What we are currently experiencing is a once in a lifetime event. The full blown financial meltdown is imminent. No one can tell you how far this will go down or how long it will last with any certainty. Based on pure technical support you can however see support and resistance levels to watch for. Remember technical support is a science, a tool of trading the equities markets. Stockshakers strives to merely point out the indications we observe.
The Financial Bailout plan is now Law. Credit markets need to start flowing, seems like they should with $700 Billion behind them right? It is not as simple as that. The Housing market in many ways drives the bus. If the Credit market is going to recover it will require the housing market to spark new life. Inventories have to drop, buyers have to have a way to obtain reasonable loans at reasonable prices and be able to earn a living wage so they can consistently pay the banks back to keep the credit markets alive. Was it outsourcing that doomed us?
The credit swaps? Trading pieces of paper and assigning huge values unchecked to signature with no collateral other than a signature or a handshake?
For the most part it was ***Archimedean copula*** - Normalizing possibility distributions using formulas and equations to calculate out the risk of credit-default swap contracts. A two-dimensional shifted square-root diffusion (SSRD) model for interest rate derivatives and single-name credit derivatives, in a stochastic intensity framework. The SSRD is the unique model of the automatic calibration of the term structure of interest rates and of credit default swaps (CDS’s). Analytical approximation is based on a Gaussian dependence mapping for some basic credit derivatives terms involving correlated CIR processes.
***Unregulated- that’s the key word! An you should be mad as you can get that these were unregulated.***
If you were doing business with someone and you saw them doing things in an unregulated and damaging way it would make sense to ask, “What kind of operation are you running!?” The U.S. government did not address this issue when they should have.
Why was Dodd able to make huge gains while we get stuck with a huge financial conference and there is no accountability? Hartford Connecticut is the Insurance capitol of the United States of America, how are these companies not paying the piper after creating these derivative vehicles and “Shadow Market” that may have single handedly tanked the U.S. economy?
Contact The ISDA yourself and ask them about the Credit Default swaps that have led to this collapse of the U.S. economy.
Fingers keep pointing at sub-prime as the issue. Sub-prime research shows an original intent by both political parties to help those most in need to gain ownership of a home. Over time there are so many grey areas and thinly veiled tacticts to variate the original intent of the sub-prime concept. What ultimately has occurred is the unchecked exploitation by politicians, investment firms, Bankers, mortgage lenders, and some that simply saw this as a way to make a quick buck. At what price?
Experts say the most important thing that needs to happen before the $700 billion bailout even has a chance of working:
Home prices must stop falling. That would send a signal to banks that the worst has passed and it’s safe to start doling out money again. The rescue plan also raises the federally insured deposit limit from $100,000 to $250,000, a move that could boost banks’ reserves and further grease the lending wheels.
It also creates a vicious cycle: No trust means no lending; tight credit means it’s harder to buy a home; the more difficult it is to buy or sell a home, the further home prices will fall; and the further prices drop, the more foreclosures there will be.
There are fears that the global benchmark of bank funding costs may be inaccurate. The benchmark is the London interbank offered rate (LIBOR) and it could be understating the interest rates that banks pay each other. Banks do not want to show that they are “desperate for cash”. Experts believe that many banks are desperately short of cash and need an injection of capital to survive.
Europe is now in emergency bank bailout mode as well.
Germany became the latest country to move to allay fears about the financial meltdown, enhancing a rescue plan for Hypo Real Estate AG and guaranteeing private bank accounts as European governments scrambled on their own Sunday to save failing banks.
Wells Fargo Bank may be one of the most sound publicly traded companies poised to come out on the other end of all of this adversity in sound shape. WFC
Expect any small bounce to be shorted immediately however if there is enough thrust the shorts will have to cover which has a self fulfilling prophecy type effect that drives the market up. This simply gives the shorts a better price leverage to take the price back down. Inverse ETF’s are the play right now if you have the knowledge and the skill to even attempt to challenge this market head on. This is not a market to toy with.
You have the choice of when to take risk and when not to take risk. The risk to reward ratio is simply not reasonable right here.
Again remember this may be a once in a lifetime event we are experiencing right now and with no previous landmarks to utilize as mile markers there is a higher likelihood to make errant choices.
Friday’s employment report showed a ninth straight month of job losses. While the government’s official jobless rate held steady at 6.1 percent, that counts only people who are actively job hunting. If you count people who have given up looking, the so-called “augmented” jobless rate rose to 9.1 percent in September from 8.9 percent in August.
Consumers are cutting back, spending is slowing. two-thirds of the economy is based on consumer spending; if that spending slows further, so will the economy.
DOW at a new Low for the year at 10,325.38 down - 157.47 (1.50%)
NASDAQ closed at 1947.39 down -29.33 (1.48%)
The S&P 500 closed at 1099.23 down -15.05 (1.35%)
This is the bad news: AAPL, GE, RIMM, CROX, SPY, QQQQ, F, DIG, Q, all at a new Low for the year.
the Stockshakers Long term portfolio will be created after he markets find footing.
This may be the most risky and challenging market environment since the 1930’s and now as a global economy has been created there is a risk of global “Depression” if this situation is not handled correctly. There will be stimulus in our future, possibly quite a bit of it. However the biggest concern here should be that this is the riskiest phase of the bear market. The lack of breadth & volume or any leadership sector or stocks leaves us in a position that would suggest extreme caution. T-Bills are always a better idea than a loss.
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