S&P Implores Congress: Restore Glass-Steagall ~ The Risk Averse Alert

Monday, April 18, 2011

S&P Implores Congress: Restore Glass-Steagall

Say it isn't so! A bond rating agency complicit in the perpetuation of a magnificent swindle? Forty years too late — the minute Nixon trashed Bretton Woods should have come downgrade of Standard & Poors' outlook on U.S. Treasury debt — today's brazen proclamation from an entirely discredited industry represents but a more insidious facet of the fantasy presently binding the trans-Atlantic financial system.

Let's think about this. The U.S. Treasury's solvency is being called at risk, that tribute to a fraud-rife Ponzi scheme it increasingly supports might not be crowded out by obligations falling into the so-called "entitlements" camp? That's the impression you get anyway from most every tool making his or her way onto the airwaves.

Yet do any of these folks think about to whom these so-called entitlements largely are directed? Why it's the Vietnam generation.

Those behind today's S&P move could not have found a worse moment in the nation's history to expose their insolvency. What might rather gather from here is a large captive audience chanting in unison a simple call like, "Glass-Steagall Now!" How effectively might a mass swansong be inspired by swindlers venturing war on that fuller measure of human dignity won by representatives of the many parents and grandparents of those from the dissenting '60s generation. We could be looking at a very hot summer.

Meanwhile back at the ranch, all appears still very complacent. The question is to whose benefit?


Today's market dive took major indexes (save those BRIC faves of the DJIA) below respective 50-day moving averages, and this from day's start to finish, no less. Yet neither speculative fervor, nor fearful, long-equity hedging lit up the CBOE trade in put options. Hmmm.

Then, the matter of modest increase in put option trading since the market's April 8th top at premiums seemingly oblivious to the market's softness...


Could this be something manufactured by interests possessing considerable power to drive the market lower? Might relative increase in put option buying be positioning for a pending market swoon?

This sort of thing would be in keeping with mechanics employed during the market's counter-trend rally off March '09 bottom. Over the duration call options were written, that long equity positions could be trimmed — transferred to those call option buyers who exercised their right following CME-driven short squeezes whose effect gave call options intrinsic value.

So, the question, presently, is whether the same interest finds such great urgency to raise capital that, time has come to cast all caution to the wind.

No doubt, anyone who is not a sucker for days of old — days of ease not soon to return — is keeping an eye on the exit. And as the radical reallocation of wealth higher up in the capital structure since the '08 disaster confirms, non-suckers are a considerable force. Among these, of course, are interests thought to have been paring long equity positions over the past two years, as just described, writing [covered] call options. Might these be risking a mad rush for the exits in an apparent turn of strategy now venturing to drive the market lower, such as the recent, relative increase in put option buying suggests is possibly a new turn of affairs in the making, this at the crossroad of Glass-Steagall and Weimar Germany, 1923?

Fast Money
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