The Many Signs of End of Times ~ The Risk Averse Alert

Wednesday, August 10, 2011

The Many Signs of End of Times

Shhhhhh! The European banking system is imploding, but it's not 2008.

No! It's 2011: a most unique moment — and a confused one at that — in an ongoing systemic collapse whose recent past saw the once mighty Lehman Brothers — "Zeus" of systemic lynch pins — present an astronomically greater exposure to systemic stability than does an entire continent comprising major, developed nations presently. May I offer you a smelling salt?

Not to worry! Even if I am right to point out this collapsing euro-zone slash it's not 2008 paradox whose present risk's disbelief is trustingly satisfied with power lenders-of-last resort have gained since the "mighty" Lehman fell — this giving authorities capability to quickly address whatever trouble arises — there is today, besides, less leverage than existed in 2008, or so it is claimed.

Yet, that's not what Doug Noland said. "In less than two years, hedge fund assets surpassed a record $2.0 Trillion." Truth is leveraged speculators remain even more threateningly disposed now than in '08. How's that? With sovereigns — lenders of last resort — under pressure everywhere? Has this rhetorically answered it? Increased leverage's risk is undeniable.

Already its consequence has been revealed in spades.

As I was saying yesterday ... the sophistry just keeps getting thicker. Every minute counts when there isn't enough Charmin in the world to clean up bank balance sheets. And wasn't today a beauty in hopelessly insolvent land!

First, there was Bank of America groveling to a hedge fund. Then, as if this weren't enough, the man who has never told the truth in public claims the banking system is well-capitalized. An Allan Schwartz double header!

If your position as a banker were not precarious, would you bother sucking up to a hedge fund? You don't like the company, Mr. Berkowitz? Sell. That's the way it would be were things even close to stable. And now, with both leveraged speculators reeling and sovereigns on the ropes, this is a good time to trustingly believe all is under control? No! This is a good time to send out a CEO well regarded in the hedge fund community and have him say the banking system is well capitalized.

It's over.


We'll need a lot more hedging than this before there's a serious bottom. Look what it took last May (2010). Not only was trust and belief a lot stronger then, the market's undoing was not nearly as awful.

Any attempt to put in a bottom naturally will find long equity interest well-hedged with put options. Chances are, too, it is going to take considerably more juice now than in May 2010. This much should be intuitive. Thus far there appears no line in the sand drawn. Therefore, in all probability the market is going lower, and this until such time as a well-hedged long interest steps up and lends strength to a bottom.

So, here comes another weekend, and already euro-zone problems have spread from Italy to France. No doubt, the Obama, Bernanke pow wow today raised the issue. Yet both being boxed in lap dogs what could they have resolved? Their political message as the crushing blow is delivered? Certainly not a response resembling anything American! These two are traitors to the tradition.

Whatever happens tomorrow, there's a good chance by this week's close there will be sorrow: another awful week following on last week's awful throttling. If ever there were a weekend before which a consensus of interests might rather not be so terribly exposed long equity, the approaching weekend, with its recent precedents, offers all the right ingredients for an awful bloodletting bringing capitulation to conclude a third wave down from July 7th top...

Fast Money
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