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Steve, someone posted that Merril internal documents show them to be leveraged 97 to 1, and that a drop of 10% below the summer lows will put them out of business. Hard to believe, but you have to believe others are in such tenuous positions. You probably noticed that Block Trading, the original day trading outfit, locked their doors a couple days ago, and is looking to file for bankruptcy. You start to get the feeling that we might be sitting on top of a house of cards that is just waiting to collapse in any type of prolonged bear market. How many other brokerages will go broke, especially all these on-line discount brokers that have been springing up like crazy? Heck, half the internet has probably been built around this bull market; data feeds, charting programs, level II, news, brokers, etc. Most of this segment will probably die. CNBC will lose half of their audience (which at this point may not be all bad, I'm getting pretty disgusted with their coverage lately, parading all these GS, ML, MS, analyst in front of their cameras to say the bottom is here, time to buy, etc. They must all be desparate, and CNBC has been told to support this market, IMO. Fleckenstein is the only bear they let talk.) I think most hedge funds have been shorting gold for years (central banks would loan their gold out for something like 1.25%. Short their gold, buy bonds, and you're making free money, as long as gold stays down). So it looks like there are huge forces at work to keep the Dow up and gold down, but they seem to be failing on both fronts. If they fail, it may get real ugly. |
