Sunday, May 31, 2009
Tuesday, May 26, 2009
All it takes for our new era stock market to lurch forward is an hour or two. In the week ending 05/22/09, we had a one day rally of almost 3% across the board on Monday. Presto! the Dow moved higher from the 8200 Bernanke line of intolerance. The rest of the week went negative every day so we wound up where we started. This was a lesson from our new leaders. One, they obviously wanted to take the rest of the week off as we looked forward to a Memorial Day weekend. Without our government buying stocks each day, the market is liable to slide toward zero at an unsustainable pace. Two, our new government wants to put the fear of the Fed in the short sellers of the world. Rallies will form from nowhere based on nothing and the markets will lurch higher as the government wishes. Why not just board the train of irrational optimism and play along with the con?
Well, there are a few weeds in the 'green shoots' of economic growth that the government is selling these days. The Fed themselves now believe economic recovery will not happen this year. Further growth will even be slower than previously thought. GM and Chrysler are broke and have joined the government dole for daily survival. Housing starts slackened to the lowest on record. Unemployment is pressing 10% (even by government figures). We all know the stock market 'climbs a wall of worry' but this is ridiculous! This is reality. The task for our new government is to blow the next bubble in the stock market and hope that their precious banks can enrich the masses so we return to the mortgage offices and car dealerships with cash in hand.
All depressing economic negativity aside, we have to make the stock market go up on declining earnings and shrinking economic activity. That means the market will have to support the eventual highest valuations ever. Of course, you can accomplish this task as long as you have a printing press and a completely ignorant populace with no clue as to the destructiveness of such monetary printing. Good luck, Mr. B.
Here is the way the government plays us. Our government is heavily indebted and we all know and accept this fact. So, the Treasury issued $44 billion in bonds. The world cannot absorb all this debt so the Fed kindly announced that they would buy $7 billion of these bonds. Of course, what really happens is the Fed buys the bonds from the banks and now the banks have $7 more billion to lend and play with. Using the lending power of '9', that $7 billion becomes $70 billion. If you are keeping score, our government borrows $44 billion and with Federal Reserve help, turns the exercise into a $26 billion dollar currency injection. Gee, I wonder if some of those billions will find their way into the stock market? Only in America!
Stock chart courtesy StockCharts.com
Dow daily 1 week chart 05/22/09
Monday, May 18, 2009
I'm sure you are familiar with the children's game 'Where's Waldo'. The idea is to find Waldo amongst a camouflage of graphics. The S&P 500 lost some 5% for the week and we have to wonder, where's Bernanke? I panicked a few weeks ago when Bernanke's right hand conspirator, Tim Geithner, was making a speech somewhere early in the morning as the Dow was opening lower. My panic was calmed as I noticed the location of the event was in Washington. Wheew! At least our main man was close to the printing press. Without it, we have nothing. And fortunately, neither Bernanke nor Geithner is one bit afraid to unleash the power of the press. Why am I somewhat negative, you ask?
Well, in the last year, all of the investment banks in the US have folded. This past week has seen the bankruptcy of Chrysler. Any day now, GM will follow. Housing continues to collapse and unemployment continues to rise. Job creation is negative and governmental lying continues to be downright pathological. For instance, House Speaker Pelosi claimed she was 'misled' by the CIA on waterboarding but there are some alleged documents that would prove otherwise. No one can tell the truth about anything anymore. When that happens, I have to think things are terrible. Why is the lie so necessary? Why does our government talk about 'green shoots' of economic reprise when the facts are so diametrically opposite? Why does our government think they can run banks and auto manufacturers and health care when they can't even get my mail to me on a consistent basis? Again, they lie because they know that we cannot handle the truth. The government said that retail sales slid .4% but the number would have been a tenth worse if it weren't for an uptick in auto buying. See, someone should tell the car makers since they are more busy preparing for bankruptcy than they are building more cars.
In addition, the 'economy' that we speak of these days is a worldwide economy. Sony announced that they lost a billion for the year and Panasonic lost four billion. Toyota's sales are way down and oil tankers are dropping anchor. Reality is a bear! Unfortunately, bears don't eat money. Otherwise, Ben and Timmy would have them all at a fat camp by now!
Let's look at a one-week intra-day 60-minute bar chart of the Dow for the week ending 5/15/09. Yes, the Dow was down but you can see the week's total loss was due to about 3 hours of trading (3 long red bars). This is not in and of itself very significant these days. Almost all trading movement is done in short bursts. The question is really why didn't Bernanke step in to halt the week's downslide? After all, he is the new keeper of the stock market. Without him and his stock market interventionist role, we have nothing. Well, for one, since the Fed started the current rally on March 10, the Dow has come a long way. A cool off is okay. Two, the markets' leader, the banks, have come a very long way on their crumbling pillars of deceit. A cool off is okay. This gives the illusion of an actual 'market' when in fact, there is none. The Dow goes where our new government wants it to go. I suspect the Dow will be rallied in the coming weeks to push it over the 9000 threshold. Why? This was the last lower high in the downtrend. Then, Ben can say the 'downtrend' has been broken. All it takes is money! Print on, my man!
Chart courtesy StockCharts.com
One-week, intra-day, 60 bar, DJIA ending 5/15/09
Monday, May 11, 2009
As we complete the first full week of May, 2009, the major indices continue to rally. And why not? The Federal Reserve is busy blowing another asset bubble with their monetary printing press. They are giving the banks and insurance companies a mulligan for all the money they lost through bungling incompetence. You borrow at zero and lend at ten or twenty. How do you not make money doing that? Oh, well, if you think you are so smart that you know investing and you use derivatives and credit default swaps to 'reduce' your risk and up your commissions, then you may have found a way to lose trillions. Not to worry. You can get Ben the bubble blower to steal the money from the suckers that you loaned money to in a quest to put everyone in an over-valued home. But now you have to raise a question. Which comes first - Arrogance or Ignorance?
To pull off the grandest heist in the history of mankind, I think you must first possess the arrogance to 1) think you can pull it off and, 2) the conviction that you are just. The Fed obviously took control of the US government in August of 2007. Therefore, by use of their big ol' printing press, they became convinced they could resurrect the banking industry. Note, I do not say 'the economy' because I believe that to either be secondary or insignificant to the plans of the Fed. This is about domination and the only weapon they have is money dispensed through banks that is in turned used as an enslaving device through perpetual debt. In turn, they have to have a hapless, profoundly ignorant populace with no understanding of government or central bank functionality. Look at the mental midgets that are in Congress. Who do you think voted for them? People vote for other people that resemble them!
You also must believe you are just in your actions. I believe these people truly think that the US Constitution is a rag and capitalism is wrong. The Fed tolerated capitalism until the right arm of the Fed, the banks, ran afoul of business intelligence and lost all of their money. Capitalism would have put the offenders out of business and the Fed could not allow that process to proceed. I believe these people actually think they are just in now running the US through Fed policy. Of course, this would be the first time in economic history that borrowing and printing money actually made a country richer! But hey, if you are arrogant enough, you finally find yourself believing all the hogwash heaped upon you by Congress members whose lips are stuck to your backside. So, we have arrogance in the Fed that they think they can steer the ship.
Now we have the ignorance that borrowing and printing will not work. As the US piles on the debt and the governmental controls, the country continues to lose its ability to economically function. More and more money gets consumed by the government just to pay its bills and the same happens at an individual level. We are slowly losing our ability to grow because our resources are shrinking. It is pure ignorance not to acknowledge this inevitability. So, the Fed is both arrogant and ignorant. In the end though, they are just doing what we are asking. Isn't this why Obama was elected? Isn't this why voters gave the Democrats the majorities in both the House and Congress? Haven't the majority of voters given our government a mandate to 'save' us from ourselves? Are we not completely ignorant or our own actions?
We will give up everything as long as the Dow moves higher. Sure, we got the good news from the US Department of Pathological Lying (some call this the Commerce Department) that our economy only lost 500k jobs and not the expected 600k. Of course, this propaganda machine always plays 'good news - bad news' in that they 'revised' (I'm winking rapidly at you right now in an exaggerated motion) down the job losses for the previous report. Without repeating all the lies from our government on economic data, we can all safely assume that the economy is not improving. But our government is selling the idea to us that at least the economy is only getting worse at a less steep decline. Well, that's all the stock market needs to rally. The rally has been led by the banking sector and why not? The government has been busy mortgaging every American's future in restoring these banks to their pre-Ponzi Scheme levels. You don't mind, do you? Of course not. The Dow was up. Sit down in your ignorant chair and hope for an 'Obama Stimulus' check to be mailed your way.
Now we have to attack Dow 9000. That's the only way to break the downtrend that is still in place. Isn't it extraordinary that the Dow could rally 30% in a month and a half and still only be back to even for the year? Carry on, Ben. You still have a lot of work to do!
Sunday, May 3, 2009
A Rally Without Wilt
On March 9, 2009 Ben Bernanke gave birth to the current rally by issue of proclamation that there would be no more 'big bank failures' in the US. By virtue of the return of 'mark to fantasy' accounting, Citigroup said they made a profit. Instantly, our current rally began. Of course, Bernanke now owns the banks as illustrated by his mandate to Bank of America CEO, Ken Lewis, to buy Merrill Lynch or else. That else included a pink slip. Now you know who's boss! Since the Fed's coup of August of 2007, I have been documenting this abysmal turn of events in American history. As April wound down, all analysts were trying to gauge the effects of the Fed's so-called 'stress test' on banks. Most guesses were that the big boys would be required to raise hundreds of billions in capital. Big deal. The Fed will give it to them even if they have to take it from you and me. The big effect? Nothing - and the Dow rally rolls on. Besides, after jacking the shares of all banks higher for the past six weeks, why would Bernanke let the bank rally fail over a silly little detail like lack of capital. No one stops a scam in mid-scam. He will see it through.
Interestingly, with the Dow at close to 8200, it now has a P/E of about 30. We can't say for sure because earnings are no longer for sure. With mark to fantasy accounting, earnings have become whatever the Fed needs them to be. Therefore, unless the Dow drops some 50% very quickly or earnings improve significantly really fast, the market is grossly over-valued. But, and this is a big 'BUT', we are in a different era now. This is a government run market and a government run economy. Capitalism is muted and federalism reigns supreme. Earnings no longer matter anymore and market rallies can be sustained because the Fed says so. The Governmental Department of Pathological Lying (ie, the Commerce Department) claims that consumer spending increased by 2.2% in the first quarter. See, the economy is improving. That is, unless you believe their reported GDP number of minus 6.1%. Now remember, a large part of GDP is consumer spending. If consumer spending was up 2.2%, how could GDP be down 6.1%? We must also remember that a large part of GDP is government spending. What number would you like to put on that? Do you think it declined what with bailout - stimulus- debt ballooning politicians carrying on the Fed's manifesto? I find this, and all numbers our government puts out to be more fictitious than the tale of Little Red Riding Hood. But, with the economy on the ropes and gasping for air, the government needs a stock market rally and that is what they are going to get. If there is any bad news like contracting GDP, there has to be some good news to offset it like consumer spending. Truth is the enemy of the State as Joseph Goebbels, (Nazi Propaganda Minister) said. Damn the earnings and fundamentals, full speed ahead!
I won't repeat the real economic numbers. They are all bad. The government wants us to believe, however, that they are getting 'less bad'. It's like if you were shot in the carotid artery, you would begin to bleed profusely. That would be very bad. Soon, your body would run low on blood and the flow of blood would lessen. Oh, that's good. You are getting better. Stand up and do jumping jacks! But, we want a market rally so we are willing to believe anything to make that possible.
Oh, by the way, Chrysler declared bankruptcy one day after claiming to secure agreements with creditors. Liars. Then Mr. Obama said that 'bankruptcy was not a sign of weakness'. Nah, it's just a flesh wound. Strong companies declare bankruptcy everyday. Who's next? Exxon? Walmart? Microsoft? Is everyone on acid except me? Why didn't someone from the press question the man about this statement of deception? Is the media brainwashed like the Obama-nites? Hey, don't jeer me. The Republicans are just as stupid and inept as the Democrats. America is a country devoid of leadership. It is also a country devoid of intelligence. Else, how else do we let such stupid people run our country?
Okay, let's talk truth. Chrysler is run by a hedge fund and venture capital group. They apparently bought credit default swaps that would repay them if Chrysler went bankrupt. Our government offered them a deal to accept pennies on the dollar for their debt but they did not accept. Why? Well, they were talking to bailout Barrack. Again, don't jeer me. The idiots before him started the bailouts and now the new guy is just doing what the old guy did. Why? Because he is told what to do by Lord Ben! Anyway, the owners of Chrysler will come out better because of their derivative operations if the company declares bankruptcy. So, derivatives strike again. Why won't there be any legislation passed by the current administration to limit the use of derivatives? Because the Fed runs the derivative show through the Bank of International Settlements. Game - set - and match.
Below is a 5-day chart of the DIA ETF. As always, note the volume at the beginning and end of each day. This is when the PPT is most active.
Stock chart courtesy of StockCharts.com
1-week 30-minute bar chart of the DIA week ending 5/1/09