Stock Market
It was a mild down day in the end. But there was a trough to peak
swing of 1000 Dow points during the session. Thus it is that
traders have a strong interest in this deeply oversold market. I
try to observe the rules of the classic Sicilian trader: Never disclose
your positions or intent, and never offer advice. However, with
option premiums so high, some traders may well buy and write
against their positions. These fellows are acquiring downside
protection and income and if they go a little out of the money, they
may not care if positions are called away. A mere passing thought.
The crash in the market reflects the fact that investors have been
lowering expectations for profits and have been doing so in a rapid
manner. Not irrational action in my book since it could well be that
earnings may prove disappointing for this quarter and for Q1 '09.
However, further dramatic downside action in the days ahead
might be evidence that bearishness is getting ahead of itself.
The Panic Of 2008
There are new nostrums to end the panic in the air -- having
central banks guarantee international interbank lending and using
taxpayer money to buy equity positions in banks to bolster
primary capital directly. The first looks awfully unwieldy and I
regard the latter -- direct investment -- exceedingly dimly.
The ability of governments to manage properly a program such as
this over time seems heavily in question (Think post office and
FEMA). The Fed and the Treasury have so many $ irons in the
fire already, that it is reasonable to wonder how easily they can
unwind these programs in the future without causing further
dislocation. I also remain very wary of allowing lame ducks in the
US so much leeway in their closing days. But the tinkering will
go on.
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