Wednesday, December 19, 2007

No market for old men

While not as bleak as the film this title refers to, the outlook between now and year end for financial markets has somewhat of that desolate look. The whipsaw market of recent days will likely continue. Any major breakout will probably be to the upside, and will not be based on fundamentals but instead on a give up by the sellers. Most folks are just trying to get to year end, and then the real pricing resumes.

One wild card is the smaller hedge fund world. There are some funds, how many is unknown, that are dealing with significant losses on the routine research based value investing/shorting with leverage approach. Some are getting clobbered now, and most are below the radar screen of Bloomberg or anyone else besides professional traders. Those traders may be exacerbating the situation as they take advantage of the liquidity situations of these stressed funds. Most investors can stand on the sidelines and watch this play out, and maybe look to pick up some bargains early next year. Some of these smaller hedge funds will fold at year end, and that will not necessarily be negative for the market, may in fact be a catharsis.

No market for anyone right now. Waiting for 2008.


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