I'm not sure why you would feel a need to apologize for saying you were 50% into the bull costume. There have been several trading opportunities to the upside this week. They faded quickly, but they were still there. It hasn't been a straight line down.

Looks like your call of a potential bottom at S&P 911 wasn't so far-fetched, although the futures suggest an open 30 points below that in the morning. Wait---it is morning. I'm up trying to find vehicles for the bounce higher, but the pickings are slim.

I am glad to see I am not the only one awake looking at the markets. Todd, like you say, every time you take the day off from the markets! Your 50% bull costume got me a nice gain on a quick trade in WFT so next time I visit NYC I owe you a drink! I think tomorrow morning cold be a great short term buying opportunity, but obviously has great risk. I am planning on adding to my JNPR position.

Just a note to thank you for Minyanville.

It provides a refuge of sense as the winds of change rage around us.

I think your only culpa has been beeing too early in your percepctions - so far well done!

I rose an eybrow at your surprise in the face of Fed's entry into bank's capital, given that I didn't read anything about their crazed plan to take UNSECURED BONDS FROM COMPANIES. Wouldn't that bee replacing banks in the financial market? Isn't that even more risqué than nationalizing companies with all their working structures and human capital intact? If I lost it diregard this, otherwise, any comments?

As for the dollar I am now pretty sure that, at a point an Argentinian solution will be adopted, with change to a new currency (exchange rate move and condonation bundled up in the measure) Anybody up for bets? (since you can't short the euro...)

Keep up the good work! Thank you for all the good stuff

Just before i read this article i was wondering if the "dynamic" duo of Paulson, Bernanke were burning the midnight oil and circling which banks they are going to save and which they are going to let sink with the ship.

And then I read that the government would likely consider hedge funds as acceptable casualty of war in the battle to maintain solvency battle. Again i understand its not confirmed course of action and just a story doing the rounds with reliable sources quoting it.

But it brings us to a point that no matter what the unwind of this situation is there are going to be victims. A lot of them. Some innocent, some not so innocent.

On the silver lining side of the story, i finally see confusion, fear (not that i would wish it on anyone) and see capitulation finally coming. Which usually is precursor to a better markets.

Good luck to all Minyans tomorrow.

Todd, I think you are spot on with the wishbone theory.

While you and many others are able to survive and even prosper in this severe deflationary environment by preserving capital and shunning debt, after many sleepless nights I cannot figure out a way to protect my family and assets against the serious inflation coming in 2010 and beyond. It is clearly the path to maximum pain.

Maybe you and the other professors could weigh in on ideas.

The only way to make a bank loan out the money given to it by The Fed is to nationalize the bank. This will only create more problems.

Todd,

Just when I thought you couldnt do a better job summarizing-- Great work, and a great mind!


"The path of maximum pain for most Americans plays out like this: The savers�those who sold stocks and/or preserved capital�get the double whammy when the dollar debases and everything denominated in dollars jacks higher." --

It would be great to have a better discussion on this statement. One it would be interesting, but so many of my trades are based on the dollar, and I must say I cant find my gut to which direction the dollar will take and how?! I can intelligently argue for both sides of the wishbone world.. But that argument is all in my head-- would love to hear others.

Didn't Orwell's 1984 begin with failed Capitalism and bankers being the new social evil?

It may be no consolation but, like you, I moved to cash some two and a half years ago and then suffered the derision and yes, self doubt that ensued as the market went higher. Minyanville provided some psycological support in those trying months. Unfortunately the smug satisfaction of vindication is bittersweet as we witness the unravelling of the system as we knew it and struggle to find a glimpse of what the end game will resemble. There will be an end but in what shape and after how much pain for literally millions of financial innocents?

Thanks for the insight of you, your contributors and the countless Minyans who post - you folks are smarter than I am.

They will have to use the nuclear option, there isn't enough time to unwind the junk trades.

Hey Todd! I live up here in NY State, and I'll tell you, things are still WAY over priced, so don't listen to realtors! If you need any tips on your property search, just let me know.
Oh and by the way, your Minyanville articles are very helpful, thanks.
-Mike

I cashed out 1 1/2 years ago knowing when the end came it would come swiftly. Missed the top and may miss the bottom, but sleep well nights.

The decline has been steep and the word panic has been used a lot but I haven't seen huge volume even when the DOW was down 800 points in 5 hours. I think we need really huge volume with a spike down before we get a bounce.

I thought we would bottom around 8 - 9000 unless Obama wins the election - perhaps the market is factoring in a win by him. (Yeah, people will say that injecting politics here is not good but most solutions will be politically driven).

Todd, an excellent piece. Two small comments:
1. I think I caught a snippet of a panicked-looking Jim Cramer telling people to get out of the stock market. I'm not sure I can conceive of a stronger sign that (at least for the short term) the bottom is near.

2. You said, "While we're on grassy green knolls with tin foil hats, I'll remind ye faithful of something I said late last year that fell mostly on deaf ears. The president has the right�no, let's call it an option�to suspend the election in the event of national emergency. Such a situation is a low probability affair but I'll toss it out there through the lens of 'seeing all sides.'

I have a dinner bet with a somewhat estranged friend that if Obama wins the election, there will be no transfer of power. It was early this year when I started chatting about how I doubted there would be an election, and everyone thought I was an absolute crank. My expectation has been that there would be some sort of "exogenous" terrorist attack, and while that still might happen the financial panic seems to be pushing us toward a national emergency well enough, doesn't it?

We are seeing the car crash in slo-mo which almost killed the patient, but the cancer is the aftermath that all of us will suffer from and many will die.

Like the cancer that took it's toll after the 1929 crash that took a decade and a World War to cure, we will be suffering for many years after this crash.

A quiet, organised mind marches steadily forward with only an average amount of creativity. A random firing neural synapsis brain is much more complex, but will also be able to meld unlike items into justifiable thought. That is creativity.

Todd, thanks for the wisdom provided by Minyanville. It cuts through the mish-mash of misinformation provided in the daily press. I'm glad I found a light here.

Re; the comment about the election suspension - I mentioned that 2 years ago to my wife and co-workers - they thought I was completely off-base and paranoid. (maybe so - one can only hope!)

And there are areas which are still in denial over the whole real estate market. Here in Seattle, the 2003 median house selling price was $293K; last month's figure still was something like $442K. We still have a long way to fall here!

Who could have guessed how wildly successful Osama Bin Laden's attack on America would be! He energized a brain-donor president and duped him and congress into committing a series of missteps that would ultimately spell the doom of the US economy. Trillions of dollars lost to the "War on Terror", a two TRILLION dollar government surplus depleted in less than two years followed by a mountain of useless debt. On top of that, conservatives in Washington quietly set the table for an unrestrained no-holds-barred corporate greed fest that would lead to the greatest destruction of wealth seen since the great depression. But this is just the overture to what may very well develop into full-scale civil war in this country. Once companies start laying people off en-mass, and the prospects for reemployment begin to look hopeless, there will be events the likes of which this country has not seen. Do you think people are going to quietly take to the streets and soup kitchens like they did in the 30's? Not a chance. They will fight and riot and do whatever they need to do to stay in their homes. Gunfights during evictions will become common (hint: this is NOT going to be a good time to pursue a career in law enforcement).
The internet will allow for a degree of coordinated protest not seen in U.S. history. Crime will become a way of life for many. CEOs will become the new targets for assassination and I predict that at least some will be taken out before they retreat to offshore enclaves. The pullout in Iraq will likely occur because the troops will be needed to enforce martial law. This will go on for 12 to 18 months. By that time, the damage to the US economy will be so extensive, that its place in the world as the world economic leader will be lost for the foreseeable future. The only consolation will be that most other nations will be facing the same circumstances.
Scared yet? It gets better (worse). In a final effort to restore order, the US military �stages� a terrorist nuclear attack. A relatively �expendable� city like Baltimore or Las Vegas will be the likely target. However, I wouldn't rule out a major �retirement city� like Boca Raton where the added benefit of eliminating a large population of entitlement depleting retirees are located. After all of this, who knows what American society will look like. One thing is certain however, there will never again be a United States as great and powerful and free as the one we have come to know.

I place my bet on the dollar holding. The reason being is that as leveraged debt deposit destruction continues we will return to a finance system that requires borrowers to provide with cash or hard assets a loan to value ratio of 80% and in the future these new debt contracts will not be used as deposits to other banks for the purpose of leveraging more money. That means we will need a lot more currency to keep the wheels of commerce going. While the printing press is churning out a lot of currency I doubt that they are churning it out as fast as losses accrue in the paper debt destruction in the deleveraging process. In this game of finance the bag holders will be the investors holding the exotic debt instruments which are spread out across the globe. As their paper goes up in smoke then the government steps in to refinance the next generation of investors with more currency to replace the old paper debt instruments. This makes the dollar more valuable as it is again backed by tangible hard assets that have been already revalued to currency by the current deflationary process.

I bet two cents on this senario. And thats my two cents worth for the day.


JPM

Come on Todd. With that "suspend election" rumor, you're just a late wag of the dog by the blogosphere. More discipline, please!

That "election rumor" was started Sept 16
at:
http://www.whatdoesitmean.com/index1141.htm

"The Federal Security Service of the Russian Federation (FSB) is reporting in the Kremlin today that the Bank of England has received from the United States Federal Reserve Bank a �notice' that President Bush is preparing to declare an �Economic Emergency' during the week of October 5th and will further announce that the American Presidential election due to be held on November 4th will be �indefinitely suspended'. "


Sept 27, this next blog gave some background on the author above
http://www.knowthelies.com/?q=node/2830

"I have just been informed that this article is a disinformation piece which was released by a woman (fictitious entity) who goes by the name "Sorcha Faal", aka David Booth supposedly living in Russia.

She/he/it is the webmaster of www.whatdoesitmean.com . You'll notice that every story is SOLD... if you want the answers you'll pay for them. "

OK -- perhaps suspending the election is a bit far fetch. (boy I hope so!) but in any event, Mr. Harrison certainly deserves some credit and the luxury for going off on such a wild tangent every now and then. How he manages to create such perfectly rounded comments and summaries, REAL TIME, in THIS market is extraordinary. No less being able to actually trade and get in front of the camera! You sure wouldnt want to see me right now!

After all that is happening, though, one does have to be careful, or at least identify, spreading wild rumors. This is after all Minyanville!

Agreed.
On the other hand, when even foxnews starts reporting stuff that feeds conspiracy theory angles, maybe that's a tell too!

(somehow my links above had an extra space inserted in them. Hopefully this one is okay)

http://www.foxnews.com/story/0,2933,435681,00.html

Either way, I believe we're deep in the <I>throes</I> of the panic phase of denial-migration-panic.

George:

I too have been in cash most this year except for July and August, and then jumped out at the end of August with a slight 2% profit.

This has been my best year financially . . . especially when I sold my home last summer 07 . . .

Having been a trader in the late 80's and early 90"s I do feel we are in for a 10% rise in the market and then will trade sideways after that . . . I am tempted to jump back in but fear our country is headed towards socialism (election will confirm it to my dismay) which may keep me in cash much longer than I wish to . . .

I may look for bargains now in real estate or may wait until early next year for it to run down a little more . . .

Good Luck Minyans,
Mark Bobitka

Toddo,

I see how well your last rumor worked out--the one about the short sale ban being due to perceived foreign shorting attacks on US financial entities. Puhleeze.

Between that and this latest clap trap, you should stay out of the political BS. I perceive that you are either a strong Obama supporter, developing a paranoia complex, or both.

I still appreciate your insights on the markets, economics, and trading. I hope you continue to focus on that, rather than diversive and unsupported rumor.

William

I think it is certainly legitimate to talk about politics in the context of the current melt down. There is a building anger among many people that think they bought into the American dream only to bite into dust. Investors need to look six to eight months down the road to see what course that is going to take. As much as an Obama vote may be cathartic to some people, I do not think that it will be sufficiently cathartic to release all the pent-up rage - especially as the joblessness rates go up dramatically and middle class people are forced from their homes. Social stability may become an investment criteria. Entertainment stocks did well in earlier downturns, and those tend to be non-geographically centered. Stage 2 of the bailout will likely be some for of 'works' programs -- even with an empty treasury. If the government printed billions for banks, will surely print billions to prevent riots. Since construction technology is well past the long-handled shovel, it may not go there, but it will surely come -- perhaps mass education or mass arts or mass technology research. Businesses should look for companies that have the capacity to support massive employment schemes while putting out a socially desirable - but not necessarily market oriented product.

Bob,

Great post, spot on.

I sense the societal upheaval as well.

We have created a house of cards in terms of income, debt and credit, and production and transportation of necessities.

Socialization is likely, unfortunately. A second round of FDR socio-facist programs disguised as patriotism and "we have to do something."

Do something? Great! Bail me out. I've paid my various mortgages and bills for 20 odd years and what is my reward? The shaft! The shaft from industry and government.

I really don't believe looking to the past will help becasue we haven't been here before. All market crashes and inflationary/deflationary panics and crises of the past occurred in a world where most people could grow there own food and had a scrap of land at the least to do it.

We are now living primarily in cities and suburbs and depend upon production, distribution, and transportation to these areas from corporate or very large family farms. If this system breaks down there will be pandemonium, riots, societal collapse.

Let's see...where are the databases that contain the records of who owns or owes what? Hmmmm...the cities. Where will the riots and fires and looting start? The cities. I'd be surprised if burned employees haven't erased datatbases already.

My personal opinion is that Fannie and Freddie were intentionally run into the ground by handing out mortgages to buy votes and build socialism. The sad part is that the greed of market capitalists caused them to buy into the ploy.

Now you have a populace that sees the greed, has lost money, and have a messianic candidate they can feel good about themselves voting for because he's black and says what everyone wants to hear (cut taxes, raise spending, chicken in every pot, etc.).

Scary indeed...

Good Lord, I mispelled "their" as "there", the world as we know it is coming to an end! (chuckle)

I do really hope there is the character, ethics, and spirit left in the American people to rise above this...I hope and pray...

doesn't EVERYONE profit from someone's pain, to some degree? If I profit from a purchase of equity that someone else sold, they've suffered an opportunity loss - a form of psychological pain for most people.

Most of the losses in the current downdraft are of the paper variety - which is precisely why I've not worried much about all this. I've never seen a dollar of this value, so why should I worry about the loss of it? But my wife spends days worrying about money she's never seen or touched.

Someone is profiting from my wife's pain. From me, not so much. But that's simply a difference of perspective or attitude.

I don't believe buying a foreclosure is profiting from another's pain. It's an unfortunate part of ANY economic system that some people make a bad decision and will suffer because of it. There is no system that has been created that prevents loss while insuring gain. As a matter of fact, one could say the experiment of the last few years to push that envelope have led us to where we are today.

Still, while things continue to play out, I've still got to wonder where the bad times are. I'm concerned that things could still get worse, but surprisingly I've met very few people who, like my wife, are genuinely worried about the next few months, let alone the next few years. Most are taking a more sane attitude that they need to alter their monetary situation, focusing on paying down debt and increasing savings.

One fellow, who I had dinner with the other night, was very clear in his view that the US, as the most innovative and entrepreneurial nation on earth, should realistically weather this storm because we are so flexible, adaptable, and adroit at dealing with change. I'd have to agree.

I'm sure the fall of oil from $140 to $80 was no small part due to a speculative bubble. But a good portion was also due to the very adaptability of consumers to price - using a commodity less as its price exploded. This trend WILL continue, because the oil scare will remain fresh in people's minds for some time.

This same mindset will help to "fix" things in the financial markets. I suspect savings rates in the next few months will "explode" (everything is relative...going from 1% to 2% is a 100% increase, thus would equate with an explosion) and debt will be reduced dramatically in relatively short order.

I'm pleased that my wife and I made a habit of making extra payments on our mortgage when the cash was available. We will continue to do so when opportunities exist, but we are building a cash reserve. When you put your mind to it, it's not hard and can grow rapidly.

In the meantime, I've played the market for an opportunity when it fell Friday...so there's always a way to make money, even in a bad market. I guess playing the market Friday is me profiting from another's pain?

great little essay... Fortunately, both you and your wife seem like very optimistic people, albeit with plenty of rationale and smarts. That to me is the ideal way of being.

however, i get an unsettled feeling that I dont believe all optimists are rational, and thus might bury their head in the sand further.

Do I believe in the US? YES! I still think things can get worst in the medium term.