there’s going to be some screamin’ bargains out there.
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Question is when? August? September? October? I’ve seen overvalued markets really tank twice in my adult life in September and October so this is a dangerous time of the year to go all in. Is this one of those years with a significant late summer/fall correction? How much longer does our economy go without a recession and when does the possibility of a recession factor in? What will the effect of the housing downturn be on the perception of wealth and well-being? Is there really a liquidity crises? Does Hillary overturn the economic apple cart?
Reminds me of the old Mark Twain quote; "October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February."
Here’s the thing:
This market isn’t over-valued. That’s not why this market is going down. Equities are going down because hedge funds and investment banks are having to sell anything liquid to raise liquidity to bail out the debt markets.
The root of all evil in this situation are the CDO’s and CDO-squareds. They’re mark-to-model, and as a result of the debt crisis, no one wants to sell those dogs at a 50 to 70% haircut — they want to carry them on their books and sell them later, when the panic is over.
So they’re selling commodities and equities, because those are mark-to-market, and they won’t take a 50 to 70% haircut on those positions — only a 5 to 10% in this down market. They use the cash raised from selling equities/commodities to meet the margin calls on their debt/CDO positions, so that they’re not forced to sell off the CDO’s or asset-backed mortgage debt.