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...which is the simple explanation for getting lucky this week.
My last post had me repositioning the portfolio to accomodate what I feared would be a bloodletting based on the banks reporting. The market did respond in a half hearted fashion, being down at the close almost every day this week.
Friday was what I had envisioned, but earlier in the week after a couple of banks had divulged their soiled laundry.
What gives me pause is how the market struggled each day to go positive, even with bad news. I'm unsophisticated in the market, perhaps there are many possible explanations involving hedge funds, short selling, etc - my unsophisticated vantage suggests it's more akin to the "bubble" Phenomenon of year 2000 - little guys trying desperately to get into the market "..cause it always goes up, right?"
This mortgage paper is like the Terminator, and if you remember the quote from the movie, "..it can't be bargained with, it can't be reasoned with, and it absolutely will not stop until you are dead."
That paper is still out there, the mortgage companies haven't forgiven the loans, the government hasn't banished it, goats haven't eaten it - so who has it all? Likely, it's the folks who are not required to report it - banks have to, it's the law.
I expect plenty is offshore, with oil at record prices and profits likely similar, many of the countries that fatten themselves on our driving habits had to buy even more securities, the dollar is continues to weaken - my guess is they weren't buying that.
Until the "terminator" surfaces, we are on a guessing game - pure raw gambling, as most of the bad news may still lie ahead of us.
I locked in profits before this weeks downturn, and shorted the market with 7000 shares of SDS. It kept my head above water all week, including Friday's 266 point drop. I am going to take 12 seconds to pat myself for guessing correctly, but only 12 seconds.
A good guess does not a career make, so I remain anxious and leery of next week, but well positioned to weather whatever the market flings at me. I will continue to short until I see something that suggests otherwise, and will gradually liquidate other securities if the corpses start to pile up in the streets.
As always, best of luck to you folks, let's be careful out there.
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