The Real Climate Change ~ The Risk Averse Alert

Thursday, January 21, 2010

The Real Climate Change

We will not be discussing "Glass-Steagall 2.0" today for two reasons...
  1. Doped-up horses, leveraged to the teeth, long past have left the barn. Before giving any thought to corralling these wild beasts, the dope and its dealers first should be removed from the stables. One problem: the dealers bought the farm! So long as there is a prevailing mentality among ranch hands defending such fallacies as "AIG had to be saved," then what stability, really, can come rebuilding the wall separating commercial and investment banking? Geithner, Bernanke, Summers, and countless other Adam Smith lovers in Congress best be let go first, then we can begin rebuilding confidence. However, not even this is sure to radically alter the present, Monetarist Monkey-centric dynamic, because the man at the top remains on the same page as these others. Indeed, that the President's proposal comes one year too late and a Senator short of an absolute majority rather makes the exercise in regulatory religious revival more suspect than credible.

  2. The more pliant and accommodating, less penetrating financial press and its thoroughly debunked, British school bent is hardly worth serious engagement on this matter. Are you listening to these people? Out of their collective mouths we hear so much mindless banter about threats to "free market principles" the banking system's more restrictive regulation purportedly presents, and yet no one bothers to wonder how the financial system and the global physical economy became such an unmitigated disaster requiring unprecedented intervention, given how efficient the vaunted god of the free market is claimed to be.
Besides, the administration's proposal for restoring greater regulatory oversight of the banking system probably had very little to do with today's sell-off. Maybe you didn't notice, but the BKX was among the day's best performing sectors, down only one-half percent.

Rather more likely responsible for today's thumping was the triumph of the American people in defeating the legislative effort to gut the nation's health care system in the hope of freeing capital needed to sustain the bailout regime. Yet not even so much this particular, momentary victory should be thought a serious impediment disrupting Team Fraud. Instead, a Mass Strike movement's strengthening — revealed, first, in Massachusetts on Tuesday, and then again today, with the Speaker of the House of Representatives surrendering — is the more ominous threat bedeviling Team Fraud.

A fantasy-filled financial press thoughtlessly yapping about the supposed threat presented by proposed, stricter banking regulation ought rather be contemptuously regarded than taken the least bit seriously. Good lord, how ever did the financial system and the physical economy prosper for over fifty years while Glass-Steagall was the law of the land? Considering this you might sooner suppose some diversionary tactic hoping to steer attention away from matters at the heart of the Mass Strike movement rather is at play.

Take, for example, GenRe Reaches Deal With Justice Department in AIG Case. Who among Team Fraud would wish this news dissected ... particularly considering how the first reader comment on this story no doubt speaks the mind of tens of millions of people?

company chart (BRKA)

As you can see, with this little judicial nuisance out of the way, it was time to celebrate in Omaha. Yet one wonders whether the bullish spike in Buffett is pricing in the possibility of missing rail spikes sometime over months ahead?

Such risk does not at all seem far-fetched, given real climate change sweeping the nation.

company chart (GS)
company chart (MS)
company chart (JPM)

High volume breaks in the stocks of companies greatly benefiting amidst a much-despised, attempted bailout of a hopelessly insolvent financial system is an eye-catching turn of affairs. Still, given these are companies among a group that, more or less flat-lined over the past five months, levitating while broader-based benchmarks inched higher, one is hesitant to suppose an anticipated bloodbath likely has commenced. Months spent defying growing technical weakness temper willingness to go out on that limb just yet.

Still, bottom line, political cover needed to perpetuate bailout priorities necessary to sustain the viability of a fragile financial system is fading fast. Furthermore, the pace of retreat should only quicken as election day draws nearer. No matter what one might reasonably suspect about the sincerity behind reactionary policy proposals such as Glass-Steagall 2.0, the fact of the matter is none of this is occurring in a vacuum. Discontent feeding a Mass Strike movement is a growing threat to the guiding principles of a wildcat financial system teetering on the edge of collapse.

Fast Money
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