Spreading the Fear Too Thickly

Have you ever suffered a panic attack ?
When the base of your throat tightens; your heart starts racing; cold sweat in your palms and soles; and the hair on your head standing at their roots in feverish radiance ?

I have had a few of those before – always when something unexpected and monumentally bad happens. Panic sets in.

Most fortuitously for me, it has only happened twice in my career in the markets. The other 2 times pertained to matters of a more delicate personal nature to catastrophical results in life.

The markets appeared to be in a panic mode early last week, dumping everything they could muster.

24-May-12	Reuters	EU urges Greece to stay in euro, but plans for possible exit
24-May-12	Zerohedge	German Press : “The Greek Exit is a Done Deal”
24-May-12	Zerohedge	China HSBC Flash PMI Declines, Economy Now In Contraction For 10 of Past 11 Months
24-May-12	Zerohedge	Spain ‘Discovers’ 28 Billion In Debt
24-May-12	Roubini	China headed to hard landing, Eurozone recession deepening as PMIs lower and YK reccession deeper while US growth remains anemic
25-May-12	WSJ	Facebook Shows There’s a Sucker Born Every Minute on.wsj.com/LcWo73
25-May-12	Economonitor	The Fed and the Fiscal Cliff bit.ly/LIDNSO
25-May-12	WSJ	Hole Deepens for Euro Zone
25-May-12	NYTimesBusiness	China’s Once-Hot Economy Is Turning Cold nyti.ms/JAzCbe
25-May-12	Reuters	Moody’s cuts ratings for 3 Nordic banks
25-May-12	CNN Money	Big European Funds Dump Euro Assets
25-May-12	Goldcore	Police Urging Greeks To Stop Stuffing Mattresses
25-May-12	DJFxtrader	Weidmann : “Thinking Euro Bonds Would Resolve Crisis Is “Illusion””
25-May-12	Business Insider	China Has Failed In Its Gamble For Growth

2 days worth of headlines heaped onto Japan’s downgrade by Fitch, HP announcing 27,000 job cuts ! and the question of Gold ?

Taking a deep breath… here my take.

Fear sliced too thin in April and spread too thick in May.

Charts showing skittish fickleness, traders running from one currency to another, one asset to another. Because of “meddle economics” its no wonder we have the following FT headline.

We no longer know what things are worth, an advance on when we believed what we were told, but it still threatens paralysis, writes Tony Jackson

At this rate, there are 2 outcomes for June.

1. Capitulation before June 17 Greek elections, or

2. Out of despair comes hope.

David Rosenberg: “Despair Begets Hope” 21 May 2012

Or maybe a bit of both.

Collapses take time and do not happen overnight. Honestly, I have serious questions of what will happen when Greece does make its exit, which according to Citi would be Jan 2013 ? Flight to what ? USD ? GOLD ? JPY ?

I will not be making big bets right now. Only options in Gold, EUR short, USDJPY, XAU/EUR and VIX.

Fear is clouding the vision, numbing the mind and masking the pain.