Wednesday, September 17, 2008

UNBELIEVABLE WEEK

As bearish as I've been with my $60 oil/9000 TSX & 9000 Dow talk months ago.
As bearish as I was when I wrote this on August 8 on a day when the Dow was up 300 pts (11,734):

Then we plunge into mid November as the credit crunch really takes hold, the US economy plunges and recession is accepted by all. There is a chance that we get a slew of bank failures at the same time and systemic risk becomes a concern.
Even though, I predicted bank failures at the same time (I think Fannie, Freddie, Lehman and AIG with Merrill in astericks meets that standard)

and even though, I knew that Lehman & FanFred were goners (I purposely did not buy puts on Lehman, Fannie & Freddie because the risk/reward was not good enough and the puts were expensive) and I had puts on AIG for this possibility (sold them on Monday & Tuesday)

I am still AMAZED BY THIS UNBELIEVABLE WEEK (and it is only Wednesday)!
  • 2 400+ down days on the Dow
  • Lehman, Merrill and AIG gone
  • Fed taking anything as collateral
  • Central banks injecting massive liquidity
  • 3 month TBill going to 0.02% in the US; TED spread up huge
  • 1 money market fund breaking a buck
  • Russia down 17% in 1 day; closed for 2 days
  • Treasury saying No to Lehman; Fed saying no then yes to AIG 1 week after saying yes to Fannie & Freddie
  • Merrill Lynch taken over with 70% premium to Bank of America in a shotgun marriage
  • Gold up $80 in 1 day
  • New rules instituted against naked short selling

It is one thing to predict something; quite another to live through it.

I feel bad for all those losing jobs and money in this, but unfortunately, this was inevitable after a 25 year credit bubble. The good news is that finally the financial markets are beginning to get it and eventually we will set the stage for a sustainable and healthy economic boom (unlike the most recent 2003-2007 one).

The other good news is that despite global deflation in all asset classes, Canadian housing will continue to grow at 5%+ a year and thus, housing is a great investment at these prices...

Full Disclosure: Puts on MER , SKF and equity in SKF, SDS, QID, GLD, GDX and gold mutual funds.

7 comments:

Jen said...

Love the new look!

I've been a "lurker" on this site for quite while, but this is my first post. Just wanted to thank you for the information you share and the time you spend maintaining this site.

You do valuable work, and I hope you're aware of how valuable it is.

Please keep it up!

Matt said...

Always enjoy your posts, your predictions have been bang on thus far. So I'm curious, what would you recommend for my current situation?

I have $50K in a BMO monthly income fund, which is basically ~55% bonds and the rest in Canadian Equities, with 5 of the top 10 holdings in Canadian Financials (mentioning that part makes me wince.) The money is dedicated to a downpayment on my first property, something I have been staying FAR away from since I started looking in 2006 - at least I feel I made one wise decision. Fortunately I'm not being pummeled like some of the other funds - today dropped ~1.3%. I'm not expecting to purchase property for at least one year, and most likely two. Regardless, my current instincts are telling me to stick it out and NOT PANIC. But logic is telling me to swing by the bank with a large sack.

I'm not a savvy investor by any means, but I am getting into it now and learning the ropes. But right now I'm hoping to make a wise decision before I get knocked out.

Cheers.

Anonymous said...

Likewise, I enjoy your blog - insightful and bang on. Like the comments too.

One question: is Adil now bullish on housing? Here's the quote: Canadian housing will continue to grow at 5%+ a year and thus, housing is a great investment at these prices...

Can someone please give me their thoughts . . .

Rumor said...

Is my sarcasm detector broken?

The good news is that finally the financial markets are beginning to get it and eventually we will set the stage for a sustainable and healthy economic boom (unlike the most recent 2003-2007 one).

The other good news is that despite global deflation in all asset classes, Canadian housing will continue to grow at 5%+ a year and thus, housing is a great investment at these prices...

BBC said...

I am pretty sure that Adil is being sarcastic with this comment:

'Canadian housing will continue to grow at 5%+ a year and thus, housing is a great investment at these prices....'

Don't let me down Adil! Keep up the great work.

Adil Burney said...

Thank you everyone for the nice comments! Please keep posting as I appreciate all comments and it gives me insights for future posts.

My calls have been quite good recently but I must warn that this is unlikely to continue. I will also try to address that in a separate post.

Matt's question is an excellent one and I will try to answer that (as best I can) in a future post,as that is a tough question.

I was being sarcastic (trying to sound like CREA) with the bullish housing spin. That's why I put the part about "global deflation in all asset classes" to make it clear that I was sarcastic. Hope this clears that up.

My views haven't changed and I will provide a long term view on housing (updating "Chain of Events" that I wrote in April).

One day I will be bullish on housing but it is likely to take a few years.

Anonymous said...

"I was being sarcastic (trying to sound like CREA) with the bullish housing spin"

Good, because I was about to call you delusional...heh

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