September 15, 2008


I fell into a burning ring of fire
I went down, down, down, and the flames went higher;
and it burns, burns, burns:
the ring of fire --
the ring of fire.

-- Johnny Cash

MY OPINION -- NOT THAT YOU CARED -- on today's rather spectacular blowup is not as gloomy as you might think. That's based on the following rationale, as I wrote to a friend of mine today:

In my estimation, this is not as bad as it seems. In terms of the market correction, it's not (yet!) as bad as 2001, and not as bad as 1987, and not as bad as 1973-74, and certainly not as bad as 1929. ...

The reason I think this is not as bad as it seems is because the financial system is purging the toxin in its system. As with any illness, you have to purge out the bad stuff before you can recuperate, and I think that's what's happening with the market right now. Now, I only wish I had a crystal ball to tell me when the fever breaks. But despite the short-term struggle that goes along with all this upheaval, every daily crisis that comes along will push us towards a position to eventually rebound.

For the record, my crystal ball is broken, so I'm not advocating any particular trading strategy. I just don't think there's any reason to panic in the streets. (That day may come. If it does, see you on the barricades!)

But there is good news: lost in all this is the fact oil prices have crashed too. As I write, the October futures are down to $93.55 per barrel. At close on Friday, the per-barrel price was $101.18. That's roughly a 7.5 pc drop and there are, at present, no signs that oil's inexorable slide is going to continue any time soon. The hot money has left the station, folks. So at least that's something for all of us.

Posted by Benjamin Kepple at September 15, 2008 07:51 PM | TrackBack
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