Monday, September 5, 2011

Risk On, Risk Off For Dummies

If you listen to the propaganda network CNBC like I do, (you have to so you can know what the financial terrorists are doing and thinking and yes CNBC is the financial terrorist's media outlet) you may have often heard anchor Bob 'market's off its lows' Pisani utter the phrase "risk on" or "risk off". I thought it time to define this for the record. I use the title humorously as regular readers know who the 'dummy' is around here!

Now to understand this phrase you need to use your imagination for a moment. Imagine your real world non-ritalined, sober, completely normal hyperactive and energetic 6 year old son has make believe credentials, say like an MBA from an Ivy league school - which basically qualifies him to drive a bus, no check that, that's an insult to bus drivers the world over as they have training and qualifications- and is managing, no check that, deploying a few odd hundred millions or even a billion of other people's money.

So now that this make believe 6 year old has that Ivy league MBA that the we judge a book by its cover crowd covets which includes but is not limited to;
a) those institutional investors who like to have someone to blame for not being able to spell due diligence let alone do it themselves or
b) those who inherited money or like to brag about said MBA son at the country club,
c) other like minded MBA's who manage others money

Okay now next step.

Imagine this 6 year old wiz kid money manager who bought you all those internet stocks recommended by Merrill's Henry 'please don't read my emails' Blodget. Those 'pieces of shit', his words not mine, that had $12, 15 or 25 million in gross sales and market caps of 1 billion plus brought public by pay to play thugs like Frank Quattrone and his ilk on Wall St. (see now why I used the word deploy instead of manage?)

Well all that seasoning and Wall St. trenches experience is now saved up and blossoming as we have our 2nd Fed induced bubble the housing/free money bubble which sadly yes your 6 yr old son was loaded up on Countrywide, Washington Mutual, and Lenard. Not to mention Fannie, Freddie, Lehman and so on.

Wow I am digressing here. What was I talking about again? Oh yeah, risk on, risk off.

Your real world son wants cake and ice cream, he wants chocolate chip cookies and licorice, he wants popcorn and soda, he wants gummy bears and sour patch kids, he wants video games and to stay up late. When he gets these things he behaves, is happy and content resulting in a pleasant environment.

Your make believe Ivy league MBA toting, fund managing 6 year old has his wants as well. Most especially when things go off the rails with his portfolio. When that happens he wants TARP bailouts and quantitative easing. He wants easy credit and low interest rates in perpetuity from the Fed. He wants an accommodate Keynesian Fed. He wants debt ceiling raises ad infinitum. When he gets what he wants or thinks he might he celebrates and buys stocks, stock futures and anything else he can thinking he can manipulate the adults in the room for more, hence risk on.


Your real world son never wants fruit and vegetables, he needs bran and fiber, he needs water and homemade soup, he needs carbs and protein, he needs exercise and less TV, he needs to go to bed early to rest. When he gets these things he misbehaves, is very unruly and discontent resulting in screaming and tantrum throwing.

Your make believe Ivy league MBA toting, fund managing 6 year old has his dislikes as well. Most especially (again) when things go off the rails with his portfolio. When that happens he is petrified of fiscal austerity and largess cutbacks, (most especially of Ron Paul types) is horrified of hawkish Fed pronouncements, tight credit conditions and higher interest rates from the Fed. He loathes a restrictive Austrian school Fed. He abhors debt ceilings in any shape or form. When he gets any of these or thinks he might he sulks, pouts and sells stocks, stock futures and anything else he can thinking he can manipulate the adults in the room for less, hence risk off.

I hope this helps the next time Bob 'markets off its lows' Pisani or any other boob on CNBC comes on harping about risk on, risk off.

Please enjoy whats left of the Labor Day weekend and if you're travelling please arrive safely.
HD

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