Notwithstanding recognition of today's vulnerability in the euro-zone, hope apparently waxes eternal in restoration of yesteryear's status quo manifestation of Ponzi finance...
One can root all they want that, European banks will succeed in "kicking the can down the road," but without a shadow banking system manufacturing the necessary quantity of prized "assets" reliably generating positive cash flows for these banks, there will be no papering over assets of old. That confidence game is over. Last year's stillborn carbon market conceived in the lead up to the Copenhagen climate change summit was securitization's swansong.
The last hope for a massively over-leveraged banking system is continuing the illusion of its solvency long enough that, physical assets (particularly property) can be stolen, thereby providing something substantive which to leverage when the day should come allowing this.
Yet if it were not bad enough that, the second coming of Jesus might more likely arrive first (given Fed-induced breakdown of the physical economy casting a pall on the security of existing capital), last night's "60 Minutes" report on mortgage securitization document lapses and foreclosure fraud has got to be a big concern for those banks who can ill-afford an investor run on RMBS assets presently marked to fantasy on their books.
So, let's talk "undervalued" equities. Were it so, as is widely claimed, then where is the strong bid whose effect, although making stocks less undervalued, could raise the supply made available to those who champion their cheapness?
Ho, ho, ho. Oh, that was three months ago. Today's volume — the thinnest yet this year, and following on two weeks proving that, fear is in shorter supply than is confidence in the resurrection of the shadow banking system — rather stands as further testament that, the "undervalued" camp, for the most part is all in. Were truth otherwise, then all manner of claimed cash on the sidelines would be coaxing those currently long to give up their shares, that "value" yet realized might be more fully captured by those making this ridiculous claim.
Likewise, today's M&A is but an echo of that which occurred in the heat of collapse during the latter half of 2008. Reshuffling the deck chairs can no more keep today's leverage afloat than it could Titanic.
Now, it hardly seems likely that, those "all in" suddenly have found the wisdom to hedge their positions. Rather, today's conspicuous bump in the CBOE Put/Call Ratio could be a matter of positioning for the bloodbath ahead.
Had there been some notable indication that, underlying technical strength was increasing in formation of March 16th bottom — something along lines occurring prior to late-August 2010 bottom — then today's lift in the put/call ratio might be thought similar to early-September 2010.
I could be wrong, as it is possible that, in this final push higher off late-June 2010 bottom (and March '09 bottom before that), those capital starved desperadoes thought principally behind the market's advance since March 16th might be hedging their current long exposure, that plans for slowly bleeding suckers calling stocks "undervalued" might proceed through April options expiration (4/15), with risk of upset appropriately hedged. Yet, then again, the hour seems late for this sort of thing. We will see.
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