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This is a fascinating chart that finally captures what I have been stressing for the last few weeks – the US no longer has a liquidity crisis. It has a US Financial System credibility crisis. The Chinese called America out onto the mat on this score today. They were right to do so.

Since the beginning of November, GS has lost over a 1/3 of its already drepressed value. When people talk about the Great Depression, I think they are talking about having their compensation tied to this Titanic’s sinking chart.

More interestingly, since CEO Lloyd Blankfein was ‘You Tubed’ (November 11, 2008), look at what the stock has done on a relative basis to 3mth LIBOR.

Question: Since LIBOR is a reference rate for “counterparty risk”, and it’s been relatively stable since November 11th, after coming in meanginfully from it’s October highs, what does the GS chart’s volatility really tell us?

Answer: stating that leverage has no correlation with returns lack credibility.

KM