COVID-19 Crash Dossier: Real-Time Market Notes on the KOSPI Collapse, Bottom-Fishing Calls, and the Pension Fund Shield

The Wuhan Pneumonia Issue

2020. 2. 5. 3:49

The Wuhan coronavirus first began making headlines on January 23, and based on the January 22 closing prices—right before the Lunar New Year holiday—both the KOSPI and the KOSDAQ fell 6% over the following five trading sessions (this ended up in the past tense because I drafted the post and never published it).

In my outlook for this year (2020.01.27.), I wrote, “Use the Wuhan pneumonia selloff to accumulate value stocks with sound fundamentals." How many people actually followed through, I wonder?

Buy the fear and sell the greed.

“The Current Market Resembles the Period Just Before the IMF Crisis… Sees KOSPI at 1,940”

2020. 3. 10. 14:55

Warning from a Research Head … “The Current Market Resembles the Period Just Before the IMF Crisis” (2020.03.10.)

I see it differently. Unless some additional negative factor emerges that has not yet entered the discussion, the KOSPI should stay above 2,000.

The level of foreign-exchange reserves, corporate fundamentals, the functionality of the financial system, and the size of the domestic market are all fundamentally different. So I do not really understand in what sense this is supposed to be “the same” as the period just before the IMF crisis.

The chart pattern, perhaps?

KOSPI Circuit Breaker and KOSDAQ Sidecar Triggered Simultaneously for the First Time in History

2020. 3. 13. 15:48

“Fear Sweeps the Market” … KOSPI and KOSDAQ Halt Trading Simultaneously for the First Time in History (2020.03.13.)

FSC Abruptly Bans Short Selling for Six Months … Thoughts on the KOSPI’s Break Below 1,800

2020. 3. 14. 0:05

FSC abruptly bans short selling for six months… resorts to an extreme measure after daily trading volume hits KRW 1 trillion (2020.03.13.)

They do this now? Please. Had they moved preemptively in late January or mid-February, that would have been a different matter…

If the government is going to intervene in the financial markets, this seems less useful than deploying the public pension funds in an all-out defensive operation, given that most younger citizens are not even sure they will ever receive their pensions anyway.

With the general election just around the corner, the incentive for the incumbent administration to deploy the pension funds in support of the market must be strong.

Frankly, it seems better to let short selling flush out all the leveraged excesses―so that both market frenzy and panic can be cleared―while domestic retail investors absorb what foreign institutions are dumping.

People say one should “go in when there is blood all over the stock market," and by that standard the KOSPI ought by now to have moved beyond mere bloodshed into something closer to a field of corpses and a sea of blood. Yet strangely, it still does not quite feel that way.

Using today’s close of 1,771 after touching 1,684 intraday as the reference point, this corresponds to June 2007 on the initial breakout, May 2008 on the way back down through it, and August 2010 on the subsequent breakout back above it. If an additional disaster on the scale of a full-blown financial crisis were to occur, then one could argue that even 1,300 roughly half the previous peak remains open.

But at a minimum, I remain skeptical of the kind of extreme alarmism found in the article below—“Korea’s financial market could fall to 1,100”—the sort of cry that suggests the KOSPI itself may be doomed.

“We Have Entered Hell”… KRW 223 Trillion Wiped Out from KOSPI and KOSDAQ in a Week (Comprehensive) (2020.03.13.)

Note: Scoring 0 on an exam is every bit as difficult as scoring 100.

Since market timing and bottom-fishing are domains in which no one can promise anything with confidence, I will throw this out on a take-it-or-leave-it basis: if the market falls further from here, I believe the true bottom will form around 1,650 on a closing basis, and at the very lowest around 1,600. Panic selling could push it lower, and as noted above even 1,300 remains open, but even if it does go that far, I would not advise waiting to catch the exact bottom. Rather, I would recommend beginning to step in from next week onward and adding whenever it falls further, accumulating in tranches across the 1,300-1,600 range. In other words, I regard the low 1,600s on the KOSPI as a valid entry zone.

That said, since 1,300 remains open and no one knows how long recovery might take, absolutely do not use loans or go all-in; buy in a staggered and diversified manner.

The reason I remain skeptical of extremely bearish views such as the one quoted above is twofold.

First, the KOSPI entered an upswing in 2009, broke above 1,800, and then spent the next decade trapped in “BoxPi” territory, to the point where people were openly talking about the Korea discount.

So in a situation where the market has already fallen roughly 29% from the previous high, and where on a PBR basis prices have already fallen even further than they did during the 2008 financial crisis with 1,300 corresponding to a 50% decline from the previous peak, is it really plausible that it could collapse all the way to 1,100?

Short of listed companies’ factories literally burning to the ground, is there really that much additional downside left to use a somewhat absurd phrase for the market to crash all the way to 1,100 on the basis of declines in corporate net asset value?

Second, as many economists and financial professionals are currently pointing out, this is not a problem of the financial markets.

A Second IMF Crisis Is Coming? “This Time the Dimension Is Entirely Different” (2020.03.13.)

I agree with the view expressed in the interview above by SG’s chief economist Oh Suk-tae. This is not a collapse caused by financial dynamics the way the 2008 derivatives-market implosion was, with its globally interconnected and effectively immeasurable scale. Their point was that there were “no available policy tools,” so their purpose and perspective differ from mine here, but the underlying distinction still stands.

In 2008, the problem was in the financial markets themselves, so naturally the indices—as indicators of the financial markets—had no choice but to get smashed. This time, however, the problem is of the kind that “economists and financiers cannot solve." And if this is not the kind of financial problem that requires financial experts, then paradoxically that also means that there is—for now—no financial risk of the same nature or scale as the CDOs that served as the detonator in 2008, or as the Wuhan coronavirus that is currently devastating the real economy.

Of course, the very concept of a black swan refers to problems that arise from uncertainty that is not cognitively recognized in advance. Even so, since the 2008 financial crisis, financial markets around the world have matured substantially in institutional terms. Front-office people complain that compliance makes it impossible to do their jobs properly. To put it more intuitively, if the same welterweight punch lands, the actual impact and the speed of recovery differ depending on whether the person taking it is a welterweight or a heavyweight.

So I do not believe there is a financial problem here severe enough to cut the stock market in half the way it did during the financial crisis. The reason I wrote in my early-year post (2020.01.27.) that “the tailwind in the U.S. market would probably last through the first quarter, or the second quarter at the latest," was that I viewed the U.S. market as distorted by a bubble created by the sharp rise in FAANG. Now that the Wuhan coronavirus shock has pulled the market down roughly 30% from the highs, that bubble risk has to some extent already been defused.

Fundamentally, of course, U.S. industry still has to recover for this upward trend to continue―and on this point I have long said, based on what I personally experienced while living, studying, and working in the United States, “where exactly is this alleged U.S. boom you keep talking about?". But once the current U.S. equity selloff has run its course, then at least from the standpoint of the financial markets, bubble risk should no longer be the immediate concern for some time.

The key question, then, is how long this downward trend in equities will continue. No one knows where rock bottom is, of course. But if one takes seriously the idea that the stock market discounts the real economy in advance, then by applying the old saying “buy on the rumor, sell on the news” in reverse, my own view is this: now that the WHO has at long last officially declared a pandemic, the pace of the decline should begin to moderate. I do not expect this globally low sentiment to persist for more than a month or two at most. Naturally, there is still room for further downside, but even if the market falls more, the magnitude of that decline is unlikely to be so great—certainly not to the point of 1,100—and I suspect the market is already nearing readiness for a reversal into an upward trend.

+ 2020.3.14. 03:15 AM Addendum

As I noted in the comments, I am cautious about sounding too definitive on timing. But personally, I expect a reversal trend to begin—or at the very least for that turn to start being reflected in the market—as early as next week, and no later than the week after.

KOSPI Drops 2.5%, Lands in the 1,600s … The Cards Are Now in Play

2020. 3. 17. 23:24

Market commentary (2020.03.14.)

I had guessed that the broader trend might reverse into an uptrend as early as this week, or, at the latest, next week. For now, the KOSDAQ closed positive today while the KOSPI closed negative, so even if one says my forecast has not yet been reflected in the broader market, my own account at least showed a faint spark of hope, as today finally turned positive after seven consecutive negative sessions stretching back to March 6.

Of course, the losing streak could resume again as soon as tomorrow, so I need to watch a little longer.

And as for my “KOSPI 1,650 this week, let’s go!" call, I suppose it counts as roughly correct, given that it opened at 1,638 and settled at 1,672.

It still looks as though it could fall a bit further, but the week is not over yet, so I will wait and see. If it falls, I get to buy cheaper; if it rises, I make money. Either way, not bad.

But as Jesse Livermore said, the point is not hypothetical trades or mouth-trading, but real trades with actual cash on the line.

Since I wrote last week that “bottom-fishing is a domain in which no one can promise anything with confidence … I recommend beginning to scale in and adding whenever it falls further. In other words, I regard the low 1,600s on the KOSPI as a valid entry zone," I went in and bought at the levels I had been waiting for.

Practicing what I preach.

What worries me a little is that retail margin balances are not shrinking as much as I had expected. They have come down a lot over the past three or four days, but to my eye there is still quite a bit left that ought to be flushed out… Or has the country as a whole simply become more tolerant of volatility after its short crash course in Bitcoin?

Or is this the time when retail investors—buffed by the short-selling ban—actually win?

+ Appendix

A well-off friend of mine is so timid that she usually stays far away from risky assets like stocks, but her parents apparently gave her and her two siblings a mission to prove their financial literacy, so she sent me an urgent SOS last Wednesday night (2020.03.11.; KOSPI close: 1,908)… LOL

And over the phone I told her, “Even if you buy after the market rebounds a little, the stock price will still be very cheap. So do not rush in right now; just watch it through next week, and if it collapses to the 1,600s, then go in."

I am now happily wondering what delicious and expensive meal I should have her treat me with.

KOSPI Breaks Below 1,600 for the First Time in a Decade … The Donghak Ant Movement Melts Away

2020. 3. 18. 19:54

I had expected the KOSPI to enter the 1,600s this week, and as I wrote in yesterday’s post—“it still looks as though it could fall a bit further”—I did expect further downside. But to be honest, I did not expect it to break below 1,600 not just intraday but on a closing basis and slip straight into the 1,500s. As of the morning session it was still tangled up around the low-to-mid 1,600s, so I stopped watching. Then it bled lower in the afternoon. 1,591, of all things. LOL

Even so, this still remains within my expected scenario, and I have not changed my mind about the basic approach: “start entering in the 1,600s and keep accumulating in tranches whenever it falls further."

What worries me, however, is that the market has reached the zone below 1,600 that I had regarded as the likely floor much faster than I had expected. If it fails to rebound in the 1,500s and gets slammed down one more time, then the basement opens.

I estimate the floor of that basement at 1,320.

And below that?

Hell.

Below 1,320, both prediction and response become meaningless.

So if it happens, fold the economic paper you were reading, gently, soak it in oil,

and let it flutter, butterfly-like, on every flame rising over the blue-tiled roof.

KOSPI Breaks Below 1,500 … What Exactly Is the Market Pricing In?

2020. 3. 19. 12:00

Retail Investors Attempting to Catch a Falling Knife: A Mid-Crash Check on Margin Credit (2020.03.19.)

In the post above—where I went through the margin-balance data—I wrote, “Judging from how rapidly cumulative unpaid balances and the daily scale of forced liquidation are increasing, one badly timed wave of program selling is eventually going to set off a chain explosion and wipe everyone out." And while I was correcting a calculation error in that post just now, the index dropped by more than 100 points. LOL

Is today the day?

KOSPI Remains in the 1,500s … Revising the Basement-Floor Outlook

2020. 3. 20. 14:04

Unlike the past few days, when outperforming the market merely meant losing less than the market, today feels genuinely satisfying, because my portfolio rose more than the market itself. Even so, I suspect the picture will only become clear once next week’s margin-balance and forced-liquidation data are out.

I have consistently maintained the view that one should “begin buying as the index approaches 1,600 or breaks below it," and that remains my position now. I also said that “the market would enter a reversal phase—or at least begin to shift in that direction—by this week at the earliest and next week at the latest," and, judged purely by the index, that view appears to be tracking correctly. Even so, both the speed of the decline and the speed of the current rebound are far greater than I had anticipated, and the human indicators still look dangerous.

Since levels below 1,320 seemed to me beyond the meaningful range of prediction, I had recommended staggered accumulation in the 1,300-1,600 range and wrote that “the basement floor, as I see it, is 1,320." But just as I dug through the margin-balance data the other day because something felt off, I took another look today because the market’s sudden ignition—despite no visible change in the human indicators—also left me uneasy.

Having looked only through MTS until now, I pulled it up properly in HTS today and took a closer look—and yes, 1,100 does in fact appear technically possible. My apologies to analyst Han Dae-hoon of SK Securities, whom I mocked earlier. That said, my view remains unchanged: a rebound is still more likely to come before any move all the way down to 1,100.

The market is currently at Basement Level 2—the zone where, in my view, a failure to rebound would mean a vertical drop—so the question is how much farther it intends to go. I hope this proves to be no more than misplaced anxiety.

Since the margin-balance and forced-liquidation data for yesterday and the day before yesterday—when forced liquidation appears to have been triggered—have not yet come into view numerically, I re-examined the situation once more under a worst-of-the-worst-case scenario. If it ends merely as a concern, so much the better. Judging from yesterday’s index action, it does look as though a good deal may already have been flushed out.

This is something only time will tell, but if today really did mark the beginning of a reversal trend, then my forecast would in effect have been right across the board. If that is the case, then I may as well shift toward index directional bets whenever spare capital becomes available.

Securities Firms Face Dollar Margin Call Emergency … So There Is Financial Risk in the KOSPI After All?

2020. 3. 22. 9:49

The human indicators I could see and hear around me—people who had never invested even once all saying they were going to start, and answering “Samsung Electronics” when asked which stock they planned to buy—had already been weighing on my mind. Then, after Friday’s sharp rebound, I felt so uneasy that I started checking again to see whether I had overlooked any risks. First of all, however, I owe an apology for having conveyed incorrect information.

At the time, I was focused only on the domestic market and did not give the matter much further thought, but I had overlooked ELS—overseas-index-linked derivatives.

Securities Firms Face ‘Dollar Margin Call Emergency’ over Overseas ELS (2020.03.20.)

Even without running the complicated calculations, the mere existence of a KRW 20 trillion ELS detonator means that a move below 1,320 is entirely plausible.

Whether the dollar swap will prove to be no more than a stopgap, or whether it will become a genuine spark of hope, I simply cannot judge yet, as I have not done enough research on the matter.

Outlook for ‘20 (2020.01.27.)

Setting aside only the assumption that “the bullish trend would continue”—because no one can know how quickly the damage caused by the coronavirus will be reversed—my view remains the same as what I wrote at the beginning of the year. The reason is simple. No matter how much the coronavirus damages the real economy, and even if the ELS detonator sets off a credit squeeze among securities firms, the Korean economy underlying the index is still vastly larger than it was in 2006, even if the market declines further in the short term.

The current level in the mid-1,500s was first broken to the upside in April 2006. During the global financial crisis, that same mid-1,500 level was broken to the downside in August 2008, and the market went on to print its lowest monthly close (1,063) in February 2009. It then broke back above the mid-1,500s in July 2009. Given the current scale of concern over the real economy, I believe analyzing this manufacturing-based market using P/B bands is less informative now, so I will instead compare each period using earnings yield (E/P), where $$\frac{E}{P} = \frac{ROE}{P/B} = \frac{1}{P/E}$$.

If one uses the lowest value, that of July 2009, as the benchmark, that would imply a further 35.82% decline from here, which yields 1005.23. So does that mean it really could decline further to reach 1,000?

If you look closely, the highest 1/P/E reading was in February 2009, when the KOSPI printed its actual trough, at 0.1181. That is more than twice the July 2009 figure of 0.0487, despite the index being roughly 500 points higher by then. In other words, the P/E in February 2009 was much lower, which means the panic selling at the time was severe enough to overwhelm fundamentals.

Conversely, when the market first broke above the 1,560 level in April 2006, the P/E was 11.7, whereas when it reclaimed the same level in July 2009, the P/E at the breakout was 20.55—75.6% higher than in April 2006. That means that once upward momentum took hold, price growth outpaced earnings growth.

The question, then, is how far the current panic selloff has already gone. Since there is no way to know what the “proper” P/E for Korea actually is, there is no way to know exactly where the selloff becomes the terminal stage of capitulation.

That said, if one uses my projected final basement level of 1,320 and my underground parking level of 1,120―below that, I had regarded as Hell in which any prediction or response would become meaningless―as benchmarks, then the index would still have to fall a further 15.71% and 28.48%, respectively, bringing 1/P/E down to 0.0899 (P/E 11.11) and 0.1060 (P/E 9.4335).

Put differently, across the 1,320-1,566 range the P/E spans 11.11-13.19, while the historical low P/E is 8.47. Given that the market first broke above 1,560 fourteen years ago at a P/E of 11.7, and broke back below it twelve years ago during a shock on the scale of the subprime crisis at a P/E of 11.46, the current index at a P/E of 13.19 already looks, to me at least, sufficiently attractive on price grounds whether the market falls further or not. If your position is, “I absolutely must catch the exact bottom,” then by all means wait until it falls through 1,000 and then comes back up through 1,000. Personally, I do not think KOSPI 1,000 will ever come again.

As I keep saying, however, because no one knows where the bottom is, I strongly discourage going in with leverage. Remember that although there were hedge funds that correctly foresaw the subprime collapse, most of the funds that shorted the market ahead of it went bankrupt because the timing took longer than expected and they could not withstand the margin calls.

The entire world is now short of dollars, and once again the global system is intertwined through derivatives, so for the time being, the best course is simply to stay on the sidelines, since everything depends on how U.S. equities move from here. If one must invest, then he should begin scaling in only with money that can be left alone for more than a year.

By the numbers alone, this is an absolute undervaluation zone by any reasonable standard. I fully understand why people want to know how long such undervaluation can persist, but that is a meaningless question. No one can answer it.

[Breaking] The Fed Goes “All In” on Bond Purchases … Did the Effect Last All of 20 Minutes?

2020. 3. 23. 22:40

The Fed Goes All In With Unlimited Bond-Buying Plan (2020.03.19.)

Don’t fight against the Fed?

After the Fed announced unlimited bond purchases, NQ shot up from 6,782 to 7,316 in no time, only to fall straight back to 6,906 just as quickly.

Night-session KOSPI 200 futures ran from 200.05 to 209.22 and are now sitting at 203.15.

So the Fed’s extreme measure—promising to flood the system with unlimited money—ran out of steam after just 20 minutes.

Just how much farther is this thing trying to fall?

KOSPI Resettles in the 1,500s … A Rebound from Here Would Make Sense, But

2020. 3. 24. 11:19

The human indicators are what keep bothering me.

Yesterday alone, I overheard people talking about stocks three separate times in the street—including a group of bus drivers at the terminal heatedly debating whether now was the time to buy. Yet the market, which had only managed a twenty-minute burst even after the Fed’s unlimited-QE announcement, did not react when the U.S. Senate stimulus bill failed to pass. And the top real-time search terms on Naver are “how to buy stocks” and “stock market closing time."

This does not apply to people who were already investing in the first place, of course, but many of those opening stock accounts for the first time appeared to be operating without even a basic grasp of fundamental or technical analysis such as multiples or moving averages.

Is this not exactly the sort of high-level signal that the investment gurus consistently warn about?

Meanwhile, the number of global victims of the Wuhan coronavirus continues to rise—South Korea’s death toll passed 100 the day before yesterday—and any therapeutic, whose very feasibility remains uncertain, is unlikely to enter human trials before July at the earliest. It is already a foregone conclusion that the global economy was wrecked in the first quarter, and there is a very high probability that the second quarter will look much the same.

As I wrote in a previous post, this is not the sort of problem that can be solved by financial means. Beyond the Fed’s unlimited QE—which is enormous, to be sure—nothing fundamental has actually been resolved.

Of course, if this market simply traces out a V-shaped rebound from here, that would be fine by me, since I already have positions on. But if it were really the kind of problem that could be resolved this easily, would things ever have escalated to the point where the world declared a pandemic, countries everywhere were screaming over shortages of even basic masks, and the United States and China abandoned diplomatic niceties altogether and began openly trading insults?

I am still holding all my existing stock positions without cutting any of them, and I intend to keep holding them. Even so, I am deeply uneasy.

[COVID-19] IMF chief: “The real economy is more damaged than during the financial crisis; recovery is expected next year” (2020.03.24.)

The IMF chief is saying that “the real economy has been damaged more severely than during the global financial crisis, and it will take at least a year to recover." Can the financial markets really already declare the Wuhan coronavirus risk fully burned off?

The stock market may discount the real economy in advance, but is it not setting off the victory fireworks far too early? Of course, that is a different matter for those investing only money they are perfectly willing to leave in the market for more than a year.

Old man Buffett is probably too busy enjoying the happy problem of deciding which company to own at distressed prices and lock in a high rate to get any sleep. I’m so jealous.

Weekly Stock-Market Recap + Short-Term Trend Outlook

2020. 3. 28. 8:01

There was much talk this week of a historic surge, but the human-indicator signals still looked too strong to dismiss further downside. So I continued to put more weight on the possibility of further downside and was expecting the Nasdaq to collapse once more, with yesterday’s employment data serving as the trigger.

But when I saw the market ignore the worst employment print since records began that is, in the past fifty years and push upward by more than 4%, while the National Pension or rather, the “Pension Corps,” as retail investors have taken to calling it kept torching KRW 200 billion a day for three straight sessions, absorbing every futures dump from foreigners each time the KOSPI broke below 1,700, I began to feel that qualitative analysis was pointless. The pension fund was apparently even coming into the overnight futures session and pouring money in, trying by any means necessary to keep the market up.

So I ran the numbers off the chart alone and got a Nasdaq floor range of 6,687.8-7,010.6. Since it has already printed 6,628, I do not think it will come back down to those levels again… And given that 6,687.8 was also the opening price for Nasdaq futures on March 22, I am increasingly inclined to think the true bottom is already in. I was honestly startled by how cleanly it lined up, right down to the decimal. At this rate I may turn into a chartist.

With the Fed manipulating the Nasdaq and the pension fund manipulating the KOSPI, I have reached the point where the charts which I used only as secondary indicators have effectively become my primary tool. In any case, the charts suggest that while there may still be additional downside whether it comes today or after a few more days of shaking people out, it probably will not be the kind of decline that breaks below the previous lows.

I started calculating the downside under the assumption that the previous low in the 6,680s was not the true bottom, but halfway through I saw the leading digit that the Nasdaq would print under that scenario and got chills, so I stopped. I do not know exactly how far down things remain open if that low is not the true floor.

For the immediate term, 7,890 looks like the key level, and for now it cannot break through it. If 7,890 gives way, Nasdaq futures go straight to 8,300.

The short-term footing lies at 7,500-7,530. If the Nasdaq futures that got rejected at 7,890 today were to fall as much as possible next week, that short-term footing could get pushed as low as 7,300, but I suspect it will probably test 7,530 and then try again.

Because the real economy is in such terrible shape, it is also possible that the market just chops sideways for quite a while in the 7,300-7,890 or 7,530-7,890 range.

Exactly how wide that range becomes, and how long it lasts, will depend heavily on how far it breaks upward before getting rejected and how far it gets knocked back down afterward.

This is a 5-minute chart, and just look at the state of it… It dropped 200 points in thirty minutes. Is this the Nasdaq index or some KOSDAQ penny stock? LOL

In any case, the point about the true bottom having already been printed applies to the Nasdaq. As for the KOSPI, which is currently being defended with a 1,700 “Pension Shield” by dragging in the Pension Corps, I have no idea what would happen after the April general election. Looks like they spent KRW 140 billion today alone.

Of course, I understand the logic. The 1,600s are not a particularly meaningful range anyway which is why I kept saying that the buying window begins when 1,600 breaks. Once 1,700 gives way, things move very quickly.

Still, with crude having fallen as low as $21.1 intraday before clawing back only to $21.84, and with the VIX, after dipping a bit, up another 7.44% to 65.54, I do not see how they intend to defend the KOSPI while the global economy is getting obliterated unless they are prepared to throw in the entire KRW 600 trillion fund. There were elections in 2008 too.

Even if one assumes they can somehow keep the market afloat by continuously pouring money in, I understand why they would need to manage the stock market before the election, given already terrible public sentiment. But once the election is over, is there any real reason left to keep defending it?

And no matter how aggressively the pension fund intervenes, its firepower is not unlimited. The KRW is not a reserve currency, and with the exchange rate only barely being kept in check, Korea cannot do what the United States can do—massively expand the money supply or slash rates to extremes.

Especially when even the U.S. market, with the Fed openly manipulating stock prices, still failed to hold onto gains and rolled over. It looked as though something triggered the quant funds’ algorithms and the indices got hit all at once. Since most ETFs trade as baskets, the Fed is intervening aggressively to prevent exactly the kind of instant chain-reaction liquidation we saw today.

The new maxim—“Don’t fight the Fed”—is now colliding head-on with the old maxim—“Don’t try to beat the market." Once this whole episode settles down, we will have a much clearer idea of which one we are supposed to listen to going forward.