Thursday, September 18, 2008

The Eye of the Storm

Wow, the last few days have been incredibly exciting. For the rest of the market, it's absolute madness! Sheer madness. It's so bad it's driving straight men into each others arms. Watch the two guys in the background of the video.

For me, I haven't been this excited about the stock market in my 10 years of investing and trading. What's happening now is what every stock trading book tells you about. To paraphrase; "Be greedy when everyone is fearful and fearful when everyone is starting to get greedy." So everyone is saying that this is only the middle of the crisis, and while that may be true, there are a few things that are happening that are really encouraging me to start buying in force.

So while there are predictions that there are more disasters comings such as the fall of Citibank. Here are some reasons why I believe we are going to be ok moving forward.

1) The world is now serious about combating this. Today, the banks of the world combined together to build up 250 billion (and still growing, Canada just joined up) in money to calm financial markets.
2) Merrill Lynch, WaMu and all other distressed companies have already positioned themselves to be bought up or combined if the need were to ever arise.
3) Short Selling, which is one of the biggest contributors to this crunch, just had it's leash around it's neck tightened. In the US, you are not allowed to do any naked short selling anymore and in the UK, you're not allowed to short sell at all until next year. On top of that, the SEC is forcing all hedge funds to publish the list of all of it's shorts and frankly, that will be a big deterrent for those companies.

So with that, I implore everyone to keep their heads and just watch, soon enough things will be better.

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