On the Prospect of Imminent Doom ~ The Risk Averse Alert

Thursday, September 16, 2010

On the Prospect of Imminent Doom

How is the lender of last resort backstopped? Of course, it is with tax revenues. So, might the Bush tax cuts simply be left to expire at year end?

Last Friday I thought the stage possibly was being set for a "coaxed" extension of the Bush tax cuts. However it occurs to me that, failure to legislate an extension might be thought best given the financial system's still awfully precarious state.

Consider this prospect in the framework of a herculean effort to maintain the illusion of normalcy made over the past couple years in an attempt to buy time so excesses might be worked through. Well, the excesses — in fact, historic imbalances — are proving rather momentous. Were taxes set on a course to dramatically rise, then, suddenly, any illusion of a near-term return to normalcy might be shattered.

OEX monthly

It has been some time since a longer-term view has been assessed. My, how monthly RSI suggests the present moment probably is best thought extraordinarily precarious!

OEX weekly

Ditto weekly RSI.

From this perspective an imminent trip back down to March 2009 lows might be a "best case scenario," for it rather appears something much, much worse could be in store. Richard Russell's forecast earlier this year for an unrecognizable country by year end, indeed, has real possibility. Collapse could be at hand.

Fast Money
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