Wednesday, October 15, 2008

Some Random Thoughts

How is this possible? How could governments around the world spend trillions of dollars to fix the markets and then have the markets post their worst day in 21 years?

Could it be that these same governments have absolutely zero clue what is happening? Judging by the comments of the last few days, I'd guess so. So how could these clueless bunch of bureaucrats possibly come up with a solution to a problem they can't even explain?

We've had nearly 20 government interventions in the last 14 months. Every single one of them has resulted in enormous rallies followed by even more selling. And the duration of those rallies has been shorter and shorter even as the interventions get bigger and bigger. Is it time to officially declare the Federal Reserve as obsolete? They're clearly not helping. I mean seriously, if they can't bail out the world with "unlimited funds," what can they do?

How many buyers will we see on a retest of Friday's lows? Or will there even be a 'test'? Will it just blow right through it? I draw support at Dow 7,500 and 6,000. If you're in 100% cash and expecting this to last for years, rather than days, does it matter?

In market environments like this one, it's difficult to make concrete statements about anything, so I prefer to ask vague and open-ended questions. But what I can tell you is this:

The problems are as follows:
- fiat monetary system
- fractional reserve lending
- governments and corporations too cozy with eachother
- too much debt
- too much leverage
- a complex derivative structure of $1 Quadrillion (a thousand trillion) that even our smartest number crunchers can't make sense of
- unfavourable demographic situation

The falling stock prices, frozen credit markets, collapsing real estate values and economic weakness are all symptoms of the above problems. They can not and will not go away by throwing money at them. The only possible solutions are:
- time
- price

It's just that simple.

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