Condor Options

This creepy gossip via Naked Capitalism:

Forgive me, but we are going to be a bit lean on posts tonight. I had too much to drink with someone who is terribly plugged in (security clearances AND knows tons of people in academia and the officialdom personally, both here and overseas).

Unfortunately, I can’t use many of the specifics he conveyed, but he is a very upbeat sort by temperament but also has been studying the banking/credit mess. He sees us going down the Japan path. Banks will not be technically bankrupt, but will have so many bad assets on their balance sheets, and will have taken hits to their equity bases, that 18 months from now they will be unable to make new loans. They will be quasi nationalized. BTW he said this in a completely evenhanded fashion, as if he was giving a weather report.

This, mind you, comes from someone who has written frequently for the American Enterprise Institute and tells me the Treasury and the Fes are working on this scenario now. This is far more dire than any forecast either yours truly, a constitutional skeptic, or even uberbears like Nouriel Roubini, have been putting forward.

So, world coming to an end, etc. etc.

And a great reminder today of why everyone should be reading VIX and More:

The chart tracks the ratio of up volume to down volume for the NYSE and uses a 21 day EMA to smooth the data. The NASDAQ version of the data looks similar, but this NYSE chart shows the potential for volume data to help call both tops and bottoms in advance. So dial up some Mahler and watch the volume.

[You'll have to click through to see the chart]

The Helicopter Man speaks in about an hour; we’ve been treading water all day, so hopefully he has something nice to say and everyone takes it as an excuse to rip things higher.

[tags] Fed, markets, banks, VIX, Japan [/tags]