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Saturday, November 28, 2009

Market Thought... think

The more and more I hear the term 'Animal Spirits' the more and more I get annoyed by it. (Despite the fact that I utilize the psychology of the market to assess my view of it, and its the premise of my blog ;)

At the moment, I just think it is over played. We all know all markets are subject to wild swings, but the underlining assessment of an asset is based on value. period. Uncertainty allows for a mispricing of an asset. Depending on the level of uncertainty, the magnitude of mispricing is correlated.

So, will this Dubai thing cause AAPL or GOOG or retailer or countless other companies, to reduce their earnings potential, which during this last quarter many proved is very much intact?

I seriously doubt it.

It will most likely affect some European bank earnings, definitely some individual investors, and Industrials. But will the repricing of debts cause massive de-leveraging from hedge funds or individual investors, when we just went through a period of the greatest de-leveraging in 80yrs?

I seriously doubt it.

So we have a situation with Dubai that many think will be a catalyst, but the more I think about it the more I realize there is no domino. It is a catalyst to nothing.

Even if there is multiple situations where repricing of debt becomes wide spread, the credit holders are the fucked one taking in less money. (As they should be, this is the name of the game, if they don't like it, get out of the game.) If this did not come off the heals of a massive de-leveraging process I would think it can cause damage. But at the current moment, I do not think that is the case.

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