Morning Observations

Good Morning. It is a sad day as Lehman employed 25,000 people with families. We are now facing the realization of what years of excess has brought us. Bailouts, 1% interest rates, 0% financing, no money down, NINJA loans. This is the other side as we now have to pay the piper. However, this is part of the healing process. There will be good times again after we make adjustments. The primary adjustment will be for Americans to live within their means. Our 6% current account deficit must be dealt with. This will be achieved through lower consumption and a reallocation of resources. More Americans will need to work in goods producing sectors that the rest of the world wants instead of in money shuffling sectors. Here are some thoughts for the more immediate future:
  • People were probably positioned for an up day as the Bear Stearns and Fannie weekends brought stock market rallies. This should exacerbate the downside.
  • Many are using S&P 1215 and S&P 1201 as stop loss levels. It could get uglier if we break those levels but it will also get rid of the renters. That should help produce a better rally at some point.
  • "Buy when there is blood in the streets" comes to mind. While these days are usually good times to buy I would prefer if this came after a long decline where we were already oversold.
  • The key will be the debt markets and how it reacts to this.
  • I dont plan to do much trading today but those type of plans have been known to change.
  • Good luck and be careful.

No comments: