Market Crash

In the spirit of George Orwell’s Animal Farm commandment: “all animals are equal, but some animals are more equal then others” comes the galling news that bankruptcy trustee, Louis Freeh, could approve the defunct, MF Global to pay bonuses to certain senior executives. This, despite the fact that nearly $1.6 billion of customer funds remains “missing” or otherwise partially accounted for, yet beyond the reach of those customers, perhaps forever, since before the firm declared bankruptcy on October 31, 2011... The Orwellian nature of finance is spiraling out of control. It was acutely demonstrated during the fall 2008, merge-and-be-bailed period, and subsequently, through mainstream acceptance that “too big to fail” validates the subsidization of reckless banking practices (bail first, ask questions or consider tepid regulation later), and the European debacle. Three wrinkles of audacity underscore the potential MF Global bonus approvals.

Some of these 15 swans are blacker than others....

All this money sloshing around is nothing but kindling. This is enough to start one hell of a large inflationary fire, but probably not until we have a deflationary panic first – which will add even more kindling to the pile. The progression from the $1.5 billion Chrysler rescue to the current multi-trillion dollar worldwide financial support operations seems to parallel the march from the first US forestry service attempts to limit forest fires about a century ago to the far more sophisticated efforts possible today... Studies have shown that the onset of that catastrophe is almost totally unpredictable. By suppressing small fires, the forests approach an unstable state where the dead wood, resulting from the natural cycle of birth and death in the wild, is piled high, ready to explode into flames if the conditions are right. The central banks and other governmental authorities have piled the money so high that bubbles are popping up everywhere. With so many bubbles and so much kindling, volatility in price is a sure thing. As research has shown that the timing of these dramatic breakdowns, whether a forest fire, an earthquake, or a market crash cannot predicted, or mitigated as it runs its course, the time to control these crises is way before they start. The US Forestry Service knows that, please tell Bernanke!

We need to look to Europe now to see what TPTB have in store for us. This is the consummate problem, reaction, solution game being played for all the marbles. First, you get the problem “spiking interest rates for the peripheral countries.” Then the “reaction,” financial panic and fear. Finally the “solution.” The placement of unelected technocrats as the leaders of Greece and Italy with ties to all the power structure’s institution such as the Trilateral Commission, the Bilderberg group and of course Goldman Sachs. It is like a coup that takes the shadow government from the shadows and puts them in your face. The reason that this is so key is because we are next. They don’t want to roll up everything at once. If they can get Europe safely consolidated then they will move here. That is when interest rates in the U.S. will spike (problem), and we get panic (reaction) and then the solution (bankster technocratic committees in charge and the IMF to the rescue, ie loss of sovereignty). This is the plan and I see it as clear as day.

Now everybody's bank bashing, of course the reason to bash the banks is 4 years old, despite Bove-like analysis to the contrary. I will discuss this on CNBC for a FULL HOUR tomorrow from 12 pm to 1pm.

Explain to me again, how often is EVERYBODY ALWAYS RIGHT? Finding value in not following the name brand following crowd...

Here comes the (re)crash and the search for shortable stock is on! The good thing about bankruptcy is that despite silly manilly market, bankrupt is bankrupt and the stock will act accordingly. Ask GGP/LEH investors.

A lot of stuff in here this morning.

You're about to hear a big boom come from across the Atlantic, but I've yet to hear a peep from the rating agencies. And many of you guys think they were delinquent during the other credit bubble!!!????

GGP part deux, as the hopium high sold by US regulators that allowed banks and borrowers to pretend bad loans were good wears off and reality sets in..

So, who're you gonna believe, your NYC broker or your lyin' eyes???? Another Reggie Middleton "I told 'ya so" exclusive...

We have now entered the fifth year of this Fourth Turning Crisis. George Washington and his troops were barely holding on at Valley Forge during the fifth year of the American Revolution Fourth Turning. By year five of the Civil War Fourth Turning 700,000 Americans were dead, the South left in ruins, a President assassinated and a military victory attained that felt like defeat. By the fifth year of the Great Depression/World War II Fourth Turning, FDR’s New Deal was in place and Adolf Hitler had been democratically elected and was formulating big plans for his Third Reich. The insight from prior Fourth Turnings that applies to 2012 is that things will not improve. They call it a Crisis because the risk of calamity is constant. There is zero percent chance that 2012 will result in a recovery and return to normalcy. Not one of the issues that caused our economic collapse has been solved. The “solutions” implemented since 2008 have exacerbated the problems of debt, civic decay and global disorder. The choices we make as a nation in 2012 will determine the future course of this Fourth Turning. If we fail in our duty, this Fourth Turning could go catastrophically wrong. I pray we choose wisely. Have a great 2012.

Flashy Crashy. Is History repeating itself, or is this time different?

I fully believe that we may in fact be on the verge of a Crash in the markets. All the Red Flags are there. Europe’s entire banking system is on the verge of systemic collapse. Take a look at European banks and you’ll see what I mean.

In keeping with the tradition of always blaming something for everything that doesn't do quite as expected, be it the rain, the heat, the cold, the snow, (henceforth known as "the climate"), the earthquakes, the tsunamis, the nuclear power plant explosions (henceforth known as "the life"), or simple things (no pun intended) such as former presidents (henceforth known as the "Bush"), even when the current one is campaigning hard for this second term, we now have identified the one and only culprit for the market collapse: Europe. As the following chart from John Lohman demonstrates, just like back in 2009/2010 the entire market move higher was due to POMO days and the "first Monday" phenomenon (between these two events alone, they accounted for about 120% of the entire market move higher) in the past two years, so now we have the inverse situation, whereby almost the entire drop in stock can be blamed on Europe. Specifically, well over twice the market decline since the beginning of July can be traced to market hours in which Europe is open, while the drop in hours when Europe sleeps is completely unremarkable. For the arb-minded, this means that selling the Europe close to Europe open and buying the Europe open to Europe close boundaries will result in outsided returns. Then again, this has been known for a while: as we tweeted today at 11:30 am Eastern when Europe close, we expected the melt up to proceed. Sure enough, 150 DJIA points later, this was the only catalyst that was required. However, a caveat: these simplistic trades usually work amazingly well, until they don't and someone ends up getting badly hurt.