Set your seats in the upright position and lock up the serving tray. We have been given the clear signal and we are ready for take-off. The chart of the Dow shows a nice cup-and-handle that looks eerily similar to the one of June - July of last year. The charts these days are like everything else. They are prescribed and sanitized for our comfort. This cup-and-handle is perfect because it is the precursor to the assault on Dow 11,000. We are getting the troops ready and the supply lines established. Next week, we will blow through Dow 11,000 and make our way to the pre-Lehman failure mark of 11,400. Hallelujah! The mountain will soon be conquered and the rest of the world can quit bitching about why the Fed let Lehman fail but saved AIG and Goldman Sachs while carving up Bear for JP Morgan and Merrill for BofA. It didn't seem fair nor did it seem logical to the outsiders looking in. But they were wrong. The new owners of the US had personal stakes in AIG and like the serpent in the Garden of Eden, offered fruit to their Eve in the form of investment banks stripped of portfolio derivative cancers and stock prices pummeled to nearly zero. Who could have passed up that deal?
But there is a price to pay and Eve paid with her soul. So shall we. The central bank now has the world in their hand and a loan contract with everyone's name on it. They own the country. Lest any of us offer resistance, they unleash a security buying program feed by the best printing press in the world. Fiat money is free to print and the Fed more active in the markets than a porn actor in an orgy scene. Their goal is to restore the economies of the world through the ebullience of an ever-rising stock market. The latest 'correction' was a one day dip below Dow 10,000. The Fed arrested that fleeting moment of sanity, as Greece threatened to start an avalanche of debt defaulting throughout the EU thus shattering the pretend asset values of the central banks' derivative 'capital', with a furious and voluminous burst of buying not seen since the days of March of '09. Clearly, Dow 10,000 will not be penetrated again. Now, it is time to take out Dow 11,000. Let the bubble expand!
To support the rise in the market indices, the serpent has polished the apple and let the sweet aroma of the fruit waft underneath the nose of its targeted souls. The US governmental department of pathological lying announced on Friday that the economy gained over 162,000 new jobs in March. Outstanding! My home state of North Carolina and sister state of South Carolina both say that state unemployment is now at all-time highs. But nevermind. We all like the government's story better. It's better for the stock market if we think the economy is growing and adding jobs. Maybe it is. Sadly, in the government's report, the sector adding the most jobs was the government at over 40,000. This seems like a used car salesman driving up sales by buying his own cars. Nevertheless, true or not, the media will be fed a Jack and the Beanstalk story of economic recovery and they will eat it up. Nevermind that local municipalities are laying off teachers, closing libraries, laying off social workers, and cutting salaries because the money isn't there. Ask yourself a question. If the government claims that the economy is recovering, consumer spending is increasing, and housing has bottomed, why then are states and counties taking drastic measures to cut expenses? Shouldn't they be enjoying some tax revenue from a recovering economy, increased consumer spending, and a recovering house and labor market? Where is the money? Maybe the numbers are just fantasy.
The bottom line is this. The Fed knows that they can support their sales job as long as the stock market is rising. And, the stock market will rise as long as someone with a big printing press can shovel money into the beast. Once we all see the shiny apple, we forget about being evicted or foreclosed or unemployed or reduced in salary. We are just stupid and the Fed knows it. Don't you want the shiny apple? We all know what Eve did. I think we all know what investors are going to do. Now is not the time to be prudent, intelligent, or rational. Now is the time to ride the rally. Lock in the serving trays and put your seat in the upright position. We are not just taking off. We are going to Bubble-Land!!!
1.5 years of the Dow ending 4/2/10
Chart courtesy StockCharts.com