In The Middle Of The Storm

Sept 16. 2008 Hans Lysglimt

We are in the middle of the storm. We have been predicting this storm since November 2007, and now it is here. As we are mostly in cash and some put options in mostly banks we are riding this out just fine.
If some of your cash positions have been US long term bonds you are in luck, they have had a tremendous rally. Good for you. Our cash positions have mainly been in banks earning interest.
We have recommended diversified currency cash, including the USD that has rallied.

We sold some put options yesterday, and continue to have some for sale at high up in the spread today. If someone picks them up that high in the spread we are happy.

Will the FED lower interest rates later today? The rate is now 2%, how much lower can it go. We think the FED will not lower rates. We believe FED intervention right now is more effective by direct interventions. Remember that the FED can start buying equities if they so like, they can print money and buy anything. Just expecting rate cuts is vastly underestimating the power of the FED. The FED is potentially very very powerful, and I fully expect it to wrestle its muscles against this Bear market. We will be surprised.
In all I have to give Ben Bernanke some credit for how he is handling this. I am against the FED as an instituion, but given the mandate that Bernanke has he has handled it quite well.

The DOW will go below 10 000, and then lower as we have predicted.

The Oslo Stock exchange will go down to the 200 numbers. We started predicting this in January/February 2008. We were not taken seriously, we were taken as a crackpot. This says something about the sheep herd mentality of the market and the media. We contacted several media outlets in Norway to try to get our view out there. No one would touch it, I was considered a cracpot when I predicted the markets 40% down.
Now that we are almost there all of a sudden many economist are coming out to predict gloom. They speak as if they have predicted this all along. They did not call this.
Well well. My readers have made some money in this fall, I guess that will be our pay.
You dear reader have been warned and I hope you have made money in the downturn, or at least lost less than you otherwise would have. Buy me a bear when the occasion arises.

We are now thinking hard about writing about when this market will bottom out. More will follow on that. There is still plenty of time.

Some shares in Sweden and Norway are now getting cheap by traditional measures. But what does that really mean?
Are traditional measures still relevant?
What will happen to the underlying factors for the valuations?
Interest rates, inflation, profits, taxes… many wild cards.

Do not start buying quite yet.

Oslo, Norway. Sept. 16 2008 Hans Lysglimt

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One Comment

  1. Farmann
    Posted 16 September, 2008 at 10:18 am | Permalink

    You predicted it!