By John Galt
September 23, 2011 – 05:01 ET
Effective at 5 p.m. Wednesday, September 21, 2011 the most profitable company in America was:
Any bar within walking distance of Wall Street.
With thousands of financial industry workers facing layoffs, the Federal Reserve dropping their shorts and mooning the Obamites and retirees of the nation, and Main Street more concerned about the televised distractions of our Roman Circus based society, the world is sending a strong signal that the cyclical bear has departed from its cave and wants to chow down on some bull.
The one chart I commented on earlier this week is sending one hell of a warning of the onset of deflationary episode that started several weeks ago:
(chart from INO.com)
The breaking of the 50 day moving average isn’t the key, that’s just a symptom. Deflation is the most pressing problem as asset values collapse and fictional balance sheets at the world’s financial institutions and corporations implode. The major crisis that is about to occur will be due to solvency issues in many Western economies and worse, accounting creativity finally being called on the carpet after years of science fiction being promoted to the investors of the world.
In a second bear market, after a near world collapse in 2008, everyone who gets caught in a lie will be zapped. Governments, banks, manufacturers, and even internet companies which relied on investor’s financial libidos rather than actually improving and expanding product will be taken out back, given a blindfold, and summarily executed.
This is going to be the bear market that your grandchildren will talk about decades from now.
With U.S. futures up slightly at this moment, watch for a wild day with selling into each rally and absurd statements emanating from the world’s political capitols. In the end, the smart money will be selling like there is no tomorrow, and frankly speaking, there isn’t one.
If we finish with a 2% plus correction today, Black Monday or Tuesday is coming.
If we finish up less than 0.5% today with any bad news over the weekend and Monday could be even uglier.
A finish of 2% plus today with promises of more printing and stabilization might occur but the decline will begin again some time next week and accelerate in October.
Either way S&P 1094 will be violated and the 990-1005 levels tested before all is said and done. Of course, 990ish on the S&P cash is my optimistic assessment, it could get a lot worse with the idiots we have at the Fed and in Washington, D.C. mangling policy and intervening in our economic system.