Quick Market Update

In reaction to my friend's Tony@Macro Story post who wrote: "If you are short as I am today is a very tough day."

We just a brief email conversation, and I wrote him:
I think i've read that on your block every day in october :-)  
Markets up 200 S&P points in 20 days. That's completely crazy. 
A massive part of my profits vanished... 
Anyway, markets are not meant to be easy. It's hard, we feel a lot of pain, but what doesn't kill us make us stronger.
I would add that I think we've now topped as of the futures contract trading at 1273. This is about 210 S&P points higher than the intraday low reached on the 4th of October.

210 points, in about 15 trading days.

Talk about unsustainable crazy markets.

But as Mish just wrote:
Good News for Bears
Although many details are yet to be resolved, the bulls got everything they wanted except endless printing by the ECB. However, the sad fundamental situation remains unchanged
  1. No structural problems have been solved
  1. Banks most assuredly need more than 106 billion in recapitalization efforts. The idea that French banks only need to raise 8.8 billion is preposterous.
  1. No investors in their right mind will fund Greek and Spanish banks to the tune of 56.2 billion euros
  1. The haircuts were not voluntary

Instead of the rumor mill of potential actions working to lift the market 24 hours a day for three straight weeks, it will be up to the EU to make the plan work. However, the plan won't work because of point number one above: not a single structural problem has been solved. 
[...] The bulls got nearly everything they wanted, putting an end to torture by rumor. What could possibly be better news for the bears?
On my portfolio, nothing has changed except that I closed the few long positions that I had opened near the bottom, banking in about 25% gain, which is decent on non-bank shares.

Once the euphoria of the Eurozone announces comes down, markets will realize that the Eurozone has no cloth:

  • Banks need more than 100 billion euros of recapitalisation (which they will certainly not get it from the market)
  • This is massive understatement of what is required
  • Greeks will have 50% haircut on their debt, which is not a default! And just a few months ago, it could have been 20%, but even 50% seems too small today. If tiny little, irrelevant Greece managed to make so much damage, wait for Portugal, Spain and Italy.
  • France and many other sovereign should lose their AAA, unless they have also made under the table deals like they did with the corrupt ISDA.
In any case, we are living historical and extremely interesting times, and whether you are losing or making money, you should be enjoying and considering yourself lucky to be able to attend to these events.


Tiho said...

Mish just wrote:

"I called a double dip in 2010 and got it wrong. I called a new recession couple of months ago and got it wrong again. Hopefully I will call a new recession in a quarter or two from now and get it right!"

Why should people care what Mish wrote, unless people who read Mish have a strong urge to go bankrupt with their funds?

I got ridiculed for saying this is not 2008 and there will be no major crash and recession. Man... during August and September, no one could say anything to the bears, they have a million arguments why nothing will be done or fixed.

But the bearish sentiment always does its own thing, squeeze the living lights out of every single perma bear expecting the lows towards March 09. All of a sudden, everyone who was doing the ridiculing has returned to their caves saying "let's just wait and see".

Now obviously, there will be more problems to come and the bears will say... you see you see... I told you so... total non sense if you ask me - you are all perfect contrarian indicators!

p.s. All bears were screaming and shouting during August and September, but the egg is on all of your faces now!

p.s.s. Hahahaha I'm enjoying this very much. =)

pej said...

Quoting doesn't mean acting :-)
I found his quote clever and interesting. that's about it.

I can see you're enjoying it, but you were also bearish on equities.

Moreover, this is not the end. We'll have ups and downs, and as long as you buy low and sell high, no matter when you do it.

I'm still massively positive for the year. It doesn't mean I will still be high if the market decides to jump another 20%, but then, we're not there yet neither.

Tiho said...