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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: jimmg who wrote (76714)	12/27/2006 11:01:39 AM
From: Real Man	Read Replies (1) \| Respond to of 110194

There are no bears left - the ones that are left are trading spike rallies, as I do, just read the clown thread. Russ is the only bear left. He has his fundamental reasons. Grrrrr.... -g- I enjoy reading his blog, as it is aligned nicely with what I think. I agree with Russ. Did you buy the dip? I did. -g- I see the number of coupon passes, and I get long calls on the dip. It proved very profitable over the last 2-3 years to do it. I don't want to commit to the long side, cause Russ is right, and this market could crash some day. The record low spreads and record low volativity for a record long time, and the possible manipulation (bid under the market) makes this market very prone to a large scale decline in a short number of days, also known as a crash. The risk in this market is severely mispriced, since the Fed always comes to the rescue. If there is a manipulator, the market will overpower manipulation some day. This always results in a large scale crash. Take silver in the 80-s. The catalyst? The number of hedge funds shorting risk has swooned, as shorting volativity (put options) has ballooned their returns. A move in the market more than 2-3 standard deviations down could trigger a meltdown for these players, who now hold a record number of short puts on the market virtually naked, because the Black-Scholes model tells them to do so at this volativity. We have seen this in June this year, but the market was promptly saved by the Fed. Derivatives can't control derivative markets, some day the drop that can't be saved will originate there