Thursday, August 2, 2007


The chart above of the Nikkei 225 index does paint a very rosy picture. I know some very shrewd value players are recommending this market. The kind of people who I probably couldn't even shine shoes for let alone match wits. The chart is the chart and it portends further weakness unless 18400 is taken out to the upside.

Now we can discuss all aspects of the fundamentals of the Japanese economy, to which I say, sure I agree. The markets have become so interconnected, not only via information technology but via trade and also by central banker blueprints. Those looking for refuge may be hard pressed to find it. In the end my simple mind has a hard time reconciling how the world economy continues to motor when the buyer of last resort, the U.S. consumer, runs dry. Or in the least scales back his past profligacy.

A lot of strategists out there come up with, lets say a bullish thesis. which is backed by a fundamental argument. The minute that fundamental argument comes under significant assault, instead of being like Keynes, who once responded to a critic "when the facts change, I change, now what do you do sir ?" the strategist moves on a more supportive fundamental argument to continue his case. I ask why not continue to examine the prior fundamental support and now that it is not supportive of the case maybe just maybe it is a hindrance. Just as in technical analysis prior support becomes resistance why cannot a prior bullish argument become a bearish one.

In light of recent market events I continue to hear pundit after pundit exclaiming "we saw this coming" and "this is not a surprise", this is a normal correction. The arrogance of these shills is beyond comparison. I recall Citigroup chairman Prince's comments about dancing while the music is playing. In a breathing example of hubris taken to the exponent ten we see how greed mixed with ambition and shaken with a splash of ego, create the master-of-the-universe complex. To believe he and his team are so smart that they believe they can find a chair when the music stops. I suggest a read of Lowenstein's book "When Genius Failed" as a introduction. But then again fear and humility have no room in the Wall Street career handbook.

I will repeat here again the financials stink and this is a MAJOR problem that is not going away no matter how many soothsayers and handholding pundits CNBC may trot out along the way. Good trading to you.

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