Mark Twain --

To paraphrase a famous line from Mark Twain, "The rumors of our death have been greatly exaggerated". Perma bears have tried to bash the market down three times in the last a few month, in order to get a what they called "correction". They have shorted the market since 2002, and consistently being wrong.

The first effort was the famous "inflation scare" -- if the oil goes up to $60 a barrel, stays there for 3 month, the whole world economy will crash! The reason is, if the oil price is high, consumers will pay extra for gasoline, they don't have enough money to buy consumer discretionary products, the industries will go down to hell. They predict that the high gasoline price will penetrate to milk price, every thing, then the whole world will come to an end.

Sounds familiar? Remember the Y2K problem? Made a few poor fellows went to the deep mountains, carried the whole years caned food and spring water enough for a year, to avoid the nuclear catastrophe, the religious mania was so convinced... no I don't want to be too offensive.

The second theory was the Fed is always wrong, they will keep raising the interest rate to tame inflation, they always over do it, since they are looking a bunch of lagging indicators, when those indicators are just right, the economy is on the verge of collapsing. So history has constantly proved this will happen every time in the tightening cycle... blah, blah, blah... They were wrong! Burnanke, right or wrong stopped long before the economy started collapsing. So the perma bears scratching their heads...

The third one is the one we are experiencing now, subprime crisis, they invented the theory one year ago. Economy goes in cycles, credit expansion, a lot of hyping, loosening lending standards, potential disasters! What happened is, people watched the house value shot up, they started pull money out of stock market, from their 401K's to invest in the housing market. The mortgage industries mushroomed. They lended money to the people who could not afford buying, but they said it's okay, because the house value increased, it can pay itself. They don't have enough income, it's okay, we don't check your income, instead we charge you higher rate (no, actually lower teaser rate first, increase tramatically later). Then the housing market crashed, the owners were hit with the higher rates, they can not afford to pay, they walk out of their houses, filing Chapter 11! Now it's the banks (and the hedge funds bought the CDO's) who got burnt.

But if you listen to the Gurus, Warren Buffett alike, this is the time they buy. Cramer banging his head against the wall was his effort to make sure his buddies get the a good deal. Now Burnanke and Co. unwillingly, but it will happen, bail out the hedge funds, mortgage lends. Maybe if they feel that they can be saved every single time, they will run even higher risk in future, eventually the whole market will crash, but not this time, it's time to buy. When you buy, just buy the following, when all the geeks united together, we can beat the house!

CMI
DRL
ANN
AnnTaylor Stores Corp, A director has bought 35,000 shares.

VIX is trying to fill the gap:




Just came back, a lot of miss spells, but I have to go...

Good night,

Swimmer