A Will To Be Fleeced Sighting ~ The Risk Averse Alert

Wednesday, December 18, 2013

A Will To Be Fleeced Sighting

Probably the most insightful question asked at today's Confetti presser was whether the Fed's third attempt at decelerating the rate at which it is tempting insolvency will prove as fruitless and misguided as the first two did. The answer, of course, is yes, today's $10 billion per month QE taper is virtually certain to prove another case of wishful thinking from the gods of zero due diligence. We'll see if soon to be crowned Queen Confetti taps the brakes again when the fate of annual bonuses on Wall Street is not quite such an imminent concern. The Dow's leadership today pretty much gives away the motivation behind a market move otherwise counterintuitive to fundamental reality, which matter was raised in another question querying the Fed Capo about why the economy remains so sluggish in the face of the Fed's extraordinary subsidy. Naturally, Confetti wasn't about to state the obvious and admit the U.S. banking system is hopelessly insolvent.

Could $10 billion less per month push the banking system over the edge? You bet. In the face of a squeeze likely to develop on account of the mere prospect of less juice forthcoming from the Fed, an economy dominated by leveraged speculation fueled by fictional accounting creating reserves that in fact could evaporate in an afternoon's trading instead finds Confetti's meager attempt to manage market psychology no match to "wealth" waiting to be destroyed in a less liquid climate. The lesson of the Fed's two previous attempts to loose from life support the hopelessly insolvent banking system over which it lords is that, Ponzi schemes always need more grease, not less.

Not helping matters is a banking system whose assets are marked to fiction. Thus are its so-called plentiful reserves no less a fantasy. This reality has been coming home to roost in emerging markets over the past six months. The Fed is tempting the same hard lesson for the insolvent dung pile atop which it sits.

It's almost comical to watch this Fed puppet pretend he has any hope of removing the U.S. banking system from the trap into which Venice on the Thames has lured it. Of course, that's just me. There obviously are a number of people who buy into the idea the Fed will one day be able to normalize its balance sheet. Seeing as today's "God save our bonuses" trade brought to the table something more than the standard circle jerk manipulating a broken price discovery mechanism, today's fairly notable lift in the volume of shares exchanged reveals the will to be fleeced evidently is alive and well. We might add this to our alternate NASDAQ-based view of Monday. The same trait quite possibly has been influencing "the stock market for the next 100 years" since last November.

The market's still deteriorating, short-term technical state raises odds today's lift will be given back and then some. As there has been more than enough time for the weakest of weak hands to demonstrate their willingness to be fleeced, it's hard to imagine the group stepping up today has much powder remaining. Combine this with what for some money managers must be an almost insatiable itch to lock in profits for the year, these last two days of the week preceding the holiday doldrums seem likely to see the market flat line at best, if not come under pressure. Lord knows in just a matter of a couple hours today, short-term technical measures went from moderately oversold to decidedly overbought, so save maybe some capital fleeing Saudi Arabia looking for wildly mispriced, dollar denominated trash to diversify portfolios otherwise heavily invested in battered cannibals doing business in Syria, Confetti's swansong probably will find high notes straining for more liquidity, the likes of which the delusional Fed thinks it can refrain from providing.

(p.s. Any Federal Reserve official who argues for an "inflation target" should be shot on the spot. The Fed's well established imperative to impose paradigms facilitating backdoor taxes simply is criminal. Should we simply be satisfied with the Fed's apparent willingness to confess its criminality, as such, advocating inflation targets? I think not. What good, really, comes from the Fed's increased transparency when in fact it only strengthens Madoff's case for appealing his well deserved life sentence?)

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