No Financial Crisis, But Banks Will Underperform? ~ The Risk Averse Alert

Sunday, July 03, 2011

No Financial Crisis, But Banks Will Underperform?

According to David Goldman, there will be "No Financial Crisis, But Banks Will Underperform." Now, a lot of people will read that as meaning, woo-hoo!, bull market in store. Yet this is by no means the only conclusion — let alone the likely one — to be made from Goldman's case.

Why not consider those derivative fee junky casino gamblers he covers as simply being in position to withstand the physical economy's invariable contraction and consequent social upheaval unfolding as you read this? Then, we might see how in the upcoming stock market collapse those banks clobbered in '08 might fall 70% from here and still remain above their '08 lows, much as I have been supposing for some time now, while the rest of the market at last joins the financials in misery.

With but a tiny tweak, then, Goldman's headline might better read: "No Financial Crisis But Equities Will Underperform." And to be fair, indeed, he has been saying so much with arguments calling for deflation.

I would argue, too, that, the consensus among the stock market's movers and shakers has been projecting precisely the same, and this for as long as lenders of last resort have been proving themselves but the fabled last sucker in (be they profligate or austere)...


The NYSE New 52-Week High-Low differential is a picture that says a thousand words. Animal spirits: vanquished. The past six months ... the past year ... but a stark reminder that...


Equity is dead money, and this the consensus of interests resoundingly voted with its feet when Adam Smith's Leveraged Ponzi Scheme entered its collapse phase in 2008. This vote, too, more ominously explains, "Why Covered Call Writing Is No Free Lunch [for Eaton Vance]"

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