Watching world markets implode this past year has been a strange experience. On the one hand it has been gratifying to finally see proof positive that we were founded in our concern and assessment that market risks were off the charts 2005 to 2007. Turns out, it wasn't just our imagination, things had gone crazy. After smouldering ominously for a couple of years, the structure finally did burst into flames last fall and has been burning up capital ever since. The hard part has been watching so many people stay inside while the fire envelops them.

With the incredible volatility and losses of the past few weeks, a period of at least an interim rally should be in the cards. Market indices have been so deeply pummelled that a rebound of up to 20% would not even reverse the down trend at this point. We recall the three separate 20% rallies during the bad bear of 2000-2002. For those that have remained improperly structured and over-exposed to equities throughout this bear market to date, strong clearing rallies would present another opportunity to downsize their risk.

Meanwhile we are watching carefully for a final bottom or at least a tradable bottom should markets rebound and rally for more than a few weeks. Belief and then panic have surged through the world the past several days. The pessimism has gone mainstream. Global fear is palpable...   more »