Thursday, September 18, 2008

Whipsaw

I have a couple of longer posts still cooking, but I do want to drop a few comments.

The DJIA whipsawed today, up, down, then up 400 to close. You'd hope that outright nationalization of major economic entities and a flood of liquidity would at least give the stock pimps a little bang for their buck. This was a good ol' fashioned short squeeze. Expect more volatility like this. Beware October.

The Brits have lost their minds and banned short-selling of financial stocks. I kid you not. Good luck with that as it will create "air pockets" beneath the stocks' prices and make them susceptible to massive volatility. To actually make their money, shorts must BUY to cover positions, thus putting an eventual floor under stock prices. Yes, I know, I know, Great SuperGeniuses like Cramer are bitching about using short positions to crush financial stocks. It's a load of crap. Now, naked short selling is fraud and I agree with ending that. Short-selling itself is not abusive. As a matter of fact, it was shorts who found the rot in companies like Enron and Tyco long before the media and Cramer and other bubbleheads got around to it. Question for those who think short-selling is the cause of this debacle - would these companies be in this shape if they were leveraged 2:1 as opposed to 20:1? Oh gosh, it can't be the balance sheet or the fact that these financial companies have been operated in a reckless manner. Gotta blame someone. Oh well, if nothing else, blaming shorts has a long pedigree.

UPDATE: Wow. The SEC is now talking about a ban on short selling here in the USSRA. Dear God, did I die and wake up in a Marxist Hell?

I've held off on commenting about the unrest in Bolivia and the continuing violence in Mexico. Mainly it is because there is nothing else to say. Memes such as secession and the rot of the nation-state are taking root in the periphery. They'll make their way to the core all too soon. If the hundreds of posts on the coming wave of 4GW actions that could potentially sweep America haven't convinced you to at least pay attention to this trend, well, then there ain't much else to say about it.

Be prepared. DJIA 12,000 is pretty solid resistance. The market movers may try and run it up that high, if nothing else than to kill the shorts and "validate" current government actions.

Did I mention, beware October?

Pay attention folks. We are living in historic times.

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