Maybe there never was a stock 'market' where prices were set by investors. Maybe the power elite and central banks of the world always interfered and manipulated. As I have been detailing in this blog, the charts clearly show certain patterns that scream 'manipulation' and 'interference'. The weekly chart at the bottom again shows major volume in the DIA at the beginning and end of every day just like all previous weeks. This week was a down week. Again, Bernanke has to drive the Dow above 9000 to take out the previous lower high so the government propaganda machine can get behind a 'downtrend has ended' theme for stocks. They spent the past few weeks trying to sell the world on the 'green shoot' idea that the economic downtrend had bottomed or at least was weakening at a slower pace. This is like saying that the swimming pool that was leaking is now leaking at a slower pace so go ahead and dive in head first. It's all good.
Meanwhile, on Planet Reality, unemployment continues to rise and job creation continues to contract. Trillions in wealth, either real or perceived or paper, has melted and it will not return. People don't like me because I tell the truth. That's the truth. Real estate has been the biggest wealth accelerator of the last decade and it is now dead. Our lying government continues to talk it up and act like they have some sort of magical power to revive the sector but it ain't happening. We are broke. We can't afford the houses that we are living in much less a new one. We can't afford new cars. We can barely afford groceries. The insane idiots that run this country think the way out is more debt and more borrowing. Sadly, I think they actually believe that giving big banks all the money back that they swindled in the real estate scam of the early 2000's and then lost is the best approach. What is the result?
Well, aside from the CEOs of these banking institutions playing the American public as the stupid ignorant fool that they are and riding corporate jets to lush vacation spots, all the money in the country is being sucked into the vacuum of the banking institutions. There, they will hoard the money because they now know better than to lend it to us since we are all losing our jobs and can't repay current debts much less future debts. And why not? The banks can borrow at the Fed Funds rate of zero and buy US Treasuries yielding nearly 4%. Meanwhile, Timmy of TARP has taken his comedy act to China (our chief lender and enabler) to tell them that their investments in the US are safe and the dollar is strong. After which, many listeners had to be carted to the hospital with cramps induced from excess laughter. What a bozo! So, when the government goes into the debt well for $10 trillion, the debt has to be issued by the Treasury. Since there aren't enough buyers, the interest coupon has to be raised. Thus, Treasury yields are on the rise and are poised to turn the Treasury yield chart into a Mt. Everest look. To combat this unwelcome development of higher interest rates, President Bernanke has elected to buy large chunks of Treasuries for the Fed. The Federal Reserve is therefore becoming one of our lenders/enablers now. Why is this a problem for the average ignoramus American? The Fed controls our interest rates through their Fed Funds policy. Let's say the Federal Reserve accumulates a trillion dollars in Treasuries. Don't laugh. They soon will at the rate they are buying with purchases of some $15 billion this past week. Ditto for previous weeks and coming weeks. The Treasury needs to sell some $100 billion next week and so on to fund the bank heist that our witless nitwits in Congress condone as 'economic recovery' strategy. So, do you think the Fed will ever raise the Fed Funds rate in the future if they hold massive amounts of Treasuries? Only two things can happen. True investors would see this as suicide and buy treasuries under the idea that the idiots at the Fed would eventually invert the yield curve since raising rates would destroy whatever economy we have left and put us in a depression so deep we wouldn't be able to see the 'green shoots'. Or, bond holders would take the action of the Fed raising rates through sales of their own treasury holdings and sale their treasuries in concert. Bond yields would shoot through the roof. Now, I ask again. Do you think the Fed can ever raise rates in the future? Well, I guess they could. They could always get the Treasury to run off a few pallets of C-notes that they could put back on their balance sheets. Welcome to insanity.
If the current rally stalls and begins to fall back towards Dow 8200, don't let the rally door hit you in the behind. Take the stairs down to Dow 5000. The next leg down should be a doozy! Unless of course, Bernanke gets back to work this week in his primary function of PPT stock market manipulator. Come on back to work Ben. We're counting on you. The party won't start unless you hit the switch.
One-week DIA ending 6/19/09 15-minute bars
Chart courtesy StockCharts.com