Friday, October 24, 2008

S&P500 may drop additional 20 - 25% next week

My EOD and EOW data indicates that there is more than 50% chance for such a move. If it happens, I think it will complete the bear market.

Monday's open will be very important indication. I am partially positioned for the move however I will decisively initiate new positions based on Monday's opening.

65 comments by xTrenders :

Aneo Designs said...

Hi Atilla

Fed meeting is on Oct 29th. With the expectation of a rate cut stocks may be bullish on Tuesday and Wednesday.

Stocks may go down monday to force the fed to act. Once the rate cut happens, it is anyones guess. The funds may sell more the the rate cut rally.

aneo

Atilla M. Demiray said...

GDP is on Thursday

Expectation is 0.5

Reality is more like 1.5-2

That is what the market is afraid of

Fed is a non event. Any intervention or attempt by government or Fed or Treasury will trigger more selling imo.

Atilla M. Demiray said...

However, this forced selling or implosion of leverage will eventually create beautiful bargains.

Aneo Designs said...

Do you see this stopping by the end of the month? That will be 2-3 days before 31st, right?

November is not a crash month, but this time could be different?

aneo

c.m. said...

Atilla,

Thank you for letting us know. Your hard work is much appreciated.

Aneo Designs said...

I think the we need to have a bargain bin or something, where members can list stocks/ETFs they think will shoot up maximum in the next rally

Atilla M. Demiray said...

I see us hitting the bottom next week, then choppy for a few weeks

kam said...

Scarey stuff, Atilla.

kam said...

Atilla, any chance of an uptick early next week to get out of long positions?

sonny said...

Atilla, as I'm managing my parents' account which can only get out EOD, I assume that you would then recommend selling everything Monday EOD and wait for the big bottom? Or, is this a situation where the strict money management that I am learning from you would dictate it'd be best if I go out and buy a bunch of OTM puts as soon as I can, which, even if they expire worthless, I'm more than equipped to handle?

I am sorry to ask you to answer a question that does not pertain to your own situation. I only want to do what would be best for those I care about.

As always, thank you very, very much in advance for all of your advice, it's a truly wonderful thing you are doing (even if I have not followed or profited on the trades, I have learned so much).

kam said...

By the way, this call would jive with the Elliot Wavers as well as McHugh, who is also calling for a 20-25% drop next week. Basically, everybody and his uncle are expecting this.

Atilla M. Demiray said...

Please do your own DD. I am just giving my opinions and trades.
I need to see the monday's opening to have any idea about the next immediate move but at the moment. I see the possibility of 25% drop

Atilla M. Demiray said...

Sonny, can you send an email to me, So I can reply

Sam said...

Atilla, not just you. Entire EW world is expecting 600s next week. Can it be that easy when everyone I know is positioned for this move?

sonny said...

Of course, Atilla, and feel free to delete my post if it was inappropriate. I apologize in advance, and I should email you at admin.xtrends@gmail.com?

dhw said...

For those who study ewave, here's my best guess at the ewave count for the ndx.

Looks like we finish wave 5 sometime next week. That would coincide with Atilla's bottom.

http://img234.imageshack.us/my.php?image=ndxsharpchartsfromstocket8.jpg

Atilla M. Demiray said...

Sam said...

Atilla, not just you. Entire EW world is expecting 600s next week. Can it be that easy when everyone I know is positioned for this move?

Saturday, October 25, 2008 12:32:00 AM EDT
---------------------

EW people has no idea how the indices act on the downside, that is, there will be relative strength differences between indices and that will make some indices sell less or more

S&P will necver see 600 I can tell you that right here right now. So those EW crowd you refer will all miss the bottom waiting for that number

Atilla M. Demiray said...

sonny said...

Of course, Atilla, and feel free to delete my post if it was inappropriate. I apologize in advance, and I should email you at admin.xtrends@gmail.com?

Saturday, October 25, 2008 12:34:00 AM EDT

-----------------

Yes send it to that email, I think I have access. If I dont, I will let you know

Lawrence Chiu said...

Atilla M. Demiray said...

there are 10s of thousands of people following the blog after I caught the crash. Lately all my trades seem to work for a limited period of time as if the sysyem gets clogged out after a while

Friday, October 24, 2008 3:32:00 PM EDT

===
Atilla,

Thank you for sharing your thoughts and trades with us.

I have the utmost respect for your skills and for you as a person.

If you decide to stop posting your trades, that's understandable as well.

But what is not right, and what does not sit well with me, is to blame the blog for trades that are not working.

I think I speak for many of us when we say that is just assigning blame.

You are human and you made wrong calls this week. That is OK. No one is perfect. Owe up to being human!

But don't blame posting your trades as the reason.

I had to say it, because a lot of people are thinking it.

You were wrong because the selling was not over yet. You read the charts wrong, sentiment wrong, whatever. But it's not the blog.

I just had to get that off my chest.

Thank you for reading.

Aneo Designs said...

dhw

Who is the best EWaver with some good history of predicting bottoms or crashes?

I find them funny, always changing counts per situation. It may be my ignorance. I am not bashing them

Thanks
aneo

Atilla M. Demiray said...

Lawrence Chiu said
------------------------
That was the only loosing trade in 2 months.

35 ES points.... after making 100s of ES points since August. IF that is what gives you relief, fuck off!

Lawrence Chiu said...

Atilla, I don't know what I wrote called for a "f-off". I re-read my post and I truly did not intend it to be read in a negative way.

If I offended you, I am sorry.

I have paid dearly already with a -50% loss this week.

Have a nice weekend.

LearningWizard said...

Atilla M. Demiray said...

I am looking for new posters like Sol for xTrends. I will get them here and mind my own business. I will let you know when the fund is open.

Atilla, if you need someone to be a moderator for your blog, I'll be more than glad to be of service.

dhw said...

ewave is completely subjective.

I don't find it very useful for ST trading. Its ok as a general guideline tool for what the markets are going to do.

Atilla's calls are much better than ewave.

sonny said...

Atilla, I sent the email. IMHO, on the subject of posting trades, I have no opinion. I have learned more actually in the discourse before/during/after a trade than by seeing the trade itself, I think. Have a wonderful weekend, thank you again.

Radium said...

Do you ever sleep? Unreal man unreal... Thanks for the heads up for next week...you rock!!! I was raked over the hot coals this week but it could have been much worse without your direction.

Im 100% in cash right now. Just so I could breathe this weekend.

I agree the GDP Data is the real kicker. AS the market is always forward looking I assume your outlined scenerio of the 20-25% in the SPX would be factoring in this potential for 1.5-2.

and then build/push forward towards the election?

Enjoy your weekend Atilla!!!

Much Gratitude.

Radium

Narayana said...

Atilla, what clues are looking for as the mkt opens Monday? Does gap up = 20-25% drop?

Mr. Lockwood said...

monday should be fun

Rhett said...

My interpretation of events is we are inside a huge margin call. If you look at INTC, mutual funds/hedge funds that liked it at 35,30,25,20 would never sell now by choice. That they are selling implies the selling is forced.

The question is, how to tell when the forced selling is over? I though if the indexes are up there will be no more forced selling, but apparently the funds losses in non-equity markets (credit stuff) forces them to sell their liquid (stock) positions.
Also disturbingly a hedge fund with losses (most of them) may simply close if investors pull funds, which again means forced selling.

-Rhett
Indexes down implies a positive feedback margin death spiral. This is why 1929 is relevant, that was a margin death spiral too.
I'm hoping the indexes well up on the week (next week??) means the coercion is over.

WagTheDog said...

To Lawrence Chiu:

PLEASE correct your posting made to another blog. Atilla does NOT say the S&P will drop 20-25% on MONDAY. His time reference is NEXT WEEK.

Also, He did NOT say this will occur. He says, clearly, that there is more than a 50% chance and that Monday's open will provide an important indication.

I think very highly of Atilla and Sol and feel a disservice is done if either is misquoted or misinterpreted, even by accident.

Thank you in advance.

Dan said...

Blogger Dan said...

Here.....

"Blogger Dan said...

Sorry to hear that Sol. Glad you're ok bud.

Still lookin long myself at the moment. But this market is a haze right now.

Expecting to retest Fri's high probably but with that said the market almost always comes back down to retest lows and likely break them after a pattern like this.

Monday, October 20, 2008 12:35:00 AM EDT
Blogger Dan said...

Which means I'll be short very soon.

Atilla could have could the top. Lookin for a little more myself though.

Monday, October 20, 2008 12:36:00 AM EDT

--------------------


We did in fact test friday's high. Market reversed.

We're gonna test the lows. Market doesn't skip a beat. We're gonna break the lows and penetrate 800 IMMO.

Chart the retail, financial, and many other sectors. We're going lower in the IT. You need to show me where you're seeing this "bottom" because I see one technical spot on the chart and in an established bear move it's not very strong.

Wednesday, October 22, 2008 4:40:00 PM EDT


------------------------

Interesting. Been expecting this all along. I really hope we're both wrong though.

Atilla. You said you need a partner. I need an internship. I'll send you an email bud.

johnboy said...

Atilla,

Thanks for all your calls to date. I've profited handsomely and intend to put the money towards worthwhile endeavours (including your fund, if I qualify).

It's totally your choice not to publish your trades anymore, however Mrs Market is massive and I'm dubious that publishing your moves here is moving the market against you. I think the more likely scenario is that we are at levels that *should* be a bottom in former times, but these are not ordinary times and there are different mechanisms at work now.

I agree that there is the real potential for more downside next week and the behaviour of the market after mondays open will be telling.

I will be watching, with interest, anything info you feel you can share.

Mrs Market has turned a more crimson shade of bitch these last few weeks, that's for sure!

Sam said...

Atilla, 20% drop from here is 700.8. I am 99% sure a 6 handle on SPX is coming if not next week it is in 2009.

Once the triangle broke, the length of triangle is to 680s.

All major EWers are on crash alert for next week. McHugh, Neely, Prechter etc.

PCP said...

I read somewhere that Oct 28-29 have been when majority of carnage occurs in the market during the bear. That was the case in 1929. That will be the case this time too.

ROLLER said...

Nowhere does it say that markets CAN'T crash in November or any other month. If you can make money using Elliot Wave, please do so. Also, waiting for a big gap down to buy, does not always work. We can have that gap down and see nothing but selling, the bottom won't be in until the bottom pickers are broke. There are still too many people trying the play the bull side, once you are defeated is when we will rally.

Sell below ES 830 and buy above ES 900

GWBush said...

Atilla,

If next week's decline is the end of the current bear market, then it is the shortest (12 months) in comparing to the ones in 1929-32, 1973-74, and 2000-2002. Of course, maybe this one is the mother of all bear markets and thats why its the shortest and steepest in history. Any thoughts?

Trader Joe said...

Atilla your calls are amazing.. been trading the markets since the late 80ies off and on ecking out small frustrating gains along the wway. Your ability to call intra-day sell offs/rallies leaves me with a feeling of total incompetence. I suspect you have discovered some secret method of determining if a rally will hold or not based on the 1st hour tape. I would luv to know what signal convinced you we would sell off into the close.

I was wondering if you wouldn't mind shooting me an email at braddley12@yahoo.com
I'd like to ask you something.

thanks

Tor said...

Lawrence Chiu seems to be a total waste of time.

I echo whats already said: Go FUCK off out of here.

Whats the point of your comment? You choose to follow blindly, then thats your choice. Entry and exits are provided. BUT the choice is yours.

Now go and fuck off somewhere else, you tosser. PLay your stupid point scoring games elsewhere.

Wanker.

angus said...

Atilla, I am totally with you with respect to the potential 25% drop next week.

I was thinking the exact same scenario yesterday.

I think the triangle (ABCDE) that we've been talking about was completed at 923 ES on Thursday. It's not a perfect triangle, but we're not doing geometry here ..

The breakdown of the triangle occurred at 900, the projected drop is 1066 - 837 = 229 ES points from 900. So, the target is 671 on ES (which is exactly 25% drop from the breakdown point of 900).

The drop can occur under different patterns as well, but I believe the resoluton of the triangle is waht's going on.

I don't believe this would be the end of the bear market on the weekly charts, but it will be the beginning of a multi-month rally of epic proportions (if we drop that deep to below 700).

Let's assume, we indeed bottom at 671, which would be the bottom of the wave that began at 1440 in mi-May. This would be 769 points. At least a 50% retracement is in the cards after such a big drop (after the first rallies stick, everyone will think this is the ultimate bottom and will get sucked in). So, 50% retracement is 385 points for a target of 1056.

Now, what catalyst could cause a 25% drop and then a huge rally off the bottom that will stick?

I think pre-election, the goverment cannot introduce any further big actions. Continued weakness in credit markets, carry trade further breakdown, hedge fund blowups, you name it can cause a waterfall downdraft the next week or so.

What happens after November 4? there are already rumors that the next administration may take over earlier! A massive stimulous package may be announced and other actions. Such actions in combination with historically depressed equity values may cause a lasting turn in market sentiment and lead to a lasting rally into 2009.

Cheers!

ref said...

Atilla,

Please ignore some posters like Lawrence Chiu; his comments on your trading is very inappropriate.

ref said...

Atilla,

In order to recognize and access your posts quicker can we color the types or put a frame or something around yours. Come Monday or Tuesday and this blog is going to be busy! There are some helpful posters in here too I must say, but come Mon and Tues with the hurry one can only cope with reading a limited numbers of posts and all eyes on the charts.

in the mountains said...

angus,

that all makes sense. However, I think it could easily go the other way too, we could stay in a trading range until the election, and then the market tanks big time right after the election.

I have a couple of problems with the triangle interpretation. One is that the E leg is very short, does not come even close to the upper trendline. The other is that the wave structure since then does not look all that impulsive to me, the retracements have been too deep.

So I think we could all get fooled again and the market could go up next week, at least head up toward the upper end of the trading range. We could still be doing a 4th wave triangle but larger and broader than initially thought. Or maybe double or triple 3.

We ought to know by end of day on Monday. Actually we will probably know during the day. If we go above 910, the big plunge is not likely to happen, at least this week. Certainly if we go above 925, the top of the E leg of the supposed triangle. This would invalidate the triangle theory, at least that particular triangle. And obviously, if we plunge toward new lows right away on Monday, then it's likely the 20 to 25 percent move down is underway, especially if we go below Friday's low.

angus said...

in_the_mountains, you're absolutely correct, there are many patterns that can happen next week.

I just cannot think of any positive enough catalyst that could happen next week to keep the thing from falling apart.

The path of least resistance is definitely DOWN. So, you need a positive catalyst to just transform sentiment to neutral.

The crisis is not even U.S.-centric anymore. Look at emerging markets last Thursday and Friday (Argentina, Eastern Eruope). We're having an emerging markect debt crisis much worse than that of 1998.

Look at the flight to the safety of the dollar, look at the massive rally in the yen (a big indication of extreme risk-aversion).

I think any play on the long side next week should be a day trade at best unless something dramatically positive happens (which I do not see with my binoculars).

Tony said...

Atila,

i can make one bullish divergences here, and that is while most of the world markets made a new low for the bear market, the DOW didn't even reach close to 7800, and S&P also didn't make new lows. Only index that made the lows was NASDAQ, which kind of did have capitulatory action, and if DOW and S&P had rallied higher, looks like NASDAQ could have closed much higher. IMO. just my two words.

aymon said...

attila, please let us know what you see on monday morning.

thanks!

buylo said...

in order not to clogg up this, Atilla's blog, will you people kindly think twice before actually posting? I mean, we are here to listen to Atilla and Sol, a lot of the rest is just needless noise

dhw said...

I have a feeling we gap up on monday and then sell off..

in the mountains said...

angus,

I appreciate your comments. I agree with you that the trend is down until proven otherwise. And also agree that holding positions overnight is risky, what with the wild volatility in the market lately and especially the big moves that happen overnight or before trading begins in the mornings.

I have been fooled many times by what I think is an obvious EW pattern only to have the pattern violated after I've taken a position! So while I look at charts from an EW perspective, my trades, especially short term, are based on a lot of other factors.

I do like the EW ending diagonal though, that's a pattern that's reliable and usually offers a low risk trade with big reward. (That's a general comment about EW. We have no ending diagonal in play right now as far as I can see.)

So it seems that the two most likely scenarios for next week are: 1) we go down hard, eventually landing at a price 20 to 25 percent lower than where we closed Friday, or 2) we continue in the trading range as the 4th wave continues to play itself out. Seems the consensus is that #1 has the higher probability.

waiting2pounce said...

tor and Others:

IMHO, I feel that you should ease up and have some compassion for Lawrence. I agree that he crossed the line in criticizing Atilla, but he has been active on the blog for a while and for the most part has been polite and grateful. He seems like he might be a nice guy, but was under duress due to suffering large losses in his portfolio. I have read much fouler criticisms and comments from other participants than his. He did not taunt, like some others have.

The crazy, exaggerated swings in the markets have created big winners and losers, and it has been sad to read of a few others whose accounts have blown up. Lawrence seemed too dependent on others for guiding his trades and did not manage his risk properly, but seems like he wishes to learn. I'm sure he learned some lessons through all this.

in the mountains said...

buylo said...

in order not to clogg up this, Atilla's blog, will you people kindly think twice before actually posting? I mean, we are here to listen to Atilla and Sol, a lot of the rest is just needless noise

------------------

I didn't get that from reading the "about xtrends" page, but maybe I missed something. I thought the comments section were for comments and for questions and answers to and from Atilla and Sol and other posters. I thought that if Atilla or Sol had important information to share, they would do so on the main page, not in the comments.

Seems like if Sol and Atilla don't want the comments jammed up, they would restrict the comments to only themselves, or would edit them and throw out the ones that they feel are not worth posting.

coption said...
This comment has been removed by the author.
Susannah said...

I don't have a problem with having a separate blog for comments that aren't directly relevant. I can understand if the comments are getting a bit overwhelming to Atilla and Sol at this point. I'd hate to lose the camaraderie we have here, though.

gwbush, I think your thought is a good one, I don't think the bear market is over. But, there is also reason to be very careful here especially if after a big down move from here to bet on further down moves if you are short term and leveraged at all. Just looking at 1929-1932, after you had the initial down period of the October crash and then some more downward into Nov, the market rallied for 5 months and almost 50%. If you were leveraged down at the point where it turned, you would have gotten run over. The bear market wasn't over, but for 5 months, that fact didn't matter. I think the same principle applies here. We're in the middle of things, be very careful of it pivoting because you can get run over, whether or not the fundamentals support it. Just saying why we have to be careful.

That being said, though, I think Rhett's idea of a death spiral is a really good way of seeing it, it fits what I'm thinking. I favor looking at it right now by which groups of people are we catching wanting to pull out of the market with each down move. Just reading over message boards and blogs about money, there is a group of people still left that are holding on, I guess they would be your die-hard buy and holders. Some of them, though, are starting to get very shaky in their beliefs, and I have to think that they are getting very close to pulling their money off the table. This guy's blog is extremely popular and he's one of the buy the index funds, and keep buying through everything type of guys. His latest post reflects the type of thinking I'm talking about doubting the experts.

People like to talk about that a bottom is formed when the last person turns bearish. That's kind of correct, since you have a bottom when you run out of sellers. I think what gets forgotten sometimes, though, is to sometimes look past your normal groups to the next round of potential sellers. Right now we've got to be looking past pools of traders, nimble investors, and skittish buy and hold investors to the investors that have remained strong in the belief of positive expectancy in the risk/reward of the market long-term. These are investors we don't have to consider often.

I think when people talk about the markets as fractals, this is the practical way to look at it. Which group of people does each ever increasing component of the fractal represent? Do these people have a great chance of coming to the table soon? If so, then stop looking around just yourself seeing if all the sellers are dried up. Look a little further and see what the next wave of potential sellers is saying.

Looking at the COT is that same type of analysis, IMO.

Sorry that got so long.

Ko Ko said...

Atilla M. Demiray said...

but God forbid if a piece of good news come out , it will be unforgettable for the bears
===============================
Coption Said:
Atilla, I don't know any good news i can think of...
___________________________________
I'll tell you what will send this market up by 2,000 points.
Mrs. Blair of the FDIC announces she has worked an agreement with Paulson to immediately buy millions of at risk ARM home loans and immediately refinance them into 4-5% 30 year notes, thus instantly stopping the flood of foreclosures which is the single thing that is making all the banker's leveraged positions work against them. On top of that she could announce that the Government will also immediately begin bidding on foreclosures that are for sale in the distressed markets where the government will immediately turn them into rental homes for displaced families with a plan to slowly sell them back to the market over the next 10 years.

ANY ANNOUNCEMENT LIKE THAT WOULD BE A TRUE SOLUTION TO THE HOUSING CRISIS WHICH IS THE CAUSE OF THE BANKING CRISIS AS WELL.

But our government is too dumb to figure this out and I'm just a guy on a blog so they will probably never do this action even though it will save the entire world's markets.

bubb said...

I imagine the PPT wouldn't want to extend the whole moral hazard issue to the general population, just their pals.

Dcengr said...

Everyone is expecting a day where the exchange has to close. No one is trading like it will happen.

Therefore, it will happen. Its simple logic.

I am not sure about a great buying opportunity thereafter. If I can find companies that I can take over and raid for their cash and fire all the employees, I'll take it. Because thats what will happen. I don't think that's too good for the economy either.

Melf Elf said...

Johnboy said:

"Mrs Market has turned a more crimson shade of bitch these last few weeks, that's for sure!"

LOL. That's hilarious ;)
----------

Waiting2Pounce said:

"IMHO, I feel that you should ease up and have some compassion for Lawrence. I agree that he crossed the line in criticizing Atilla, but he has been active on the blog for a while and for the most part has been polite and grateful"

I agree. Lawrence crossed the line, was too dependent on, and expected far too much from Atilla, but he didn't act hateful, like some of these characters we've had. Lawrence is hurting. Let's give him a break.
--------

Angus and Greg (in the mountains),

I've enjoyed your good discussion, guys. I've have thoughts similar to a lot of the things you've said. Here's my read of the SDS and SSO, if you're interested. WARNING: It's long, tedious and bor-r-ring for anyone who isn't obsessed with charts ;)

SDS & SSO: Wolfe Waves
http://melfsworkshop.blogspot.com/

Basecamp said...

Question for all, as we obviously have some very sharp people here.

I followed Atillas reccomendations shorting the market, and did very well. I did not have the guts to go long when Atilla did, and dodged a lot of pain. I am now sitting 100% in cash, and I am not a day trader, but more interested in value investing. I would like to be close to the bottom, but an exact bottom is not critical. I refuse to use margin at this point, with all the volatility.

My question is, do we feel the absolute worst this market could go is 650-700 ES, or is there a possibility this whole market could implode and plunge sub 500? I would really like to start scaling in, but with my strategy, I am really struggling with how I might scale into long positions in this market. I am thinking about scaling in on leveraged ETF's starting at about the 750 level, and be fully long by 675.

Since I am a more conservative investor, and will have the ability to ride any losses, is my strategy too conservative, agressive?

Interested in any thoughts or comments on my plan, as I believe there are likely many people in my circumstances, who have capitalized on shorting the market, and just want a good entry on the bear market rally. Thanks again for all your great comments Sol and Atilla, as I have learned and profited a ton. I went from making 30-40% this year to doubling my funds the past two months. Great blog.

Ferd the Moon Cat said...
This comment has been removed by the author.
goblin said...

I'm with Dsengr - it is not just another market ordeal - it is one in generation event- total overhaul of world economics and finance. When did we see not one but around 10 countries on the edge? Whoever still have money will lose them , trying to prevent economic disaster. Just look around you and try to evaluate how many businesses are needed in hard times and how many peoples they employ. Where all this IT, sales, designers etc. will go? What about non-skilled labor, finance ,insurance, RE, contractors of all sorts- they don't have EI , no savings, they'll sell and cash everything, including college funds for their kids.

almost44 said...

Ko Ko said...

Atilla M. Demiray said...

but God forbid if a piece of good news come out , it will be unforgettable for the bears
===============================
Coption Said:
Atilla, I don't know any good news i can think of...
___________________________________
I'll tell you what will send this market up by 2,000 points.
Mrs. Blair of the FDIC announces she has worked an agreement with Paulson to immediately buy millions of at risk ARM home loans and immediately refinance them into 4-5% 30 year notes, thus instantly stopping the flood of foreclosures which is the single thing that is making all the banker's leveraged positions work against them. On top of that she could announce that the Government will also immediately begin bidding on foreclosures that are for sale in the distressed markets where the government will immediately turn them into rental homes for displaced families with a plan to slowly sell them back to the market over the next 10 years.

ANY ANNOUNCEMENT LIKE THAT WOULD BE A TRUE SOLUTION TO THE HOUSING CRISIS WHICH IS THE CAUSE OF THE BANKING CRISIS AS WELL.

But our government is too dumb to figure this out and I'm just a guy on a blog so they will probably never do this action even though it will save the entire world's markets.
========================

Answers like this are why I believe the S and P could hit 500 any day now.

If the Government could simply buy up every loss on everything and stablize the economy, they why don't we simply have the government fund everything--hell they should have taken over funding our entire economy years ago--the Dow would be at 20000+ by now right?

While I agree that your idea would probably make the stock market go up for a very short time (remember the latest $700 Billion TARP "answer" to our problems and the 30 other bailout programs before that--how have those turned out so far?), it would ultimately cause the market to go even lower as the government would then be offering 32 different backstop programs to the tune of 3-5 TRILLION dollars OR MORE--and it would get much much bigger in a hurry as every home owner who is underwater or paying a higher interest rate defaults so they can get the better financing too.

The Chinese are already saying to abandon the dollar, how many more TRILLION dollar plans do you think they and other countries will tolerate before they want their treasuries cashed in and the US credit worthiness is truly at risk?

Finally, you can offer all the 5% fixed mortgages you want, but most of the problem homes were financed at teaser rates of way less than 4-5% and INTEREST ONLY-- so everyone's payments are still going way up -- and who wants to make a paymnet on a house that is worth 30%+ LESS than you paid for it 1-2 years ago anyway

There is more, but the point is:

The government CANNOT solve this problem by buying or bailing out ANYTHING -- The reality of our phony economy is finally becoming known and the bullshit is about to end--and the stock market is now in the process of reflecting that.

Ko Ko said...

Almost44.
I see where you are coming from but I don't think you fully understand what I proposed.

Yes, the government cannot simply create wealth when there is none by tossing money at the problem. However, the government can prevent the snowball effect that is now destroying every major economy across the entire planet. Simply put, the housing crisis exposed the extreme leverage that companies across the globe had been engaging in for years. Without the housing assets moving against them, the leverage would have continued to work in their favor.....but now that leverage is all exposed for everyone to see.
Right now there is a temporary FLOOD of homes on the market which is significantly depressing prices. If the government simply bought those homes and leased them for a few years, this would dry up the inventory and it would also be a profitable investment for the government entities as well. Buying homes at 40% off distressed prices then collecting rental revenue and selling the homes many years later after prices have stabilized will be very profitable for taxpayers.
And for the refinancing part of the plan, this would be a win win investment for everyone as well. The government buys at risk mortgages at their current reduced market prices, then refinances the loan for all those wishing to keep the home based on their income level. Obviously, only the employed will qualify. Lastly, any profit from the eventual sale of the home many years later would go mostly to the government entity, not the homeowner who picked a poor loan product to begin with.

This plan is an investment by an entity that can afford to hold on to the real estate assets for years and it immediately prevents the downward spiral in home prices which was and still is the primary catalyst that revealed the banking, insurance, and investment industry's dangerous ADDICTION to leverage. And it is this unwinding of leverage which is causing the world's markets and world's currencies to plummet.

hp said...

JFC people. Atilla opens a blog and the vulturistic nature of people clog it with pathetic, help me, you're the best, pointless, mindless clutter. A new thread is opened by Atilla, and there's 700 comments of which Atilla contributes 5 of those 700 posts. Angus feels obligated to take over the thread and continually post all his/her observations before he/her heads off to class. Open your own damn blog Angus. You obviously need a stage. Quit hijacking someone else's venue.

Atilla I'd be grateful if you'd shut the door on these idiots and limit it to your and Sol's posts. I can't take having to filter through a gazillion posts to find the content that matters. TY.

observer said...

i second hp's comment.

Sol,

Please close the comment postings except for you and atilla.

thank you.

in the mountains said...

I'm guessing if we took a vote, those of us who would want the comments to be open to everyone would be a large majority.

It's a free blog, there are comments, if you don't have time to read the comments, don't read them. You are not obligated to do so.

I read the comments and have learned from them, not only from Sol's and Atilla's, but also from other posters, Angus' included. In fact, I find his to be some of the most intelligent and useful on the blog, so what's with singling him out? If there are some posters whose comments you don't want to read, just scroll down the page and move on, no need to dis them here.

Greg

uber007 said...

I have been going to trader meet-up groups the past three years and had noticed that attendance was sometimes a good contrary indicator at market tops and bottoms. When few people attend the meeting it often signifies disgust with the market and a possible bottom. Last night we had the largest attendance ever, an ominous sign to me. When I mentioned this to the group they all laughed, which I interpreted to mean that they did not think the market was in for a further decline. Many of the new attendees were noticing the volatility of the market and wanted to find ways to profit from it. Could it be that as long as we have lots of people looking for opportunities, this market will not bottom? Capitulation (and bottoms) usually occurs when people want no part of the market.