Paul F;

Can’t say I blame you much for taking long positions. Too tempting, even if it takes a while to come back – which it will.

Reasons:
1) Way oversold. S&P down 15% in 5 days. Worst performance since the ’87 crash. 20 years.
2) CNBC and Cramer have given up. Excessive pessimism -> contarian indicator.
3) Everytthing is being sold, good and bad companies. Something like 70% 52-week lows on the S&P (correct me if I’m wrong)
4) The assumption is that the financials will get slaughtered tomorrow with the removal of the short-protection. However, the assumption was instigating this rule would protect financials. Ask WaMu and Wachovia how that worked out.
5) While I will certainly agree that the rate-cut wasn’t as successful as hoped for the bulls (the rally lasted about an hour pre-market), the bailout bill and CP purchase have not been implemented yet. Think of them as rate cuts that have been announced, but no one knows

I think the shorts are getting overconfidant and there is way

Gotcha. That’s complicated to me not knowing options. I understand the hedge and I do that some times.

Thanks

So Iceland defaults on… that has to be sorted out it seems, but we have at least two more banks triggering the CDSs. UK is suing Iceland to honor their obligations in the UK. Maybe to refinance their

bailout plan which for the US would translate to more than 4 trillion USD.

Banks paying 9.5pct at overnight auction with the ECB, LIBOR 5.38 – global rate cut, eh? So we have talk about sufficient funds but no one is willing to loan anything. Sounds like a lack of funds to meet the obligations to me. Btw US mortgages are linked to 6month LIBOR – up 1% during the last month. Expect higher defaults – the Fed did everything to prevent that but then the fools decided to kill LEH because they had to show they have balls. Balls maybe, but no clue about banking and risk.

Lowering interest rate – Japan unfortunately could not participate – kills the carry trade, which was a key source of credit generation over the last years. So the rate cut is likely to do more harm than good.

Global shippers have the highest inflow of new vessels in the next years. They are now talking about converting these ships to cruise ships. I don’t see a demand for lots of new cruise ships for retirees without savings.