Last week, global stock markets finally woke up to the fact that all is not well with their cousins, the credit markets. The FTSE 100 ended the week down more than 100 points, as concerns about the US subprime mortgage market started to spread to other areas. Of particular concern is the leveraged buy-out market, where deals agreed months ago are running into funding troubles. Given that the M&A and private equity booms have been one of the key driving forces behind recent stock market gains, it's no surprise that the prospect of the boom ending has dented stock markets. And investment bank Morgan Stanley reckons there could be a lot more to come. Full article http://www.moneyweek.com/file/32544/will-stock-markets-see-a-14-plunge-next-month-.html
No concern. I just use pullbacks to re-enter the longs from which I've taken profit. My pile just keeps growing and when it's finally the big one I'll lose on that trade. But all the upsides I've had for the last few years make that loss insignificant. Basically, long til you're wrong.
Yeah, these private equity and M&A deals remind me of the AOL Time Warner deal a few years ago. Personally, I think the credit bubble will be the undoing of the markets. We'll see whether their clever spreading of the risk in the credit markets will actually make a difference, or just prolong the bubble's inevitable pop.
I believe the market knows everything and will let you know when something is about to change. The skill lies in being able to spot the changing conditions and then to make the required changes to your portfolio, trading method, etc.