The chart below is a microcosm of the new era of investing. Since the Federal Reserve coup of 2007, the 'market' behavior has radically changed. No longer do we need to concern ourselves with a 'market'. It no longer exists in the sense or definition of a 'market'. The indices go where the Fed pushes them. We no longer need to concern ourselves with corporate earnings. The Fed doesn't care so neither should we. Besides, the Fed allows companies to report earnings as 'needed' by allowing silly puddy accounting. We no longer need to concern ourselves with economic data. That stuff is supplied and compiled by our government and is now less believable than a politician's promise not to raise taxes in a campaign speech. Our government is nothing more than a propaganda machine dedicated to their own aggrandisement. What we need to concern ourselves with is the chart below.
It shows the last five trading days and the story has not changed. The stock market is manipulated completely to the point that sellers don't want to sell. Short sellers have to be salivating at a market grossly overvalued and an economy grossly over-exaggerated. Yet, selling has been met with forceful Fed buying thus eliminating profits of prudence, intelligence, and skill. The 'market' now resembles a carny game at a state fair. The chart we are looking at shows the dilemma of the manipulators. The US continues to sink into the deep sea of debt necessitating the constant issuance of more debt in the form of government bonds. The Treasury had to issue a tad over $80 billion last week and it is becoming harder and harder for the world to soak up that much stupidity. The Chinese and the Japanese already hold close to a trillion of the junk. Do they keep buying? If they don't, then our government will lose their already preposterous claim of 'strong foreign interest' in the auctions. Anyway, the chart shows the obvious. Debt is issued on Tuesday thru Thursday. The world has to scramble to accumulate US dollars to buy the massive issuance of US debt. This distracts the stock market manipulators away from stocks over to the task of manipulating the bond market. Why? If they didn't manipulate the bond market, interest coupons on the newly issued debt would soar. What ever is left of real estate would surely collapse and the real economy would accelerate its contraction. Sure, the government would still claim 3% GDP and no inflation and all the other utter nonsense that it already disperses. But look at the chart. When interest rates jump, bonds have to be bought to bring said interest rates down. That strengthens the dollar and weakens the stock market. The Fed will have to create even more money going forward to get the Dow back to pre-Lehman 11,400. And so they will. It's a hard hill to climb but they do have a printing press and they do run insider trading scams with Goldman Sachs.
In reference to bogus government numbers, they claim that November employment actually grew by 4,000. That must have prompted enormous laughter throughout the world and we thank our government for supplying a bit of chuckles. Meanwhile, the research firm, TrimTabs, estimates that the economy lost over 220,000 jobs for the same November. I guess the numbers all depend on methodology. The government prefers the lie while others stick with reality. Rock on Ben! You have a rally to stoke!
Last 5 days - TNX in red, Dow in blue, IEF in green
Chart courtesy StockCharts.com