Doesn't anyone remember 2000?

Discussion in 'Trading' started by athlonmank8, Oct 11, 2007.

  1. Oh wait, few of you guys were around during that period. You only got the perma -bull half. Now it's time for the real fun. Losing. It's time for the longs to grab some popcorn because now the market's going to teach you how to REALLY invest.

    Now let me update you on what happened.

    Prices decline over the summer. Everyone wondered what the hell happened and no big deal.

    Then WACK. We got nailed. Just like today.

    The same scenario is playing out EXACTLY like 2000. Those of you who were around and were in techs remember it well.

    Those of you who are long and simply too dumb to sell....will learn the hard way.

    Remember, investing comes with experience. It now begins.
  2. I told my wife I'm gonna name the dog China and sell it on E-Bay for a million!
  3. You're reading a lot into a little dip. The situation isn't exactly like 2000; there is no speculative bubble in the market per se, although you may argue that the housing bubble can stand in for an actual stocks bubble, but that's working it a bit. No doubt we could shed two or three thousand Dow points though, all things considered.
  4. what has me worried is the market hitting new highs and the USD dropping like a rock.

    Thats recipe for disaster that could hit on an option expiration day.

    Then you have all those quant funds out there and no more requirements to short on the uptick. Could be a very ugly day sometime in the future.
  5. bh_prop


    "The same scenario is playing out EXACTLY like 2000"

    Except in 2000 the highs for the year were put in months before the summer rally very much NOT like new highs put in the day of this post.

    We already had 2 major selloffs this year and both have already yielded to new record highs. Get everyone bearish, rip to new highs, repeat.

  6. They pound them down huge, you look for a bounce and they pound them down even bigger. Yes i remember.
  7. You guys really need to look up OUTSIDE REVERSAL. Several stocks posted them today on the candles.

    Yup......should be fun. Im even holding a small long overnight just in case im wrong. But i dont think i'll be

  8. No one knows if we get hit again tomorrow. We may or we may not. All i can say is BRING ON THE PANIC! We can scalp some nice days out of it
  9. America's houses of cards
    There are times when being proven right brings no pleasure.Published on October 12, 2007

    For several years, I argued that America's economy was being supported by a housing bubble that had replaced the stock market bubble of the 1990s. But no bubble can expand forever. With middle-class incomes in the United States stagnating, Americans could not afford ever more expensive homes.

    As one of my predecessors as chairman of the US President's Council of Economic Advisers famously put it, "that which is not sustainable will not be sustained". Economists, as opposed to those who make their living gambling on stocks, make no claim to being able to predict when the day of reckoning will come, much less identifying the event that will bring down the house of cards. But the patterns are systematic, with consequences that unfold gradually, and painfully, over time.

    There is a macro-story and a micro-story here. The macro-story is simple, but dramatic. Some, observing the crash of the sub-prime mortgage market, say, "Don't worry, it is only a problem in the real estate sector." But this overlooks the key role that the housing sector has played in the US economy recently, with direct investment in real estate and money taken out of houses through refinancing mortgages accounting for two-thirds to three-quarters of growth over the last six years.

    Booming home prices gave Americans the confidence, and the financial wherewithal, to spend more than their income. America's household savings rate was at levels not seen since the Great Depression, either negative or zero.

    With higher interest rates depressing housing prices, the game is over. As America moves to, say, a 4 per cent savings rate (still small by normal standards), aggregate demand will weaken, and with it, the economy.

    The micro-story is more dramatic. Record-low interest rates in 2001, 2002 and 2003 did not lead Americans to invest more - there was already excess capacity. Instead, easy money stimulated the economy by inducing households to refinance their mortgages, and to spend some of their capital.

    It is one thing to borrow to make an investment, which strengthens balance sheets; it is another thing to borrow to finance a vacation or a consumption binge. But this is what Alan Greenspan encouraged Americans to do. When normal mortgages did not prime the pump enough, he encouraged them to take out variable-rate mortgages - at a time when interest rates had nowhere to go but up.

    Predatory lenders went further, offering negative amortisation loans, so the amount owed went up year after year. Sometime in the future, payments would rise, but borrowers were told, again, not to worry: house prices would rise faster, making it easy to refinance with another negative amortisation loan. The only way (in this view) not to win was to sit on the sidelines. All of this amounted to a human and economic disaster in the making. Now reality has hit: newspapers report cases of borrowers whose mortgage payments exceed their entire income.

    Globalisation implies that America's mortgage problem has worldwide repercussions. The first run on a bank occurred against the British mortgage lender Northern Rock. America managed to pass off bad mortgages worth hundreds of billions of dollars to investors (including banks) around the world. They buried the bad mortgages in complicated instruments, buried them so deep that no one knew exactly how badly they were impaired, and no one could calculate how to re-price them quickly. In the face of such uncertainty, markets froze.

    Those in financial markets who believe in free markets have temporarily abandoned their faith. For the greater good of all (of course, it is never for their own selfish interests), they argued a bailout was necessary. While the US Treasury and the IMF warned East Asian countries facing financial crises ten years ago against the risks of bail-outs and told them not to raise their interest rates, the US ignored its own lectures about moral hazard effects, bought up billions in mortgages, and lowered interest rates.

    But lower short-term interest rates have led to higher medium-term interest rates, which are more relevant for the mortgage market, perhaps because of increasing worries about inflationary pressures. It may make sense for central banks (or Fannie Mae, America's major government-sponsored mortgage company) to buy mortgage-backed securities in order to help provide market liquidity. But those from whom they buy them should provide a guarantee, so the public does not have to pay the price for their bad investment decisions. Equity owners in banks should not get a free ride.

    Securitisation, with all of its advantages in sharing risk, has three problems that were not adequately anticipated. While it meant that American banks were not hit as hard as they would otherwise, America's bad lending practices have had global effects.

    Moreover, securitisation contributed to bad lending: in the old days, banks that originated bad loans bore the consequences; in the new world of securitisation, the originators could pass the loans onto others. (As economists would say, problems of asymmetric information have increased.)

    In the old days, when borrowers found it impossible to make their payments, mortgages would be restructured; foreclosures were bad for both the borrower and the lender. Securitisation made debt restructuring difficult, if not impossible.

    It is the victims of predatory lenders who need government help. With mortgages amounting to 95 per cent or more of the value of the house, debt restructuring will not be easy. What is required is to give individuals with excessive indebtedness an expedited way to a fresh start - for example, a special bankruptcy provision allowing them to recover, say, 75 per cent of the equity they originally put into the house, with the lenders bearing the cost.

    There are many lessons for America, and the rest of the world; but among them is the need for greater financial sector regulation, especially better protection against predatory lending, and more transparency.

    Joseph Stiglitz

    Joseph Stiglitz is a Nobel laureate in economics. His latest book is "Making Globalisation Work".
  10. FAST.AM


    Just get some DIA puts and youll be fine....:D
    #10     Oct 11, 2007