Look out Below

Written on November 20, 2008 by OptionsRopeaDope

First - to the commenters and emailers that have asked where I’ve been, is the blog dead, have I fallen off the planet, etc: I closed my last trades on Oct 5 (some Iron Condors that got very sick that day and needed to be closed for a loss). Over the previous weeks I had noticed a couple of other blogs saying they were getting out until after election day. Frustrated at my flat performance lately, I wanted to hang in and grab what I thought was “fat premium.” Not fat enough  The VIX is over 80 today. If you look at a chart you’ll see that was a good time to get out. The S&P has fallen over 300 points since then. I’ve been in cash since and felt like a person that was going down a hill with no brakes on when I decided to jump out of the car and take a couple of scratches from the gravel, only to watch the car go over the cliff and explode in flames on the rocks at the bottom. A little shell shocked (but with my capital intact thank god) I’ve been directing my attention at some other business interests. It’s humbling to think traffic has increased here while I’ve been gone. Hell, RSS subs have nearly doubled. I imagine it is because of the Greek calcs I’ve messed with - if it is, expect more of those in the future as I get back in the saddle.

Now on to today - The S&P 500 closed at 752. For fun, on TOS I brought up the 10 year chart for the s&P 500. 10 years ago the S&P closed at 1163. The market will have to have a 54% rise to get to where it was 10 years ago. Wow. That means an entire generation that has contributed to 401ks FOR 10 YEARS has lost money on every one of those contributions. 

I don’t know what to think, except that I don’t know where the bottom is (no one does) but I know this isn’t it. The government has already increased the national debt by 700 billion (or trillions if you count the investments in AIG, Fed actions, etc) and it hasn’t stopped the bleeding. I’d actually be scared if the government tried to do more. I’m 38, and does my generation and generations younger than mine really have to bear the burden of all the mistakes these bozos have and are and will make? Please, the government has already oured enough into this hole.

And given the speed of this drop (S&P has dropped over 50% in a year, over half that in the last 6 weeks) and the credit crunch for businesses, I think the business failures have a long way to go. And there will be some domino effects for a long while.

I wouldn’t plan for a bottom. I’m not betting either way right now, in any case.

On an amusing side story, roll back to this article I pointed out about Warren Buffet selling puts. I think those liabilities were way, way underestimated. I’ve no idea what the premiums were, but I imagine right now that they are under water several times what the initial premium he collected was. Wow.

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Posted in Real Trades, Misc