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A lot of the institutional traders and hedgers who have been heros (never
confuse a bull market with brains) have never "been there done that." Walk
around the bond floor at any dealer and you see a bunch of 20 year old MBAs
who have been long for their entire careers.
I have always dealt with hedging accounts... Those accounts who have been
active risk managers have under preformed. Many of these managers have
been replaced by managers who have thrown risk management to the wind and
hung themselves and their accounts it out there. I wonder how prepared the
market is for a real turndown in the financials?
I wonder how many of the managers will have enough sense to throw in the
towel and cut their losses before its to late? I also wonder how well the
systems that have worked well for stocks and bonds in bull markets are
going to preform when the worm does finally turn. Frankly, I (like Neil)
love a good bear market.
By the way, my comments aren't aimed at predicting a crash in either stocks
or bonds.. but major corrections and reversals are a fact of trading.
Good post Tim.
COPIED:----------------------------------------------------------------------
Neal:
One thing that is interesting to ponder...and it makes me feel very old, bu
the
way...We have not seen a prolonged bear market in the US stock market in the
1980's and 1990's, and so very few traders are even trading that have
experienced a prolonged stock market decline. I know as soon as they read
this,
some people are going to post that we have had several 'crashes' and they
count.
Maybe. Maybe not. I don't think so.
The other argument I've heard is that the economic cycles have changed because
of technological changes/improvements and so, the economy no longer 'needs'
this
sort of cleansing cycle...again, maybe, maybe not. I don't think so.
Stewart Taylor
Taylor Fixed Income Outlook
Voice: 501-219-9774
Fax: 501-228-0963
E-Mail: staylor@xxxxxxx
Web Site: http://www.cei.net/~staylor/
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