|Re: just got home to look at charts, ... Good post, logical evaluation on the current situation...|
I stand by my assertion that none of this financial meltdown is by accident but rather the result of longstanding plans executed by people in high places with shared backrounds and allegiances... The "elite" as it were making moves to protect and increase their control over populations resources, regions armies etc
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| Reply to bearishben - Msg #1947241 - 05/23/2010 02:05|
Re: just got home to look at charts, ... It's going lower at least 20% more d...
i read a very old essay by Martin Armstrong, i think it was his first public essay published in 1999 (let me know if you want me to dig up the link, i can't find it right now), but basically he describes how capital flows in and out of specific sectors/markets (which on the surface causes bubbles), so what we're seeing right now is capital that WAS in banks/financials flow out of them since 2007, and flow into emerging markets like China (this is why the China bubble---see FXI pop in Fall 2007), and commodities and gold.
however, the outflow is still occurring, because they (whoever is behind the scenes) weren't able to get all of their capital out before the Lehman bankruptcy triggered the sell off, so what we're seeing now is a second attempt to evacuate the financials/banks because they (those with more info than us outsiders) know how bad it is going to get (mortgage-related losses). Wells Fargo was the most conservative bank out of the megabanks, so it suffered the least from loan losses, writedowns, CDO exposure, though it did however acquire Wachovia, which did have enough exposure to go belly up (bankrupt, then firesale). Also, Bank of America has massive exposure from its acquisition of CountryWide.
so i find it very suspicious that the banks have been flying high, with JPM almost returning to its 2006-2007 pre-crisis pricing levels in April 2010. I was pretty suspicious of all the financials hitting near 2007 highs, that's why i picked up FAZ calls, but i didn't make nearly as much as I could've in those FAZ calls because i kept getting scared of FAZ's exposure to volatility (loss of volatility drives FAZ down) and GS and AIG (either of those popping due to favorable news kills FAZ). IN RETROSPECT, it looks like shorting or buying JPM or GS puts was the trade to have made max gain on the DIRECTION side, with far less uncertainty psychologically than holding FAZ long or calls (due to time & volatility decay of ETFs).
Abstracting from all of this and learning from it, it looks like buying and holding WFC June or August puts with extreme conviction that it will go down at least another -10% from its recent close (May 21) is the best anti-financials trade at this point, just because it's not down as much as the others have been (so it has more downside potential than, say, JPM or BAC or C), and because it also has exposure (through its ownership of Wachovia) to further mortgage-related losses or weaknesses in the housing sector.
I think if Armstrong's right and we apply his ideas from that first article, we can see that we were fooled---we thought the bubble was in the fricken HOUSING sector, but in actuality, the LARGER bubble is in the FINANCIAL sector, with these banks/financials now strapped with massive derivatives exposure. And anyone who has traded regular plain-vanilla options knows that tiny little changes in the underlying asset can cause massive moves in the derivative price just due to their nature and reaction to volatility.
I stand by my assertion---until proven wrong----that the "flash crash" of May 6th was not an accident, but rather, an event that *masked* further selling in financials. Notice how on May 7th there was also a massive intraday sell off in the S&P, sell off that sent the S&P to a lower LOD than the LOD reached on May 6th. that move came out of the blue! i was sitting there watching AIG, sipping my coffee and almost spat it at the screen when it TANKED on May 7th then jumps right back up. Looking back, and trying to piece these past events together logically, it looks like those "in the know" are continuing to distribute financials (causing these severe intraday sell offs), while pension/mutual funds are soaping them back up (causing the move right back up).
So what's happening is that the most powerful firms, and the U.S. treasury holding such winners like C and AIG stock, are dumping shares into the open market, while dumb mutual funds, pension funds, are soaping them up, being the buyers, and thus causing the average joe with his 401K to be the buyers of trashy financial stocks that are basically worthless (e.g. AIG stock is 80% owned by the U.S. Treasury).
Benjamin Bernanke in the recent Fed meeting minutes gave us two logically (and economically) inconsistent statements:
1. the economy is showing improvement
2. but we still have to keep interest rates at emergency levels
what? okay how much is the economy improving? if it's improving by tiny baby steps (which is what the recent econ. data show), then okay that makes sense that they'll keep rates as is, but if that's the case, that means those baby steps just don't justify the rebound in stocks that we've seen lately (in financials & tech mainly) because they're flying waay too high, near pre-crisis highs to be exact. if the economy's improving in a medium-sized rate and magnitude, then okay, maybe a tiny rate increase is in order, by 25 basis points?
so what i take from this reasoning is that if what they're telling us is true, then the economy is improving by baby steps, but it's still fragile so we need to keep rates at emergency levels, that's fine, but such tiny-baby-step improvement in the economy simply does not justify the recent run up in stocks going into April 2010. that's why i was bearish as hell, and continue to be fully clothed in bear suit attire, while eating honey from this bear-shaped container:
or maybe my tinfoil cap is covering my eyes and i just can't see the clear bullish rebound that's about to happen next week.... =/