Of Belief and Disbelief...

That’s all that’s left of what our financial system is based on. Over belief in central bankers to overcome everything and anything. This is most definitely NOT the case, as evidenced by the ECB and the FED’s failure in Europe.

Situation Normal all F**ed Up…

Cyprus was a slow motion train wreck facilitated by the FED and ECB encouragement for EURO banks and institutions to take advantage of central bank liquidity and to take risk buying very risky bonds. Withdrawals from Cyprus banks hit critical mass and the ECB, given a litany of new and larger calamities that are coming up fast, decided it could no longer support its own charade, whereby lots and lots of economies pretend to be solvent because ECB says they are and find out they are not when ECB says that they are not.

During this time, it seems pretty clear that just about any asset other than a European bank deposit is a better risk - given that you can easily lose 70 to 90% in a bank. This apparently has had the effect of levitating the US equity markets despite significant declines in most every commodity market. It also, supported the dollar which is certainly counter the equity rally in the US. However, what is happening now is the collapse of other much large banks than the Cyprus institutions…the grace period offered by the symbolism of the Cyprus adventure will not be afforded for a bank in the top 100 as per assets. This is what is happening in Italy right now and when the bank run starts there in earnest, which seems imminent, there will not be sufficient sovereign capital to back up the bank and there will be a very real risk of a cascade of bank insolvencies and sovereign defaults. This will not result in the outcome of people being afforded the luxury of picking up bonds and other assets in the US (the least of the dirty shirts) or time to make adjustments. Instead, it will result in assets being liquidated here and everywhere with great gravitas as the over leverage, over belief and over optimism explodes into the one thing people are forgetting - over risk. Freefallin, Freefallin should not be confused with buying as its dip’in. Believe it or not…

When you find out that your financial institution has no money, it will not happen in such a way that you have time to go calmly to the bank and request a withdrawal…it will happen on a holiday weekend, when you have no real alternatives and insufficient time to get in front of it…the Fed and ECB have setup all the elements required to accomplish the same as this but in a far bigger fashion and there will not likely be time for all the margined up investors and buy the dippers to make the smooth transition they may be imagining.