Thursday, September 25, 2008

A Small Prediction for Tomorrow

9:15PM 9/25/08

I'm going to go "out on a limb" here and make a small prediction. If it's right, I will take small consolation in that fact. If it's wrong.... why, I'll just delete it tomorrow. :)

Here it is:

I think the Democrats and Republicans have assessed the situation from a political point of view and they have both come to the decision that "no deal" will help them win the election, regardless of the outcome. If there is no deal and there is no crash, then the Republicans have stood firm on socialism and the Democrats have stood firm on no bailout for the rich. If there IS a crash, then the Democrats think the Republicans will be blamed, and the Republicans think that no one will trust the Democrats in a time of real crisis. So I think there will be no deal.

Both parties have judged this to be better than if there was a deal and it failed before the election. So that is 3:1 odds against a bailout tomorrow!

The other player is the PPT, Paulson, Bernanke and the big investment banks. Even if they have some ammunition left, I think they are at the point right now where they will say, "fuck it... let 'em see what a crash feels like." This will be their Hail Mary Pass for the bailout to go through next week. Dow futures are down right now, which says that the PPT is getting some much needed sleep.

WAMU folded today. On a Thursday no less, when banks are supposed to go down on Fridays so as not to affect the markets. Yesterday, GM unexpectedly closed two dealerships here in Las Vegas as well as several others in other cities, hoping to get a piece of the taxpayer handout. So the FDIC (via WAMU) and GM (another big player) are positioning themselves in weakness while the taxpayer bailout is still "up in the air" so to speak.

I think this is all a play for taxpayer dollars. I think we will see a crash in the markets tomorrow. How big? I don't know. Without shortsellers to slow the decline, and without the PPT buying shitty stocks, it has the potential to be pretty dramatic. Gold should skyrocket tomorrow. Perhaps above $1,000 per ounce.

If this comes true, then it will likely continue on Monday. Beyond that I cannot predict. Only God knows what knee jerk pill our saviors in Congress will swallow at that point. But most likely, it will be exactly the wrong thing.


Justin_n_IL said...

You can bet holding onto their power is first priority for these snakes.

Anonymous said...

FOFOA, Has tomorrow arrived? This post is still here.

Remember, things move at a snails pace. Even if a bank goes down today, it will take time for the ramifications to manifest themselves throughout the system. There will be write downs, but there must be a scramble to cover first. Common margin calls allow for three days. I’m sure the rules are similar for those affected by this – don’t call it a bankruptcy – situation.

Hold fast to that limb! As long as the dollar functions against gold, people will continue to receive it at rock bottom prices. As we watch paper burn, take comfort that it is more probable that we will run out of physical gold before the paper markets run out of supply. It’s a confidence game and people in general still have confidence.

FOFOA said...

You are right. Things move at a snail's trot. But occasionally crashes happen at lightning speed. I think some of the jitters from Thursday last week must still be present. But what do I know? The market is supposed to price in the future. Right now it is pricing in an overly optimistic future.

Ender, what's the significance of October 7th? Is that from halfpasthuman?

Sorry if this post is gone before you reply. I'll leave it up for a little while longer.

Gotta take it down to preserve my credibility, just like Jim Cramer! ;)

FOFOA said...

I took this post down on 9/26/08 because I am not a short-term market timer. But on 9/25/08 I felt so strongly that something big was happening in dark corners that I decided to stick my neck out and make an overnight call. I was wrong and then two weeks later, on 10/9/08 when I had a similar feeling I restrained myself from making another overnight prediction.

My justification for taking the post down was that such a policy allowed me to stick my neck out once in a while without the risk of being wrongly judged based on a string of wrong call posts.

But in hindsight, now a year and a half later, something big was happening behind the scenes. And after reading this great retrospective from Eric Sprott I decided to put this post back up on the blog for reference. It was the only post that I ever removed.