The Credit Crisis Financial Stocks Short Journal

One thing about my view of the US stock market is that the more I'm told I'm wrong for even consider shorting it the more bearish I get, I'm not sure that is good. I do it because it shows that people psychology are getting affected, with the overall bullishness taking over, and people feeling invencible, that nothing can take the market down, that is what momentum mini-bubbles are made of. Matt Simmons was back in 08 saying 'there is no reason for oil to go down' just a bit before it topped

In fact I even think some of the 'fundamental' investors have turned into momentum players here, they know its quasi bubble that will pop but they keep going along for the ride because its just too irresistible. This where I differ a bit from the hussman theory, it happened with oil last year too when key oil players started to hold back oil in tankers because they thought the price would rise enabling them to sell higher, and these guys never heard of moving averages, so the fundamental guys can turn into specs too
 
Quote from Daal:

This Hussman insight gives me the confidence to now try to get short this market through ES in a big way. I, of course, wont counter-trend so I will wait for a key technical level to be broken(A trendline of some kind or MA), get short with a tight stop, anekdoten style. If correct and if I'm patient with the stop(I dont keep trailing at every opportunity) the gains there could be huge compared to the risk

I will need huge discipline because I wont be able to tighten the stop when the profits are all hanging out there but then I just need to remember what the patient bull made when he bought at 800 and refused to put his trailing stops tight but used KEY levels instead

But the hussman insight seems quite correct, there seems to be a large gap between fundamental reality and technical factors. When the market dip stops exactly at the 50MA like it did a while ago you know its not warren buffett that is buying. The momentum guys will crash this market as fast as they drove it up, they are not known to be loyal
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like the thinking. i am in the same boat here. i think that way one can build substantially larger position when compared to risk, than with just sell and sit. Discipline .... its hard.... I still dont feel that bull confidence you talking about which will be sign to reverse. I am a good sample of idiot and -reverse- signals are quite reliable. At present have buy signal for resources going. this play works out, will increase my size for this system.
 
Quote from ralph00:

Bullard from the Fed ...

http://www.calculatedriskblog.com/2009/10/feds-bullard-falling-unemployment-rate.html

“It is a little disappointing that private-sector economists are thinking so much about when we are going to move our fed funds rate up,” he said. “We are at zero. We are going to be there awhile. The focus should be more on” the Fed’s asset purchase program."
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“I’m the north pole of inflation hawks,” Bullard said. “But we are trying to describe optimal policy, some optimal outcomes in an environment where inflation is below target -- we have an implicit target of 1.5 to 2 percent -- and you have the specter of a Japanese-style outcome, which I have worried about and some other members of the FOMC have worried about.”

If this hawk is worried about Japanitization, I wonder what Bernanke is thinking
 
Quote from austrijec:

like the thinking. i am in the same boat here. i think that way one can build substantially larger position when compared to risk, than with just sell and sit. Discipline .... its hard.... I still dont feel that bull confidence you talking about which will be sign to reverse. I am a good sample of idiot and -reverse- signals are quite reliable. At present have buy signal for resources going. this play works out, will increase my size for this system.
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I'm not sure when this will end, good thing I dont have too. I'm watching the trendline from the March and July lows, it hasn't been tested yet(it came close in the last sell-off). It it breaks after putting some kind of bounce I will get short with a tight short
 
Krugman is also dovish for the next two years
http://krugman.blogs.nytimes.com/2009/10/11/when-should-the-fed-raise-rates-even-more-wonkish/

However there a many ways to use the Taylor Rule, depending on the inputs(and specially when you use forward data) you can get different outcomes. In fact, Taylor himself is calling for hikes in early 2010. So I wouldn't pay too much attention to this, except to say that the 2000-2004 cycle was marked by the Fed keeping rates lower than what John Taylor suggested to cut off Japanese tail risk, so I'm not too worried about Taylor's bitching
 
Goldman Sachs downgraded and down pre-market. Bank stocks down on the FTSE. JNJ reporting this morning, INTC after close.
 
From the nytimes.com article
“It’s quite significant, because small businesses generate significant job growth,” said Andrew Tilton, a senior economist at Goldman Sachs. “And small businesses rely more on bank financing, whereas large businesses have the alternative of raising money in the capital markets.”

Looks like a 90-94 repeat where "Big businesses were able to tap other sources of funds, such as innovative debt markets that had sprung up on Wall Street...But small and midsize manufacturers and mer-chants all over America were finding it hard to get even routine business loans approved. And that, in turn, made the recession unusually difficult to snap out of" - age of turbulence book

That lead to one of the slowest job recoveries on record
 
There was an interesting article that came out recently on when should the fed raise rates. In the article it pointed out just how incredibly difficult it is to lower unemployment just by 1 percentage point. It said based on the standard rate increase formula which factors in unemployment and inflation, rates should be a -5%!

That's insane and scary to hear that we may be at 10% unemployment for a long time. Some are now saying we should all get use to it.
 
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