All Eyes On THE Trillions of Dollars Bottom ~ The Risk Averse Alert

Thursday, January 05, 2012

All Eyes On THE Trillions of Dollars Bottom

Yet another ominous sign of the times is delivered in rumor of some Fed miracle cure whose mere mental effect on perplexed doctors clinging to a dying patient shows hope for eternal life abounds among mortals bidding up banks and financials. Would some other sentiment toward the patient be more rightly fitting a moment preceding a Great Flatline spreading fast from the euro-zone periphery to the core and beyond?

So, what happens when a huge Italian bank is brought to its knees? Does the Italian parliament dissolve and say, "Here-a, take-a Italia?" How much more before the push for sacrifice is met with a defiant shove? Which is not to imply a new political course is likely to be more democratic and not at all fascist. In fact history suggests a likely political outcome could be quite the opposite. All the more presently with everyone everywhere stepping in this very unappealing direction.

Now, being that it is a fair certainty something upsetting to the financial system is behind the slide of banks and financials over the past year, and not only is nothing on the horizon potentially alleviating the patient's dire condition, but near-term risks threatening death abound, then a different view toward this group is both in order, as well as more likely fitting the moment. Take for example BAC...


About a year ago (and some months before that, too) I argued those issues most punished in the 2008-2009 mayhem might have seen a so-called generational bottom. Yet while these could be set back some 70-80% from their 2010 highs and remain above their March '09 bottom, the broader market might be throttled to the effect of sinking major indexes to levels last seen in the 1987-1994 period. Plainly, though, something else is in store.

How important is March '09 bottom to banks and financials most emphatically! Should it give out — confidence in recipients of tens of trillions of sovereign support vanquished — everything else in all probability will be slated to follow. In other words, following break of March '09 bottom among key banks and financials, a bottomless pit will be revealed.

Yet in all fairness many likely suspects are well on their way to this game over line of support. BAC is not alone. Still, recent decades' fonts of economic "growth" fading are no recipe for recovery. One might rather say these foretell disaster, even near at hand. Yet today a trade is swayed by seeming bargains floating in the calm seas of a New Year. No better sign of the times than a market whose New Years Resolution is to catch falling knives...

Fast Money
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