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Wait 'Till Next Year, Again!

October 10, 2007

Dear Fellow Options Trader,

Like all long-suffering Chicago Cubs fans have said for 99 years: Wait 'till next year!

The Northsiders flirted with post-season glory just long enough for that contagion known as "Cubs Fever" to overtake their fans and send playoff tickets into the stratosphere.

But the Cubbies joyride was briefer than the Academy Awards coverage of the technical awards dinner! There was no joy in Wrigleyvile, as our beloved Cubs once again treated the faithful to a triple dose of humble pie, a dessert that I've become all too familiar with in my 26 years in Chicago.

Maybe we can blame the Cubs' loss on global warming, or Britney Spears. Or maybe it's just fate that Cubs fans have their hopes dashed nearly as frequently as another member of their genus, the bears of Wall Street.

The similarities are striking: Both Cubs and Wall Street bears favor pinstripes, frequently scare their opponents, and are the loveable losers in their perspective arenas of competition. But unlike our Chicago Cubs, the Wall Street bears occasionally do bear their teeth, as they did this past July and August. But one look at the past three months in the markets and you get the feeling the Wall Street Bears squandered their chance just as surely as our Chicago variety!

Less than two months ago, the stock market looked so sick that you could see puddles of drool pooling up as the bears were ready to feast! Then on Aug. 16, the day prior to the Discount rate cut of 50 basis points by the Federal Open Market Committee (FOMC), the bears got the unexpected shot to their solar plexuses that took them to their knees -- er paws!

In the midst of all that bearish sentiment and headlines such as, "Foreclosures Hit Record Numbers!," the bears seemingly could not screw up. But they did and here's why: They were exhausted.

They'd spent the past six months pounding the drums for the subprime blowup and clamoring how foreclosures were going to take down everyone, even those who didn't have a mortgage! It didn't matter; the die was cast, and trillion-dollar markets hung in the balance, as "no document" mortgages given to perhaps 1% to 2% of the population threatened the other 98% of the market.

Or maybe, just maybe as I had been saying, the foreclosure of one home in Nevada for every 165 households, which was triple the national average, was still just .06% of the total. Yes, the headline grabber was "US Home Foreclosures Soar in August," but the reality was just 6,125 homes were in foreclosure in Nevada in August -- against a population of 2.6 million!

In other words, the foreclosure rate in Nevada didn't mean your $600,000 home Chicago or Montana had been devalued to $300,000. Maybe those folks who bought the Cadillac Escalade for zero down, along with the two jet skis and the vacation home with no money down, would be the losers, and the rest of us would be just fine.

As a final point to ponder, consider the Cubs' post season mantra, "It's Gonna Happen!" I would say that both our Cubbies and Wall Street's bears know the truth is that not only is it going to happen, it already has. Again!


Jon "Doctor J" Najarian
Editor
ChangeWave Options Trader