Rally in a Bear Market

It's quite a common occurance to have a rally in a bear market. These are the mechanisms that are used time and again for the bigger players to exit the market.

Subprime crisis is far from over. It is reported that every month 250,000 foreclosures are taking place, that means that Primary Lenders seized the assets and sell them out, with entire profit and losses belonging to them, leaving ZERO for the secondary holders. Thus the total loss per month is 250,000 x US$ 0.25 Million (US$ 250000 mean average price per home) = US$ 62.5 Billions. Against this amount, the secondary derivatives issued (which were bought by ICICI Bank and SBI and also BOI) were 6 times or US$ 375 Billions per month. Deducting $ 62.5 Billions for primary lenders, the holders of secondary derivatives are US$ 300 Billions PER MONTH. Since the Primary lender has seized the primary mortgage assets, and leaves nothing to secondary holders, the secondary derivative holders are losing at the rate of US$ 300 Billions per Month. Their valuation is ZERO and may be they are not recognizing in their books, but they will have to. When $300 Billions, the size of India's entire FOREX reserve, is disappearing every month, where is the question of 'End of Subprime'.

Profits, EPS, P/E are the good old fundamentals. When markets crash - money normally flows into the bond markets. But nope - the situation in bond market is too poor, the returns in teasury is far too low.

Giant banks have started issuing shares, bonds to face their loss/crisis. This is no growth story.
When big banks start loosing out credit tightens, sensex falls, margin calls come into play and we/you loose!