Forced Selling Makes For Another Tough Final Hour of Trading

Today again felt like forced selling in the markets, some sort of combination of margin calls, investor redemptions, etc.

The Wall St. Journal ran a story yesterday about big hedge fund players raising cash and moving to the sidelines. There have also been margin calls on many funds in relation to the frozen assets from the Lehman bankruptcy. And all of this has led to panicked selling among individual mutual fund investors.

All of this adds up to a rough day, a rough month (so far), and a rough year. The hard part for investors is that this selling has more to do with structural factors as opposed to fundamental reasons at the specific companies.

The news looks grim, but that is how it always is during bear markets. With the new Treasury plan, I would point out that the backdrop is more positive than last week, when there was still a lot of uncertainty about our large financial institutions.

I still have my small hedges on, and have not deployed any of the cash I have been sitting on for over a month. Yesterday, I sold one of our holdings (SLB) for a loss, which was tough. But today it was down -18%, so I felt vindicated.

Today's volume was lower than the last three 5%+ declines, so maybe the selling pressure is exhausting itself. Today felt more like a buyers strike, where there simply were not enough buyers to meet the selling pressure, and that is why the price declines were so severe.

Get some rest.