Oct
24
War, from Andrea Ravano
October 24, 2008 |
I have the privilege of being born in Western Europe in 1958, and I don't know what being shot at means. On a day like this though, I get the feeling of looking at my city being shelled, in ruins. I do remember two days after the Monday October 19 1987 we were waiting for the 14:30 CET Economic data from the US. Not a noise could be heard. Telephones as well as mouths were shut. The figures for the balance of payments came out much better than expected and the market came back to life. Very few of us were aware at that moment that the market had changed direction. The general manager of the bank had started buying the US market the very same day of the crash. Some executions came in by late Friday due to the massive volume traded on the NYSE. Most purchases were already very profitable by the time the booking was done. As I write I relive some of the feelings of those days, fear, hope, dismay and disbelief are running around in my brain (Dillinger "Cocaine" late 70's). The contract futures limit down early on Friday October 24 2008 are a pretty good sign the forced sales are almost over.
Comments
3 Comments so far
Archives
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- Older Archives
Resources & Links
- The Letters Prize
- Pre-2007 Victor Niederhoffer Posts
- Vic’s NYC Junto
- Reading List
- Programming in 60 Seconds
- The Objectivist Center
- Foundation for Economic Education
- Tigerchess
- Dick Sears' G.T. Index
- Pre-2007 Daily Speculations
- Laurel & Vics' Worldly Investor Articles
I’ll go against the panic meme and claim that the market since October 10 has not been in a panic. Up until the 10th, the selling was indiscriminate, but since then, some things have rallied while others have gone to new lows. The market seems to be pricing in the impact of a global recession and credit contraction. As an example, gas pipelines are way above the Oct. 10 lows, while REITs are printing new lows.
I was a broker in October 19th 1987 and I remember that day well. It was nothing like today from the view that there wasn't nearly the media coverage we have now. Brokers did not have access to televisions or CNBC. So you really could not tell what was going on. There was no commentary from Bob Pisani on the floor. No Mark Haynes, or Dylan Ratigan. Our only real contact with New York was the Squawk Box some nondescript voices on the other end and a very antiquated quote machine. Nothing like the set-ups they use today. Even afterward you really could not tell what was going on with the rebound. The brokers were in a relative Stone Age. It was not until much later in the process, that we began to learn that the NYSE almost completely froze up. The system was overwhelmed. There were no circuit breakers in place and definitely no plan to handle such a crisis. Think of 9-11 when EVERY single plane within the US airspace was grounded in one hour and you get an approximate picture of what could have happened.
The other fact with respect to 1987 was that it was all over very quickly. Down over 20% in one day a spring back and then a general leveling off. As I recall, that year actually ended in the plus column. I think it is safe to say that barring some miraculous comeback of 500 s@p points this year will definitely end in the red and be the worst ever.
In 1987 the cruel damage was over in a day. In this case, it has taken a month. I am encouraged that over the last two weeks the markets have been trying to find a bottom. Looking at Friday's action in the SPX and confirmed with the NDX this appears as what is unfolding. Anything can still happen and Monday is of course another story and the beginning of the last week of October.
We shall soon come to learn as in October 2002 whether October in general and 2008 in particular lives up to its reputation as a bear killer.
My view is the market won’t find a bottom until all the selling is done. Because we are near the end of the year, tax loss selling should accelerate into December. October fund statements will be sent out soon and likely show another disasterous month, which could accelerate the selling (Get me out!!). So, my expectation is that all the selling will be done by the second or third week of December, after which a momentous rally of 30-40% will occur by the end of January 2009. My intention presently is to load up on call options in December for expiry in February. But I’m not buying anything until December.