Continuing from previous posts and writings, while all the idiots are watching CNBC and debating 'health care reform', the real story of our lives is being played out in the bond market. Members of Congress and the House have obviously been put in place based on their profoundly diminished cognitive abilities due to the affects of intellectual de-evolution. They are helpless and hapless to recognize the real assault on the free world launched by the Federal Reserve. In an effort to carry on their strategy to destroy capitalism, and perhaps with massive and fatally flawed egos, they have attempted to wrestle control from dimwits that sleep in the White House and nitwits that march up and down the halls of the Capital Building. Well, that was easy. What are they up against - Nancy Pelosi? Reid? Dodd? Frank? How pathetic are we as a people that these are our elected leaders? How and why do they surrender the country to the Federal Reserve and their banking cartel? Why on God's green earth do they rely on the ignoramus of the Fed to solve economic problems? The Fed creates problems - they don't 'solve' them. Why on God's green earth does anyone expect the likes of Dodd or Frank to formulate intelligent financial reforms? The bottom line is we are toast.
The Fed's main weapon is ignorance steering the chariot of stupidity. The average fellow on the street is in such a stupor that they are easily swayed by the ebbs and flow of the stock market as if there really existed a true 'market' since the Fed coup. The best way to control a mass of people is to keep them ignorant and distracted by things like stock rallies. So let's get to the main point this week so we can stop slapping our flippers together every time the ring master tosses us a fish.
The Fed is currently trying to sell the idea of economic recovery to a mass desperate to hear anything that resembles Polly Anna. Of course, the Fed collects economic data from the government. Of course, it's all a lie but they can fool all of the people all of the time as long as they back up the lies with 'stimulus' and manipulation to drive the stock market higher. The idiots that speak for the Fed are talking about winding down 'stimulus' and even raising rates at some point in the future. Really. Maybe they are smoking crack but the economy in the US (and the rest of the world) is a walking zombie and it's walking only because of the magical Federal Reserve printing press captured from the Treasury Department. The government juiced the car industry temporarily with the cash for clunkers but since the program ended, sales have again resumed their steep down trend. Housing has been juiced (for whatever pathetic activity is out there) because of the $8000 subsidy program that apparently has accounted for 80% of sales. This is backed up by the vast preponderance of sales being at the low end of the pricing scale. All this is done to excite the stock market. The rally from the March lows has been a bogus rally from the beginning and looks poised to roll over. Why?
This past week is a perfect window into the real story. Since our government decided that the prudent thing to do in response to our banks bankrupting themselves by becoming unsuccessful derivative traders was to give them there money back. Why? They are bankers like the Fed and the Fed needs them to carry out their plans for domination. Of course, we had to print the money and borrow from the rest of the world. As a result, the national debt in the US is fast approaching $12 trillion. This requires borrowing in the form of US Treasury bond propagation. So, like most weeks this year, the Treasury had to issue some $119 billion in bonds on Tuesday and another $69 billion on Wednesday. Our foreign friends, along with the Fed, had to buy up all this garbage. The trick is, in order to by US bonds one needs US dollars. Check out the chart below. This is a 5-day chart ending on Friday with 5 minute bars. The Dow is in blue, the etf UUP is in green and the etf IEF is in red.
Now, the Fed held their meeting of village idiots to discuss interest rates and announced on Wednesday that all was well and rates would stay at zero for the foreseeable future. Duh. Yes, they claim that the economy is recovering even though the evidence suggests otherwise. Durable goods declined 2%, new home sales were down similarly, and worse, rail car shipping was some 18% below last years' volumes. Anyway, lying is the Fed's policy so what do you expect? The stock market reacted by rallying into Wednesday afternoon and then something happened. The phone rang in President Bernanke's office. It was the red one. That's the one that the Chinese call in on and I think they use speed dial. You see, if all is well and stocks are going to the moon, investors sell bonds and buy stocks. You can see the red line that is the 7 year bond eft IEF descend sharply with the Fed announcement. You can see it immediately reverse as soon as the Chinese rang up Mr. B. It seems they hold a trillion or so in US bonds and they don't take kindly to their portfolio being dissolved. Mr. B had to make a choice - us or the Chinese. He knows who the real master is now so he threw us to the curb and sold the market out for the sake of the Chinese.
Here is all you need to know. There is no 'stock market'. Its valuation is determined by money and Fed intervention. Remember what I said about bonds? They have to be bought with US dollars. When the Treasury issues $200 billion in a two day span, that's a lot of dollars that have to be bought. Thus, the green line, represented by the strengthening dollar etf, UUP, moved up immediately with the bond etf. Since the stock market is a function of the dollar and thus a pure reflection of inflation, the dollar turned higher while the Dow turned lower. If you are counting, the Dow lost 200 points in the last 90 minutes or so of trading on Wednesday. Yep, that was right after the Chinese called and Bernanke sold us out. So, now you know what to do. Forget earnings. Forget valuations. Forget fundamentals, bankruptcies, and insolvent banks. If you are counting, 95 have now failed this year as we 'recover'. Hey, I had to put that in for some comedic relief. By the way, no one, and I mean 'no one' believes this poppycock line of 'economic recovery'. Well, maybe the crack smokers! No, all we have to do is watch the dollar and we will know which way the Dow is headed. It is crystal clear that the Dow and indices of the world can only move higher on the back of a weakening dollar. Welcome to Zimbabwe!!
I don't think the Treasury is issuing debt next week so it should be happy times again for the stock market. Yippee! Enjoy what we have left as we march to zero. Think about this the next time you go to Walmart and buy those Chinese products. They control us now because of our strategy to print and borrow our way out of the recession. Of course, with a nice rally next week, all of the above will quickly be forgotten. But again, as Zimbabwe found out, the dollar can't fall forever. When it hits zero, the game is over. Or should I say, 'the scam of the Fed' is over. Maybe Chris Dodd is working on some kind of financial reform to keep this from happening? Hey, I thought I'd leave you with a joke that would leave you in hysteria!!!
5 days ending 9/25/09 - 5 minute bars - Dow in blue, IEF in red, UUP in green
Chart courtesy StockCharts.com