Is This The Panic

Sept 5. Hans Lysglimt
Yesterday the Dow fell 3% and NASDAQ 3.3%. Is this the panic and the crash we have been waiting for and warning against since November 2007? It could be. Apparently from eye witnesses there was panic in they eyes of the traders yesterday on Wall Street.

The only real panic we have seen this year was Monday January 21 in Bombay India when the markets there fell 9%. That was real panic. But this panic was fast curtailed. Then on Tueday January 22 the FED lowered rates by 0.75%, the antidote that we are still under. I have not seen anyone write well on what actually happened in India and how it affected the rest of the markets. The US was closed that Monday. Asian and European markets continued to fall on the Tuesday but all rallied on the FED cut that came before the markets opened. As you will remember we here on Farmann also called that the FED would cut rates before the open of the markets on January 22.

We wrote on the Morning of Tuesday February 22 that we expected the FED to lower rates by between 1% or 0.5%. (In Norwegian).

Question is now:
– Is this the panic? Needs to be confirmed before it is called.
– If it is, what will the FED do? What can the fed do?
– Depending on the FED’s actions, what will happen?

We belive the FED is tied now, it can not do that much more. And the awareness of the coming slump is so much higher now that anything the FED does will not have the same impact. In January the FED was actually able to avert the panic fully. The US markets never even saw the panic, it is as if the US investors where spared. All traders based in Europe however was seriously spooked. This is why Europe and the US might act differently to the next round of panic. The main way for the FED to inerweene is to take on assets on its own books. Remember the FED can buy ANYTHING and montize ANYTHING. The FED could start buying stocks big time on Wall Street directly. Should they do this there will be a sharp reaction up on Wall Street, similar to what we say on January 22.

We are worried about what George Bush et co might do as well. The stakes are extremely high from now until November 5. The stakes are about control of the entire world, the stakes have seldom been higher. For the Republican establishment any price is worth paying to hold on to power for another 4, 8 or more years. Any price worth paying means a huge price might actually be paid. Expect new unexpected bailuot scheemes to controll the panic and crash as it evolves.

Stockholm has fallen quite considerably from the 1300eds down to the 800eds. This is approaching a flatting out of the downwards slope. The US however has just started. I fully expect the Dow Jones to plunge down below 10 000 in a rapid fashion once the panic is confirmed.

Today is Friday, and Friday is bank-faliure day. There are plenty of banks that will fail, they are already under water. But it is impossible to predict just when they will fail. It could be any Friday.
Since the parties conventions now are over they might release a big failure today or next Friday. Tighten your seatbelts.

I am a bit catious to call the full panic quite yet, but it could be that it has arrived.

Hold on to your short possitions and hol on to your long maturity put options.

Oslo, Norway. Sept 5. 2008 Hans Lysglimt