Identifying Pigs About to be Slaughtered ~ The Risk Averse Alert

Friday, January 30, 2009

Identifying Pigs About to be Slaughtered

Why is it common stocks historically have offered the highest returns? And why is it corporate bonds offer higher yields than a government-insured, bank savings account?

The answer, of course, you already know. So, let me ask you this...

Why are so many fools promoting the perpetuation of wildcat finance? Whose interest do Monetarist Monkeys serve working overtime putting forward unsubstantiated claims that nationalization of the banking system is the worst idea since Coke mistakenly changed its original formula more than two decades ago?

Consider fundamental principles surrounding questions I am raising here. Now, look over to the left under "Things I Believe."

There it is! The answer to everything...

"Bulls make money, bears make money, and pigs get slaughtered."

My, how pigs squeal as they sense their demise.

Jim Cramer, the raging monetarist monkeyThis is precisely what we are witnessing before our very eyes in protests to nationalization. It is the sight and sound of pigs on the verge of being slaughtered.

There's Martin Feldstein from Harvard University. And there's our boy Shemp.

If you asked the likes of these two the same questions I began with, I bet their answer speaks of risk and reward. Risk is why stocks and bonds historically deliver superior returns. Which, of course, implies investors are responsible for performing due diligence.

Does not Cramer repeatedly preach the need for doing one's "homework?" For what? To learn how much feed is available at the trough? Or is due diligence, first, a matter of assessing one's risk?

Yes, it is the latter because RISK IS REAL (as if I needed to shout it in times like these).

Now, about the matter of undue risk having been taken at critically important financial institutions vital to our economy's functioning...

Who FIRST should be responsible for bearing losses? The taxpayer or the shareholder? The struggling slug or the gentleman bondholder? Am I missing something?

So, then, what if the losses are so large, all classes of investors are wiped out? (And the fact of the matter is, they are.) What should be done with such economically vital financial institutions as are facing bankruptcy?

The answer is made plain by a President left no choice but to admonish financiers for their continued reckless behavior.

These institutions will be taken over. Management will be thrown out. Precisely what Bill Seidman spoke about the other day.

Let's get something straight, Cramer. It is a done deal. Now, the big question...

Does a pig's squealing delay its own end?

Absolutely not.

Yet, too, a pig's cry speaks a truth (albeit one involving its own demise). So, then, Cramer's talk about how nationalization threatens the market's fortune should not be thought the ravings of an irrational victim. After all, the name of the game has been (and would continue to be, if only it could) Inflate or Die.

Cramer squeals because were banks nationalized, structured finance might then be given a decent burial ... and the finest inflationary tool ever conceived will officially have life no more, at least not in our lifetimes. Thus, the grease helping turn Cramer's world — as well as that of his pals over at Goldman — will have dried out.

So, he probably is right about Wall Street's fate should banks be nationalized. And like I said, it really looks to be a done deal. It's only a matter of time before the fat lady sings. There simply is no other choice available. This fact, all on its own, speaks of why those who argue against nationalization are rightly called pigs.

And pigs are slaughtered because real people must eat. There is a breakdown in world trade ... caused by a collapse in credit ... and this indeed is threatening the availability of dinner ... for real.

As for this moment, well, there are rickety bridges still standing, affording escape to those aware of the coming slaughter. This is where politics intersects the bounce I have been projecting (and continue to expect) — the market's melt-up — a profit opportunity to those who did not play the fool in 2008 ... a face-saving moment for those investors who wish to play the fool no more. Political support for the Street appears likely to crumble soon. When it does, look out below.

NYSE 5-min

What you see above is exactly what the next-to-last paragraph yesterday was all about. Next up, then, should be the market's strong move higher ... that is at least eventually.


There's no reason why the market couldn't trade in the range established this week for several more days to come ... before launching to a new high (post-November bottom) ... then suffer still another pullback ... delaying the market's ultimate melt-up yet again ... all over the weeks ahead, extending into March-April.


One thing is becoming relatively certain. The vast majority of common shares outstanding have already been distributed into weak hands. So, see the rickety bridge ahead and buyer beware.

(FF to 5:00)

Fast Money
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Anonymous said...


Does the destruction in the NYSE McClellan Oscillator make you reconsider your melt-up thesis?

Starting to look like mid-September, no?

TC said...

I don't see trouble signaled by the McClellan Oscillator, particularly with the Summation Index now in positive ground (although declining as a consequence of January's pressure). This was not the configuration of McClellan measures mid-September. Then, both were falling and squarely locked on the sell-side (below 0).

A further difference now v. then is two-fold. First, there has been no breakdown to new lows in major indexes during the present bout of selling (unlike early-Sept '08), and second, volume of shares exchanged during January's sell-off has been contracting (relative to Nov. '08) rather than expanding like it was in September (relative to June-July '08).

Sometime over the next 6 months much of last year's second-half losses look to be made back. Elliott Wave considerations suggest this could occur via a melt-up rivaling last October's meltdown in its speed.