Game Over: Countdown to Default ~ The Risk Averse Alert

Wednesday, November 30, 2011

Game Over: Countdown to Default

Apparently, cutting by 50% one daily cost of pretending the trans-Atlantic banking system is solvent deserves a 4% increase in the price of toilet paper. Only in fantasy land.

Here's the real message of today's global central bank effort to forestall massive debt implosion: protect the banks while starving the sovereigns (joining municipalities), as the latter scramble to gouge their constituent wealth producers — citizens. And so begins the exciting crescendo in a long-running countdown to sovereign (and municipal) default.

These "genius" devotees of the London School of Economics who steer central banks that, continue acting as though the trans-Atlantic banking system is not stuffed to the gills with "assets" marked to fantasy have played their part brilliantly in hastening an end provoking sovereign default. Surely on the verge of going parabolic is dissent raised by today's statement of intention to squeeze blood from the stone of collapsed national economies as antagonists most responsible for this condition continue being protected.

The question now is whether default, just like the past eighteen months' deviously misguided experience imposing so-called sovereign bailout, can be achieved piecemeal, or instead a chain reaction of sovereign defaults occurs and sends the euro-zone, then the trans-Atlantic and the entire globe into chaotic shutdown. With assets of every sort facing a future in which risks can only increase given present circumstance, the latter likelihood — chain reaction collapse — is all the more probable.

Look, when you're seeing central banks at this point forced to provide cheap financing to satisfy the overnight borrowing needs of so called "banks," the hopelessness of the situation is vividly displayed. Not that such exposure is anything new in the experience of the past few years. Yet three years into playing make believe that dead money is good — this at a cost of trillions of dollars — still finds confidence so fragile the overnight bank lending market now requires extraordinary support. There could be no clearer signal flashing "game over."

That's my humble view, and the market's technical backdrop supports it...


Substantiating the wave count indicated above is volume coinciding with what are assumed 2nd wave peaks. Fitting is today's volume here at the peak of wave 2 of (3) less than that exchanged at the peak of wave (2), but more than that at the peak of wave 2 of (1).

So, the above prospect suggests the current moment is more like early-September 2008 than early-June. Thus, wave 3 of (3) of C lower could be on the verge of unfolding...


Honestly, this possibility has equal shot of promptly developing as the several other alternatives put forward over the past week. We could be at the precipice of a moment following which those long today are hopelessly trapped.

In fact, from a technical perspective there simply is no saying the market's imminent collapse could qualify as an unforeseen outlier...


Quite the contrary! The Volatility Index plainly reveals a consensus quite aware of a frightful prospect and, indeed, poised to make the market's imminent collapse a self-fulfilling prophesy.

Fast Money
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