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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (75933)	7/8/2007 9:28:29 AM
From: Real Man	Read Replies (2) \| Respond to of 94695

That could take a while (after the meltdown). We might need to travel to new lows first, or close to those -g- I also think the probability of a quick meltdown is very high today. The main reason is the popularity of hedge funds shorting options. Perhaps, as many as 1/3 of all funds are doing it. This is a winning trade as long as there is enough liquidity in the system. If liquidity faulters, then the trade quickly becomes a BK, as program trades all bet in one direction when the market goes down. That is, to hedge their short puts as the market blows through strikes. Now, there is trouble already in the bond land: credit derivatives and related hedge funds are blowing up. That, of course, sets us up for more printing, so the markets could go even higher now. The situation is highly unstable though, and once the dollar starts reacting properly (melting down), I really expect a pretty bad bear to come out of the woodworks. The Yen carry trade positions are also at a record. The blowing up bond hedge funds set the stage for a liquidity event. Message 23681377