Punctum Saliens: One Brown Down Deserves Another ~ The Risk Averse Alert

Tuesday, May 11, 2010

Punctum Saliens: One Brown Down Deserves Another

Perhaps the most interesting takeaway from today's hearing of the House Financial Services Subcommittee on Capital Markets probing last Thursday's stock market dislocation might be gleaned from the surprising appearance of Congressman Barney Frank, chairman of the full House Financial Services Committee. Apparently the chairman was compelled to defend the very necessity for today's hearing, centering his argument in the context of last week's euro-zone crisis and its momentary abatement via another bailout over the weekend (a remedy that the likes of Frank continues being loathe to ever find objectionable).

Chairman Frank's intervention, however, reeks of desperation — a need to defend a status quo whose viability is being severely challenged, both by the markets and within the Congress.

In other words, Frank's presence appeared intended to convey the message that, although the global financial system continues its downward spiral, relevant authorities (i.e. the Congress and the President) are on top of matters with power undiminished.

However, when the world needs such verbal reassurance, is this rather not a harbinger of rapidly approaching chaos, Mr. Schwartz?

This question is particularly relevant because that Herbert Hoover, Jimmy Carter clone in the White House apparently is attempting to kill a bipartisan effort in the Senate to attach a Glass-Steagall amendment to the so-called Dodd bill, taking aim via the umpteenth resurrection of the so-called Volcker rule.

However this card already has been insincerely played by the White House. Fool me once, shame on you, fool me twice, shame on me likely is becoming a growing sentiment among a number of congressional representatives who recognize the increasing danger of a financial meltdown. All the President's men indeed might find themselves confounded to reverse the drive for substantive reform at this very late hour in the life of our wildly dysfunctional financial system.

Which brings us right back to today's hearing. Absolutely nothing to bolster confidence in the stability of the nation's equity markets was accomplished. The very lack of profound alarm — rage — over what happened last Thursday, nor consternation over terrible vulnerability exposed (which vulnerability remains intact, by the way) presented, I believe, one of the most vivid demonstrations of complacency I have ever seen.

Judging by how weak the market's underlying technicals still remain, there is good reason to fear the worst, then. So, brace yourselves. We just might be on the verge of spectacular collapse...

Fast Money
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