Ok, So Shoot Me. I Lied.

One more post this week taken from the comments section. I think it deserves timely front page notice to be taken into consideration along with my last post about the Major Market Index running off of a cliff. I suspect I know who posted it but since it's anonymous, let's just paste it here. The poster can claim credit if they want to.

Anonymous said...Dow briefly passed the 3rd Standard Deviation above the 200-Day m.a. . for the first time since March of '98 , and only the 6th time since 1990

So, what does this mean? It means you shouldn't be taking risks because the market is delirious. I remember March of 1998 quite well. 1998 was a year of fine wine and delirious lunacy as well. In case you don't remember 1998, it was a great year for small caps. The Russell 2000 dropped 40%. There were some minor trillion dollar problems that year. If you'd like to relive that time and be reminded of that little problem, click HERE for one of the best videos you'll ever watch. (The QuickTime link is best for Firefox users if you have it installed on your PC. The other link might lock your browser. No QuickTime, I'd assume you could use your Explorer browser and click on the Microsoft Media Player link.) I think this is an outtake from a Frontline documentary you can order on PBS.com as I recall. I just so happen to know the link because I've watched this more than once. A humbling reminder since these guys were geniuses and were destroyed. Leverage is a risky scheme even the brightest minds on Wall Street should respect.

A bit of trivia. The white haired man with the beard in the video is Stan Jonas who is a mathematician and likely one of the most brilliant people on Wall Street. If anyone knows Stan, please alert him to my blog and tell him I'd crawl on my knees for a chance to work for him for free just to be able to learn from a legend. He's at Fimat the last time I checked.

So, why is this timely? Because it is about real estate plummeting and financial market consequences. Sound familiar? My earlier post on the largest drop ever in American real estate this past month, posts highlighting financial institution risk in this cycle and comments about the mortgage derivatives market . No, I'm not saying that is what is going to happen so don't misinterpret my comments. But financial markets don't always reveal unusual behavior in advance. We sometimes only know the reason after it happens. This move in mega-caps is highly unusual per the comments by the anonymous poster and my prior posts.