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I had a little time over the weekend to think about market structure, capitalism, and the NFL. Unfortunately, I had this opportunity during the second half of the Broncos vs. the Patriots game. (Full disclosure: I am a Broncos fan and would like to thank them for an exciting season.) As most should know by now the Broncos were defeated by a superior New England Patriots team. Tom Brady and company were at the top of their game, the Broncos not so much. The "market place of football" determined a winner.

Some of the audience might be wondering how the author is going to link Bernanke to Tebow, others might have seen this as a weak attempt to tie into Tebowmania. Bear with me...

We take for granted that the NFL is a fair and organized market place to determine the best team. Generally speaking, it is. We are aware of all the players stats, we know the teams, we watch highlight reels (research), the referees are "fair & balanced" and most important the game is played in the open so everyone can see. So you get the point? But now let's assume Ben Bernanke is the referee and the game is played without any knowledge of players stats and the second half of the game is played in secret. Imagine Uncle Ben is really an amalgamation of the Republican & Democrat establishment attempting to maintain control and power. (Sorry, this is not a political commentary, it's economics. I am registered to the "generally apathetic" party.) Uncle Ben is the referee that has studied football but never played the game.

Well I believe this is what happens in the market place every day. With Ben as the referee he has the ability to shift the game in the direction of popular opinion as long as the game keeps moving. He can do this by lowering interest rates to zero, bail out banks, print money, provide dollar swaps to foreign countries, exchange risky assets for US dollars and most importantly he can sell and buy treasury bonds. Let me say that again, Bernanke can issue debt and then turn around and buy it back. (We should all try that with our credit card companies, please let me know how that works out for you.) In this Bernanke-led football game we don't know the "stats" of our players because of market to fantasy rules, that the banks have employed to protect their balance sheets. Would you want Tom Brady on your fantasy football team if you didn't know his stats? If the teams don't like the rules, they just lobby Uncle Ben's boss to change the rules. (I'm thinking Volcker rule and Glass Steagall.) For the second half of the game, the rest occurs in secrecy via Goldman's Simga X (black pool). When a popular team such as the Broncos falls on hard times, Uncle Ben starts breaking the rules to support the team. (General Motors (NYSE:GM) and Chrysler bailout comes to mind.) Finally, let us not forget the best profiteers (inside traders) are those in Congress. Is that a football game you would watch? Would anybody watch this year's Super Bowl if the Indianapolis Colts were ordered to play, ignoring the other teams?

When the game is controlled by Uncle Ben people are starting to lose faith. Investors and savers are withdrawing from this market on a continuing basis. This could be for two reasons:

  1. The unemployed are cashing in their savings.
  2. They are losing faith in this flash crash market. The price of gold and silver continues to increase. An increase in revolutions (Egypt, Syria, Yemen, Bahrain) and the rise in the occupy movement and tea party movement here in the United States, just to name a few.

But poor Uncle Ben, the one thing he can't control are those pesky little birds called Black Swans. The federal reserve sure has a lot of PhDs pontificating, propagandizing and colluding with the banks, but they forgot to identify the financial crisis of 2008 or the dot com bubble of 2000. So what are the next black swans? if you can foresee the black swan, it's probably not a black swan. But here are few candidates to keep an eye on: The pending Iranian war? The continuation of Middle East democracy movement, Greece default or the rise the occupy movement? SOPA? NDAA? Stephen Colbert as President?

Investment outlook: For the risk adverse, I recommend sitting in cash for the next month or two. Don't be afraid, you are not going to miss any high frequency lead or European rumor-based debt rallies. For those more adventurous, I recommend short positions in the XLY (consumer discretionary) and any positions within that sector, as well as the XLF (financial). Don’t let profitable positions “ride” as this market can easily turn against your positions in nanoseconds. Set stop and limit orders on a daily basis. Don’t believe me, just look at Sears' (NASDAQ:SHLD) price volatility since the beginning of the year.

Trade accordingly.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Ben Bernanke Vs. Tim Tebow: A Game With No Rules