Monday, June 05, 2006

90% Down Day

Today looked like it could be a second 90% down day -- the first was May 17th. These 90% down days signify that the stock market is open to panic; 90% down days tend to come in series -- there will probably be more 90% down days coming up.

The markets took the "Bernanke warning" surprisingly hard. Why would one more rate boost of .25% this month be that scary? Hey, I never argue with the market. On the face of it, the market MOST DEFINITELY DID NOT LIKE THE IDEA OF HIGHER INTEREST RATES! Why? Just look at the real estate stocks -- they've been falling apart. What if housing in general unravels? What if defaults surge? What if business slumps in the face of all the debt built into this economy?

The Bernanke Fed wants to halt asset inflation? Be careful what you wish for Bennie, you might get it -- and a lot more that you didn't wish for. Anytime you have this much debt built into an economy, that economy is fragile. Furthermore, US consumers are hardly in a defensive position, hardly ready to deal with rising rates.

The action of the market the rest of the week will be very instructive. As I've been saying, get defensive, be careful, get out of debt.


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