Thursday, October 9, 2008

The Kirk Report

The Kirk Report

The Stock Market Crash Of 2008

Posted: 09 Oct 2008 04:33 PM CDT

Although the market spent most of the day searching for stability, the sellers swamped the tape in the final hour pushing us to new multi-year lows.

S&P 500: 7 Day View

With these losses, we've moved far away from just a mere correction or nasty bear market, but we're now in stock market crash mode of the likes we've never seen in our lifetime and most likely will never see again.

Like sitting on a sinking ship and taking on water fast, I spent the day plugging holes in my life raft by booking losses and renting shorts to offset my equity exposure while at the same time looking for reasons to raise the level overall equity exposure. Much like yesterday, I found very few compelling reasons other than what we continue to see day after day after day. Once again, we continue to see zero price confirmation that being long this market is the right move and being early has been wrong.

They say you have to listen to the message of the market and that message today is to run for your life. Every business in America (see General Motors) is going bankrupt and taking you, your financial future, job, savings, and everything you know with it. If you believe that, you should have been selling everything today. I don't, which is why I'm going to the mattresses and fighting the good fight every single day. Sure, the battle scars are starting to get numerous and even I am having a difficult time staying opportunistic, but everything I've worked for and learned over the past twenty years has prepared me for what we're seeing now. My only hope is that I stay up to the challenge and hold true to my strategy even though like everyone else, I'd very much like to run for my life and sell & short everything in sight.

Talking Points

Posted: 09 Oct 2008 07:54 AM CDT

Good morning. As markets around the world attempt to stabilize, premarket futures indicate we'll see some buying interest return at the open. Premarket futures currently indicate a +1% to +2% gain at the start of trading.

There's a lot of headlines this morning but the key talking points surround IBM's upside earnings surprise, the Treasury is considering a plan to take ownership stakes in many U.S. banks, the Treasury is working with AIG to replenish liquidity more quickly, Wachovia will likely be carved up and sold to both Wells Fargo and Citigroup, and National City is in talks with other banks about a sale. Meanwhile, all eyes remain on the credit markets which remain tight, jobless claims fell 20,000 to 478,000 last week, and as expected we received a batch of disappointing retail same store sales reports (see GPS, ANF, TUES, PIR, SSI, ZUMZ, GOT).

Premarket gainers: HUN, NCC, BDN, OKS, QSFT, RHD, IVAN, LYG, ABK, LNY, CVH, SI, ABK, SFI, GNW, TS, PKD, HBAN, SOL, MICC, LAB, AIG, AAUK, IBM, C, ENER, CSIQ, CIT, UAUA, SOV, NOK, TRIN, ETFC, JASO, RIMM, & DRYS.

Premarket losers: MW, ABX, RT, CS, ABH, AU, GFI, ISIL, NBG, CHRD, AUY, IFX, HMY, ANF, QTWW, LINE, & TJX.

There's nothing really on the economic calendar today, but we'll have a 1:30PM speech by Minneapolis Federal Reserve Bank President Gary Stern who will talk about financial shock repercussions in Minneapolis. In addition, a lot of of people are waiting on the results from a Lehman auction for their credit derivative trades so you should keep that on the radar as well. As you know, the short sale ban has been lifted and many will be watching for a change in market behavior as a result. At a minimum, that would at least reduce one element of uncertainty that we've had to deal with this week.

All in all, we're well overdue for a positive day to unfold. Whether we'll get it, we'll soon see.

Six In A Row

Posted: 08 Oct 2008 08:05 PM CDT

We all knew there would eventually come a day when even emergency rate cuts by the Fed wouldn't help the market. Today was that day.

S&P 500: Six Day View

We're now down six days in a row and tomorrow is October 9th, which has historically been a key day for the market. Not only did we top out last year on that very same day, but back on October 9th also marked the bear market low back in 2000. With the short sell ban expiring tonight, I'm sure that alone kept many sidelined as there's a fair amount of uncertainty to what we will see as a result. In addition, Yom Kippur celebrations have already begun this evening. If we see a big rally tomorrow, that will go a long way to confirm the "Sell Roshashana, Buy Yom Kippur" trade.

Although I spent the morning looking for trades, I didn't see anything beyond the move in gold (see GDX) of much interest. At this point, I have enough capital in play (now 50% equity/50% cash) and before I can put more to work we either need a washout crash or see a rapid turnaround (or a combination of the two), and neither was present at least for today.

All in all, I pretty much used to day to catch my breath, get 18 holes of golf in this afternoon (ironically, I shot my lowest round of the year), and I'll be getting some extra rest tonight. Like many of you, I needed the break and figured that this was a good afternoon to get it ahead of the next couple of days. As always, I hope you're holding up under fire and staying opportunistic although I know it isn't easy in this once-in-a-lifetime bear market.

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