Panic – The Storm Is Here

Sept. 15. 2008 Hans Lysglimt

Ok, we will call this as the panic we have been predicting since November 2007. The storm is here.
Lehman is gone.
Merrill sold to Bank of America, for a song.
AIG in big trouble.
Washington Mutual about to tip over.

There is clearly panic in certain parts of Wall Street. Because this has been going on for some time the panic is not quite as dramatic as we have predicted, but this the storm.
If you have followed our advice you have some January 2009/2010 puts and we advice to now start selling some carefully. People are talking about today as a “Black Monday”, and that tells us this is a good day to sell your put options.

Bombay was down as much as almost 6% this morning. We follow Bombay closely as a panic collapse might be visible there first. It has not collapsed, but if the markets are to fall double digits in a day we might see it first there.

We think about the Bank Of America board handling of the purchase of Merrill Lynch, this happened during the weekend. Probably a meeting and decision on the phone. We suspect the entire purchase is hasted and might well end in tears, 50 billion in stock is low (by traditional valuations), but still a lot of money.

On Intrade McCain is now at 52.5% and Obama has fallen to 46.8%. It seems McCain will pull this off. Obama has played his historic chance poorly.

The good thing about McCain looking likely to win is that Israel might halt the attac they seem to want to do on Iran. The IAEA also came out this weekend confirming their assessment that the Iranians are not enriching uranium for weapons purposes. It would be an atrosity for Irsael or the USA to attac Iran now and we would condemn any such action.

Gold is up from USD 751 to USD 785 over the weekend worries. This is not a reversal of golds fall, gold will likely fall back again further in the recession.

What to do?
Stay mainly in cash, 80%+.
Diversify your holdings, in assets, in currencies and in institutions.
Do not have all your cash in one bank, with one broker etc. Spread it around!
Focus on preparing to enter the markets at some point.
Focus on finding areas where you have the ability to add long term value by your personal involvement.

Oslo, Norway. Sept. 15. 2008 Hans Lysglimt

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