This market reaction was predictable as soon as President Bush said; "This sucker could go down." A similar meltdown occurred in 2000-2001 when
Greenspan said equity markets were in a bubble that was going to burst. These actions by people at the top are signals to short a market.
The problem with shorting the market is that the seller has to cover eventually, or the losses he takes as gains disappear as the stock recovers.
Right now the shorts have gotten rich so they are ready to buy back the stock they shorted at a discounted price. GM and Ford are at record lows. If
I had the money, I would be a buyer, as there should be a significant bounce when the bears race to cover their massive short bets. They will then buy
quality equities to hold for a long term. Buy into blue chip at these lower prices, and profit.
The Congress has just sent 900 billion into the markets, and there is an orchestrated global governmental response in progress as well. Stocks go up
and down, and the trick is merely to buy low and sell high.
If concerned about loss exposure, or you don't have the money to play larger stocks, buy covered call options instead of the quality higher priced
stocks. To get a quick definition of puts and calls, proceed to infoplease
These covered calls are extremely speculative, so anyone using them needs to use a broker or suscribe to a newsletter and gain an education first.
Sellers in this environment are taking a ridiculous hit. A lot of the selling has been generated by margin calls, so investors that were trading on
borrowed money via "Margin Accounts" have been wiped out.
Margin Calls have figured in as a major cause of the recent market meltdown. The selling was done by brokers to liquidate securities speculators made
bad bets on using brokerage firm's money. That selling pressure is over. A similar pressure will ocur where uncovered puts and uncovered shorts are
forced to liquidate and buy back securities during the coming bounce. The bounce will be far greater than it otherwise would have been. Buy baby
Many prudent investors on the sidelines are looking at charts that will signal this as a buying opportunity. Buy good values to hold for the long
term. Please remember that the Dollar remains down against the Euro (from five years ago) by approximately 30%. It has come back from 1.6 dollars to
buy a Euro to 1.36 dollars to buy a Euro in the past 12 months. The US Dollar looks good in a "head and shoulder" chart.
The US Stock Market looks like a great buy here, and the dollar looks stable the in short term. Many of us have concerns about inflation, but this
has become a global crisis. Any short term US Dollar hyperinflation shouldn't occur due to the global nature of the problem.
If the US government were smart, they would legalize marijuana and tax it, which could result in 50 to 100 billion a year in Federal Tax Revenue
enhancement. That move would also have the benefit of calming down the taxpayers over the implications of the 900 billion-Dollar bailout
vis-a-vis financing the thing. It would also shore up the Dollar, and make it stronger vs. foreign currencies. Legalizing Marijuana would be a
responsible way to rid us of huge sums of currency being exported to terrorists as well. That one move could easily cause a surge in equity markets.
Let's all live in the solution, and realize that in the end we will weather these storms.