dogfox

Well I'm off for a drink, with my last remianing friend! Whilst I agree the markets will eventually provide a buying opportunity it is a fallacy to think that buying at anytime is OK in the long run. It is clear from the statistics that if you bought before market corrections it takes years to get back to your starting point. I dont know anyone with a 70 year time horizon so for my money it is time to wait or be short. I fully expect a relief rally at somepoint due to falling oil prices but in my opinion that is a selling opportunity, and as for hanging on well I guess its more exciting than watching paint dry but who needs excitement in this market. The level of debt in the USA and UK is tearing at the very fabric of both economies we are at the beginning and not the end. Volatility options ar efine to protect some of the downside but I woudn't recommend trading this market. On CDS and CDO's the market is so opaque with so many SIV's created it will take years to work out which bank had what where and I would not be buying financials for a long while yet. This is all to say that while interesting no one really knows how bad the CDS CDO market can get and thats why banks wont lend to each other. Nite

They appeared on Bloomberg about 5 months ago but the reference originally comes from Sanford Bernstein, the broker/ investment manager in the USA who are a good source on credit markets

The options for both Fannie Mae and Freddie Mac look bleak. It is unlikely the US government will let them "fail" (technically they already have) but the risks for the world economy have now increased dramatically. If the US government takes on the debt of these two institutions its debt will double overnight. AAA US govt bonds will not be worthy of the AAA status and therein lies a huge problem. This is before the 46 trillion of CDS and CDO's start to be marked to market and unwind. (Fact: in 2002 the CDS market was 1.46tn in size with a default rate of 9.3% since then the market has grown to $46tn and default rates dropped to less than 1.5%. Now some 40% of CDS protection is written on below investment grade companies. If the default rate reverts just to norm then some $5tn will default. I think it will be worse.) THe only way out for the USA is to devalue the USD. (Note that the pound is in no better shape) hence the flight to the Euro on Friday. THese are seriously dangerous times and cash is king. This weekends press is poor at best. There are opportunities out there though in the form of short ETF's, and currencies. Would be a brave honcho to buy anything equity related or property related now. More pain to come (No one invites me to dinner parties anymore Im so bearish any similar experiences???)