With liquidity drying up over the last few weeks what did the Fed do to pump it back up and inflate an even bigger problem, they cut the discount rate by 50 basis points. Yes its great for the markets in the short term, but one thing you have to understand is that its going to create an even bigger credit bubble. Im sure if liquidty starts to dry up again over the next few weeks that the discount rate will probably be cut another .25-.50 basis points, if this is the case I would expect an even bigger credit bubble. Everyone is cheering these discount rates now, but I dont think they will be cheering when liquidity returns to this market creating another asset bubble somewhere else.
But there is no bubble. Everything is under control. Not like one person can pull a switch and everything collapses like a house of cards.
this is exactly how it will happen if it does....and it will take you 3 or 4 huge losses to throw in the towel...so be careful...peace
Prices only fall when demand is weakening. These market makers should learn economics 101 Demand decreses as price increases. Demand for stocks or anything decrease as the price increase. With high interest rates it doesn't make sense for hedge funds with margin positions to 'participate' in the market. If you sell the price will fall. so be it.
Nice post bro. On the commodity exchanges it's called puking. A very apropos term. We've all had nights when blissful sleep turns into sickness. You run to the toilet and let loose. (the first hard reaction off a swing high). Then comes the lull. (short covering)The sweating stops, the coolness of the bathroom floor offers comfort but then it suddenly starts again. Then the calm. (Fed action) Just when you think you may be able to quench your dehydration and get some shut eye the most violent episode of all engulfs you until you're begging, often praying for it to end. Alas it's not over until you experience the dry heaves and every morsel of food has been purged from your system (account). .