You can add the VIX to list of things that have profited in this declining market. An index that few knew much about, is now an important market indicator. It's so important that many investors claim that's it's just as significant as the Dow Industrial Average. Dan Deming has been on TV and in newspapers explaining not only this point, but using his expert analysis of the VIX in explaining investor sentiment. Here are some excellent links caputuring his opinions.
Wednesday, October 22, 2008
Tuesday, October 14, 2008
I would like to add some thoughts to the conversations we have had over the last weeks about the wild markets.
1. If you were to ask me for my personal opinion this is it: I don't know if Friday was the bottom but there is a good chance it was and I think the market could go back to 10,000 in a flash. Take a look at JNJ below, which is typical of the blue chips classic charting bottom during Friday's whipsaw. These kinds of bargains will not last for long, and once we have bottomed these falsely low prices will be replaced by a strong recovery.
2. For me, the idea that we would go into a steep economic decline is just not valid. As a student of economics what I have witnessed is a classic market panic, a once in generation kind of thing and something that tends to come back quickly once confidence is restored. Panics do have roots in real things; here the de-leveraging of banks bloated and risky balance sheets, but for me, their losses are just the retaking of their false profits. Using the example of JNJ above, major blue chips like this actually spent the last few years raising cash and buying back shares?the exact opposite of what the financial firms and hedge funds did. So JNJ has about 10B in cash and over 40B in equity with little debt.
3. I like what the Treasury has proposed: instead of using the 700B to just buy and prop up troubled assets, they will instead use this to buy into and re-equitize the banking system. Together with taking interest rates to near zero, this will have a bank capital ratio multiplier effect that turns the 700B into a far greater and perhaps multi-trillion dollar credit rebound.
4. In times like this our Financial 911 Americans are responding by pulling together. This is refreshing after years of credit greed and overspending by bankers, hedge fund managers, and petro-billionaires. This spirit was evident Friday when wild cheers erupted on the trading floor when the market finally surged off its lows. And to fully energize Americans for a quick recovery, three weeks from now I believe the right man for our times will be elected president in a Reagan style landslide with a recovery mandate.
I have attached a synopsis of my last live Bloomberg Television report, where along with describing the extraordinary trading conditions, I called for a rally of a least 1000 points! And finally, again I will be talking with each of you as we look for opportunities to strengthen and to capitalize on the inevitable rebound in the markets.
MWS Capital LLC 6501 N Bosworth 1C Chicago, IL 60626
Brian Stutland was interviewed by the Chicago Tribune to get his take on what was happening in last week's declining markets. When asked about where the market was headed last week his predictions were fairly accurate, "I'm expecting another 5 or 10 percent down before it's all over," said Chicago trader Brian Stutland, president of Stutland Equities LLC. "We may be nearing a bottom, but it was definitely real panic selling [Thursday]." Here's the whole article
Monday, October 13, 2008
Reacting to one of the worst weeks on Wall St, the Dow rebounded over 900 points to close at 9,387 on Monday. Coming off record highs over 75, the VIX finally came back down to earth closing just under 55 down 21%. The big rally's impetus early Monday morning as markets worldwide reacted positively to European government's interventions into the banking system, pouring billions worth of capitol into world banks. Echoing this tactic, Treasure Secretary Paulson is rumored to do something similar tomorrow. Dow futures are already reacting positively to the news up 192 points in early trading. The question remains however, with the economy still in turmoil, how long will this rally last?
Monday, October 6, 2008
For the first time since 2004, the Dow Industrial Average hit below 10,000 this morning. News around the world was not much better as the sum of all fears of a downward spiral in the credit crunch has spread globally. In Europe early Monday morning, banks continue to decline especially in Russia. Sberbank, Russia's biggest bank, dropped as much as 22 percent. In South America, the Brazilian Stock Market hit a down limit shut off of 10%. In Us markets, many investors are worried not only over Friday's bailout plan specifically that it came a little too late, but also have a lack of trust in the economy. This fear was marked by the VIX level which was up 23% at 55.64 in mid morning trading. We have not seen these unprecedented numbers in the VIX since 1989. Historically, when the VIX has hit a level this high, it has marked a bottom such as in the 1989 level. However, many are speculating whether or not this is the case in this unpredictable market.
Friday, October 3, 2008
CNBC's Erin Burnett interviewed Dan Deming this morning as they discussed the rising levels of the VIX. Dan referenced the movie Spinal Tap as he compared the VIX going to 11. Also on topic was the House of Representatives bail out vote on Capital Hill. Dan explained that the passage of the bill is not only imperative today, but it has to be passed quickly. Here's the link.