These markets are good for ranting!
The Abyss
September 19th, 2008 at 9:42am · 1 Comment
I’m reading comments on the web from people who are upset that they ‘changed the rules’ mid game on Wall St. Apparantly today’s moves are catching quite a few hedge funds on the wrong side of the ball. But the changed the rules at the ’80 gold top and ’87 crash too – so you can’t be surprised if you know your history. Yet maybe the bigger point is just what ‘the abyss’ looks like. One can be short certain securities and think one is positioned for ‘the abyss’ – but I’m not so sure. Years ago in my obsession to collect interesting market data I came across daily prices for tulip bulbs during the mania in the 1630s. I was curious as to how far prices fell in the collapse, but it doesn’t work that way. When markets really breakdown, prices don’t collapse so much as they just stop trading. Tulip prices didn’t drop, rather everyone woke up one day and there was no market at all. That’s ‘the abyss’ and I don’t think anyone can be positioned for it.
Tags: Editorial · General Market Commentary
1 response so far ↓
1 Steve Bassett // Sep 19, 2008 at 12:08 pm
I imagined a while back Bernake and Paulson as two boys building a sandcastle and then a mote around it as they realized the tide was rising. Today I envisioned the boys and girls in Congress shoveling the mote deeper into the late evening and this a.m. standing proudly atop their apparently secure castle. The trouble is they were unaware that water tends to invisibly creep through sand. After the mote is full the castle will come down.
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