I don't have anything new to say, except that these levels of VIX and VXN have never been seen - everyone is just jumping on the opportunity to sell puts short, since it's free money -ggg- All this on very low volume, with a 3-d gap up.
I added more qqq 2006 OOM puts today. Mr. Market works in both directions. I think this bear market is far from over, and the next leg down,
which will likely start this year, will be quite devastating. Mr. Market is about to dump the Fed, by proving it's quite useless. When Greenspan put
expires, speculators in bonds and interest rates derivatives will panic.
Stocks will just crash then. BWDIK?
If they manage to bounce the dollar from these levels, it will save the system for a little bit longer. If not, the dollar dump will intensify and drag
down stocks and bonds, and the likelihood of Greenspan put expiring right now will increase.
People totally forgot that with interest rates at 0.75%, the Fed has no real
armour left to defend the system against what might develop next. The printing it might engage in will just crash the buck and bonds more, creating hostile interest rates environment. That's the vicious cycle I'm expecting.
If long-term rates go any higher, the consumer will default. Money isn't free when interest rates are low. Someone has to pay all these banks speculating on derivatives. I think it's Joe 6P with his mortgage, car, and credit card payments. At these rates, he hardly manages the payments.
He will default should rates go higher. |
