Thursday, November 2nd, 2017

Survived stock market 2008

I am happy to see 2008 coming to a close.

The year is over almost, not yet though at the time of this post. Oh what a year this has been. I cannot recall another horrific year since 1992 when George Bush Sr was President and the economy collapsed and a young new face named Bill Clinton came out from nowhere from Arkansas, and beat the pants off him. It was a hard year. As I remember I made only $5000 in the whole 1992 struggling and worrying and not knowing how I will get hold of my next dollar and if the key in my lock would turn.

Well that was 16 years ago and people forget everything or is it history that just keeps repeating itself ? They say it does and I couldn’t agree anymore. The year 2008 dawned with a harsh cold winter like chill in January and a jittery and gloomy stock market in pure angst ! Than the whole economic debacle started unfolding right before our eyes. The beads scattered across the marble floor and each one of them dispersing into an ugly pattern.

As goes January so goes the year, you have heard that saying on Wall Street? Well that is true. The year did exactly how January was. The ugly turns in mortgage mess and sub prime fiasco became horrific tales that only you could tell to your grand children someday. The basket of mortgage tranches became unsaleable fruits that no one would pick in the market place. That shoved the big players Bear and Sterns, Lehman brothers, Citigroup, Merrill Lynch and even Goldman Sachs into a tight corner. Saddled with debt, unable to push it away, some of these giants sank with it. Panic ensued, and the whole stock market went into a tail spin hitting new lows and wiping out our national wealth by trillions each day!

Than came the Feds, ready to give it a jump and they cut interest rates in March 2008 with generosity. But the medicine was too late and quite ineffective. The damage was already done. Public confidence shattered and vanquished by events never recovered. However, that produced a spark and the markets started rallying from March 19, 2008 till May 14 2008 as I recall. I was trading BIDU puts deep in the money, that acted like long calls. I was able to garnish substantial profits in that rally alone. BIDU and AAPL just two stocks, some POT and MOS and others as they came. That bliss lasted only six weeks.

Than all of a sudden, the rally fizzled and the markets never went back up and kept sliding down from thereon for the balance of the year. After taking some losses I quit trading BIDU and still kept trading small shall we say against the winds ? It was a no win situation. The whole trading environment turned so bearish and untrustworthy it was impossible to place any long positions for a few days. Even Iron condors trading became a challenge. You couldn’t have survived in that tough tough market. With Oil futures galloping high and falling incomes and and a gala of bad news everywhere it was a horrific time. Nothing seemed to work right, nothing at all.

June and July were intolerable months. One day BIDU dropped 40 points and I incurred serious losses in my personal account. I stopped trading BIDU. You see BIDU is a dangerous stock. It runs fast and climbs 20 points in any given rally, at least it used to, when it was a a $ 340 dollar stock but when it drops, it can crater your whole trading account in a heartbeat. In my opinion having traded BIDU first half of the year, I pulled the plug on it and decided I will never trade it again. That decision in hindsight has proven quite profitable for me, and has preserved my trading capital to this day.

August and September the economy was in utter shambles but we kept trading Iron Condors with caution. and Market Crisis 2008 in full swing. Luckily Bear and Sterns was bought out by JP Morgan & Chase earlier in March, but Lehman Brothers, was left to hung dry by the Feds. Bank failures became an ordinary scares everyday. First it was INDYMAC that went down, and than right after that nation 5 th largest financial institution Washington Mutual went under ! Nothing was safe. The panic had set in quite hard and gripped every American from coast to coast. People were lining up outside banks taking out cash. Meanwhile the stock market went into a giant tizzy cascading into a waterfall sell off. There were days of 500, 600 points drops and one day it was a 780 points drop within few hours! Those charts are still there after September 20, 2008, just take a look at it, and see what a horrific time that was in 2008.

We were doing IRON CONDORS on NDX and when NDX crashed through the 1600 barrier, I ordered everything to be sold no matter what the losses were, it was obvious the dam has broken and Dubya has crashed the economy into the Wall just like his father did 16 years ago. But what was more notable this was far more spectacular and horrific, than 1992 ! Much more damaging, disgraceful and painful !

WE STOPPED TRADING. The were no trades ordered for the next 3 months. When the Stockmarket Crashed 2008  in October, we took to the side lines and the VIX shot up over 45 and went to 87 and 90 something it has never seen before in its entire history ! There was not a single trade done in that time, and capital preservation became the only game in town. This was history in the making. We survived and survived well. Many advisory services who kept rolling trades month after month, they incurred huge losses, that they cannot recoup in 2 years to come. But we did not lose a SINGLE PENNY in that time!

What was more amazing, that the stock market kept rallying hard. Seen 900 point rallies and 700 point sheer drops. The volatility was insane ! Like a menacing Bear, it produced some spectacular sharp rallies to the upside only to crash harder than before! Take a look at older posts on index options trading during that time. This was an awesome sight to behold. Charts were damaged so badly and mauled that it may take years to get them back to original lustre. The SPX and NDX went down to pre 2003 levels wiping out pension plans, savings, IRAs and the asset base and backbone of America ! The market crashed and crashed hard as it could.

Congress came back with a 750 billion Stock market bailout for these for Wall Street folks and for the people who screwed up the whole till in the first place, and padded them on the back. But It did nothing for the markets though. Still its doubtful it ever will. The real estate market is still in the dumps and has not bottomed out yet and unless it recovers with some buying ,donot hope much too soon.

But that was what we have seen in 2008 and history does repeats itself often and repeats hard. We are still not out of it yet, lot more hardships on the go. It may get worse before it gets better. Lets be cautiously optimistic for 2009. See how January goes and you know the saying right?

We have started trading lightly and with caution. If the markets become volatile again we are out of it soon. Meanwhile Iron Condors and spreads and January trades are doing well. I want to wish you a very happy New Year and lets keep our chin up and not fall to this doom and gloom falling everywhere.

I am optimistic, how about you?



Comments

3 Responses to “Survived stock market 2008”
  1. Amy says:

    I seem to have been one of the few people who made a profit last year by buying puts on the banks. If things look to good to be true, get out of the market and sit on the sidelines. Don’t ride it down.

  2. Amelia says:

    I am going to Moscow, and i will have time to visit the Lenin?s Mausoleum only during the weekend. Is there a big difference in queues there between weekend and week days? How soon before opening must I come to ensure, that i get in ?

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  1. […] In addition to this, Feds also agreed to buy $750 billion in mortgage backed securities from Fannie Mae and Freddie Mac. This moves proves that Ben Bernanke has thrown the kitchen sink at the economy, and has left nothing unturned and pulled out all the stops. These are some very bold and aggressive actions taken by the Feds to date, to  combat Stock market crash of 2008. […]



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