Saturday, November 6, 2010

11/06/10 - Bernanke’s Bubble

What in heaven’s name do they babble about all day on financial networks? The casino is simple. The Fed runs the show. There you go. Now you don’t have to watch the nitwits anymore. Financial networks are about as necessary as a WWE referee. Look at this past week.
Monday was kind of a flat day in anticipation of Tuesday’s mid-term election. Tuesday brought a small rise in the indices as investors anticipated a change in Washington that would result in a checkmate between the village idiots on the right and the village idiots on the left. Wednesday saw a nice pop at the open as election results confirmed investor nirvana. But basically, the casino indices didn’t move much and volume was poor. No big deal. The ruler of the village idiots, Ben Bernanke, held a pow-wow on Wednesday and decreed the banks were worthy of another trillion in Fed conjured dollars. Yep, the Fed would buy $600 billion more in Treasuries from the banks as well as $300 billion in MBS (Mortgage Backed Securities). I included a chart showing the SPY ETF (candlestick line, 10-minute bars) intraday trading we can see the reaction. The indices all went crazy for about thirty minutes and then they settled down. Obviously, the Fed has a bigger influence over the indices than politics. Thursday, of course, the indices exploded with the Dow jumping more than 200 points higher to finish  above its pre-Lehman failure mark. I have been saying for a long time that this was the Fed’s target. Now they are there. All it took was a few trillion dollars including the trillion they promised on Wednesday. Friday seemed like a consolidation day but without the Fed punching buttons on their manipulation keyboard, the indices slumped. Well, the Dow slumped until it experienced a furious 40-point rally in the final 20 minutes of trading to finish in the green. Glory be!!
So what did we learn, kids? Well, we learned that the only thing that moves the stock index these days is the Federal Reserve. I would like to emphasize that I said, “the only thing”. Nothing else matter. I would like to emphasize that I said, “NOTHING ELSE MATTERS”!!! One might argue that earnings matter. Please. Don’t get too excited about Thursday’s big rally and mistake shill for skill. Fannie Mae and Freddie Mac were up on Thursday like everything on the planet. Fannie and Freddie both lose tens of billions every year. As for politics, does anyone think the clowns elected on Tuesday can do anything to make the economy better? Do any of them have a clue? Please. Bring in Mr. Bernanke and his suitcase full of trillions. Bang! Up go the indices. Yes my friends - it’s that simple. 
Clearly our country has been sabotaged by the Federal Reserve. Greenspan gave us market bubbles, the Internet bubble, the Y2K bubble, and the post 9-11 bubble. Bernanke gave us the credit bubble and the housing bubble. Now he is going to give us a stock bubble. Bubbles don’t come free of charge. 
After Thursday’s big run, a friend of mine told me that he was ‘rich but poor’. What he astutely pointed out was that while the stock casino floated higher, it did so in a lake of rising inflation. The chart below is again, the SPY ETF in candlestick and the sugar ETF, SGG, in gold. I picked sugar because I could remember the ticker off the top of my head. Clearly, investors made money in stocks only to lose it in the grocery store. Bernanke is determined to blow another bubble. But why? Is he stupid? Is he incompetent? Does he work for al-Qaeda?
I think the trillion dollar missile was not necessarily fired at the stock casino. That missile had China’s name on it. Bernanke is doing several things here. One, he is devaluing the US dollar in hopes of increasing the value of the Chinese yuan. Here, he is stupid because a higher yuan increase our inflation rate. Also, Bernanke wants to try to even up the trade imbalance but that can’t happen because China makes all the cheap crap that keeps all of us at the shopping mall every weekend. Bernanke is incompetent in that he is no doubt frustrated that trillions in stimulus and zero percent Fed Funds rates have no revived the bad real estate paper that the banks still hold. Uh, I mean all that stuff hasn’t revived the economy. Yeah, sure, that’s it. The Fed is trying to make the economy better. Uh-huh!
The second thing Bernanke is trying to accomplish is to complete the theft of America’s assets. The $600 billion was for all the dopes that are so transfixed on the Dow. Of course it will go up. Yea! But the $300 billion in mortgage paper will be swapped out for new Treasuries and the Fed will then have $3 trillion on their balance sheet. Of course, the shill banks will have cash and we will have debt as far as our grandchildren can see.
Look at the chart and understand that a federal reserve note would buy less sugar on Friday than it would on the previous Monday. Ditto for the entire commodity spectrum. Oh, I almost forgot. On Friday, the government said the private sector added 151,000 new jobs. Pardon me while I yawn. That number didn’t even make the Dow wiggle. Where was Bernanke? What was he doing? Was he putting his face on the new money he was printing up? Bring on the trillion Ben! It’s your bubble, baby!
11/01/10 - 11/05/10 - 5 days, intraday 10-minute bars, SPY in candlestick, SGG in gold
Chart courtesy

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