Saturday, March 15, 2008

Line Up the Dominos

Liquidity Trap - The Current:
"The terrifying speed of Bear's collapse has stunned investors -- less than ten days from rumor to ruin. Investment banking stocks plunged on the news, particularly Lehman Brothers, which like Bear Stearns, has relatively light cash reserves and a heavy exposure to the debt markets. If the bank's sudden collapse shakes confidence in other institutions, more such situations will surely follow, and Bear could be the first domino in a long line."
This and the level of consumer non-payment of debt has me concerned about a meltdown. This might be a time that I thought would not come. Then again, it might be a Japan scenario of real estate crashing followed by economic morass. The only difference might be the flight from the dollar into other currencies causing an even weaker dollar translating into even higher energy costs. All of those things might be enough to tip over the hole pyramid scheme.

What am I doing about it? Keeping lots of cash and shorting the market to balance my long positions. I just don't think I am short enough.


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