Is Yogi always right? It seems so. 5 Mar 07

On Friday, I told you I didn’t thick the selling was finished.  Betting on continued selling was a high probability bet. 

From an analyst’s perspective, here’s a list of what we knew or suspected:

Financial disruptions, or serious market corrections, usually come in bunches. A bad day is followed by a serious of bad days.

Talking heads are taking heads.  Until the broker-come-analyst-come-Wall Street house mouth pieces are demoralized, you probably can expect things to get worse.  And last week, there were way too many of these guys and girls wanted to step in front of this train. 

Some quick math may have done it.  A trillion in yen borrowing, by the major funds, leveraged up on thin margins elsewhere for “easy profit” means there is a whole bunch of money to come out of the funding or yen carry trade.  It’s interlinked with other markets. 

Price action in subprime is ugly.  I could have examined price action in the subprime U.S. mortgage market, widening credit spreads, and surmised these problems may have some contagion impact into other markets. A hedge fund going belly up here would be no surprise.  And if it’s big enough, it’s counter parties (read other hedge funds) have to sell “good” assets elsewhere to cope. 

I could have analyzed all this stuff to justify my reasons why I didn’t think the selling was over—and I did.  But I could have save a lot of time and cut right to the chase—the voice of wisdom that has stood the test of time—Yogi Berra. 

Yogi knows a thing or two about human nature.  And if you’ve followed markets for anytime, you should know human action (not fancy econometrics) represents the heart of price action.  Until they outlaw fear and greed in markets, Yogi’s famous quote: “It ain’t over till its over,” is all we need to know.

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