Buying stocks up here is no different than spraying one another with high octane gasoline, while smoking cigarettes. What will happen when Greek debt holders take a “voluntary” 50% haircut? See, I am not so much concerned about the losses, which will be horrific. I am interested in hearing the Euro leaders tell CDS buyers of sovereign debt their insurance is no good.

If you own Italian debt and have insured it via CDS, how worried are you about that “insurance” right now?

If Greece defaults, but doesn’t let the CDS trigger, I sense there will be a run for the exits on any sovereign debt in question. It’s like buying puts to hedge your long bets. What would you do if the market crashed and your longs got smashed by 60% and some authority declared your puts to be invalid? I’d never buy stocks again.

There is no easy out, in other words.

In other news, CAT posted good earnings, which bodes well for basic material stocks. And, ORCL bought RNOW (nice trade Howard Lindzon), which should buoy the tech sector. There is definitely a sense of complacency out there. You’ve been conditioned to believe nothing can go wrong, because you’re accustomed to sucking government tit.

Finally, going into November, I will be allocating funds towards gold and silver stocks. Traditionally October is a bad month for gold. Conversely, November is a fantastic month for precious metals. Keep your eyes on Italian 10 yr yields. I don’t care how cheap stocks look. If Italian yields keep edging higher, we will collapse under a flaming vat of refined light sweet crude.