Mark McHugh

It’s all About Redemption Now

In Open Thread, stocks finance, Uncategorized on Monday, March 2, 2009 at 2:45 pm

No, not your immortal soul, goofy.

My prayers for a snowstorm that would paralyze the Northeast and close the markets were only partially answered (sometimes God says, “sort of…”), so I’m home today, watching the train wreck.  This is looking to me like the kind of washout that we need, and I’m not seeing any price action for the X-files today.  Could it be that the powers have finally decided to let the chips fall where they may?  Who knows.  I believe that facing reality is usually the best course of action, no matter how painful.  I must concede however, that these are not usual times.

The key to successful short-term trading is figuring out what the other guy is going to do, before he figures it out.  The economic news, especially on Friday of last week, was grim.  Changing bailout terms, GDP much worse than initially thought, more Ponzis, initial unemployment claims thundering along, GE cuts dividend,  Santelli’s a Ho?  etc, etc, etc.  I  found too myself overwhelmed to write anything coherent (at least 5 pieces hit the trash can).

more…………………………………………………………………….


The news is what it is, the question is how people are going to react…..

I’ve always maintained that mutual funds are the real driving force of the market.  All that “dumb” money that trickles in from the unwashed masses, only to be front run by people who think they’re smart and valuable (read dickheads).  From time to time, these dinosaurs make sudden moves (or think of elephants getting out of a pool) and traders get caught.  My feeling is that a lot of these “buy and hold” chumps hit their pain threshold this weekend, and are calling thier 401k guys saying, “just get me out.”  I have not seen much evidence of mutual fund managers hoarding cash, so when the redemptions come in, they have to sell stocks, driving prices ever lower.

Hedge fund investors are a lot richer, but only a little smarter.  Madoff and others may have convinced them that the only way to be sure that you aren’t part of some illiquid trap is to redeem.

Let’s not forget margin calls (discussed previously) either.  About the only positive I can give you is that, at a glance, the options market looks bearish (which is bullish), but that’s a very slim positive, because the data I look at doesn’t tell me if those options are being bought or sold (just traded).

If the final trading hour is an enema, I might start looking for a re-entry point in stocks, but anything else, I’m gonna watch the river roll.

All in all, it still might be the perfect time to panic.

  1. Looks to me like the government is considering a bit more meddling….

    http://www.calculatedriskblog.com/2009/03/wsj-l

    Keep up the great posts — They are among the internet’s finest.

    Maximus
    http://4best4worst.wordpress.com/
    Searching for truth….

  2. An Edvard Munch Economic Model?

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