Friday, October 24, 2008

We Had a "Market Crash" Party but Nobody Showed Up!

As if the wild turns of the financial world were not painful enough, when I was lifting the top section of the new coffee table out of the box my right shoulder made a bad sound and really hurt last night! I have full range of motion, but the shoulder is very sore. This whole getting older thing is starting to be a real drag.

Treasury To Stake Insurers at the Texas Hold Em Tournament
Last night I asked if we could go even one day without a new bailout plan, and today it seems to be answered. While this move falls under the TARP, there was never a discussion about plowing cash into insurance firms, so this counts as a new plan to me!

Mr. Paulson now sees the "systemic risk" posed by all kinds of insurance companies the world over and has decided that direct cash injections are just the thing. Maybe they could even lend it out to banks overnight! Then Paulson could say "While the banks are not lending to each other in this credit crunch, the insurers stand ready to fill the void! HOO RA!"

Now reasonable people thinking clearly may wonder why it seems a good idea to push money into the insurers right now. With CDS blowups, currency meltdowns, and various other calamities making forecasting losses by the insurers impossible, the Treasury thinks putting money into the game blindly is a good idea. Hard to argue with that logic.

The Treasury has now become in fact a deep pocketed poker player stake holder. Taxpayer money is being given to many firms to keep playing is the World Series of Poker Tournament. I can attest that there is nothing like playing No Limit Texas Hold Em with the house's money. You have this great feeling of aggression because you have nothing to lose. I think this is all going to end up good, don't you?

We Had a "Market Crash" Party but Nobody Showed Up!
I got up this morning at 5am, got some coffee, fed the dog, and sat on the couch. I turned on the TV to the local news for the weather report. I then flipped to CNBC to check the futures, and holy moly! DOW futures at 5:15am were "lock limit" down 550 points! I was sure my tired eyes had not seen the right numbers, but the shrill sounds coming from the CNBC host made me confident they were correct.

In the car I checked a few radio stations, and things were looking pretty bad. As bad as that Friday from a few weeks back at least. On the way to work I was wondering if this was the big one. Lots of blogs were calling for the end of the world. People on TV seemed scared. Everything looked like an Icelandic moment for the US. The pressure was on, and I waited for the market open.

And then nothing happened. Do not get me wrong, the DOW shed over 500 points at the open, but a huge spike up came right behind it. There was no panic. There was no capitulation. There was never any danger of the markets being shut down or "circuit breakers" being tripped. It was just another in a long line of down days. Nothing more, nothing less.

So what happened? The same thing that always happens in bear markets. I have seen this phenomena during the Tech bust, so I remember it well. What happened is that too many people are so conditioned to buy "at the bottom" that buy orders were cascading into the system almost non stop. It can be termed "panic buying" and what that means is that more people are worried about missing "the bottom" than they are of missing their last chance to sell. On cue at about 11am all the rage was the "successful test" of the lows. I saw many calls of a reinforced "W" triple bottom or other such nonsense.

Today was no bottom. The bottom comes when nobody even asks what the averages did. The bottom comes when after a week of solid gains, people want to sell the next Monday because they think the market cannot hold the gains. A bottom comes when ALL the dirty laundry is on the table and any not scared away are all that is left to rebuild. Today was not that day. Today was yet another large scale entry by institutions, mutual funds, and others chasing their losses down. As the title of the Led Zeppelin song says, "The Song Remains the Same".

The same pattern is now at work across the US financial system. Instead of opening the books and figuring out which banks are finished and which can go on the FED/Treasury buys them time with taxpayer money. Instead of a market wash out we see many trying to play the next bailout or interest rate cut for a leg up. The entire system is doggy paddling in the middle of the ocean and wasting both every one's time and all of our money.

Until after the elections and probably not until early 2009, I think the "Song Remains the Same". I would prefer we get to the root of this mess. Faster Please!

Friday Night Entertainment
No comments for anything in particular, so I guess it is all my choice!

Book Passage
"The Kurgan liked modern cities. They were seething with violence, always ready to explode. He liked the fever of the streets, especially in New York. Everything was close to the surface. If you stopped to listen, you could hear the city screaming, in a thousand different ways, through a thousand separate mouths. You could feel the tension in the air. You could sense it was ready to snap. There was always a climate of despair hanging over the false gaiety. Drunks had sudden insights into the deeper layers of the city, and tried to warn others, but people took no notice. People thought they had control. Then, occasionally, something happened-like a series of decapitations-which showed them they did not, and the normal quiet panic moved into the hysteria zone."

from the novel "The Highlander" by Garry Kilworth

Film Clip
A true modern comedy classic was the film "Old School". If you have not seen this film, you simply must! Too many laughs to even count, but here is a scene which should show why drinking too much at a wild party usually ends up bad:

Music for the Masses
I broke down and bought an Ipod. In the process of transferring my music to the computer, it was nice to come across tunes I had not heard in a long time. I had a Bette Midler album and I was like "What the heck??" The album is from the soundtrack to the film titled "The Rose" which was a loosely based Janis Joplin biopic. I then remembered the title track named "The Rose" and listened to it. I can say the song really hit me hard. Rarely will you hear a song that can elicit such emotion as this one. If this song does not truly move you you must be dead, or British. Enjoy "The Rose":

Ok, now enough sappy stuff! Never let it be said that Economic Disconnect is heartless!

When KISS reunited and came out with anew album in 1998, I figured it would suck. Luckily one of may favorite KISS tunes came from that album. Take the great song "Psycho Circus" out for a spin (complete with 3-D video to boot!):

For one of the sickest opening riffs of all time, get excited with Jimi Hendrix and "Voodoo Chile":

Have a good night.


Anonymous said...

You ain't old yet brother, it gets worse trust me on this one Ok. LOL

Interesting how the market closed -3%ish and then the futures tanked - over 5% across the board after the close. I don't really expect any kind of bottom for a year and I don't see much in the way of bounces until after the inauguration. Paulson is one of the main problems getting his ass down the road may help but that will depend on who replaces him.
May guess is 20% more downside in equities and commodities. Next year may prove interesting and not good either for equites if the witch hunts start in earnest. I want to see some of these bastards hung and a 50% fall from where we are would be worth it to me.

getyourselfconnected said...

Thank you for your comments. your solid, grounded opinion is much liked here.

norcalboon said...

Thanks for the entertainment. I, too, walked with notalgia when doing the digital transfer of all my albums (although, to note, my 'earliest' tracks were already oldies to me, i.e Hendrix, The Doors, The Greatful Dead, etc). I made my wife listen to the Hendrix anthem recently just for appreciation.

As for the markets, I do not enjoy swimming where there is so much intervention and made up rules. On one hand it's nice to know that 'things weren't as they seemed' (listen to your gut), but on the other hand I have an uncle that is now holding his substantial life savings in a one ton safe. Crazy times for sure.

Would recommend some Pantera clips one of these days. 'Cowboys from Hell' maybe.

If interested in California, check out Dr Housing Bubble or Mr Mortgage sometime. Spot on.

watchtower said...

Crash party moved to Monday!

(just kidding, I have no idea)

Anonymous said...

Never fear the carry trade is here. Don't forget to sell this dead cat bounce. 99 Yen and I would be slowing moving to the exits.