From the onset, let me say that I sure wish the volatility in the market would subside. I find myself tracking at either 2(ATR) or sometimes 3(ATR), which gives me the willys, for lack of a better term. Of course, the volatility is a double edged sword, if you are on the right side of the trade and the market accelerates, as it so often does, you get the momentary feeling that you are a genius. That illusion can easily dispelled on the very next trade however, and you can end up feeling just as foolish as you felt smart…all within five minutes.
And some rationality in the market might be nice, too. Granted, a new Treasury Secretary might turn out to be a wonderful thing. but his options are as limited as the current Treasury Secretary’s. We have the accelerator on interests pushed nearly to the firewall, and the next step will surely be a Fed. Funds rate of 0%, ala Japan for a good part of the last decade. For all the worry about inflation we have heard, I find myself much more concerned with deflation and demand destruction, which causes all sorts of problems in balancing money supply, interest rates and a host of other more subtle problems. The point is, the problems that were sending the market downward Friday morning did not change with the potential appointment of a new Treasury Secretary, regardless of how talented the man is…we have some serious problems at hand and no real remedy in sight.
And the credit problems are really what has been giving the market indigestion, if not a downright ulcer. The numbers on the CSO’s and accompanying credit default swaps are just plain staggering, and solution is not apparent to even the most gifted economists. My favorite economist, Paul Krugman, has a number of suggestions, but I have yet to see a solution. We are in a situation of treating the symptoms of the disease but are, so far, unable to cure the root problem. And I’m not so sure throwing a pile of money at the problem is the answer….but maybe it is.
That being said, we also find outselves bailing out just about every industry that is in any way related to finances….the automakers being the most prominent. The most important question that has to be asked is fairly simple….”are we chasing bad money with good money?” I don’t have a credible answer to the question either. And then there is real estate, and mortgages, and taxes….the problems are manifold with all the participants lining up to get a piece of the government hand out programs. Where does it end? I don’t know, nor does anyone else….but the implications for the entire scenario appear to be grave, and the patient is very ill.
There is some beauty in it all, though. As traders, we always have the chance to earn money, we always have a job. Just the same, I worry about our country and the direction we have taken in the last eight years. I pray we can find our way back home and rest on solid footing. What do you think?
