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A Poem by MJClark

Establish the arbitrage.

Establish the situation whereby you can win if you lose

And you can win also if you win.

That is the secret of being one of the elite few, is it not?

That is what power is.

The ability to engage in high-level arbitrage, fraud, insurance against losses.

The rich hire arbitrageurs - bankers -- to protect them against loses

The way the rich hire lawyers to protect them against conviction.

Mephistopheles understands this.

Mephistopheles understands the challenge of seduction by earthly powers;

And that fame and vanity is very difficult to ignore.

And so he collects souls in the dense part of the city.

And he promises them the key to the city.

And he delivers on this promise.

But then he comes back to collect.

He comes back to collect.


A rather shocking turn of events yesterday as Wall Street Legend Sandy Weill, architect of the deregulation of banking in the 1990's, came out in favor of dismantling the big banks, and of re-separating the investment and retail banking sectors. Weill essentially admitted that deregulation of the banking industry was a mistake. Weill shocked CNBC stock-talkers when he said the Too-Big-To-Fail-Banks needed to be broken up.

Quoting from

"What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that`s not going to risk the taxpayer dollars, that`s not too big to fail," Weill told CNBC`s "Squawk Box."

He added: "If they want to hedge what they`re doing with their investments, let them do it in a way that`s going to be mark-to-market so they`re never going to be hit."

He essentially called for the return of the Glass-Steagall Act, which imposed banking reforms that split banks from other financial institutions such as insurance companies.

"I`m suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won`t be at risk, the leverage of the banks will be something reasonable, and the investment banks can do trading, they`re not subject to a Volker rule, they can make some mistakes, but they`ll have everything that clears with each other every single night so they can be mark-to-market," Weill said.

He said banks should be split off entirely from investment banks, and they should operate with a leverage ratio of 12 times to 15 times of what they have on their balance sheets. Banks should also be completely transparent, Weill said, with everything on balance sheet. "There should be no such thing as off balance sheet," he said.

If banks hedge in any way, Weill added, positions should be mark-to-market and cleared through an exchange.

Weill said that by breaking up banks, they would be "much" more profitable.

"This is what all the regional banks do and everybody says buy regional banks," he said. "They`ll just be bigger regional banks."

Weill suggested that breaking up banks is the only way to rebuild the financial industry`s reputation in the wake of recent scandals and missteps.

"I want to see us be a leader, and what we`re doing now is not going to make us a leader," he said.

I hope people in the government are listening, people with the power to help delete this disastrous experiment we're now trying to survive.

How did the markets respond? With a shrug.

Momentum continued to fall.

Date SPX CM ASP T11D Sum M4 21 Sm
7/2/12 1365.51 55.47% 49.80%  
7/3/12 1374.02 56.64% 50.00%  
7/5/12 1367.58 57.03% 54.30%  
7/6/12 1354.68 50.20% 55.08%  
7/9/12 1352.46 47.27% 55.27%  
7/10/12 1341.47 41.80% 54.69% 65.43%
7/11/12 1341.45 40.23% 53.52% 63.28%
7/12/12 1341.76 36.52% 51.76% 58.40%
7/13/12 1356.78 46.09% 50.20% 58.79%
7/16/12 1353.64 41.80% 50.20% 56.64%
7/17/12 1363.67 42.77% 49.02% 55.27%
7/18/12 1372.78 49.41% 49.41% 55.47%
7/19/12 1376.51 48.83% 50.00% 56.25%
7/20/12 1362.66 42.38% 48.24% 53.71%
7/23/12 1350.52 31.45% 47.07% 48.82%
7/23/12 1350.52 31.45% 47.07% 48.82%
7/25/12 1337.89 28.32% 43.16% 41.99%
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Signals today. Mixed Signals. The VIX is notoriously hard to trade. We have a system that trades it fairly well. We're getting a cover-short/buy signal on the VIX. So this is not a mixed signal: momentum is down; VIX should be a buy

We have some rather attractive trading buy signals we like however: PCLN, Priceline, BCRX, Biocryst Pharm, and JDSU, TXT (charts below). We continue to get shortsale signals, but not many: CORT, SCHN, XOMA, AOBI.

As long as momentum keeps sliding, we consider long positions as speculative and short-term trades.

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MJ CLARK, Hanoi, Vietnam