"The problem with movies and books is they make evil look glamorous, exciting, when it's no such thing. It's boring and it's depressing and it's stupid. Criminals are all after cheap thrills and easy money, and when they get them, all they want is more of the same, over and over. They're shallow, empty, boring people who couldn't give you five minutes of interesting conversation. Maybe some can be monkey-clever, some of the time, but they aren't hardly ever smart."
Dean Koontz
I hope everyone has the opportunity to see "Inside Job" in the months ahead.
The issue is not settled. As someone who watches the markets closely every day, often tick by tick, and speaks to market participants around the world, I see an accident waiting to happen in the US financial system. And it is surprising, almost shocking, that it receives so little attention while there is so much focus on the relatively trivial.
We have just witnessed one of the greatest financial frauds in modern history. Where are the indictments? Where is the reform?
It concerns me greatly because it is such a important economy. Such a failure would have unsettling collateral damage on the rest of the world not only because of its size, but through the transmission mechanism of the dollar reserve currency which is pervasive in trade and in most central bank holdings.
Like its cronies on Wall Street, the government in Washington thinks it is Too Big To Fail. It may very well be. But propping it up is probably too great of a task for the rest of the world to bear indefinitely. And so we may have an uneasy year or two ahead.
There is quite an effort to keep the lid on gold and silver here. I suspect that it is part of the holiday window dressing. Those with large short positions do not want to mark their losses to market for year end at higher valuations.
Let's see how long they can comfortably stand on these markets.
I think we are in the calm ahead of the gathering storm.
I started building positions in gold and silver bullion on weakness yesterday and today, hedging them with short stocks positions and long volatility in the VIX.
As of today, the adults have left the building and the kids are managing the desks. So I do not expect anything profound before January unless there is some exogenous development. Volumes are thin and liquidity is plentiful.
A massive shift in fund flows has been underway among individual investors since the 'flash crash' as they flee US bond and equity funds in favor of offshore investments, gold, silver, and other commodities.
Charles Biderman, CEO of TrimTabs Investment Research, has the details and a theory that QE2 is supplying the liquidity to support US stocks at artificially high prices. Biderman says that the government is 'rigging the market.' He wonders what will happen when this monetary support falters. I myself wonder if the TBTF banks are using the Fed monies to build up assets in a pyramid scheme that will do further damage to institutional monies like 401k, insurance, and pension funds. Typically in Ponzi schemes there is a violent market correction back to a sustainable equilibrium.
Could Wall Street peddle fraudulent instruments and cause serious damage to the real economy in order to line their own pockets with fees and bonuses while the government and regulators look the other way?
Uh, how do you think you got here in the first place? Nothing has really changed as a consequence of the failure to reform and allow the system to take its losses. All the individual can do in such an environment of insider trading and artificial pricing is to protect themselves, which is what it appears many individual US investors are doing by shunning US funny money paper and placing their wealth in safer investments overseas, in commodities, and precious metals if Mr. Biderman has his facts straight.
Yes, there is plenty of short term, high risk, cynical money to be made in US equities as in any pyramid scheme while it is building. But one has to know when to get out with a profit. It will be hard to beat the pros to the exits when the time comes.
Following the Fund Flows - Charles Biderman of TrimTabs on CNBC
Airtime: Thurs. Dec. 23 2010 | 4:13 PM ET
Let us pray for those whose hearts are hardened against His grace and loving kindness by greed, fear, and pride, and the seductive illusion and crushing isolation of evil.
We pray that we all may experience the three great gifts of our Lord's suffering and triumph: repentance, forgiveness, and thankfulness. And in so doing, may we obtain abundant life, and with it the peace that surpasses all understanding.
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