And Now That the Setup is Blown? ~ The Risk Averse Alert

Tuesday, August 12, 2008

And Now That the Setup is Blown?

I am by no means the sharpest tool in the shed. Nor am I a well-spoken skeptic.

Yesterday I linked to a brief summary article about the conflict between Russia and Georgia, calling it a "staged event." Well, I learned a little more about just how much this situation is relevant to the point I made. Apparently, the war is of great interest to investment bankers in New York.

Mark Ames, American editor of "The eXile" (formerly a Moscow-based English language newspaper, shut down in June '08, but still publishing online), wrote the following on Saturday, August 9, 2008:

The invasion was backed up by a PR offensive so layered and sophisticated that I even got an hysterical call today from a hedge fund manager in New York, screaming about an “investor call” that Georgian Prime Minister Lado Gurgenidze made this morning with some fifty leading Western investment bank managers and analysts. I’ve since seen a J.P. Morgan summary of the conference call, which pretty much reflects the talking points later picked up by the US media.

These kinds of conference calls are generally conducted by the heads of companies in order to give banking analysts guidance. But as the hedge fund manager told me today, “The reason Lado did this is because he knew the enormous PR value that Georgia would gain by going to the money people and analysts, particularly since Georgia is clearly the aggressor this time.” As a former investment banker who worked in London and who used to head the Bank of Georgia, Gurgenidze knew what he was doing. “Lado is a former banker himself, so he knew that by framing the conflict for the most influential bankers and analysts in New York, that these power bankers would then write up reports and go on CNBC and argue Lado Gurgenidze’s talking points. It was brilliant, and now you’re starting to see the American media shift its coverage from calling it Georgia invading Ossetian territory, to the new spin, that it’s Russian imperial aggression against tiny little Georgia.”

The really scary thing about this investor conference call is that it suggests real planning. As the hedge fund manager told me, “These things aren’t set up on an hour’s notice.”

(Here's more on Georgian PM, Lado Gurgenidze.)

Mr. Ames' concluding remark really caught my attention, so I thought I would pass it along. As is so typical here in the United States when it comes to "news," all things generally are not what they seem.

So, having kept an eye on this developing story throughout the day today, it was rather clear things were not at all going as planned. The public fronts (press and political), when they were not being deathly silent, were a bumbling, stumbling embarrassment.

And this might just make the next act from a bankrupt aristocracy's bag of tricks all the more dangerous and reckless...

I do sometimes wonder whether my melt-up thesis is ill-conceived. However, this is little wonder given fundamental factors we have to consider.

Yet I entirely agree with Doug Noland. Markets live on fear and greed, and it is not the nature of the game to let fundamentals get in the way of price movement. We have but the market's recent performance confirming this.

So, what's next?

Well, things on the Big Board still are not looking up at all...

NYSE weekly

And the Pump and Dump is looking a bit February 2002ish...

NASDAQ weekly

Nevertheless, if there is more money to be made squeezing lemonade from lemons, then what can I do? I am crossing my fingers a couple August OEX 560 Puts will present an opportunity to save face...

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Bernie said...

Hi Tom!

Since I started reading your blog all those months ago I've added several other E. Wavers to my list of daily readings and all of you have a forecast of a quick and proper decline in the works but up until now the timing was different for every single forecast. This week, on the other hand, it seems to me that all of you are seeing the same steep cliff at the same time. This might be the moment we've all been waiting for.