Huntleys thoughts re don't fight the fed:-"The sensible investor...

Huntleys thoughts re don't fight the fed:-

"The sensible investor definitely does not play a major role in these crazy markets so there is plenty of opportunity when the momentum crowd pushes the market down, and the leveraged crowd has to sadly sell out as margin calls exhaust their resources.

If you think we live in a sensible world, just consider the US regulatory action of August 14. They amended the SEC act of 1934 which limited short selling to only selling into the uptick on stocks or markets. Those guys back in the 30s new just what damage large short selling programs could do! And they handicapped it.

Now as we are deluged with calls to make the stockmarket a bit "safer" the fools (edited) let that beasty out of the bag.

The short sellers know where the stops on margins lie, it's not hard to work that one out, so they drive down to trigger the selling action, and then hit the markets exactly at the timing of forced sales to drive them down further. Probably the cause of Big Surf, Thursday August 18.

In the background US inflation is only marginally above the Fed's preferred band, so the Fed could act. And act it did and properly, as it was faced with a log jam in the credit markets. A short term panic meant that too many buyers had lost total confidence in credit assets, and refused to buy them. Treat any more Big Surf days as a great opportunity, and do realise that they may just happen. My view is this is simply a correction in an ongoing bull market and the most likely short term direction is consolidation around the 6000 All Ordinaries Index level ahead of further upside.

A very sad day for Standard & Poors and Moody's credit rating services, whose after the event downgrades on sub prime mortgages had contributed to the crisis in confidence.

Surely the buyers of these things had sufficient commonsense to know that sub prime meant increased risk, couldn't they read the label.

In my view there could be a rest of Big Surf day, but I rate it a lowish probability. That old phrase
"don't fight the Fed"
is now the key strategy. The US Fed Reserve and the Euroland central bank are doing everything in their power - and that's heaps - to break the credit market logjam, and get these securities flowing again. The Fed is buying mortgage paper, and that sure gets things going, and takes the bears out of the equities market."