Month: October 2008

Chuck Norris on the Credit Crisis

Via email from my friend Steve. Not sure of original source, but hat tip to whoever it was. If you know, please add to comments. Thanks.

Chuck Norris on the Credit Crisis

  • Chuck Norris has killed black swans with his bare hands.
  • Chuck Norris rubs the VIX into his chest.
  • Chuck Norris continues to short the Aussie market.

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Article: Europe on Brink of Currency Crisis Meltdown

Ok, this answers my question from a few weeks ago about “what about the ROW (‘rest of world’) subprime mess? Where is it?? It’s not mortgages, it’s this (see article). And it’s [probably] going to make USA subprime look like a walk in the park:

Europe on the brink of currency crisis meltdown
The crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM.

By Ambrose Evans-Pritchard
2008-10-26
telegraph.co.uk

The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.

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Web 2.0 Expo Next Week, First Doing Market Update

Susanne and I just got back from a great 4-day trip to Berlin for the Web 2.0 Expo. Met a lot of interesting people and startups there and will report on it next week. First, however, a quick market update.

The reprieve rally I blogged about here is over, with new lows being set Thursday. See the 18 comments I added to that blog post for a number of interesting articles. Also see Nouriel Roubini’s video from yesterday in London: “It’s going to be a financial and economic wreak.”

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Problems at Zillow? Confusing UI? Yes. Deceptive? Maybe.

UPDATE: Zillow has replied, see the comments section.

Don’t get me wrong, I am (or at least was) a fan of Zillow, but my personal experience, described below, suggests that there may be problems beneath the surface (otherwise how and why would this have occurred).

I’ve asked the company to comment, but have received nothing, unless you count the two customer service emails I received (screenshots below). I ask them again at the end of this blog.

So, the problem started when…

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The Reprieve Rally Continues

2008-10-14 UPDATE: See comments section for article excerpts, links, and comments.

Why do I say continue, because as noted in Friday’s blog, it started from Friday morning’s low. From there to Friday’s high the DJIA rallied 12.9%. It is now up 25.4% from Friday’s low and 11.1% from Friday’s close.

Compare and contrast the front-page of today’s MarketWatch.com (above) and Friday’s (below):

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Sentiment Extremes Everywhere + Biggest Weekly Drop Ever & Biggest Daily Range


Just a quick post to cap the week. Sentiment extremes where everywhere you looked, even on Twitter.  Images and a few comments below.  Also some links to outside articles.

Bottom line:

  1. A rally is imminent: All but one of the elements were in place by Friday morning (2008-10-10) and Friday’s intraday reversal might have been that last element. We won’t know until next week, but I did buy late in the day.
  2. Regardless of when the tradable rally develops, based on current information and thinking, we are likely at least halfway to the bear market low (in terms of time and price), but less than halfway through the recession.
  3. While sentiment reached an extreme Friday morning, it doesn’t mean it reached the extreme of this cycle.

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The Dog That Didn’t Bark

Just quick post to note the failure of the rally attempt that started intraday yesterday.  See yesterday’s blog and last week’s “Bailout “Hope Rally” = Eye of the Storm.”

Volume declined, too, which indicates that some people are still holding on (the masochists!).  A sustainable rally attempt is not likely until the pain becomes too great and they give up.  That will show up in both the price and volume.  Government action or other “big news” could also spark something (“October surprise,” anyone?!).

Regarding my personal trades (see yesterday’s blog): Within five minutes of today’s open, I closed out all of the positions I put on yesterday (GOOG and QQQQ), as the lack of a big up open was “the dog that didn’t bark.”  Those are often gives the best signals, certainly some of my favorites, because they are subtle, in fact invisible to most people, who don’t know that a dog should be barking but isn’t.

Overall, I’ve been out (i.e. not long) since this blog post in the beginning of August, when the July mini-rally was showing fatigue (and I was going on vacation to Gotland).  Only very quick hits ventures to the long side in a bear market.  Of course, it is generally best to be sidelines or short bear-market rally failures.

PS: Here are today’s market summary stats from Yahoo Finance.

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Quick Market Update – Intraday Reversal – Day 1 Rally Attempt

Just a quick post to note today’s big reversal, which formed a hammer candle, which is the most classic reversal candle. Volume appears to be a question mark, but I’ve not had time to do a thorough analysis of that yet and maybe this chart of the NASDAQ 100 Index ETF is an anomaly.

As I noted on Twitter (original tweet here, copied below), I opened a small long position during the day (a little before noon NYC time):

Some panicy tweet crossing the wires… VIX over 50… Etrade fail whale: http://twitpic.com/evcz. Was enough for me to take a nibble.

I’m generally more of an end-of-day trader, but was away for the close so did not get a chance to buy more. VIX spiked to 58 intraday, which is extreme panic, then reversed (see chart, below).

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What Bank Run? See This Google Search Trends Chart

True it’s only anecdotal evidence, but I’m pretty sure people search Google about FDIC insurance when they’re worried about their bank going bust.

What you see on this chart is a bank run precursor, the starting gun getting cocked.  All someone has to do now is blink and the run is on.  Doesn’t matter if it’s a false start or not once a run starts, the outcome becomes inevitable.

As discussed for months by Nouriel Roubini (see here for some of his articles and references on my blog and see here for a Bloogberg radio interview with him last week).

Note, there are solutions to this problem, as discussed by Roubini. It starts with the government increasing FDIC insurance immediately (a temporary increase to $250,000 FDIC insurance was signed into law on Friday) and also recapitalizing banks (more than buying bad assets).

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Bailout “Hope Rally” = Eye of the Storm

(just time for a quick, somewhat unpolished update)

What I mean by “hope rally” is the rally off a (bear-market) low that is driven by the hope that some specified thing (the Bailout legislation in this case) is going to make everything all better. That is never the case, of course, otherwise it would be called the start of a new bull market.  Also, in the current situation, it’s almost certainly (effectively certainly) too early (time and price) in the bear market for a new bull market to start.

That’s why I make the eye of the hurricane analogy, because any “Bailout Reprieve” will (almost certainly) be only temporary.

Last week’s…

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