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A Lamb and the Fattened Calf Must be Sacrificed Now Before it is Too Late

Normal economic and financial forecasting rely on a variety of metrix that are staples of fundamental or technical analysts. Predictions of the future price of a stock, commodity, or bond rely on such seemingly logical fundamental variables such as earnings performance, supply/demand relationships, inflation indexes, etc. From the technician school of thought, the focus may instead be on trend and moving averages, support and resistance lines, decreasing vs. widening yield spreads or any other number of technical indicators. 
Unfortunately, market valuations can stray far away from fundamental analysis expectations for long periods of time. Conversely, on the technical side, the market routinely whipsaws trend followers and confounds contrarian/oscillator analysts with stubborn manic or pessimistic trends. Thus some scarred investors actually believe that, “the market will act to cause the most pain to the most people.”
The current stock market may have been overvalued, or it may have gone too long on its trend without a healthy correction, or the “economic recovery” may not have been as robust as we thought it to be, given the most recent disappointing unemployment data or housing building permits. But simmering deeper and more ominously behind this past week’s market slide that wiped out almost three months of gains is a swelling tide of the Public’s 1) pain (from income and equity losses); 2) anger (at the lack of government help to Main Street while spoiling ungrateful and arrogant fat cat bankers (Blankfein) and stoking their bonuses; and 3) loss of confidence in the markets as a result of massive bailout programs, Proprietary Investing by “pseudo-banks/hedge funds,” High-Frequency Trading, Black-Box markets, and front-trading of U.S. Government actions. (Let us not forget the massive numbers of short-term Lehman Brothers put options bought by an “insider” who profited over a hundred million dollars from information gleaned from a closed door meeting with other major banks and Fed and Treasury officers that resulted in a decision not to bail out poor Lehman.) To date, despite the obvious investigative routine to follow the money trail involved (somebody’s bank account profited handsomely from the proceeds of this very short term trade) the SEC has apparently not made any head-way on this blatant insider-trading case.
What do you get when you have deep-seated pain, anger, and loss of confidence in a population that over the past 6 months has become even poorer and has seen even more ostentatious display of bonus sharing by bankers who were rescued by the public’s own taxpayer money? You get historic political or economic upheavals, and that is what is now happening. You can’t keep partying and then insult the peasants by saying “Let them eat cake,” unless you mistakenly think that you are invulnerable, like poor Marie Antoinette. Yet that is exactly the same unbridled arrogance most recently displayed by Wall Street and Fleet Street bankers. Now, the Public has had enough and they are not taking “it” anymore.
The beginning of this political economic avalanche is upon us and the first sign was the election win of a non-descript Republican senator in a state that for decades voted for Democrats. The public’s pain, anger, loss of confidence and frustrations are only beginning. An avalanche is coming. If the President and Congress want to preserve their credibility and prevent even more political casualties, they need to sacrifice a lamb. If they continue to delay in addressing the toxic Mortgage-Backed Securities held by banks and other financial institutions (covered up by unrealistic asset evaluations that are not marked-to-market or from delayed foreclosure processing) this will only lead to a worsening and a longer-lasting recession/depression just as Japan experienced. It would be prudent for them to address toxic asset issues now and kill the fattened calf, the sooner the better. 
The obvious lamb is Bernanke. He may have properly acted during the illiquidity crisis, but the people rightfully see that he was asleep at the helm when he kept the housing mania stoked with low interest rates. They also perceive little benefit to Main Street and unfair showering of largesse for Wall Street from all of the bailout and stimulus programs so far enacted. The obvious fattened calf are the major banks: JP Morgan, Bank of America, Citigroup, etc., and of course, the one perceived by the public as the fattest, greediest, and most arrogant of all, Goldman Sachs. These fattened calves must be cut so that they do not have conflict of interest between their traditional banking roles (which should be guaranteed by the government since it preserves depositor’s confidence) and their proprietary trading roles (which should not be guaranteed by the government since any person who takes investing risk and profits from it should also shoulder the risk of loss on their own). They should also be dismembered so that they are much smaller in size and will never be “too big to fail.”
President Obama and Congress should heed the swelling of the public’s pain, anger, loss of confidence, and frustration that continue to grow day by day. Failure to do so will only result in a bigger political-economic avalanche to come and will result in the most pain for the most people. They must take action now by sacking Bernanke and cutting up the fat banks.

Disclosure: Bearish equities and commodities