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Direxion Daily Financial Bear 3X ETF Message Board

  • dpsimswm dpsimswm Feb 5, 2010 11:55 AM Flag

    Why are we crashing?

    I'm not sure I understand. I just looked at the top ten holdings of XLF. Each one is under valued at these levels.

    Either below book value, or low forward P/E.

    And unemployment just dropped to 9.7%. (Albeit with numbers that are unimpressive.)

    So, what is the fear? European debt crisis? Obama?

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    • Everyone is afraid. That's the consensus.

    • <So, what is the fear? European debt crisis? Obama?>

      All that and also the fear that recent results were only due to temporary stimulus which eventually needs to be withdrawn or they will create an even bigger asset bubble. The market fears all those items that you noted in addition to the fact that the current pricing levels can't be justified by expected results out 6-9 months particularly once stimulus is withdrawn. Until housing bottoms and unemployment turns around there will can be no improvement in the credit markets nor the economy. All they did over the last 12 months is kick the can down the road at great cost to the tax payer in programing costs and shifting of the riskiest assets from the banks to the Fed and the US government.

      BTW, its not just a European debt crisis, its worldwide. US states and municipalities are a time bomb waiting to blow up and eventually nobody is going to by US Treasuries without much higher interest rates which will drive the cost of all credit even higher killing any recovery in the crib.

      The trend has changed and sliding down the wall of worry will take much less time than the climb, particularly with the last panic being so fresh in investor's minds.

      A slow and steady decline is actually better for the price of FAZ due to daily compounding but I don't think that is what we are going to get.

    • you shouldn't have to ask that if you're in this market...

      IT"S all currency related and has been from the start as an attempt to inflate asset values...

      Europeans don't care if their currency's great for them...more tourism, more mfg...they won't stop this...all market rises were predicated on a steep bashing of the dollar...

      most countries want a strong dollar, except of course Beanie boy...

    • The usual fear with financials is that they have bad loans on the books. Financials borrow money and lend it, as well as invest it. The biggest issues are still with the loans they made 2-3 years ago, against real estate. There also have to be concerns if they have put any money into Government bonds of Greece.

      Since the big earnings have been with the trading desks, there might be vulnerability there also.

      • 2 Replies to votingmachine
      • In spite of our government's attempts to bouy up the big banks, they are still in serious trouble. The reputations of many large banks are now badly tarnished, and now the government is focused on assisting the smaller banks so that they can loan money to small businesses in an effort to create more jobs. Further, the large banks continue to carry huge amounts of bad loans on their books at a far higher value than they are worth. Big banks are now being expected to pay the government stiff penalties for the past trouble that they have caused. IMO FAZ will continue to move higher as the truth is revealed. SS

      • You should also be careful about book value. I am not sure that mark-to-market valuation is required anymore.

    • I guess my question is this; By what determination is something undervalued?

    • Crash? It's just a smart and go long again after another 5% DOWn move.

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