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The "risk on" trade seems to have returned. It may last 2 weeks or it may
last 8, potentially even
a few more. It may even be good for a new high in
"advanced" Western markets
like the United States. Everyone
knows Greece is going to blow
up, along with lots of other countries. That doesn't mean the market is going to crash tomorrow, since this information is already well known and was likely partly behind the massive spike in the
equity put-to-call ratios seen
a few weeks back (chart below shows only the exponential 10 day moving average in this ratio over the past 4 years to get rid of the "noisiness"
of the daily data):
Now, having shown this chart
for the second time and having previously warned against being bearish based on this data, I understand people who are feeling bearish. The whole global economy is being held
together only by unprecedented government guarantees/interference and
massive currency debasement.
It is sad, really. And it isn't right when viewed from the perspective of
conservative savers and the future generations that will have to deal with the
chaos that is sure to result from the ridiculous decisions being made on "our" behalf by those who clearly either
don't have a clue and/or are selling
out their countries for their
own personal interest.
Speaking of such biased parties, Goldman Sucks
(i.e. Goldman Sachs) has certainly become a magnet
for the current populist
rage, particularly in the United States. I can't say I have any sympathy for this firm. The fact of the matter is that this
corporation has been pulling the same scams for decades, but few notice or care when
times are good. As the social mood continues to deteriorate with the economy, let's just say the partners at Goldman Sucks would be
wise to keep a much lower profile.
But the chart of this firm, which of course only exists due to the generosity of the government, doesn't look healthy.
The "smartest guys
in the room" apparently didn't
see the Great Fall Panic coming at all, since they were
thoroughly bankrupted and
needed a helping of government teat milk to stay solvent. Those of us out here trading in the real world that made a fortune shorting firms like Goldman Sucks and JP Whore-gan in the teeth of the late 2008 storm despite government bans on shorting these
"important" corporations know that the
piper still hasn't been paid.
Financials remains the weak link and they have been lagging for a while. The current chart of the poster child of government largesse (i.e. Goldman, ticker:
GS) makes me think they are going to need another bailout sooner or later. Apparently, they haven't had enough time to detoxify their balance sheet despite all the money they were given
and the time they have had
to sell their toxic crap to Uncle Sam and the so-called federal reserve (not federal and they have no reserves, so Orwell would be proud,
much like with the so called
patriot act - but I digress).
Here's a chart of Goldman
Sucks over the past 27 months to show you what I mean:
Living proof that fascism
(i.e. corporatism for those
that don't like harsh terms
to describe our
"modern" world) doesn't work. But all needling of
Goldman aside, it is not a good sign for common stocks in the U.S. when
Goldman can't do well.
Our so-called "FIRE" (i.e. finance, insurance, real estate) economy needs the financial sector to do well until we
figure out a way to re-tool
our economy. And trust
me, though the situation may
get darkest before the dawn, the U.S. could potentially have a
massive economic renaissance after
all the bad debt gets liquidated, but only if we can
figure out a way to massively
slash the size and scope of our government
and their corporate
parasites/ticks.
In any case, such weakness in the financials is why I am
currently bullish on the
short to intermediate term
in risk assets but am still bearish
on the longer term. I think
Gold and silver bottomed yesterday for this shorter-term time frame but I don't
see a massive rally taking place right now. I still like the idea of a triangle
correction in Gold over the summer before a fall rally once governments realize it's fraudulent money printing or Armageddon part 2 in the financial markets. Austerity in Greece will work as well as fur coats in the desert during a heat wave.
Please keep in mind that Goldman is due for a bounce higher from current
levels, so I wouldn't be shorting
them right now. The character of the bounce in GS may or may not suggest a good opportunity in
the future, but I would be
careful shorting
"important" (i.e. those with lots of government bribe
money) financial firms in
the U.S. given the previous
bans on shorting connected
financial corporations in
2008. I think there will be better
and safer opportunities
out there.
Watch the apparatchiks cave later this summer and watch the currency of kings respond when this happens
the way you would expect - with a massive rally in the
Gold price in all major currencies
despite any and all attempts to stop it. In truth, things are someday soon going to get desperate enough that central bankstaz are going to start praying for and encouraging a higher Gold price. Hold your Gold outside the banking system until the Dow
to Gold ratio hits 2.
Adam Brochert
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