S&P didn't lower the credit rating because Obama spoke. They lowered it because we're a bunch of dysfunctional fuckups.

 

I was referring to the market plunging during Obama's speech, not the T-bond downgrade.

 

I'm very tempted to put money back into my account now. Might be able to fund a new garage with this great buying opportunity.

 

Also feeling pretty good. The Asian markets are continuing to fall rapidly right now. And oil is down as well.

 

Why is it good that the Asian market is falling? Is

 

It creates a fire-sale buying opportunity for those of us who have been standing on the sidelines saying "****, I'm missing out on the uptick."

Granted, I believe we still have a way to go. The US job market is still in the *******, we are still up to our forehead-penises in unsecured debt, and the Chinese still pwn our manufacturing economy.



Oct 2007:
August 2011:


All of this has happened before,





Man, I remember when I used to smile every time gasoline went up a nickel. $5 / gal and I was laughing my head off all the way to the bank.

Glad I got out of petroleum before The Fall. At least that was one thing I did right.




So, anybody holding a double-bear long over this evening?

 

I've moved some of my stuff around and will probably park more in SLV and GLD today and then set a nice buy order for AAPL at 300 (and hope we don't see that honestly).

 

Sadly, no. I sold after dip1 and left it in cash.

Bear in mind this is only like $500 initially invested. My "laughing all the way to the bank" is more of a "heh" and I still have plenty in the S&P and Qs

 

Interesting to consider: how does an entity which has a monopoly on the creation of the currency in which its debt is denominated default? The only answer I come up with is "voluntarily." It certainly seems like default-risk is pretty minimal unless your only information source is the New York Times.

Further for consideration: how does a megabank which is backstopped implicitly (or explicitly depending on your interpretation of Dodd-Frank) by said sovereign carry a higher rating than that sovereign?

Taken a step further: how does a sovereign which does not have the ability to create the currency in which its debt is denominated carry a higher rating than one that does?

And the megabanks backstopped by the non-currency creating sovereigns?

I would love to see those datapoints as it certainly seems to have a high correlation.

 

I suppose it depends on said entity's perception of the relative dangers of hyperinflation vs. default. Any nation can obviously just fire up the printing presses whenever it feels the need, but the risk inherent in doing so is the devaluation of the currency in question.

 

Interest-rate risk and inflation-risk, yes. Default-risk? See my previous commentary.

That is not quite accurate. France, Spain, Italy, et al cannot fire up the "euro-printing machine" independent of each other.

 

It may be the subject of an unrelated discussion, but even though they retain still a high degree of sovereignty, I don't consider the individual member states of the EU to be "nations" any more than Moldova and Uzbekistan were "nations" during the Soviet era; or that England, Scotland, Wales and Northern Ireland are "nations" under the Acts of Union of the modern UK era.

France, Spain, Italy, et al sacrificed true nationhood when they founded / joined the EU in much the same way that the Western Territories ceased to be autonomous, separately recognizable entities when the ceded to the United States government.

 

Did their fiscal policies and national balance sheets cease to be "separately recognizable entities" upon entering the EU? In other words, from a market perspective, are Greece, Spain, France and Germany one-and-the-same?

 

This CEO's point of view is by no means unique amongst our business leaders.


It's refreshing to hear someone speak their mind without trying to pander to disparate electoral groups while raising countless millions to run for high political office.

Check Steve Wynn too. All of the uncertainty and rudderless strategy from the oval office is not helping those who create jobs to do so as they grow their companies.

 

I suppose that depends on your point of view.

They share a common currency, so their economies (and therefore their GDPs, balances of trade, etc) are inexorably linked. They are not indistinguishable, in the same way that Indiana is not indistinguishable from Kentucky.

However they are not fully independent from one another either, in the way that two states which bear full, separate nationhood are. Brazil and South Korea are completely autonomous of one another, and are beholden to no common authority or shared resource.

France and Germany, from this point of view, occupy an interesting position in that they have many of the identifying characteristics of a Province or a Republic, insofar as that they are sovereign and have their own internal governments, however they are not economically independent of one another, their citizens are bound to a communal set of Higher Laws, they sign Treaties as a single entity, etc.

 

I am talking economically, fiscally. i.e. In the broader terms of this "market" discussion.

I can certainly see the argument that the individual countries have given up much of their sovereignty - if nothing else than through economic "peer pressure." That is, Germany (with a reasonably strong economy) assists in a bail out of Greece - which cannot print euros to satisfies its debt and thus runs a real risk of actual default - or risks broader "knock on" damage.

I suppose you could make the same argument that, if California were facing actual default with no access to credit markets, the rest of the states - through Federal intervention - would be on the hook to bail them out. The default mechanisms for US states and European nations are significantly different, though.


There are still important distinctions, but you could argue how applicable they are in practice.

 

 

ZX-Tex - If you are still interested in refining your re-entry process for stepping back in to US equities (other than waiting until things feel better), another data point you could consider is the $SPX/$VIX overlay.

 

I'll take a look at that thanks. Are you saying look at the overlay comparing the two, or look at the ratio of the two?

I was looking at DJI versus VIX the last few days which I guess is close since the DJI and the SPX follow each other more or less. Looking at the last 5 years of data, it looks like the VIX spikes drastically at the beginning of a big market drop and then tapers off as the market recovers. A big VIX spike seems to be at least a reasonable indicator that a big drop in the overall markets could be (is probably) coming after the spike. It seems one cannot wait for the VIX to drop completely because by then the rally is over. But, if it starts showing a steady downward trend over a couple of weeks...

And we just had a big VIX spike this week. The spike is bigger than the spike that happened during the May 2010 correction (DJIA dropped ~14%), and the biggest since the October 2008 spike (the huge death drop). It could be interesting to see if the size of the VIX spike correlates to the size of the following correction.

Another big drop today. DJI closed at 10719. GSPC (S&P 500) closed at 1120. VIX (S&P 500 volatility index a.k.a. 'fear index' closed at 43.

An interesting description of what the VIX is
http://en.wikipedia.org/wiki/VIX

 

Speaking of indicators, here is an interesting quote from a WSJ blog, posted this morning: