Red Hot Garbage ~ The Risk Averse Alert

Tuesday, March 13, 2012

Red Hot Garbage

You gotta hand it to the bankrupt pricks. When every minute counts, they make the most of it. Apparently, the situation at JP Morgan Chase is so frail, the firm found it necessary to front-run the Fed's planned Thursday announcement of so-called "stress test" results. Just how the firm's massive, opaque derivatives book was analyzed by the Fed is anyone's guess. One might suppose relegated to some long tail outside the Fed's parameters was the real risk JPM faces: disorderly debt destruction. Yet the deflationary collapse-o-meter remains well in "danger" territory, this notwithstanding everyone and yo momma suggesting the end of the "bond bubble" is nigh.

Meanwhile, those previously projecting a "blow-off top," might be disappointed to learn that, an across-the-board wealth of technical divergences suggest today's lift could be the last of it (with some measures for months already signaling the market's extraordinary underlying weakness). Although seemingly everyone expects more hyperinflationary happiness from the [bankrupt] Fed, no indication of this being soon forthcoming was given today by the FOMC. And despite February's largest monthly federal budget deficit in U.S. history satisfying the market's voracious appetite for highly-rated securities which to synthesize hedges needed to protect the mountain of junk on bank balance sheets, difficulty Team Fraud's political marionettes are having igniting world war (aiming to bury taxpayers in even more debt otherwise necessary to prosecute such a war) leaves in doubt future supply of qualified securities facilitating an endless stream of hyperinflationary happiness needed to mask a hopelessly insolvent banking system.

Of course, some will claim Dimon's move today to preempt Thursday's planned announcement of the Fed's stress test results but another demonstration of arrogance dominating the banking community. All I might add to this thinking is that in desperation is arrogance typically most obscene. A look at JPM's stock price (let alone its dwindling dividend) over the past 10+ years Dimon has been CEO and one might conclude Wall Street's worst liar, indeed, is on the ropes.

One thing certain is today's lift did nothing to alter the outlook for increased market volatility. If anything, circumstance underlying today's advance only confirms this probability. Muted volume (broadly speaking, while $XLF's swelled), but icing on the cake, suggests the hopelessly insolvent led today by way of a short squeeze (as opposed to anything indicating broad-based accumulation).


If the sound of squealing, stuck pigs about to be slaughtered is filling your ears, this might have something to do with another technical measure appearing at the doorstep of doom. Could there be a more perfect setup for an outlook projecting increased volatility? Here again, like $VIX, momentum of the differential of NYSE new 52-week highs and lows is in a position that, over the past two years has coincided with the onset of market weakness.

So, I wonder if this week might prove a reverse image of last week (whose Tuesday was a dud). The imbalance between arrogance in the banking community and rage in the investment community over garbage banks have sold them is coming to a boil with the so-called mortgage fraud settlement moving toward finality. Banks, obviously, are desperate. So, too, are RMBS investors being made with this so-called "settlement." Just as war in the Middle East appears imminent, likewise does war on Wall Street.

Fast Money
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