Jenson's Market Movers & Financial News Today - 4/19/2010 - Goldman Sachs, The Highest Nail Theory, Reuters, Volcano, VIX, Bubbles.
Well the boys at Reuter’s either heard something from a little birdie or were struck with a completely ridiculous bout of good luck in their suspiciously timed article about downside potential in the market. Goldman Sachs put numbers out that were just too good to be true shortly after the Sub Prime debacle. In fact, they were so far ahead of all the other banks that it was just too good to be true. “The Highest Nail Theory” is based on the premise of SEC and FINRA promotions being based upon cases against the biggest players in the most egregious market controversies. Obviously, the Sub Prime destruction of international markets tops the current list and Goldman sitting as top dog in the I Banking world painted a large target right on their own backs. There is dirt everywhere on Wall Street if the search continues for long enough. This was simply a matter of when not what. Now add to the Goldman trader shorting clients for a hedge fund manage Paulson to rake in over a billion on a Sub Prime shorting scheme with the other environmental and global economic worries and the market is going to test support levels. A volcano is bringing Europe transportation to a virtual standstill and China facing its own real estate speculation disaster and Asia is trading sharply down in percentage moves we have not seen for 10 weeks. With taxes just being filed and a historically choppy time of year, expect a spike in the VIX as Beta returns to the market. There is no doubt that 11,000 on the Dow will be tested by the Bears to see what kind of support it can muster. We firmly believe in the strength of this market so see this temporary adjustment to be if anything an opportunity for money waiting to come into the market. Additionally, we may see JP Morgan or Morgan Stanley pick up some clients and create a mini brain drain from Goldman as the fallout continues. Perhaps part of the huge hit Goldman took to its market cap will be spread around some of its competitors who seem the least likely to have their own skeletons still lurking in the closet.
We see a volatile two to three weeks ahead as the market is already a bit spooked. With the VIX increasing a quantifiable beta on the CBOE rises, the opportunities in the market will only increase. We wrote Friday about how we did not see a short term correction in the works without an act of God. Well we managed one act and have a few “Actors” trying to play God so the makings for some downside risk are definitely there. An interesting sub plot we commented on is whether there is an actual Bubble developing in the Green Sector and will this Bubble be strengthened by resisting any downside moves the greater market weathers? This would likely be the case in an active Bubble environment though a developing Bubble may or may not embark on its perilous journey to unknown heights. By taking a look at prior Bubbles, we note that each seems to be longer than expected, create market caps that go far beyond any logical rationale, and the subsequent burst has ever more damaging ramifications.