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Pastimes : The Naked Truth - Big Kahuna a Myth
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To: MythMan who wrote (18415)2/6/1999 6:45:00 PM
From: Lucretius  Read Replies (2) of 86076
 
I think there's a substantial chance that the bond mkt crash picks up speed this next week. FRE and FNM look hot to trot to the basement.

Something that just hit me this weekend.... but consider the possibility that a crash in stocks is MUCH closer than we think. Normally, I'd say we have more distribution to do, but consider this...

Imagine a scenario where the long bond begins to crash and gaps down at the open (a full hour before stocks even open up). Now remember that everyone's valuation models are built on the idea of high multiples propped up by low interest rates and the discounting of those earnings (including Abby). Imagine what goes thru every portfolio's manager's mind (and they ALL use this-- Abby the clown would be first at the line to get a sell signal) if say... one morning your model suddenly shows stocks 50% overvalued because the bond mkt has crashed by 30% before your stocks even opened up to trade (then throw in margin calls and other deleveraging just to make things really fun!) HO HO HO!!!

now, that would be fun to watch.... assuming of course that you had purchased puts the previous day when everything seemed fine.

something to think about.

-Lucretius

BTW- Check out your local magazine stand, in addition to your Doonesbury.... HO HO HO
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