Friday, October 10, 2008

The VIX

sorry about the rambling nature of this post, as I started it somewhere else

I tell you that this indicator isn't even an accurate read here. This isn't a sell off, it is a liquidation. We could get a strong rally. They keep talking about bottoms. They keep talking about bottoms. They keep talking about bottoms. No one is talking about what could happen, what is going on, only about bottoms.

My bean counter friend called me a few weeks back and brought up the VIX. I think the Dow was about 10,800 or even higher. He said that was supposed to make a bottom. Now we are down 3000 points. The VIX is supposed to make a bottom.

The reason there aren't any buyers is they have already bought. The guys that say they would buy have already for the biggest extent, already bought. The shorts are going to have to put a bottom in this market as they have the money.

Lets see if the brokers still have the short money to cover the trades? This will be the next mess, what have the brokers done in a decline like this? We are well into the 1987 mess and we were already down 3500 points when this downdraft started.

They are talking about confidence. The public doesn't have a clue about confidence. They still think confidence is the problem. This a broken bubble and there is continued confidence there will be a tradable bottom that will make the trader rich. There is little recognition this is the start of a deflationary market, not a buying opportunity. The market keeps going down because the bulls are buying every bounce as the bottom. Today is no different but the rally actually happened at the right time, right after the open.

The lost idea is that what the Fed has put out is owed back to the Fed. Thus these are liabilities in the system, not gifts. The CDS's are nothing more than money changing hands. The bulls think all this money has come out of the market. Nothing came out of the market that didn't go in. The whole idea there is cash in the market is nonsense.

Right now I am in front of the TV watching experts, all under 40 years old and some under 30 years old and some that look like they might be 25 or less telling us what is going on. The people that have seen a game like this are all dead. The market isn't cheap, it is high. It is high in relation to every generational top over history. It might be cheap compared to the top, compared to the Mississippi, South Seas and Tulipmania bubbles, but it isn't cheap.

This is not a capitulation market, it is not a crash yet, though it is a crash. It is a liquidation of tens of trillions of excess credit, excess speculation and overvalued assets. We are in a generational deflation. Everything about the stock market requires the re-establishment of the credit machine we have seen constructed and implode over the past 20 years for it to resume its trend to make anything. The money out there is all owed to something and it isn't sitting on the sidelines waiting to pounce on stock market deals. The money on the sidelines got there from money on the sidelines, not from heaven. The money on the sidelines, sans Federal reserve hocus pocus has no support behind it.