Discord 101 ~ The Risk Averse Alert

Friday, January 21, 2011

Discord 101

Surely, in the grand scheme of things, as ever, the financial world has its game masters and its players. When harmony prevails both groups can prosper. Yet when discord arises both will falter.

That the latter state best characterizes the present condition of the trans-Atlantic financial system is a conclusion whose evidence is bolstered by events this week in Europe...

At first glance the collapse of European sovereign debt yields might appear that, someone is blinking. Yet, if what Simon says has any truth — that Europe's sovereign debt woes soon will be resolved — then the trade in Europe this week entirely could be a matter of game masters simply positioning themselves in advance of this "resolution," while in the process shaking out weak-handed players whose wherewithal will be needed when it comes time for those running the game to pare their short exposure.

Surely, the need for bailing out a European banking system choking on worthless securities has not diminished on account of German resistance. By no means! The crush for capital remains.

So, what's a game master to do? Ah yes, squeeze the players. Discord 101.

None of the capital raised in such an attack could buy much time, though ... and quite clearly those running the game know this. That's probably why Ireland did not join this week's Euro-sigh-of-relief. Being just weeks away (if not days) from a new government whose bailout unfriendliness stands to make even Germans blush, there's no point pretending "resolution" of European debt woes portends anything but sovereign-crushing chaos. Indeed, Ireland must remain the poster child backing the EU agenda for "resolving" Europe's financial troubles if Asia is to be suckered into supporting sovereigns on the European continent.

So, the viability of the supra-national EU evidently hinges on Ireland ... and this at a time when repudiation of that nation's recent agreement with the IMF and ECB threatens to become the clarion call of political leadership vying to take power in coming Irish elections. Of course, in the process unwanted attention necessarily will be drawn to the fact that, it's the banking system, not sovereigns, at the epicenter of the trans-Atlantic financial system's insolvency. That's a problem for another day, however.

Now, in addition to this week feigning "attractiveness" of über-leveraged [sovereign] "assets" on the European continent game masters also put to work the tried-and-true, "CME-juiced short-squeeze cocktail" today on the back of an over-leveraged GE...

company chart (GE)

Take GE's Elliott wave count over the past two years for what it's worth. Whether today's gap higher merely was "throw over" in formation of a rising wedge's fifth wave (completing wave c of an a-b-c corrective wave up from March '09) should be a question resolved in a matter of a few days. The more critical matter right now is whether GE grew any coattails on account of its sudden surge of attractiveness...


Nyet. Again, we have nothing but evidence of discord rather than any sign of growing unity among a broad spectrum of listed-issues.

Something of discord, too, is revealed via the Facebook vs. Google think making its way into the mainstream recently. Come on, Facebook? It's the new MySpace waiting to fade the minute its low barrier to entry is hurdled.

And when was the last time you saw a commercial for Google search ... in comparison to Bing's dozens? You know why that is? Because there's no competition.

Per the comparison of site visits, Facebook vs. Google — wherein Facebook recently has surpassed Google — does this include visits to the hundreds of thousands of sites that feature "Ads by Google?" Probably not. What about YouTube? And the elegant Droid?

The [self-serving] claim that, Facebook is worth $50 billion reeks of Y2k's "New Era!" Could this be a [capital-starved] firm working a still hungry crowd that is no better guided now than was the case eleven years ago? Gasp! Probably.

Fast Money
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