A Dysfunctional Credit System Worthy of Fed Panic ~ The Risk Averse Alert

Thursday, July 29, 2010

A Dysfunctional Credit System Worthy of Fed Panic

Would there be any debate surrounding increasing federal government indebtedness — whether the problem be thought a spending problem or a revenue dilemma — were not the credit system in fact dysfunctional?

Indeed, this is where the discussion ought begin and end. Those in positions of power and/or influence who otherwise sidestep this issue present themselves as either incompetent or coward directing attention to anywhere but a credit system incapable of distinguishing sound investment opportunities from criminal scams.

There simply is no depth to which spending can be cut or the tax system altered whose effect will mitigate reality that, the economic foundation upon which the current credit system flounders is in a state of accelerating collapse, incapable of generating cash flows necessary for keeping all claims solvent and all interests afloat. Obviously, too, the credit system in its present state is in no position to reverse this condition. Were truth otherwise, then the debate over the federal debt's parabolic increase simply would be nonexistent.

Thus, the current discussion — whose intensity only is likely to grow, yet more wisely should be regarded a purposeful misdirection — plainly demonstrates that, anyone considering stocks viable long-term investments — indeed, calling them "cheap" — simply lacks sound skills of fundamental analysis.

Chaos of increasing orders of magnitude rightly is seen being baked into a cake whose maggot infested flour is blithely ignored while "fixes" that at best might mask this awful reality for some short time are elevated to matters of critical importance among incompetents and cowards.

This is our world. And until such time as our hopelessly insolvent credit system is put back on sound financial footing enhancing mankind's productive powers, chaos will rule.

Now that the lender of last resort finds itself under attack from the very maggots who have brought it to the brink of ruin a frightful alarm should be heard sounding (this as St. Louis Fed president Bullard's panic makes the noise all the more shrill): chaos looms.


There appears plenty of room within what today still appears a rising wedge forming off June 29th bottom for such further sideways-to-down action as causes relative strength (RSI) to deteriorate in a manner typical of five wave advances (and in so doing indicate the advance off June 29th bottom is nearing its end).

Thus, we probably are looking at another week or more before we are hit by the leading edge of the storm everyone and your momma in some way or another rather pointedly is revealing to exist on the horizon (irrelevant is whether the likes are intelligent enough to understand the meaning of their manner of seeing).

Looking ahead, the market's initial move lower should rapidly take out June 29th's low, as this is typical behavior following formation of a rising wedge.

Again, whether this "special" Elliott wave indeed is forming remains to be seen. Today's trading, however, certainly furthered the possibility.

Fast Money
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