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Blogs are a great way to express your indepth research as they are not lost in the flurry of posts on the main discussion board. |
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Recent Events - My Take On It |
| Category: News Roundup |
Published: 14-12-2007 |
By: NightStalker |
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Well, for those
who can tolerate reading my views on the recent events, here's how I see
it.
Ban hedge funds, ban fully-debt funded investing, and ban
short-selling.
That's my answer to the world's problems...!
wink.gif
Ahh - if only it were so simple.... (sigh)
But I can't
help thinking that the whole financial "world" has got itself into this mess
because they've become WAY too smartarsed and clever by half. They've invented
derivatives, then derivatives of derivatives, and so on down the line. So now we
have entire businesses doing nothing but shuffling around bits of paper (well,
computer file equivalents) which are nothing but hot air, all of which are
totally worthless, and the cycle goes round and round endlessly.
Bit like
having multiple credit cards, each with 55 days interest free, and each 54th day
paying of one with another, never having to repay the principle.
We have
hedge funds borrowing paper money IOUs from other funds, and using them to buy
companies or some types of derivatives. Then they employ rooms full of
mathematical Ph.D coneheads and computer programmers and tell them to write
programs to play one derivative
off against another in such a way that they can just milk money out of the
market. Most of the time it works - the bots do their bidding, and they make a
motzah.
But then some junk mortgage worries come home to roost, and the 5
- 10% of actual long shares they hold get devalued by that same percentage, and
these wheeler-dealer hedge fund smartypants suddenly become technically
bankrupt. So they have to "unwind", de-leverage",
call it what you like in finance-speak. It comes down to having to raise actual
cash to settle all their bills which are like enormous margin
calls.
So they sell their long shares, plus they try to double up their
profits by short-selling as well. They push the markets down, and suck in all
other players who start to panic. This is all fuelled by the very
"knowledgeable" media pundits who predict all sorts of dire scenarios. The panic
then really takes hold, and we see good value shares in strong, solid companies,
being sold off in a desperation for peanuts and totally illogical, irrational
prices. That's what happened yesterday and today.
Who knows what will
happen on the Dow tonight? Who knows how the reserve banks will react - if they
do at all? Who knows if the USA cares really, what happens in the rest of the
world - do they actually know we exist?
I do however start to get a faint
whiff of market-bottoming rubber-burning after today. I can't explain the
feeling - but I'm less pessimistic tonight than i was last night, even after the
112-point fall today (forget about the 300 point intraday fall - it was still
112 down at the end of the day) Maybe I'm wrong, but perhaps - jue MAYBE - we
could have seen the bottom today.
Of course, those who are still
desperate to get out of the market will take advantage of the slightest bounce
to do so, causing all sorts of wobbly curved bounces on the way back up to
sanity, but I suspect we'll get there. It could take 6 weeks or 6 years, but
we'll get there.
Meanwhile, buying into solid companies who have been hit
hard by selling that bears no relation to the compny's true value or even their
proper perceived value, should provide some excellent opportunitiesw for smart
investors, and even some traders.
At least - that's how I see it. As I
said - ban hedge funds, ban fully debt-funded derivatives, and ban
short-selling. None of this financial wheeling and dealing actually does a
single thing for mankind (in the most non-sexist meaning of the word). It
produces nothing, it heals nothing, and it doesn't create anything of value. It
just goes round and round and round and round and........
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