retskas bear culling thursday, page-18

Howdy all ZL crazy trippers. Just a great thread here on XJO.

What a market hey. Goes down then up then down some more & now shes up.

Mixed bag from me of some random thoughts and a Q at the end for any experienced option players out there.

firstly been doing some quick research (= googling in 2011, LOL) re economics & some of the witchcraft, sorry, science behind it. Everything I read confirms my rather gloomy prognosis for world future I am afraid.


V quick summary;
- Private sector debt now public sector debt.

-Corporate crisis of 2008 now a sovereign crisis.

-There MUST be defaults to return world order;

-Too big to fail in 2008 = bail outs. What happens when we have nations rather than corporates needing said bail outs? Seems Ireland, Greece, Spain & Portugal manageable .... Italy & others very ugly.

-LOTS of banks will go under (many European banx already technically insolvent)

RESPONSE:

1. Fiscal policy: (the use of government expenditure and revenue collection (taxation) to influence the economy) ... seems to me world leaders are just unable/unwilling to respond in any meaningful way.

2. Monetary policy: (the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.}

Problem is, interest rates are at or near zero for most of the troubled countries including USA ... thats why they introduced QE 1 & 2 ... japan has been in that situation seemingly forever.


3. Unconventional monetary policy at the zero bound:
Other forms of monetary policy, particularly used when interest rates are at or near 0% and there are concerns about deflation or deflation is occurring, are referred to as unconventional monetary policy. These include credit easing, quantitative easing, and signaling.

So we are relying on 3 & the most obvious is Bernanks QE 1 & 2. Whats next? World full of predictions/hopes inthis regard including:

Johnyd;"Bernanke to unleash the bag of tricks maybe 21-22 September"

Well IMO QE 1 & 2 were abject failures & any other trick has similar 'experiment" feel to it. The world has to take its medicine & THERE WILL BE PAIN.

In this regard how different would the world be if leaders did NOT try to intervene in 08? Many corporates around the world would have gone broke (mainly Finance/banking related ... who cares?), unemployment around the globe might have gone higher (mainly finance execs and from industries that were not efficient) etc But IMO the worst may now be behind us; the "green shoots" would be appearing & we could "move on". The US and the European may NOT be bankrupt etc


Enuff???

Lets look at some charts: (no particular order)

DOW

DAX LT

dax closer

XJO liking some channels

Now to a question/ request for experience from others re Options. The recent volatility is of GREAT APPEAL to me and i have found it fairly hard to trade; been getting stopped on positions where I have picked trend but big (& quick) counter trend spikes been hitting stops. I have been considering some med term out of money options strategies. best explained on chart (see below); any thoughts/comments welcome??

Cheers g