This is, in essence, the entire story of the stock market, as I have found it. Like the South Sea Bubble, the great tulip trading mania in Holland, the Ponzi swindles, and the chain letters of the depression, it is kept in motion by one thing–faith. Sometimes the chain is broken, confidence lost, the whole house of cards comes tumbling down, and we have another Wall Street crash. Then it starts all over again.
-Nicolas Darvas
Wall Street: The Other Las Vegas

A relatively quiet day on Wall Street today as the dollar rose so equities sank.

Someone mentioned that there was a meeting amongst bankers today. Of course, more important than the meeting was the press circuit. Special emphasis was likely placed on make up and less expensive clothing. After all - this bonus scandal is a bit hot right now. Best not to wear the $10,000 suits around for a while.

Supposedly, one of these guys that runs one of these banks (hint : $BAC) declared over the television that at the meeting everyone decided that “we are all in this together”.

Now that, my friends, is the epitome of irony. YOU’VE been in this together for a long long time. Unfortunately, what YOU were in on (excessive use of leverage and negligent risk management) is what brought US here. Now YOU are declaring WE are all in this together. Unfortunately most of US aren’t running around with multimillion dollar bonuses in our bank accounts. Now WE are all in it together. Why ? Because of the losses that YOU racked up through deplorable risk management and excessive leverage. Now, all of this has to be paid for by US.

And that just isn’t right. Is it?

Peace

The credit markets look terribly weak. Especially high yield debt. Below is a chart of the SPDR Barclay High Yield Bond ETF (JNK).

SPDR Barclays Capital High Yield B (ETF) (NYSE)

The credit markets saw a rally the latter part of 2008. They have since faltered. Look for the credit markets to take out their lows from November. Then you’ll see the TED Spread zoom higher than it did last year. Guess what happens then? The $VIX goes even higher than it did in October of 2008.

Weekly chart of the VIX

That’s the thing about Volatility. You have to be positioned before the tipping point hits. If you are positioned before it hits, it is then that you can hit it big.

Peace

The Big Time