A peculiarly dangerous month

"October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February." Mark Twain

When bubbles burst short-sellers have tended to cop a lot of the flak, but it's really the last bunch of longs with their 'greater fool' investment strategy that are guilty of having over-egged the last charges of the Bull Market.  

It is said that the seeds of each new financial crisis are sown at the bottom of the cycle. There's a lot of emotion around in the market right now - manipulable mammonist emotion - and any capital that is speculated on a stock market recovery is effectively being diverted from other productive uses. (Many investor-speculators will have portfolios down 30-40% this year and will be seeking a swift rebound.)  

On this occasion one could argue however that stocks weren't especially over-valued and that the bubble had been bulging elsewhere - in the housing market in particular. 

After a short rally yesterday, the price of oil and gas has continued to fall today, and some analysts predict a price of $50 a barrel by Christmas. This, combined with the limited freeing up of credit markets we saw yesterday could mean a briefer, more v-shaped global downturn than we have collectively feared.

There's still probably going to be a significant rise unemployment in the US and Europe next year, thanks to the commercial deceleration that will have already taken place during the last twelve months of scarce credit and inflated energy prices. 

And then the modest rallies we have witnessed on the past couple of Mondays may turn out to have been 'suckers' rallies', or even part of that phenomenon which is evocatively called a Dead Cat Bounce.