This has truly been a amazing week. I have watched in horror as my portfolio dimished at an extraordinary rate. People say that you should "buy panic" and you make the most money in a "bear market". This has not worked in the last years. The stress on the market is extraordinary. Here is a graph which illustrates the dislocation in the past week - the market on friday closed below 5 standard diviations of its 10 days moving average calculated over a time period of 3 years. A cataclysmic collapse. The bottom has truly fallen out. Will humpty dumpty be put together again.
(click on image to enlarge)
The market remains tight as drum and logic would dictate that there got to be a snap back - a bear market rally. Whether this is capitulation is yet to be seen. However without this bear market rally many investors may be permanently crippled.
Another interesting chart plot of the spread between 3 month US treasuries and 3 month LIBOR (TED) . I think unless the TED normalizes market collapse and volatility (VIX - also plotted) will continue.
(click on image to enlarge)
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