Jenna, LastShadow, Mac, and Gang:
The following is an exchange of ideas about the so called Asian flue. I felt it might be wise to consider the following thoughts when making any trades in this market. This exchange occurred on Thursday Nov. 8th:
ok folks..lets look at the calender..options expire this month on 16th..a little earlier than usual in the month. That's a week from this Friday! Thus we will see (imho) a down mkt overall..we may have 1 or 2 days of slight rally, but as has been the case for the past 5 months...a drop in the mkt most likely is going to occur. Remember too, this is 90 days from October, ie Asian Money hedgers are going to exercising their options as well. Earnings reports are expected to be down across the board...they start reporting the 10th.
I would like to find a positive note in this theme...being an optimist..but the realization is that the tenor of the mkt is down. The only "positive" note may be the fact that inflows to mutual funds, will as history dictates, be quite healthy. However, money managers may wait till buying --parking those funds in cash/bonds. Thus when money managers start to buy...the market may have a nice strong short rally, but they will not be buying until the items above are clearly out of the way, particularly the Asian money hedgers. Summary: cash is king now..as much as possible..minimize losses, and look for the inevitable buys that will occur.
At this point a question was raised as to what I was referring to as the "Asian money hedgers, and I offered this explanation. "Asian money hedgers": the big boys..that "play" the currency valuations. These are money mangers that literally can control the valuation of small countries currency valuations..they have been moving through Asia, like clock work. Examples: Indonesia, Japan, S. Korea, and now China. China is by far their biggest mark, and it remains to be seen if they can have their desired impact. Essentially they short a countries funds, then control the valuation by holding the currency, dumping it the mkt allowing it to fall. By the way, this is VERY simplistic, but its simply a supply and demand situation. The countries begin to print more money...and the inevitable happens..the valuation falls, the hedgers dump their holding..causing a further decline..and of course their shorting, thus huge profits. Just like options, hedgers "buy" a country's funds as well --similar to our feds auctions, thus their contracts are on a 90 day schedule. The last time their "options" were due was October. Basically they are trading currency futures, and selling short. But it is a VERY complex situation, played buy the top folks, .guys like George Soros, etc. It is a high stakes game. So far they have done extremely well, and China was/is the last Asian country to be tackled. Its also the biggest economy that they have attacked, and that is the risk! If they are successful the implications are global, and what we see now is the tip of the iceberg. And remember, 90 days from now, round three of the same situation occurs. And to be honest, no one is talking about March, yet.
See the big picture now?
That is why this undercurrent of talk on CNBC and other financial shows regarding the Asian flue. What they are referring to is what will happen when the "other shoe drops." This is the second wave of the same occurrence as in October. Those that may remember, in November I posted thoughts about this on the rttrader channel. The concern wasn't really what happened in October, but what might happen with the second wave.
The "Asian flue", combined with reduced earnings do not, can not, nor will it portend a rosy mkt picture! However...there is one BRIGHT side...buying opportunities will abound! Thus a choppy market at best..and a real headache foe Greenspan and other Countries that are trying to manage this crisis..
I'm not sure we will have to wait 90 days DB. From what I hear from my former partners in Asia, there is considerable panic now. We could see some hyperinflation soon.
If the Asian countries continue to thumb their nose at the IMF as Indonesia just did today, the picture will get darker. Regarding Indonesia; not so unusual -- similar "thumbing of the nose" has been done by Japan --look at their economy! Its on the verge of a depression and collapse, Korea is similar. Only this time its different -- it used to be only one country, now its all of them, and I don't think Ruben and Greenspan will tolerate this nor the Europeans. If the talk is that U.S. companies must take "hits" due to Asian earnings woes -- where is the talk about European companies taking the same hits? Its only a matter of time.
To summarize: Cash is king, trade conservative, and consider shorts on many companies. The market is nothing more than perception, and the perception is not favorable at this time.
Footnote: It was reported today (Friday) that President Clinton spent 20 minutes on the phone with the president of Indonesia, essentially telling him to follow the orders of the IMF. |
