More Crash Warning!

It has been almost two years we are flooded by crash warnings but actually the real crash never occurred. Warning by warning made market to be more immune to the crash issues. It was caused by many traders and investors saw that plunging the market is a buying opportunity on the discounted price. Because of that we never saw market crash but only mini crashes.

On April 4, John Mauldin - The President of Millennium Wave Investment, LLC wrote, "As I have written about at length in past issues, bear markets are made by continued earnings disappointments. It typically takes at least three difficult quarters to truly disappoint investors. We are just in the early stages. The recent drop in the stock market has been primarily caused by the Continuing Crisis in the credit markets, and only modestly by disappointing earnings. We need a few more quarters of disappointment to really get to a bottom in the stock market. It could be a long summer".

I think we are now on the second stage of earning disappointment seasons. Lets look at the chart below :


We are now in the red circle line, so more market down will be coming. Bull market on April and May is only a bear rally or bear contraction. So, in the upcoming months ahead after market plunge, we will also see other bull markets.

I copied some stuffs from Jesse's Café Américain. Here are:


American 'Meltdown' Reason for Capital Raising - Fortis
28th of June, 9:10
De Financiële Telegraaf

Fortis Bank predicts US Financial market meltdown within weeks...


BRUSSELS/AMSTERDAM - Fortis expects a complete collapse of the US financial markets within a few weeks. That explains, according to Fortis, the series of actions by the bank of last Thursday to raise €8 billion. "We have been saved just in time. The situation in the US is much worse than we had thought", says Fortis chairman Maurice Lippens. Fortis expects bankruptcies amongst 6000 American banks which have a small coverage currently. But also with Citigroup, General Motors, a complete meltdown in the US is beginning."



Buy `Crash Protection' Puts on European Stocks, Goldman Says
By Alexis Xydias

June 30 (Bloomberg) -- Investors should buy ``crash protection'' against a plunge this year in European stocks because losses are likely and insurance costs are low, according to Goldman Sachs Group Inc.

The world's most-profitable securities firm recommended Dow Jones Euro Stoxx 50 Index puts that expire in December and have a strike price of 3,000, or 11 percent less than the measure's closing level today.

`High inflation/low growth is an increasing downside tail risk,'' London-based derivatives analysts at Goldman, which had the second-ranked equity derivatives research team in Institutional Investor magazine's 2007 survey, wrote in a report dated June 26. ``If that risk crystallizes, we think it means material rather than modest downside.''

The Euro Stoxx 50 plunged 24 percent to 3,354.20 in 2008 and closed at the lowest since November 2005 last week. The December 3,000 puts on the index fell 6.7 percent to 83.50 euros today. They cost as much as 189.30 euros in March.

European-style puts convey the right to sell a security for a certain amount, the strike price, on a given date. Some investors buy or sell options to guard against changes in the prices of securities they already own. Others use the contracts to bet price swings, or volatility, will increase or decrease.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.


Please Note!

This is generally never true. Before buying or selling any asset you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.