There have been so many stories and blog posts about the events of this past week that it’s hard to keep up. Mish at Global Economic Trends made several references, but here is one short synopsis that sums it up:
This is a historic day for financial markets as the free market system has effectively been put on hold. The implications are profound, not only for the option markets and hedge fund industry, but for the integrity of the system itself. While something needed to be done to avert a market crash, this was a last gasp act of desperation. In many ways, it validates the view that the market would have crashed.
The SKF (proshares ultrashort financials) has been halted down 22%. It’ll be real interesting to see how they’re gonna mop that one up. They can’t simply pretend it’s not there and make it disappear. Oh wait, they can. I forgot–they can do whatever they want.
Do I sound bitter? It’s not a function of losing money. I respected the magic hat into expiration and discipline saved me. I am profoundly saddened with what we are seeing, however, to a degree that it’s probably a good idea for me to hold my tongue until I have an opportunity to digest and synthesize these historic events.
Now that it has become clear the U.S Treasury, the Fed and the SEC are in the business of manipulating markets by prohibiting short selling and propping up companies that should have failed, you know that the free market system as we have known it has been altered forever.
While a crash has been postponed, I am not sure yet what the implications will be, but as more becomes known, I will share my viewpoints with you. In regards to market direction, you don’t want to be invested in anything. This week has proven that you could have gotten your head handed to you on a silver platter no matter if you were long or short.