Bullish on Swindler Talent ~ The Risk Averse Alert

Friday, February 06, 2009

Bullish on Swindler Talent

Bob Pisani well-summarized today's trade. It was a "No Sugar Tonight" kind of day.

Vote this leading stock market expert at FeedTheBullThe consensus apparently sees Treasury's proposal for dealing with a broken financial system as providing means for maintaining the seeming validity of derivative securities in such a way as might allow market forces adequate underpinnings to facilitate a further unfolding of controlled chaos. Thus, with pressing need to batten down the hatches apparently abating — pre-Treasury financial rescue plan announcement on Monday — animal spirits prevailed today in squeezing heavily shorted sectors.

With nearly $4 trillion sitting on the sidelines, it's hard imagining fun and games ceasing as long as Treasury continues cementing its commitment to backstopping our crumbling, securities-based financial system.

Have no doubt. The days of explaining positive stock market behavior citing encouraging economic factors are over. As long as finance reigns supreme and moral hazard is kept in check by blackmail — in a game of financial chicken targeting a Congress of cowards — one can expect increasing incidence of sudden swings in the stock market. The present swing points higher.

Quite a curious response in volatility's pricing given today's advance. It seems to confirm the likelihood short covering was the larger impetus behind the market's move higher.

According to Pete Najarian, increased put buying — hedging long positions — could explain VIX performance today. Those to whom shorts delivered shares upon covering their positions are seen hedging their bets, anticipating prices will move higher.

This explanation makes a good deal of sense. Of course, time will tell if it holds water.


Time's up! Or so it seems. Does not today's CBOE Put/Call Ratio at 0.71 defy Najarian's VIX observation? For every 100 Put options traded today there were 140 Call options exchanged. Of course, this says nothing about the strike prices at which trades were made. I assume Put option strikes were closer to the market explaining why volatility pricing remained stubbornly high despite the market rising. If true, this puts a relatively stronger floor under long positions hedged by Put options ... and supports my positive market outlook.

Likewise, we see the MACD configuration the Magic Eight Ball knew of remaining in a bullish posture similar to mid-October through early-November 08 ... and late-November through early-January '09.

(That post still cracks me up. Even funnier ... it is coming true!)

... Hey, what's the typical argument given to justify huge executive bonuses handed out at financial institutions losing money hand over fist? It's about holding onto "talent," right?

Talent! The likes of which formerly ran Goldman Sachs ... became Treasury Secretary ... and in no time at all lost $78 billion "investing" in private-label, derivative credit securities? That's the story, according to the COP on the beat:

Talent! Yes, swindlers typically are among the most talented characters of all...

Fast Money
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