Monday, August 4, 2008
The dominating theme for the next 2 weeks is rising volatility. While markets oscilation downwards this week by huge price swings the VIX is not priced accuaretely to the increasing risk short term. Even next week with an upside bias due to full moon (solar eclipse) it should be volatile and a retest of the lows of july is still a likely scenario before a bigger rally can occur. Many indicators which are not time sensitive are asking for a short covering rally but we need more short term pessimism to activate it. The financials are still in jeopardy and I fully agree to Mrs. Whitney and Mr. Roubini - its far from over. House prices have to fall much further asone can see by the employment situation and what can a 300 bil. package do in a 11 tril. market make the math yourself. The losses I estimated match the ones of Mr Roubini will be around 2 tril. we are at 500 bil. so far. That might even be still too low but in any case this number will do so much harm to the world economy. Just to put it into perspective 500 bil have in average took away 50% market value of banks and they still trade above tangible book value - what will another 1.5 tril. do to them since at some people will rush in to take away deposits. I deal with that in another post.
Posted by getagrip at 9:15 AM