Monday, September 15, 2008

A Day For The Recordbooks

Sorry for the lack of posts today. Today was one of the busiest days in my career. I don't think my phone stopped ringing from the minute I walked in at 6am. And its only Monday! (Actually, I came into my office last night also)

The market did not take kindly to the news the Lehman Bros. was filing for Chapter 11. But after the market opened, it rallied modestly and spent much of the day around the -2% level. It looked for awhile like the market might close with just modest losses for the day.

But as we have seen many times this year, when the tape is weak, there are simply not enough buyers out there to sop up all the selling pressure. As such, the late day selloff picked up steam and pushed the indexes to close on their lows.

There were also concerns that AIG could be the next big financial to run into serious liquidity problems. AIG stock was down -60% today, so you can see how serious the situation is. And AIG is a much bigger company than Lehman.

The Fed has asked Goldman Sachs (GS) and JPMorgan (JPM) to head up a consortium that will raise $50-70 billion to help AIG live another day. Let's hope they get it done, and soon.

The Fed meets tomorrow, and there is suddenly a lot of talk that not only does the Fed need to cut rates more, but that they may actually do so soon. Some say that this won't help, but rate cuts do inject more liquidity into the system, and credit crunches need ample liquidity.

Amidst all of this negative talk, I would be remiss if I didn't point out at least a few silver linings:
  • The bank index (BKX) closed at 65, which is still +34% above July's lows; if I had told you today's news a month ago, I'm sure you would have predicted we'd be at new lows
  • The NYSE has 792 new lows today, far less than the 1304 new lows on July 15; another positive divergence
  • The volatility index (VIX), or the "fear" index, spiked +24% today; this surpassed July's highs, and the VIX above 30 has marked several market bottoms before
  • The volume in the QQQs was over 600 million shares, which I believe is a record; sometimes high-volume selloffs mark climactic market bottoms

The S&P 500 undercut its July lows by 8 points; the Nasdaq, mid-cap index and small-cap indexes are still above their March lows. fwiw.

I started to take small profits on one of my hedges (SDS), while maintaining my above-average cash balance. I have tried to be very defensive, although on days like today it never seems like enough.

long SDS

2 Comments:

At 11:29 PM, Blogger Job said...

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At 2:32 AM, Blogger Fernando said...

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Best regards
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