Panic, 160 million short sale barrels & the out-of-phase FED

This morning early panicked investors liquidated at 1000 points down on the DOW.  By noon it was only 200 points down.  Savvy speculators placed opening bids far below fair value and in the presence of panic selling, some of those ridiculous orders were triggered.

The lesson: simply do not sell when their are no buyers.  When there are no buyers, this is a sign of the final stage of panic.  No one is willing to wait to sell.  That means by the end of the day, there will be no more sellers and prices will rise.  Overnight 2 out of 3 Asian markets are up between 2 and 3% as I write this.

Two articles today questioned what is driving oil down.  It is not supply and demand.  160 million barrels of oil have been sold that do not exist – i.e. short sales.  This is greater than in 2008.  See interesting article here.

The U.S. economy has been getting weaker for several months.  Normally at this stage of the business cycle, the Fed would be moving to quantitative easing.  Instead, without Bernanke’s leadership, the remaining weak Fed governors are attempting to prove they know what they are doing by raising interest rates, just because they said they were going to, when all markets are tanking and huge layoffs are in the offing.

Keep your cool and do not sell into this panic.  If you need the money in the next two years, what were you doing in the market in the first place?

Good news … Yahoo Finance finally has the “yield” calculation working for MORL.  The dividend yield at today’s price is 26.5%.  In 4 years you’ll have your money back even if it goes to zero.


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