America has become an asterisk. That means it only exists conditionally. The conditions are explained by asterisks. For instance, big banks earn a lot of money as long as minor details like expenses, losses, and derivative valuations are ignored. The governments car company, GM, will soon release an 'electric' car that gets 280 miles per gallon equivalent. However, it is not really 'electric' as it has a small gasoline motor and at highway speed, the motor kicks in. In truth, it will return mileage equivalent to a Toyota Prius. Only, the US taxpayer will have to chip in about $7k per car sold to even make it seem competitive. What about the stock casino? Well, as long as the Fed is hard at work every day manipulating the indices higher with POMO or TOMO or PPT activity, the casino appears to the dopes of the world to be a 'market'. Without the Fed, it's a yard sale and everything must go! Monday was a POMO day. Tuesday was not. Wednesday was. Thursday was not. Friday was. Check the charts. Charts don't lie. Governments do.
The US government was overthrown in the coup of '07 by the Federal Reserve. The Fed is now cementing its power of control with the tool of debt. It's not like they are acting in a clandestine manner. It's all in black and white. The Fed's own balance sheet lists a sum of just over a couple of trillion dollars for total assets. A trillion of those assets are MBS (Mortgage Backed Securities) paper that they are using to steal $2 trillion in Treasuries from intellectual Treasury caretakers like Bernie Frank, Nancy the nitwit Pelosi, and the rest of the feckless Congress. That MBS paper has an asterisk beside it. The corresponding footnote says that the trillion-plus MBS paper is all backed and guaranteed by Fannie and Freddie. I can't imagine a reader of this blog not knowing this but Fannie and Freddie is you and me - the taxpayers. The Fed has no risk in the bad mortgage paper. None. You can read my article entitled 'The Fed's Furtive Filching' that is posted on sites like www.financialsense.com but the outcome is sealed. The banks had bad mortgage paper in 2008. They lost all of their money in derivatives trading based on the bad mortgage paper. They were, and still are, bankrupt. Yes, I know. They all report good profits. Go read the asterisks. So the Fed engineered the greatest theft in history. They got Congress to sign over a few trillion in Treasury notes so the Fed could issue the banks a dollar for dollar exchange of Fed cash for bad mortgage paper. Now the Fed has bad paper, the banks have Treasury notes, and the taxpayer has debt. The Fed is now buying Treasuries from banks to complete the heist so they can replace the bad paper with good Treasury notes. Very soon, the Fed will have converted a trillion in bad mortgage paper into a trillion in Treasury notes, the banks will have converted a trillion in bad paper into Federal Reserve Notes, and the taxpayer will have converted stupidity into an extra trillion in debt. Watch the asterisks. They are important.
Here is another one. On Tuesday of this week, the Federal Department of Pathological Lying said housing starts increased .3%. Not that anyone pays government data any attention anymore but I do get a kick out of the footnoted asterisk. It basically says,
'The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can’t be sure whether starts increased or decreased. In September, for instance, the standard error for starts was plus or minus 10.3%. Large revisions are common.'
In other words, housing starts could have been up 10% or down 10% or anything in between. Who knows? Anyway, the market needed a positive number so it got one. Well, it came with an asterisk!
Meanwhile, every country continues to fight currency appreciation versus the terminally cancerous US dollar. China raised interest rates slightly to try and dampen economic growth thus lessening the yuan appreciation. Brazil imposed higher foreign taxes to bond purchasers outside of Brazil as did Thailand and other sovereign nations in a effort to dampen their respective currencies appreciation versus the US dollar. It seems that there is a flight from US dollars as the current US administration continues to scare the bejeepers out of the rest of the world with a continued maniacal economic policy of borrowing, lying, and surrendering to the central bank. Even the US debt comes with an asterisk. The debt is not very large compared to GDP unless of course you have the audacity to also count off-balance sheet expenses and unfunded obligations into the tens-of-trillions.
Let me leave you with a chart of the SPX for this past week. The chart is the last five days showing 10-minute bar intraday trading. As you can clearly see, the POMO days were positive. In case you are interested, next week looks promising with POMO days on Tuesday and Thursday. Also, the Treasury will be issuing over $100 billion in new debt so that should drive the greenback down. Combined with POMO intervention and manipulation, the dissolving dollar is likely to push the indices higher. Just don’t forget to watch your asterisks. These are the riskiest indices in history. Why? They are all based on an asterisk. Yippee!
SPX - 10/18//10 - 10/22/10 intraday 10-min bars.
Chart courtesy StockCharts.com
Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented. BMF Investments, Inc. assumes no liability nor credit for any actions taken based on this article.