Afternoon Delight

In the three decades of investing this week is only matched by Oct. 1987 and the Spring of 2000, and of course the fall and winter of 2008 and 2009.  When markets lose confidence in the economy and governments we get this kind of action. What is going on is the market is looking for a bottom, A bottom where investors believe we have fair value. Friday began as I expected a early move up from people believing there was a bargain to had and then experienced traders using the up trend to get out at a higher price. That is always followed by intense selling pressure and big sell offs.  We had a 400 point swing today and were rescued by a little afternoon delight from the European Bank which said they would back up Italy in buying it's bonds. The collapse of Italy would be catastrophic for the world's economy because we are talking big money there, the eight largest economy in the world. Now the ECB backing came with a price, immediate passage of a balanced budget amendment.  Who knew that a BBA would help so much? Obama take notice here my friend. Anyway the problem here is no one knows where the ECB will get the money for the buying spree, but the market needed the news and responded favorably. I expect Germany will be get screwed here again by forwarding the money for these bonds. Wonder how long the German people will put up with this paying everyone else's bills? Hope Angela Merkel has some skills for a day job.

 

I also am pleased that even with some last hour selling today the market kept it's legs. We desperately need the weekend off with good news to give investors and traders a chance to think.  I would expect another run at 11100 level to find out if really have found a bottom. Expect that to be scary as well. If we go through 11100 level on the retest we could see selling like 1929 as I mentioned in an earlier post.  We also will find out shortly if the ECB can find the money for Italy. The USA is seeing what could happen here in a small measure if the federal government does not get their fiscal house in order soon.

 

All this action is the long overdue de leveraging of the massive debt of the world economy. Greece has defaulted, Italy has taken serious measure to put it's house in order. Britain did likewise a few months ago. We have Spain, Portugal, Ireland, and yes France in Europe to go. Then the USA the big one for a finale. Socialist is on the wane and we are seeing the dying pains each day. 

 

My hedge fund finished the day where it began 3 green stocks. Net I am basically where I began the day as well and I take that as a win since I was expecting much more carnage. Same stocks I mentioned in yesterday's post continued to hold up well. I will not be buying anything here soon since I expect a retest. But if you are a risk taker and brave soul CTL, and the agency REITs still look good here. If you are looking safety SO continues to impress. 

 

As I have mentioned many times there is no replacement for market experience. I envyed those who had it when I was a younger investor. I suppose I am the one with it now. Even with the experience weeks like this are just plain scary.