Well gang,
why don't we step off the porch and walk down by the meadow where the big oaks and shade are and chat about what has transpired and possibly is about to transpire.
Let's go over a few things that began to bring on this debacle.
To my mind, the down hill slide began when the Houses had to rescue the DOW at the expense of the NAZ. This was really not but so bad until the Houses got hit with the MSFT news that the arbitrator could not make a decision Friday of that week. On Monday, the Judge comes out with the news that he will rule after the market closes. Well Tuesday the Houses are caught by surprise when the Naz freefalls 575 points and shaken, they bring it back to finish down only 46 points. What did this do? Nothing in so far as extricating the one problem the Houses have in so far as solidifying their inventories. IF THE HOUSES ARE NOT ON MARGIN, HOW DOES THE MARGIN EXPOSURE OF THE RETAIL INVESTOR THREATEN THEM. They theoretically are not on margin but realistically if the retail investors over extendedness cause them to sell, that directly affects the inventory values of the Houses. So what happened, the Houses, and I am convinced also the FED, realized that MARGIN was the one variable that could possibly do great damage to this unbelievable economy. Although they had brought the NAZ back from 575 down, I am now totally convinced that it was pretty well agreed that the margin must be reduced at all cost. The greatest evidence of this are all the margin calls that have been received TODAY ( Saturday for God sakes) and the big question is WHY. Very simple to my mind, realizing I could be wrong, but I don't believe I will be.
The Houses are working in concert the same way the MM's would work on any given day to MAINTAIN ORDER and stabilize the market. I posted earlier that I was convinced that the Houses and other appropriate parties are meeting this weekend not knowing that ABBY had said in her speech that, "THEY WOULD BE MEETING THIS WEEKEND" according to candide's post. How will this happen? Very simple.
1. Why are the calls going out on Saturday?
Ans. To get every margin call individual lined up to be ready to sell the first thing MONDAY morning. why is this so important? Because the Fed and the Houses want this market back huming as soon as possible and they cannot do it with the large margin exposure. So unless the margin is out of the way, it is useless to bring it back up. It must be done only after the margin problem is out oft the way, hence the urgency with the Saturday Calls.
2. But V, want this cause the market to drastically decline further Monday morning? No. Why?
3. Because the Houses will work it just like the MM's. Remember, their computers not only tell them their margin exposure but also what stocks the sellers are holding, and they will liquidate the smallest denominations first in all probability. So what? This tells the Houses within reason how many shares must be bought to offset the selling that will take place Monday morning and therefore we will not see the expected debacle. How will they do it. Each House is always over weighted in certain issues and under weighted in others. They simply look at the probability of shares and the names of the stocks and allocate the buying to each House for whatever stocks they would like to have. Don't forget, this is no burden because THEY ARE STEALING THEM ANYWAY.
That is my reason for saying, there will not be a huge market wrecking sell off Monday. Watch the futures, if the futures are say down 85 or so Sunday night, I could be wrong, I bet they won't be. I also say we have an extremely benign opening that stuns everybody.
IF THE FED WILL MEET WITH THE HOUSES ON THE HEDGE FUND ISSUE AND GET THEM TO BUY IT BECAUSE IT IS A THREAT TO THIS ECONOMY, THE SAME WILL HAPPEN HERE.
Relax and get ready to BUY OPTIONS, that is the key with low capital reserves as long as you buy far enough out.
Now let's all go back up to the porch and have some lemonade.
Voltaire |
