Well, the markets didn't fare so well yesterday but I was clearly wrong that we might see the circuit breakers go off. Without any testing of the circuit breakers it is very hard for me to see how the Federal government could or even should step in and do what Roubini is suggesting: close equity markets for a week (or two)? Sorry, I get off the bus here with Roubini. That's interfering with price discovery in a way I am not prepared to go at this point. Now, say we had three days of consecutive circuit breaking collapse? I might consider it. But, at this point, it seems like a massively overdone, but fairly orderly sell-off. What's driving the sell-off? Hedge fund redemptions and the unwind of the carry trade, which are related to each other.

Are a lot of hedge funds going to go bust? You bet. As they damn well should. And finally, after waiting for three years and holding the Yen my position in it has a damn healthy profit. Not that I got paid a whit to wait, but hey, when averaged out over the three years it's a nice return after inflation and taxes, etc. . . and why is the Yen rising? The carry trade is being unwound. And that's why, I believe, we are seeing another round of massive selling. Hedge funds are unwinding the trade, taking profits, or at least anything with intrinsic value off the table in anticipation of redemptions. The main averages, the Dow and S&P, will probably overshoot on the downside, but Stirling is right, if you are a Benjamin Graham like investor there are a lot of amazing buys out there. But they are not trades, they are investments. There are companies out there that make real things that people will continue to need that, while they won't thrive in this environment, will survive and turn a decent profit. And isn't that what the prudent investor is looking for?

More after the jump.

Would I buy Apple here? (AAPL) Hell no. That's discretionary spending. No one is going to buy iPods in a recession. I love Apple. I own a MacBook Pro and an iPhone. They make fun gadgets. But people don't need what they are selling. As for Google? (GOOG) Perhaps. They have the most profitable ad revenue model around. (Although I really detest the company for personal reasons.) And yes, internet advertising will suffer, but people will continue to use Google. If it went under $300 I'd consider accumulating a position. As for Alcoa? (AA) Stirling is right. Great dividend. People need aluminum because it is efficient. It pays a healthy dividend and will pay you to wait. Another stock I like is Newell-Rubbermaid. (NWL) They make stuff people will need in a recession and the stock is trading at levels as if it is going out of business. But it has a strong balance sheet and plenty of cash. Is this investment advice? NO! It is not. It's just a window into my thinking. Nothing more and nothing less. Full disclosure is due here: family members own all three of the aforementioned stocks.

For all the lawyers out there or people reading this site: THIS IS NOT INVESTMENT ADVICE AND SHOULD NOT BE CONSTRUED AS SUCH UNDER ANY CIRCUMSTANCES. Please contact your financial professional for investment advice.