When the Dow was flushed to below 10,000 and as low as 9,560 at one point but recovered nearing the 10,000 before the closing bell on Monday, I was relieved. Firstly I was glad because I closed my position on AAPL Put Option before the last hour jump and secondly I was relieved that the Dow looked to bounce back, technically, and was fighting for the important 10,000-level. It’s no fun to see the Dow bleeds to death because it means the macro and micro economy will be affected. The last thing we want to see is high unemployment and increase in crimes, not that it’s any better now.

The Dow rebound on Tuesday but unfortunately managed to stay for a very short period of time before the freefall and erase more than 500 points from its index. In fact the writing was already in the wall when the VIX spiked on Monday. Although this extreme fear-factor indicator was not accurate due to the ban on short-selling forcing hedge-funds to re-strategize their betting on “put options”, it nevertheless showed the general sentiment. When time is bad people gets blamed as human feels good to have someone takes the bullet. Congress was blamed for the 777-point drop and Europe blamed the bankrupt U.S. for letting the shits flowed into their garden. And it’s Ben Bernanke’s turn to get the blame for Tuesday’s 500-point plunge for saying “The outlook for economic growth has worsened and that the downside risks to growth have increased”.

Bernanke’s statement is no-brainer all right but mad people running on the trading floor do not like such bad news. Ben has just cut interest rate by 50 basis points, as did the European Central Bank, Bank of England and Swiss, Canadian and Swedish central banks. Let’s see how the stock exchange will react to the latest goodies, shall we? Seriously what should the “Man Street” do when the “Wall Street” is bleeding profusely? If the fireworks of 875 points tumble on Monday and Tuesday is not enough to scare the sh*t out of you yet, then either you’re living in the cave or your financial planning is rock-solid. It’s easy to see if you’re that tough – can you survive comfortably but not luxuriously for the next 5-years, if not 10-years, in case you’re jobless anytime from now onwards?

It’s not mission impossible or some fantasy Vision-2020 dreamed by some politicians. Assuming you’ve no debts (credit card, house-loan or mortgage, car loan etc) and you need $48,000 per annum to stay alive you will need $240,000 in savings to fit into this category. It’s better if you have the extra pounds to buy cheap stocks when the time comes. Annually, a Google Software Engineer earns about $96,000, an Accenture Analyst earns $58,000 and a Deloitte Tax Consultant earns roughly $60,000. Unless you graduated yesterday, chances are high that you would have some sort of savings and if you do not have, it’s wake-up time for you. You can’t skin the fat cat no matter how cheap the stocks are if you do not have the money.

Again, stop thinking about that new car model or the new property project just published or launched. It would be cheaper to get them later. Now is the time for you to recalculate your “bullets” and it’s up to you to scoop either the stocks or the condos when the fire-sale comes eventually. Talk is cheap so let’s be the last person to laugh all the way to the bank. Only a few percentages of people are actually waiting for the real panic (selling) to happen again. This could be your first experience or your last attempt to boast to others that you actually realize and act upon the power of contrarian just like the Oracle of Omaha, Warren Buffett – be extremely greedy when others are fearful and vice-versa.

Other Articles That May Interest You …

• Dow below 10,000; $700B bailout plan was the poison?
• Arrogance, Greed & Corruption – Will We Ever Learn?
• Short-Selling Crackdown on Naked Shorties but will it help?
• Soros, Buffett and Trichet said It Ain’t Over Yet
• Microsoft chickened out, Berkshire shareholders partying
• Pritzkers’ feud offers $4.5 billion opportunity to Buffett

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October 8th, 2008 by financetwitter

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