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)...


$NYHL

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...


$NYHL

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]"

* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!