Friday, March 06, 2009

What's Missing in the Market: Panic

You know, I could be short all day and not have a problem with it. Really. However, given the statistical history of the markets, there are so much better opportunities for making money being long in a rising market which has solid fundamentals AND technicals underpinning it. Everybody wants to be early, no one wants to be late. I, for one, can stand to be late, if it means probability is working in my favor. This is a war of attrition. Capital preservation is the order of the day, if you're not trading.

The one thing I am noticing, and I see it in today's closing, is the lack of absolute panic. There has been fear, true, but it seems like everyone is trying to call the bottom (except for the people I follow/listen to, who are just trading along). There's been a lot of knife catching, and I should know, as my trading report will show. But most of what I see is people just waiting - hoping? - for the turnaround to start "any day now" so they keep buying the dips, just to jump out later for a loss. It's such a Pavlovian response. It would be funny if it didn't indicate just how long and drawn out this tape will be.

Now, don't get me wrong...there are a lot of pieces which need to come together for a sustainable rally to take hold. Most of those pieces are non-existent currently, which is why a bottom is really no closer. Given all the factors I've seen, and even with my respect for Jeremy Grantham and John Hussman, I'm staying out of the long side right now (with the exception of my primary thesis around commodities). Long is so, so wrong right now. Doesn't even feel right. We get closer to a bottom, true, but I think all of the knife catchers will find that the knife still has yet to reach the floor. THAT'S when I plan to pick it up.

I just don't see enough panic to say that all of the suckers have been cleared out. Yes, TLT is racking up gains (though it is off its highs), and TBT is getting its ass handed to it most days. Savings are up, but they can go up more. People don't even realize what else is coming down the pike, and insurance is SO fucked up I'm shocked and scared (just when I thought I had a good handle on the scope of our problems). But there's still too much hope out there. A lot more people need to get crushed to clear out the dead and create space for rebuilding. A LOT MORE.

That is all.

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