Risk Aversion Is Real

I posted a few days ago that I wouldn't buy this dip.
http://tradersutra.blogspot.com/2010/05/careful.html

I think aversion to risk is real and that a major market derisking is in effect.

EURO 3 Month LIBOR

US 3 Month LIBOR

The risk in the market is always in the intermarket lending arena. This is where loans are financed, refinanced and turned over. If the rates too which these transactions are conducted or going higher its the markets way of telling you that risk is becoming a problem. The market is getting worried about counterparty and other various risks.

Risk gets transferred in the markets this way.

-First its the currencies that get hit.
-Secondly the bonds get hit
-Finally its the equities.

Yesterday was the day the risks got transferred to equities. The currency and bond markets were telling us that the global V-Shaped economic recovery was a hoax. European and US Equity markets were decoupling from what was happening in the currency and bond markets.

The ever rising USD was telling people its time to derisk. Time to deleverage. The Euro was screaming at you to do the same, but equities that are run by machines were not listening.

This all just postpones the day of inevitable reckoning.

Greece will default. This will have cascading effects in Europe.
The Euro is finished. Its dead. Long live the Euro.
China is slowing their economy which will lead to a global deleveraging of any risk asset.
US Financial Reform is going to be vicious for the financial sector.
Goldman Sachs will settle their SEC but it will be for billions.

Non Farm Payrolls out. Looks to be a good number. Up 290K, but employment rate edged up to 9.9% - WTF?