Here’s another great post that’s a must read from one of our good friends over at the Capitalstool.com Mark to Market forum. This is from Sudaca, who is a professional money manager in South America. He is, needless to say, an expert on emerging market equities, debt, and natural resources, and he is one of the savviest traders I have had the pleasure to watch in action over the past 3 1/2 years. Here’s what he had to say tonight.
The real problem here, ladies and gentlemen, is not seen in the stock market. This is, and has been the whole time, a credit issue.
The excesses in the credit markets make the Nasdaq Bubble look like Gary Coleman playing one-on-one with Shaquille O’Neal.I have spoken to many people in the industry, and the only conversations worth listening to have been the ones on private personal lines, not on institutional recorded ones.
The situation is worse then I thought. It’s much worse than any other financial crisis I have seen and traded through, and I have seen and traded every single one since Tequila in 94/95.
There is just no way that this going to resolve with rate cuts or anything akin, because let’s face it, this is the end of the credit bubble.
What is happening with spread products and financial derivatives is the equivalent of the moment that dude ate that tulip bulb and made folks wake up to the sheer nonsense and madness..
Everyone is saying now that this time it’s different because the risks have been hyper-disseminated and diversified throughout the universe, but I’m starting to believe that is a bad thing, since it only adds uncertainty as to the final effects.
Bounce or no bounce, the underlying support of the rise in many financial assets of the past years has changed dramatically, and I believe it has changed for good. Or at least for a very long time.
Even though I see some short term technical improvements in equity markets, and I still hold some dongs [longs- ed.], I just can’t envision a return to the the risk-taking environment of the recent past. If it did happen, I would completely lose faith in the hypothesis that human beings learn from past mistakes .
Ok, having said that, feel free to fade me.
