Powder Blue Report

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Thursday, August 09, 2007

Memo To All My Readers: Get Liquid ASAP

I hope people take what I have to say next under advisement. The mortgage market has all but collapsed. There are hedge funds out there right now that are in deep shit. They have all been holding onto their junk mortgage backed securities hoping against hope that the market will recover or that there would simply be some liquidity for them to sell. Alas there is no liquidity at all for this crappy investment right now. This is the tip of the iceberg if you asked me. The stock market sold off huge again today on news that some hedge funds in France suspended redemptions because they don't know what price their investments are worth! Normally at the end of the trading day, most investments get "marked to the market". In other words, they settle at the last traded price of the day. But when you have no trades happening, you can't know what the investment is worth.

It is my advise that people get out of the stock market as soon as possible. Try to sell on rally days...if we have one. The stock market gets really volatile near market tops which is what I believe we have right now. The parallels of right now and the year 2000 when we had the last stock market peak are scary. It also goes without saying that if no mortgages are being made, the housing market is going to collapse as well. It is already happening in lots of places. We have been fairly lucky in OC so far, but the pain is coming. Mark it down. I just want everyone not to lose everything they have been saving. I believe we could see a 50% or greater correction in the stock market and just as much in housing as well. Sorry to be so negative, but I had to get this off my chest like Jim Cramer did the other day.


  • At 2:38 PM, Blogger Agent Orange said…

    I must out from self imposed exile, from this blog, on this one Allan.

    Good observation and excellent advise Allan. I should add: "stay away from the paper too".

    [Despite his detailed awareness of economic theory, Ben Bernanke who replaces Alan Greenspan as Federal Reserve chairman next year is on record as stating that he would, if necessary, throw money out of a helicopter in order to keep the US economy going. It is not easy to reconcile a willingness to ‘throw money out of a helicopter’ with a stated policy of maintaining low ‘inflation’.Dr. Bernanke actually believes in the US printing press system. Mr. Greenspan never believed in the system over which he presided. He simply did enough, in a most eloquent way, to keep it on life support.]end of citation.



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