Thursday, August 16, 2007

What else could go wrong?

Probably a lot.

First -- there's real selling out there -- indiscriminate bear market selling... and it could last a long time although it's starting to seem extreme...

I doubt it's over.

Which is not to say a lot of stocks DESERVE to drop 8% today. But that's what happens. People sell and then they sell because they figure other people will sell so they may as well sell first. Vicious cycle... yada yada.

I'm watching certain bellwether stocks.

CFC is important I think. As one of the largest and strongest mortgage lenders -- their fate will determine the market I think. Today's 12% drop is not encouraging.

There's so many problems going to result from all this: layoffs, reduced taxes, more debt, less consumer spending, less profits, more layoffs.... vicious cycle.

Remember: The markets never really should have gone up at all. I was shorting the indexes last August before they ran up 3000 points. I thought it was expensive then. Now they're still 2000 points above that.

But again -- a lot of stocks are actually cheap now.

But this is not about 'value'. It's about psychology.

There is probably trillions of borrowed money that need to unwind. It'll take time.

Once it's over - -the cash on the sidelines will return to the good stuff first.

First we need to hear about at least 20 - 30% of all those hedge funds out there closing shop. And each one will need to liquidate -- causing another to be forced to liquidate -- forcing another....

See how these vicious cycles sneak up on you?

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