th: http://www.zerohedge.com/article/pimcos-mcculley-discusses-ticking-3-trillion-shadow-banking-time-bomb-defends-fed-head-regul

    This is now a sovereign problem. That means a further decline in the banks, which mens a further decline in the indices and a rise in the USD. I’d like to see a print below 9k in the dow before Mid July and a 90 print on the USD. I’d like to see a 1350 print in Gold. Then, we get a nice bounce into August? We shall see.


  15. Mannwich says:

    You putting whole IRA house on that, franklin? ;-)

  16. alfred e says:

    IMHO WS is trying to punish DC for the financial reform package.

    Well it could also be you can only wear rose colored glasses for so long before reality seeps in.

    We will never get back to where we were.

    The real question is how far the elites will allow things to sink before tossing some scraps. Hope is a pretty potent pill.

    And so far the only one paying has been the little guy. Blood from a turnip.

  17. AGG says:

    Mini-May 6? Financial reform being hammered out in congress? Dow tanks to send a message? Nah… It’s just correlation without causation… There is a lot of cussation going on though.

  18. moonmullins says:

    Anyone here thinking gold is still a poor investment in this market?

  19. zero cool says:

    Isn’t it obvious. The market is pricing in the fact that Jacob is no longer protecting the light of the island and that Jack and company will not be able to keep the MiB/Locke from leaving.

    I’m currently watching the 4, 8, 15, 16, 23, and 42 month EMAs for a trend change.

    Full disclosure: I’m long Apollo Candy and short Oceanic Air.


    (I’m really going to miss this show)

  20. Through the Looking Glass says:

    Banks are made of monopoly money, earnings up are equal to inflation, the holdouts are going to stop paying their mortgages, the dominos are toppling in Europe and people are asking what’s going on.??

    Try putting the calculator down son, stop looking at lines on charts and do this” Pull up a 20 year chart of the S&P . Look at it and meditate on what was going on during the highs…. Dot coms bullshit, ? credit default bullshit? Housing? Now think what kind of bullshit will drive the market up again to those bullshit highs? NOTHING BECAUSE THE TRUTH DOESNT SELL STOCKS you idiots and we are getting boatloads of truths. You want lies go look in the mirror and tell yourself how smart you were for playing the HFT melt up with your floaties on in that pool of bullshit while pontificating on the virtues of the new world order. Now go watch “The Magic Christian” ending where they dive in a pool of raw sewage to collect money , the drain plug has been pulled on your oasis there chaps. Wake up and smell the money.

  21. prozach says:

    I’m keeping cash and QID for a while now, I think this is the start of a crash. There are too many issues in the world economy right now, too many issues in the US, too many issues. There will always be bargain hunters looking to buy a deal and cause some bumps in the drop here and there, but until the debt issues (not just governmental but also mortgage and the like) are either resolved, or the consequences are pushed out far enough to not be an issue, this market hasn’t seen the bottom.

    The real question is, when will the US get downgraded from AAA.

  22. Bill in SF says:

    Tesla and Toyota in deal to build electric cars at NUMMI plant.


  23. ps_fedex says:

    I have no idea what is gonna happen in the market.

  24. hammerandtong2001 says:

    “Market Whackage” is merely a tiny indicator of the real dynamic.

    “Social Mood” defines the trajectory of markets, and our lives.

    It’s been “negative” since 2001.

    Onward we trudge. How do YOU “feel” — ? A lot different than 1997, I’d bet the ranch on it.

    I see… Iran… out there, being bad.

    And oh yeah, how does RBS deal with the latest “10′s of $trillions” in looming write-offs.

    You feel good after that 2009 bottom, right?

    I wanna go back, way back…




  25. odds says:

    Lots of similarities to 1987. For instance, incompetent government response to financial problems such as the short ban in Germany. Remember, in response to the Milken/Boesky scandal in 1986, Rostenkowski’s Ways and Means Committee passed a takeover tax on October 15 that was eventually passed by the House the following week.

    Also, it’s options expiration. I wouldn’t be surprised if there’s some type of intervention in Europe overnight.

    Those May SPX options expire on the open tomorrow. Should make for a very interesting morning.


  26. teraflop says:

    Some of the shifts in non-traditional assets (out of Gold) remind me of not too long ago when peeps were dumping (relatively) good assets and keeping trash just for liquidity: i.e., selling the Seniors & Super-Seniors but keeping the junkiest.

    It’s like falling down the stairs, you don’t know the damage nor how far you’ll fall until you stop bouncing (down).

    I still miss the “good old days” when SKF would leap $5-$20 a day on occasion.

  27. RyanT says:

    I work as an Investment Advisor in Canada and don’t really know what to think.

    All our internal analysts, economists and research teams are very bullish. Just a few days ago our lead economist performed a presentation where he claims we are seeing interest rates up .25% a quarter and he expects complete recovery by mid 2011 in both the USA and Canada.

    Even outside the firm, many people who I trust remain bullish. The one who gets the most weight correctly called the crash and recovery of 2008-09 and timed it within around a month. He is extremely bullish and claims the current volatility is “adults running around like children”.

    To be honest, the only bears I come into contact with are online, and I meet and listen to people from all over the world every day. I pop online and people are stockpiling guns and calling 50,000$ gold.

  28. call me ahab says:

    fishing for ideas BR?

    here’s my take- FWIW- the future’s were ugly- but when UE claims spiked and leading indicators fell- that cemented a market smack down-

    everything that is playing out right now- uber deflationary-

    telling tale- headline- Yahoo Finance- “Fading of inflation helps buyers and borrowers”- of course- but inflation was pretty tame during the Great Depression- last I checked- no-one was stepping up to the plate to buy a damn thing-

    worldwide credit contraction- austerity and fiscal restraint new watchwords-

    you can ride that gravy train of stimulus- but in the end- it’s complete nonsense- because it all started w/ out of control debt across the Western world and Japan-

    trust me- RE no where to go but down- permits having plummeting to 13 year lows-

    you can hang your hat on more stimulus BR- if you’re very brave I guess

  29. wally says:

    I’m not minding this too much.
    You do need to draw yourself a profile of a. Who is in the market today and b. What are the alternatives to the market. Those are things that do differ over time and are good reasons who things never exactly repeat.
    The drop certainly has brought out an instant orgy of doom, gloom and misery… too much, actually.

  30. X on the MTA says:


    I work in an IBD back-office as a technology guy and while I know nobody cares what us puny little retail guys do and see and think, here’s something I want to tell everyone about the flash crash and retail investors in general

    A lot of blame was attributed to HFT re: the flashcrash, but our volume SOARED. Our reps typically input their own orders and so our trading room is pretty quiet, but the last couple of days and the flashcrash had the phones OFF THE HOOK. At one point, as I was watching the level 2s behind one of our traders, I heard one of our traders yell to one of our reps “DO NOT FUCKING DO THIS. YOU ARE RETARDED!!!” When I asked the trader what was going on, he explained to me that someone had just entered a 30,000 share sell order @ the market ~ when we were 6% down, on the downside. The rep was panicking and wanted a fill right now. As one would expect, his fill was ATROCIOUS. He tried to call the next day in panic to claim an error, but to no use since, as everyone knows, calls are recorded. Secondly, I’ve listened to one of our more level-headed in-house reps beg, litteraly beg his clients for the last couple of weeks to take some risk off and keep some cash, just in case. For the most part, his clients listened, but many flat-out refused. Flash forward to this week and these clients are yelling, sending email complaints to our compliance department and generally trying to pretend this guy forced them to be long. Lucky for him–since his calls are not recorded–he had plenty of witnesses to corroborate his story to compliance. If a little blip that brings us back to February, way way ahead of the 666 lows can cause people to freak-out like that, I expect that one more week of poor performance will have our ticket charges setting new records and our MMKT balances soar.

    People keep talking about fat fingers and algorithms that messed up and stop losses, but what I personally encountered in my little corner of the market was panicky fingers. It seems that people are fully aware that we are in musical-chairs territory, but as long as the music was playing, they were dancing. Now that the record skipped a beat, the mad-dash is on. While it seems that the “cash on the sidelines” thinking of a couple of months ago was dead-on, we are now seeing the other side of it. With demand lower, a little bit of selling pressure can really influence moves and with so much. As an added problem, a lot of our backbone-less reps had been adding leverage, either via margin or structurally via CEFs to their client’s portfolios as clients dealt with diminishing yields by reaching for more via leverage–exactly the opposite of what they should have done, and when a 6% drop causes 7.5-8% in losses because of leverage, people freak out and throw the towel in. I saw it in 2008-2009 and I’m seeing it today. I’ll be in the office late this weekend analyzing our reps’ holdings to dig deeper and make sure we have no widows and orphans buying unsuitable investments, and if I find anything really interesting I’ll come back and leave it in the comments.

    I’m IT, we run reports on our client’s holdings and analyze risk-levels by rep and account to make sure nobody is violating stated suitability and investment objectives. This is not some bullshit I made up, i see the numbers, I dig through to find out what securities are, what their volatility is, if they are internally leveraged, what their volume is and whether our reps’ positions are liquid at those levels. We try to make sure people are Doing The Right Thing, and they have, but it’s clients by-and-large that are trying to play market timer. I expect to see a very fast market if the pressure down continues.

    What we are seeing is very, very resonant of Minsky. As soon as the tough get going, a bunch of liquidity and demand disappears as everyone runs for the exits. I have faith that insurers, pension plans and other similar portfolios are going to make it rain as they pick through everyone’s perfectly good discards. I, for one, already started shopping for closed-end funds which have seen steadily-increasing discounts even though their assets have performed admirably well (see BTZ). In other areas, you can pick up a nice portfolio of high-quality equities (and a lot of brk) with very little leverage in BTF. But as retail clients become increasinly panicked–wealth effect in action–I expect to see a lot more risk aversion from the retail side, which seems to be getting tired of the stress and is finally getting ready to quit playing the game and go back to holding IG FI and safe mutual funds.

    I, for my part, am finally feeling better about the decisions I made, namely to go to cash in March, missing a good chunk of the rally and then taking modest losses trying to scalp gamma–which finally panned out, although I wish I hadn’t taken my ball and gone home today to focus on going delta-neutral long convexity in TBTF EU bank preferreds. In retrospect, I wish I had kept my Jan-March strategy of using bull put spreads, which would have allowed me to take in the final part of the rally while being covered on the downside while minimizing my friction costs, but oh-well. I was getting frustrated by the fact that the bull market was consistently outperforming my spreads, leaving me with either more frequent roll-overs or leaving me sitting out the last push forward of every month. hindsight 20/20, ya know

  31. RyanT says:

    To add to what I’ve already said, my book has always been very cautious. My goal so to speak is that when I meet with clients I should be able to show them their accounts and their yearly performance and not have to shift my eyes or make excuses. Capital protection is of utmost importance – no one complains if they aren’t losing money in these markets. Everything held well through 08.

    At the moment most accounts have a fairly safe equity/fixed-income allocation with most equities in high yield very safe stocks. I am not a fan of dripping dividends so when accounts build up cash positions I have been recommending small day-order stink bids a few dollars below market and volatility normally gets them filled. I figure that this is a good way to pick up income producing blue-chip companies at a few percent below market and slowly move cash into the market without risking huge losses.

    I can’t see my strategy going horribly wrong, but I always like perspective on the market and at the moment its hard to find safe ground.

  32. X on the MTA says:

    I’d also like to point out that I am not a permabear by any means. I am bullish in the economy, even though I see sluggish growth for years to come, but I don’t see a paralyzing double-drip. I just dont think an improving economy necessarily means a rising market. Crowd madness has a life of it’s own and that’s why I am selectively buying, as is one of the FAs I respect the most. His thesis is that you may have to sit through some time of depressed valuations, but if you get a chance to pick up bargains in companies that create real value and you are willing to wait it out, you are doing the best to properly allocate your capital, and I tend to agree. He claims that he can’t overthink technicals too much anymore because it takes too much of his time, which has a higher marginal return in focusing on spotting and differentiating between profit creators and value creators, and I tend to agree. I have no crystal ball, but I have faith that investing in productive, value-creating processes is the best way to do your part toward well-run capital markets an increase the global stock of wealth.

  33. cvienne says:

    I would only expect someone named ‘Thor” to post a thread like this (asking for ideas)….

  34. Robert M says:

    One of the things you, Barry, have mentioned but IMO pooh booed is CDS. I have never understood it because you have always been so on point about leverage.
    My point is CDS are leverage of the worse kind. Understanding them means you understand life insurance. If you do you know good company will not sell you or anyone else more insurance than they think your worth. they understand that the moral hazard is for your premium you committing suicide could lead to a large payout. Nor do they allow others to buy insurance on you because the incentive is for everyone else to see you dead.
    CDS present these same moral hazards. if you sell one beyond the owner of the bond everyone else has every inentive to see you(dead). When the premium is often less that 0.3% of face value on $10 million(my pricing probably reflects last year) and you can buy all you want surely you agree the object is to kill( the bond).
    Clearly the Chancellor Merkel knows this. As she said this attack upon sovereign debt is really an attack against the state. She smells Karma if she knows anything of Soro’s attack upon the pound after the creation of the Euro. I suspect despite the other Euro nations saying nothing to support Merkel they know she is right; leverage is dangerous.

  35. cvienne says:

    But then again BR… To you, this is just a “typical recovery… So I can understand your conundrum… All those liberals who shoveled their accounts to FUSION must be very happy that you have them IN 100% CASH at the moment… Is that how “independents” do it? Blab the liberal line during P2 cocktail parties to “liberal dupes”… Then when TSHTF, go to cash and ask what everyones opinion is? Keep sitting on your commissions from that cash and I’m sure the boat you want will be half price pretty soon…


    BR: Wow, what a douchebag set of comments.

    1) I have no conundrum, I was sparking a conversation.
    2) We don’t charge commissions, we are fee based.
    3) The retail data looks typical. If you want to argue it isn’t, I suggest you consider “data”
    4) The client base is pretty broad, and crosses the full political spectrum — (tho our Dallas office leans more right than NY or Boston)
    5) Calling anything you disagree with liberal is weak


  36. Winston Munn says:

    Since it is an opinion thread, I sense an underlying understanding (finally!) that covering up old debt with more fresh debt does not eliminate the smell of economic rot.

  37. JasRas says:

    Well we ended within a couple clicks of the precipice of the abyss. We are staring into it now… What do you see? The charts are stretched as far as they can be without breaking (at least my Point n Figure charts).

    I think prior to today’s employment and LEI reports, most probably felt we were acting solely to external forces and a snapback would come with some resolution. But today the tone perhaps changed. Those who scoff at Rosenberg are thinking maybe that Canadian dude formerly of Merrill might be right…

    The market was remarkably negative today. I’ve been tracking the up volume and down volume on the NYSE for a while now, and today blew anything out of the water from ’08 or ’09… 72:1 to the downside… Massive and persistent thru the day, save for a lunch break when it “got better” and was only 56:1 to the downside. Ugh.

    I hope the German house votes to support the stimulus or we will surely break down further. I closed out my put positions today after nine long days because the risk of upside surprise is probably about equal to downside tomorrow and I don’t do coin flips.

    I worry less about market action that the growing “hot spots” on the globe… S Korea/North Korea, Iran, Thailand, Greece and Euro country. We keep adding the right ingredients to create many potential explosive situations. If you think the markets don’t like Greeks with bad budgets, imagine what can happen if one of these hot spots flashes up.

    I hang a bit of hope that from June 11-July 11, much of the world will turn their attention to soccer and their national teams. Hopefully there is a catalyst to clear some of this stuff off the decks so they can enjoy it. Either that, or they will potentially be the most violent, or least attended World Cups in recent history. Could still be that if the volcano doesn’t cooperate and closes Euro airports…

    Back to the market. Would like to see a bounce next week. A run to 1130-1150 to end May. But if we don’t hold around here and break down, that is off the table. We were talking at work after the 1000 pt drop that since the exchanges “took away” the bottom side of that day and essentially said it “didn’t happen”, traders and hedgies would feel obligated to take it back down in that range, just to make sure that it can hold. Couple guys thought it was ludicrous talk and it just doesn’t work that way. Oh well.

    @ X on the MTA: I am at an IBD too and have been surprise how poorly the reps handled the fast moving market. They have no concept of liquidity and the lack thereof. They can’t understand why a large order is not filled with the same efficiency it is in “normal markets” during fast markets. I can’t believe it… And these are people who survived ’87, the S&L crisis, Thai baht/Russia default, LTCM, 2000-2003. They should know not to do market orders in fast markets. I guess chalk it up to growing soft… too many SMA accounts, too many managed, too many relationships, and not enough time actually investing without training wheels!

  38. EAR says:


    “The Dow Jones Industrial Average fell 6.9 percent during the four days that ended May 7, sinking to 10,380.43, the lowest level since Feb. 26. The transportation gauge closed at 4,298.12, down 11 percent in four days. Downgrades of Greece, Spain and Portugal helped trigger the decline as the prospect of a sovereign default in Europe undermined investor confidence.

    “ ‘If the two averages violate their May 7 lows, I see a major crash as the outcome,’ (Richard) Russell wrote. With the exception of gold companies, Russell advised readers to ‘get out of stocks now, and I don’t give a damn whether you have paper losses or paper profits.’ ”

    DJT 4,160.51

    Health is measured by how you handle it all. BTW…


  39. zebov says:

    PM’s are tanking too. I take it this has to do with Euro problems and the dollar’s “strength” (when everyone’s sinking, the one sinking slowest is the winner?).

  40. KidDynamite says:

    i think InsaneClownPosse nailed it right at the top here:

    “This makes it hard to judge the market action by any type of historical context.”

    that’s something that seems lost on most economists who want to draw comparisons to prior depressions/rallies/etc etc.

    throw out the old play books – there’s a new paradigm in play, and that is that the Government will support (or TRY to support) the economy. But it needs to be recognized that “recovery” is largely a result of this same support

  41. subscriptionblocker says:

    Anxiously waiting for the day when leverage will no longer be available, sober people are extinquishing what debt they have, and people get back to building the future and caring for their children’s needs.

    We can do better than this. Our rut is chosen. If you could take a “thank god I’m still alive” veteran now civilian from the 1950′s and fast forward him up to today…he’d be incredulous at what we’ve done.

    Probably go postal over at the GS tower – and would know exactly what to do. Might right the timeline vs. “those who shoulda been swallowed” :)

  42. mbelardes says:

    My world collapses if the Lakers lose to the Celtics in the Finals again. I think the rest of you will survive that though.

    As for the markets, went from 90% cash to 30% cash since the Flash Crash and collared up the ying yang, which has helped, especially today.

    I think the Euro debt problems are going to be a very significant factor in the 25%/30% correction Barry discusses along with our own country turning off the spigot (likely due to a GOP House takeover). I think the volume is screaming out that investors are taking profits right now and “weaker hands” are holding, meaning people are going to bail if things get bad. I think the economy will “recover” but it’s pretty fragile and there are plenty of factors begging to knock us into double dip.

    I think a lot. I’ve learned a few times that I don’t know shit though. haha.

  43. Robespierre says:

    @zero cool Says:

    “Full disclosure: I’m long Apollo Candy and short Oceanic Air.”

    That makes no sense. If time goes back to the beginning because Jack kills Locke then the plane never crashes and all goes back as if never happened. This is bullish for Oceanic Air. Sorry to tell you but you are wrong shorting it.


  44. Cynic_FA says:

    Waiting for Cognos to answer, I will act as the Bullish Proxy:

    Put/Call ratios have exploded. Too many people think they are going to make money on the short side. Retail investors are still broadly bearish. Mutual fund flows in 2009 overwhelmingly went into bond funds. Hulbert says newsletters have had the biggest bear shift in asset allocation he can remember. Too many bears, you cannot all be happy all summer.

    Steve Shobin at Merrill once said that the market will do whatever it can to make the most people miserable. If you got stopped out on May 6th, chased the market up the following week, and got stopped out at the 200 day today…you must be pretty dizzy by now.

    I still think that 1050 on the SPX holds, the bull market twists and turns like a rodeo bull and throws the weak holders off, and then we test the January highs around 1100-1150.

    Then we will get two or three more good employment reports stuffed with census workers and great earning for Q2 in July. Just when you think it is safe to go back in the water – an 8 handle on the SPX by October.

    Sorry Cognos, I got the short term Bull Case..You will have to do the Abby Joseph Cohen – Dow 14,000 imitation yourself.

  45. Fredex says:

    I resolved the problem of cold calling by brokers with the simple tactic of not answering the phone.

    Yet a few days ago a cold calling broker from Edward Jones got past the defenses by the simple expedient of showing up on my doorstep. Cold calling by going door to door? Is this a sign of the end times?

  46. Cynic_FA says:

    Where is Cognos anyway? Any Bulls out there????

    Barry got a great print on May 5th saying he went to cash, but, this group of bloggers is way too bearish to have made much money in 2009. Maybe if we all hope and pray long enough the market will go down. Or maybe the lecture on cognitive biases from last week means that we need to believe the world will end to justify missing so much upside.

    Or maybe, the Lakers beat the Celtics in 6 games and Lebron finds a way to get traded to LA.

  47. reedsch says:

    Mr. X: geeks rule, dude!
    But if the herd in China starts heading in the wrong direction it could get very messy. I don’t have a sense of that happening on the ground though, as though the herd remembers going off the cliff recently enough (1966, with a little reminder in 1989) to scare it into passivity and sticking with the current path, which has been a good one for almost all involved if the number of cars (and corresponding decrease in bicycles) is any indication.

  48. X on the MTA says:

    Me too. It seems like we can’t be trusted to use that tool correctly, and so now we must give it back. You have no idea the number of times I’ve felt my stomach turn into a black-hole as people explain to me that they are going to get out of heloc/cc-debt by putting all their savings into CEFs that have 7-10+% yields and levering them to the max (at call + 300 no less). They are essentially playing the curve / carrytrading their own debt and thinking they are just sooooo smart, until something bad happens and asset prices drop 8%, leverage doubles the loss and the discount increase in the CEF doubles that loss and they get margin called and they have no money and dont want to sell and after pleading them to do the right thing they either take money out of their IRAs to meet the call or end up getting sold out by our friendly margin clerk.

    It’s like… duuuuuuude, you are effin re-tah-ded. stop trying to look for clever shortcuts, there is none.

  49. X on the MTA says:

    Bull here! Well, not quite. I am very worried about mal-investment, but I see something getting very close to buy prices WTR ~16.50 HOO ~6.25 AWR ~32 VIE if you hedge the euro exposure, SBS, but you gotta take the usdbrl risk, ADP ~40 and WM ~32 CSCO ~24. yeah yeah yeah. i do have a thing for water cos. i admit it.

    I am staying soooo far away from financials, but I’m not going to short them either. I’m also mulling on and on about MEA, but i’ve heard wayy to many horror stories about youngstown corruption to be set on this one

  50. Mannwich says:

    Celtics in 7.

  51. Transor Z says:

    I’ll let the masters do my talking for me:

    Which side are you on, boys?

    “It creeps and leaps and glides and slides across the floor”:

    “Their kids will read in history books/
    About financiers and other crooks…”

    Deep River Blues

  52. Thor says:

    Cynic – Hah!

  53. robert d says:

    My wish……we go back to pre-May 1, 1975 when commissions were fixed.
    Obviously the traders would disappear and so would the insane volatility.
    Maybe then investors would then look at old-fashioned things like earnings
    and (heaven forbid) the economy. Want to hear everyone squeal…It is a shame
    and beyond belief that quant funds which control so much money are in and
    out of trades in 11 seconds. It makes Vegas look logical and thoughtful.
    If we paid 75 cents a share for trading: just think about it. We would actually
    know what those 3 or 4 letter symbols stand for.
    This market, and the way it has disintegrated into “products” instead of
    common stocks, preferreds, convertibles and fixed income is a monstrosity.
    These products simply add layers of fees on top of fees and make it practically
    impossible to call it investing. It is not even gambling. It’s not building in
    building a strong and accountable financial system.
    Every man for himself…..it sucks and real investors will simply find other ways
    to save, as if one can save using the stock market we have seen in the last 30 years.
    Guys and gals….you will be losing investors one by one until there will no one to
    ring the bell at 9:30 every weekday morning.

  54. hdoggy says:

    If the stock market has been carrying some of the load on the way up on the LEI, uh oh. We have run through all the easy year over year comparisons and are looking at more difficult ones from here on out.

    Who cares though? Write off some debt and take the second hit, then move forward. This could be a healthly correction if we don’t get another crisis mentality and decide to try and fix everything that ever went wrong because we are so scared of expectations. This is planet Earth for god’s sake.

  55. Thor says:

    hdoggy – I agree, this seesaw between panic and euphoria is getting tedious.

  56. Eye Wall says:

    Warning: don’t read this if you cannot think outside the box, accept potentially radical new ideas, or if you believe that everyone that goes to church on Sunday must be a good person who would look out for any stranger even if they had to make massive personal sacrifices to do it (yes, these are over-the-top statements).

    I have been bearish for several years, but am a naturally optimistic guy. I like to live in new products, ideas and have many issued patents. I share this because I *know* how much we have left to discover, build and do in this universe as a species, but I just don’t see it happening in the short term.

    ‘The World is Flat’ notwithstanding, I’ve felt for many years that first world countries would have to sacrifice further improvements in living standards / wealth while the 3rd world ‘caught up’ thus creating a sort of ‘great leveling’. Unfortunately the dynamic that has developed instead is that there is a ‘great sinking’ going on of middle and lower classes all over the globe while the upper classes in first / second / third world countries continue to prosper or even increase their standard of living (yes, most of us on this board are likely in the latter category). This was something I didn’t anticipate but in retrospect should have been obvious (e.g. why would the rich / powerful in any country suffer in any way from moving 1B people from 3rd world farms to 3rd world factories).

    The side effect of this is that power and wealth has become overly concentrated in the world. I know this seems heretical for any self-proclaimed capitalist, but I believe it is true nonetheless. This creates pressure on the political elites to attempt to prop-up the standard of living in the first world to stave off the ‘great sinking’, but the blunt instrument used is debt and it simply pushes the problem out in time because it is the single path in the solution space that isn’t a negative in the very near term (think election cycle).

    Meanwhile, the very top of the food chain of the business elite (e.g. the wealthy / powerful non-politicos) seem to further compound the problem, not necessarily out of any sort of premeditated hatred, but because they can, given the current societal structure and that’s what capitalism seems to mean to many, especially in the financial world (e.g. heads I win, tails you get the ‘shitty deal’, to steal a GS phrase).

    This is the real core of the problem we face and even though I’ve tried to roll the future forward in my mind, I can’t see anything except a very painful ‘reset’ of some kind in the future. I can’t tell you, and no one can know, whether it takes the form of a world-wide depression, a French revolution style revolt or a climactic crisis that turns everything we rest our business models on now upside down, but we have a very unstable world on our hands right now and at some point something is going to snap.

    How’s that for an open thread post!


    PS. ~70% chance the market is up tomorrow @ the open, sell the ES or SSO’s you should have bought on the ugly close today into it…

  57. aamylea says:

    Have been iffy on buying gold lately, wondering if too bubbly. WSJ headline today was “Inflation at 44 Year Low” is my contrary indicator. I’m back to buying gold.

  58. crunched says:

    Correct me if I’m wrong, but am I right in assuming the financial reform bill didn’t address the main issues at all?

    1. No Volcker Rule… Goldman will go on fleecing America.

    2. Derivatives still won’t be traded on an exchange, and the major banks will still be able to trade them.

    3. The new Consumer Protection Agency will be housed at the fed?

    The best I can tell is it looks like we’re going to get some reform to the language on our credit card bills and that’s about it. No Wall Street reforms at all. Banks win. Congress/the people lose.

    This is what happens when you elect a President whose only experience is ‘community organizer.’

  59. Mike in Nola says:

    My 2 cents. What we’re seeing is just what some predicted: everyone running for the exits at the same time.

    As was also predicted, the trigger was something out of left field. Wasn’t even Greece. Merkel was the catalyst but not the cause. She scared the hell out of the guys living on the edge making money from crap and leverage when they realized there was someone powerful they didn’t control and this somene might do something crazy that could easily cause them to blow up, as Taleb would say. They fled the Euro; the algos who correlated the Euro and equities sold equities. Carry trades started unwinding. That started the run.

    As Mr. Pimco mentioned, everyone was selling what they could to get liquid and preserve capital just like last time. That’s why gold has gotten whacked when the kneejerk reaction is for it to rise in times of stress. The liquidation fed on itself and other commodities got whacked. People then thought: hey, what happens to all that BRIC money if commodities crash? Well, they crash, too. So, flight to the dollar and more carry trades unwind requiring more liquidation. My long treasuries look good.

    It now depends on whether the panic can be stopped. Ben probably has the printing presses running full out to let GS buy everything. The ECB today pumped the Euro using our money via Fed Dollar Swaps. A rising Euro always meant a rising market right? Somehow, that isn’t working in the Far East. Methinks the people have seen the Emperor has no clothes.

  60. crunched says:

    Oh, and my vote is CRASH. People who keep wanting to compare this bear market rally to the 2003-2007 run are going to be very disappointed. There is absolutely no comparison to the world today and 2004. Interest rates have nowhere to go but up, the world is AWASH in debt, currencies are failing, etc.

  61. bondjel says:

    My impression of this thread is that it’s pretty bearish; as BR says many are engaging in the recency (sp?) effect; from stuff I watch I’m hoping for a big gap down at the open tomorrow and I’m a buyer. Nobody knows for sure what the market’s going to do but I’d be betting on a “summer rally” into July-August and then perhaps an even more serious drop. Let us see.

  62. nofoulsontheplayground says:

    99 out of 100 S&P 100 stocks made new 5-day lows today.

    I cannot recall seeing that in March 2001, Sept. 2001, July 2002, October 2002, Oct-Nov. 2008, or March 2009.

    We tend to see things accelerate out of control like this around op-ex times.

    We appear to be seeing leverage unwind. Of course, margin calls and fund redemptions could really kick in if this doesn’t end soon.

    Daily charts still show lots of room to move down. However, with 3-daily gaps on the charts it is likely we will re-visit the 1100 SPX level sometime down the road.

  63. Mike in Nola says:

    Jesse over at Jesse’s Café Américain put it well

    “But some sort of bounce seems more likely at he moment. Ben has not yet begun to print. I think they’re just negotiating terms and turf right now.”


    In poking fun at GartmanETF’s pitiful returns he had another nice turn of phrase:

    “I did think that it was cute that they blamed “President Obama’s attack on the financial sector’ for their lousy performance this year. LOL The Congress could not reform a schoolyard with a SWAT team if the kids had enough leftover lunch money to make it worth their while.”


  64. Mike in Nola says:


    good point about the margin calls and redemptions. Was thinking in general like that, but it never crystalized. It all depends on whether “they” can stabilize the markets before that happens or it will provide a powerful downdraft. I’m sure the lights are burning late at the Fed as they try to create some “organized support” for the markets.

  65. franklin411 says:

    Yup, adding more. Going to send in my check to max out my IRA contribution tomorrow so I can buy before the suckers realize that they sold at the bottom.

  66. kansascitypothole says:

    The Onion nails it

    Report: Majority Of Government Doesn’t Trust Citizens Either

    WASHINGTON—At a time when widespread polling data suggests that a majority of the U.S. populace no longer trusts the federal government, a Pew Research Center report has found that the vast majority of the federal government doesn’t trust the U.S. populace all that much either.

    According to the poll—which surveyed members of the judicial, legislative, and executive branches—9 out of 10 government officials reported feeling “disillusioned” by the populace and claimed to have “completely lost confidence” in the citizenry’s ability to act in the nation’s best interests.

    “All the vitriol and partisan bickering in Congress has caused most Americans to form negative opinions of the U.S. government,” Pew researcher Amy Ratner said. “However, over the same time period, the government has likewise grown wary of U.S. citizens, largely due to their utter lack of foresight, laziness, and overall incompetence.”

    Added Ratner, “And the fact that American Idol is still the No. 1 show on television doesn’t exactly make our government burst with confidence.”

    Out of 100 U.S. senators polled, 84 said they don’t trust the U.S. populace to do what is right, and 79 said Americans are not qualified to do their jobs. Ninety-one percent of all government officials polled said they find citizens to be every bit as irresponsible, greedy, irrational, and selfishly motivated as government officials are.

    Moreover, according to nearly 100 percent of respondents, Wal-Mart.

    “It makes complete sense for Americans to lose faith in a government that has allowed lobbyists and special interests to take over Washington,” Senate Majority Leader Harry Reid (D-NV) told reporters. “That being said, you could see why Washington might likewise lose faith in a populace that apparently still suspects that its president is a secret Muslim who was not born in the United States.”

    Citing the billions of dollars wasted annually on flavored water and boneless buffalo wings, the number of drunk-driving deaths each year, and the lack of citizen accountability for the rise of Kim Kardashian, government officials registered extremely low opinions of the American people overall.

    “This is the same American populace that failed to prevent us from deregulating the banks that almost caused a complete economic meltdown last year,” Sen. Jim Bunning (R-KY) said. “Year after year, they elect terrible officials who make terrible decisions on their behalf. The fact that I, Jim Bunning, am a two-term U.S. senator really shows you just how far Americans have gone off the rails.”

    “I wouldn’t trust anyone who voted me into office,” he added.

    Government skepticism is not confined to legislators, though. A cross-sampling of the U.S. Supreme Court found that only 1 in 9 justices believe the general populace to be ethical. Their confidence that the American people can resist consuming the newest Burger King sandwich just because it’s there or at least keep it to one a week has also fallen to a 10-year low.

    “They can’t even fill out their census forms, for crying out loud,” Gov. Butch Otter of Idaho said. “It’s only 10 questions long. We’re not talking about taking the SATs here. Jesus Christ, don’t get me started on the SATs.”

    One typical respondent, President Barack Obama, said he found it hard to trust the judgment of U.S. citizens after recent events, including their decision to elect a president who promised health care reform and then come out against health care reform.

    “How can I have hope for a nation that regularly protests tax cuts that directly benefit them?” Obama said. “Look, I’m not always perfect at my job, either, but I think I could make a halfway coherent comment on a YouTube video if I had to. Isn’t that basically all they do?

    Added Obama, “At this point, the only positive thing I can say about the American people is that I’m pretty sure they’ve never rigged an election in their favor.”


  67. swag says:

    In the immortal words of Jim Morrison, “Pretty neat, pretty neat. Pretty good, pretty good. All right, all right, all right, all right.”

    Or in the words of 9353, “I don’t care about industry. I don’t care about anything. I don’t care about industry. The Dow Jones Industrial does not affect me. I don’t care about it at all. I don’t care about it. I don’t care about it at all. I don’t care, I don’t care.”

  68. ironman says:

    BR asked:

    “Is this the beginning of a crash? A healthy correction? Something global?”

    Yes. No. Yes.

  69. @X on the MTA Says: May 20th, 2010 at 10:03 pm

    WOW! Fantastic post there guy! I think that post alone counts for one college credit :)


    I’m holding off my opinions until this week’s OpEx is done.

    That aside I have figured out what we are going through

    It’s worse than recession. It’s not quite depression.

    it’s……REPRESSION! :mrgreen:


    I guess they consider markets the whore of Babylon. It’s too bad she has to be so good in bed


    One thing I do notice BR is your hot button topics tend to get a larger number of replies. I think that indicates a general angst/agitation in the minds of people right now. I think subconsciously at least people are passive aggressively transmitting that into their trades. At worst it is an active thing

    I’ve also switched my market actions from price based to time based. It is a habit I’ve developed over the years that helps filter out noise when panic sets in (theirs, not mine). I first developed it when I only had a monthly amount of money to put into the market each month and couldn’t act on every price point. Since I only had a bit I had to time my investments to take advantage of when the new cash flow came into my trading account.

    If the market went down 2000 points and was back to par by the time the money came in I would do nothing. If it was still down 2000 by the time I had the cash the trade was executed automatically. This little trick is a great tool for filtering out market noise and I am starting to notice that I revert to it when volatility gets me into a state that might have me over trading.

    The time trading also gears well with monthly trading goals and that is how it has shifted for me as I’ve transitioned to more
    cash flow

    BTW, more bears:


    HA! I don’t know if it is me but it seems we get more problem bear stories around here when there is market turmoil. Animals are prophets in my opinion because they are more in tune to God’s creation and the natural flow of things. Look how they act during natural disasters. Take heed the animals!

  70. dvdpenn says:

    Out Sept 08. In Jan 09. Out Oct 09. In May 10.

    Just don’t see the end of the world, right now. Don’t like the closes below the 200-day. But this still smells like a healthy but pungent re-test of the lows, to me.

  71. hdoggy says:

    If the Dow never corrected and drove right throu 15,000 at the same pace it went from 8K to 11K I would have been long spam, ammo and gold and nothing else. Thank god things move both ways, still, indicating we still have a live market.

  72. hue says:

    today is option expiration. the SEC will announce civil suits against every investment bank and commercial bank. or the gov’t will ban all selling (not just short selling or especially nekkid short selling) of all securities. you can only buy until the SPX hits 1500.

    the first thing we do, let’s kill all speculators http://bit.ly/cRZSuM

  73. Joseph Martinez says:

    The problem is that we are and have been living in the American dream. Whenever reality comes by to wake us up we rolling over and going back into the deep American dream sleep. Reality keeps coming back to wake us up and we keep finding ways to black out reality so we can go back to our American dream. The day when reality will come with such a vengeance that it will take away our beds we will not be able to go back into our American dream. Take day will come.

  74. utiliguy says:

    A healthy correction, I say.
    The S&P 500 is still up roughly 20% from a year ago.
    Of course, the correction may get “unhealthy” from here on out.

  75. Zignals says:

    Unfortunately, markets not really oversold – fast stochastics – sure – other measurements, nope.

    But with the losses on record for yesterday some claw back can be expected and declining resistance connecting April and May reaction highs (which is mapping close to the 20-day MA) would look a reasonable response here.

    But I don’t think the true low is in yet.



  76. Expat says:

    I don’t think anyone has a clue. The same bankers, economists, and analysts who are bullish are the ones who missed the bubble in the first place. The bears missed the massive rise in stock indices. Ok, there were a few exceptions, but exceptions are ridiculed as cranks, doomsayers, and morons until the prophecies are fulfilled and they get their fifteen minutes of fame on CNBC (where they are ridiculed again since their predicted crash or boom is already passed by the time they go to air).

    I don’t like the look of the real economy (away from government handouts to big banks and GM). Unemployment near 20%. 1 in 7 mortgages in deliquency. Massive and rising debt. Austerity programs around the world. Persistent bubbles in real estate in the US and abroad.

    If we can keep simply printing money, close our eyes, and party on, then I suppose I should be bullish. If for some reason, the funny bits of paper (plastic and cloth really) don’t fool us any more, then we are screwed and I am terribly bearish.

  77. Mr.E. says:

    We’ve seen the highs for a good while, probably this year. My target for the current slide is the range of June-July ’09. But, it won’t be a smooth ride. Suspect we’re near a short term bottom and will see some sold retracement then head back down again. Much lower to go, but it won’t be a one-way ride.

  78. torrie-amos says:

    MOMNYET, micellaneous opinons mean, nyet, lol

    wow, I happen to agree with Eye Wall, 100%, I could have written that post, for I too also missed how the power elites would react, which is my bad

    I think ( hay, more opinon) everyone knows what is going on yet no one wants too say it.

    I pounded the table for six months on 85 dollar oil ends all, lol, okay, I missed it by two bucks, ( mucho supreme arrogance on my part, lol )

    The velocity and volatility in COSTS are fucking with all businesses ability to budget thus we slowly grind slower over time. This is causing massive contraction in credit in half the world and the other half has gone mad handing out credit like Halloween Candy.

    If you can’t budget, well, u just grind it out, what is is and u do your best.

    There is not enough profit too support the debt, bank debt was shoveled to soveirgn debt and now it is the POLITICIANS PROBLEM TO SOLVE, and we know they are at there best when things are at there worst, yet, in the in between times, they extend and pretend, and will until the last moment.


    all that being said, i am the eternal optimist, humanity can be described in one word, progress

    yearly dow pivot is around 9200, europe and china are in fact in bearish teritory, europe is the leader, down down down, which happens to be statistically the largest economy as a whole in the world, so for me the question is does europe retrace per the fibs

    for me the market is acting like 2001, generally good news, month after month lower lows until 9-11

    i see the stochastics and this tell or that tell, i’d like to be long something something, but what??????

    most bears go so burned in march april they are taking any dime down and covering quicker which is leading to even most bears missing this bear move

    on the whole though what i find funny, ha ha, is the general panic one feels in the air on 3 weeks of down moves, very weird very weird

    heck even BR’s plan was to put on some shorts at the 10,750 level

  79. cewing says:

    If a market drops at the prospect of having to actually play by sane rules, maybe that’s not such a bad thing. How much of the market’s value is real, and how much of it is hot air from brokers anyway?

  80. wally says:

    “Anxiously waiting for the day when leverage will no longer be available, sober people are extinquishing what debt they have, and people get back to building the future and caring for their children’s needs.”

    If it were so simple!
    The problem is that to build the future you do have to save – in whatever form you choose, be it buying a house, building a business, investing. Every dollar you save represents a dollar of debt for somebody else.
    The real issue today is not simply debt, it is WHO holds that debt. Is it debt that will come back, repaid, like say, your retirement savings will do? Or is it debt that is now stratified into an upper economic elite that simply plays speculative games around the world with it.

  81. scepticus says:

    “I think it might actually be this simple: print money and market goes up. Turn off presses and market goes down.”

    Its not that simple, IMO.

    The market went up in march because people ASSUMED that the printed money would lead straight to inflation. Expectations of inflation led the market higher.

    Now that printed money is not moving. So it can’t create inflation because people have realised it is not moving fast enough to have much effect. So I’d restate the above as:

    make people think inflation is coming and the market goes up. If people think inflation is not coming, market goes down.

    as to what combination of measures will lodge inflation expectations permanently, well that’s a matter for debate.

  82. rktbrkr says:

    No worries now, Turbo Timmy is on the case…time for the taxpayer to open up wide!

    May 21 (Bloomberg) — Treasury Secretary Timothy F. Geithner will visit Germany and the U.K. next week to discuss the European debt crisis after a slide in stocks worldwide posed dangers to the global economic recovery.

    “Geithner will meet with European officials to discuss the economic situation in the region and the measures being taken to restore global confidence and financial stability,” the Treasury Department said in a statement yesterday in Washington.

  83. Evoo Kermartin says:

    Futures went mixed/a little green overnight but are now very red.

  84. Expat says:

    I am massively bearish my ability to post a message on this board.

  85. wisedup says:

    hell, let’s extend the unemployment benefits for 10 years.
    pump another 1 trillion into the banks,
    and while we are at it we need a 100,000$ bill. just saying.

  86. rktbrkr says:

    OK, China is trying to back off a bubble or two whilst Europe their #1 trade partner (slightly ahead of Walmart) enters uncharted economic waters of Euro stress and austerity.Good chance they will overshoot their soft landing target.

    Austerity imposed in the PIIGS by the prosperous north is going to generate political heat in both the PIIGS and their benefactors beyond the Athens Riot of The Week. Euroland will have to toss a member for non-complaince to get the others to fall in line, it’s going to be messy for awhile. The weak Euro will be a godsend for industrial europe and a major pain for US & China.

    In the US lots of chickens still haven’t come home to roost, real estate is still a disaster, wishful accounting by the banks have kept most of the foreclosure pains off the books, unemplyment still in double digits with lots of 50 somethings facing a lifetime of underemployment and a double dip looking increasingly likely. The banks are going to need another taxpayer paid round of drinks to get them thru but any incumbent who likes his job better get the populist religion quick. We’re likely to make a roundtrip to 2008.

  87. constantnormal says:

    @BR — well-timed topic, this thread has been MOST enlightening (I’m sure that you think so too).

    Some missing precincts from the blogosphere … where are the technicians? What Fibonacci levels are we at (or poised to ascend/descend)??

    And why has nobody mentioned that this is an options expiration Friday? That alone ought to add some seasoning to this already spicy market.

    OK, I’ll toss in my own 2 cents worth (or worthless, as the case may be) — this is not at all like the Lehman/Merrill point in recent history, as more people are MUCH more aware of the potential plunge to the depths, and thus it will likely not occur. Not yet, anyhow. While I’m certain that the next 2-3 trading days will be exciting, in hindsight it will only be a bump in the road ahead.

    I’ll get worried when cognos turns bearish. Or perhaps I should feel relieved when that occurs, as it should indicate that a bottom of sorts has been reached, with all delusions of a bright and sunny future being discounted.

    Nobody expects the 11-th-hour “save” from disaster by the Fed or the Powers-That-Be, and this is encouraging, as we lack the optimism that such fairy tales engender. I also do not see (outside of the clueless/compromised MSM) any belief that the “financial reforms” being passed are going to reform anything. Certainly nothing whatsoever has been done to constrain leverage, and as Archimedes said, “Give me a sufficiently long lever and a place to rest it, and I will move the world” (or words to that effect). So long as leverage is uncontrolled, nothing else matters, we are still in immense jeopardy. And I believe that this is an open secret. Nobody believes that the reforms being passed — or the panoply of trading gimmicks, circuit breakers, etc — will change anything. So there is a LOT of caution out in The Real World (as many anecdotes have related earlier in this thread), which is NOT the kind of cloth that big-time collapses are cut from. More likely is yet another small (15%-25%) step lower, another tread in the Japanese staircase to a 90% drop in equities markets over the next several decades.

    And anyone expecting a 1930s Depression-style “repairing of the markets” forgets the unique set of conditions that circumstances that eventually allowed Pecora to acquire the power and media exposure to be able to hold the senators’ feet to the fire, to expose the breadth and depth of corruption in the markets of that time (which IMHO we have far exceeded today), and most of all, that the Pecora commission was the FOURTH attempt at financial investigation and reform, the previous three having been miserable failures, all corrupted into nothingness by the lobbyists’ influence over the legislators. This is only our first failed attempt at financial reform. We have several more to go, and there is not guarantee that we will EVER arrive at the unique set of circumstances that allowed a Pecora to gain the power and influence needed to bring about reforms that lasted 50-60 years.

    I think that we are firmly back in the pattern of financial crises every 5-7 years that preceded the reforms of the Great Depression, going back to the dawn of our nation. So let’s see, … 5 years from 2008 puts us at just after the 2012 elections, with the intervening period being quite depression-like, with high unemployment, mortgage destruction being a more-or-less constant part of our economic picture, continued rigged/bent markets and optimism being sloooowly squeezed out of the sheeple, with new attitudes toward debt and risk being slooowly burned into the national psyche.

    So I see no big crash as being likely, although we will come back to the brink repeatedly, until around 2013.
    Enjoy the torture, fellow masochists.

  88. Gloomforadecade says:

    It’s over…time for the big one. DJIA crashes to 4000.

  89. dead hobo says:

    With luck, this will be the long awaited correction back to historical P/E levels. According to analysis printed here and elsewhere over time, S&P 850 would be a healthy level but lower would not be out of the range of historical normalcy. The Fed’s massive stimulus bought this market and the end of the cash flow is strangling it. Europe is really just a side show, but provides an excellent cover story, plus a humorous and entertaining unwind of leverage employed by the smart money.

    I have watched CNBC a little over this period and am highly entertained by the talking heads who appear to drink their own kool aid. The lady on Fast Money sounded like she is buying all the way down. Ha Ha. All this tells me is that compulsive buyers will set the direction back up after the bottom arrives.

    I’m reading Traders Guns and Money again. What a hoot! People will bet on anything, especially if it appears complicated and is sold by someone likable. There appears to be an infinite supply of gullible buyers. My idiot relatives come across as actually believing that financial advisers have actual secret knowledge that makes them nearly infallible. Although I have another one who can’t take profits. As a result, this relative has made massive paper profits over time and has also watched them evaporate when the markets crash. As a result, this latter relative is a working senior citizen as opposed to sipping cold drinks on a hot beach. I suspect this fall will be no different.

  90. gloppie says:

    Bring on the locusts I say….

  91. TK says:

    BR, I think I’ve heard you call the last year’s market a bull run in a secular bear. Does that mean we test the 08-09 lows this summer? Fall? Interesting too how dollar strength hurts the market. How long can we obsess over the Euro before some new story hits? Summer vacation can’t get here too soon.

  92. dead hobo says:

    If Financial Regulation succeeds, then here is my forecast for the next few years. The timing is impossible to provide, but the result is fairly easy to predict.

    Limitations on derivatives will provide fewer places for junk credit to flow. Since money needs to seek a return, eventually credit will flow to places that are useful to society. Job creation in productive enterprises will be the result, as opposed to job creation in areas that just shovel credit from one sucker to another sucker. Wall Street will whine uncontrollable about not having the ability to sell flaming bags of shit to gullible ‘investors’ but screw them.

    Realistically, the timing on this outcome is both uncertain and probably a long time off. The Fed sees managed asset bubbles as an economic tool so at least one more market goosing is ahead.

  93. Greg0658 says:

    I got thru about 1/2 those market play wisdoms … me I still don’t want to run a Fortune 500 corporation as a stockholder – so I’m OUT … if I can’t make it without that game – hey I’m past 50 – it’s downhill from here if I don’t have enough stash at this point (& what’s in #s evaporates) … here’s something I’ve never tried (paperboy in 3rd grade – work’g ever since) .. I saw a tv spot that this documentary is cue’g up for play:
    “Riding the Rails – At the height of the Great Depression, more than a quarter million teenagers were living on the road in America, many criss-crossing the country by illegally hopping freight trains. This film tells the story of ten of these teenage hobos …”

    In Feb I saw a kid by the name of Josh, his dog gear & guitar coming off the interstate – let him setup in the solar room for the night … but but me thinks my age and asthma is a stumbling block for that kindof adventure

  94. Mark Down says:

    This must be that 25% correction that guy BR talked about!

  95. flipspiceland says:

    Shoulda sold in May and went away.

  96. flipspiceland says:


    Naked short selling is already Illegal in the disUnitedStates. But you can bet it is not enforced, nor is it tarcked by the SEC. Just one more piece of useless legislation that is fought over for months, only to leave the so-called victors right where they were at status quo.

  97. Hit the Reset button says:

    Well 1080/81 failed miserably, 1056 is being tested at the open, the real area of final support to maintain the bullish case is the 1024/25 and 1011 areas.

    I suspect numerous bounces or rallies from each of these levels, perhaps the bulls can turn it around before breaking 1011, time will tell.

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