From either first hand or second hand conversations, I have been in touch with three hedge fund managers who each manage billions upon billions of dollars in funds. Each of these three managers have been trading for at least 25 years, have 20+% annual returns, and have had minimal drawdowns. These managers are the best of the best of the best. They are much smarter and better informed than I ever will be. Each of them, as I understand it, is doing the exact same thing. That is, they are very, very long cash with very few directional bets at all. They are waiting for some “pivot point” or crucial bit of information that will tell them which way to go and then they will put on the trades in huge size. Why the hesitancy to put the trades on at this moment? I think that I see their reasoning - they need to see how the government reacts.
Damn, didn't realize I was in such good company or that the best of the best of the best and I are in agreement. vbg.
As far as government action is concerned, I am PISSED at myself for not having made concrete a thought which was rattling away in the back of my mind, i.e., that OF COURSE Bush would do something to help out the little guy in an ELECTION YEAR, and that helping out the little guy would OF COURSE help out the sleazy Wall St. types who got us into this mess in the first place and that OF COURSE this would be short term bullish for shares.
I suppose the back of my mind thought that Bush would act later, when the press of politics would make his action more politically effective for the GOP. But the sleazy Wall St. types are in trouble NOW, so it became inevitable and pre-ordained that he would set the bail-out wheels in motion sooner rather than later.
Lesson: Pay attention to thoughts rattling around in the back of the mind.
However, the risk is that the Democratic Congress with cheerleaders such as Clinton, Obama, and Schumer try to “one-up” Bush and extend the bailout plan to everyone in the nation. While I don’t see how exactly that can be done, the risk is that we experience a basic socialization of losses. That is, the speculator makes the profits on the way up, but the taxpayer covers the losses on the way down.
If this happens, this equates to nothing more than a huge printing of money that is massively inflationary. That could mean that stock prices would go up, and perhaps tremendously. That may be the rationale for Richard Russell’s argument that we are getting ready to see an explosion on the upside in stock prices.
Might very well be exactly what happens. However, it so bogus and near-fraudulent a way to prosper that I would have a great deal of difficulty, on moral grounds, no less, participating in a rally which ultimately will result in self-decapitation.
I will support the first candidate who has the integrity to say, No! |
