Desperate Times Beckon Desperate Measures ~ The Risk Averse Alert

Friday, August 14, 2009

Desperate Times Beckon Desperate Measures

No, that's not me on the left...

Can you believe Mr. Stein? Where's this guy from, Mars? "All my life I have heard about Treasury not being able to issue its debt." Well, welcome to Earth, Rob. The risk is very real.

This extraordinary risk notwithstanding, however, the market could relatively hold up for the rest of the year, much as Mr. Stein suggests. In fact, it seems I indicated much the same just the other day. No doubt my rationale was Elliott Wave-based. Having read in a couple different places fears of an autumn collapse, it seemed prudent to consider the near-term possibility that, the market might remain death-defiant long enough to maximize the number of suckers who become trapped when, virtually overnight, the stock market collapses.

Or, there simply may be no time and no substantive cause for which to maintain the illusion that the "credit crisis" has abated because, in fact, we are suffering a problem far more serious. Truth is we are in the midst of a breakdown of the physical economy and, most ominously, nothing of any substance is being done to address this. Nothing.

Yet financial liabilities and exposures remain intact. Those holding claim to these must be increasingly inclined to act for the sake of minimizing their losses. (I am thinking of JP Morgan Chase's stance toward Lenny Dykstra as a recent demonstration of my point. Not that "Nails" threatens to bring down the financial system. Rather that actions taken against him — with a forced chapter 7 bankruptcy liquidation now being pressed — speak volumes about the urgency of an increasingly desperate situation. Add to this record home foreclosures, the ongoing prosecution of wealthy Americans evading taxes and the push to gut America's health care system, and you see pressure on many fronts exposing how dire is our present financial situation.)

Surely, these conditions make for the kind of breathtaking collapse Mr. Deighan speaks of. The "little guy" might have some difficulty believing the risk of a "lemming effect" among the global financial system's biggest players. Yet this risk is very real. And although no one to my knowledge is speaking of this, you might recall that, back in Y2k it was the rare voice calling the run-up in technology stocks a "bubble." In other words, just because a risk is not widely acknowledged does not mean it is not real.

Fast Money
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