Some Capitulation

Market bottoms are often confirmed by capitulation in the marketplace. People say, "That's it. I can't take it any more and I'm selling." They sell everything and go to cash at exactly the wrong time: the market bottom. I read an article today stating there has been capitulation in the stock market today. Interesting. Whether we're there or not (because how can you really tell??), the damage has been done and if you sell now, you'll just lock in your losses and miss the inevitable rebound....whenever it occurs. Granted, it might not occur for six months, but it might occur tomorrow. You just don't know. We're in uncharted waters financially. During previous economic crisis, we didn't have the robust banking and integrated financial system which we have today (say pre-1980). We certainly didn't have the cohesive international markets which we have today (say pre-1990). It'll be interesting to see if pumping all this money into the system is the right answer, too much or too little.

Also read today that 50% of the homeowners who bought in 2006 have negative equity. Wow. That's a huge, huge number. A full 30% of those who bought in 2005 have negative equity. Negative equity by the way means you owe more on your house than it is worth. That same article said that there are 12 million homeowners who owe more than their home is worth. If they are under water by let's say....$58,000 each on average (some a LOT more and some less), guess what figure you come up with? $700 Billion. The amount of the bailout. Interesting shit huh?

The team that won game one of the World Series has won 10 of the last 11 titles. Something to think about.