What’s To Come In 2012 - High Tide or Low Tide?

2011 has finally died and I doubt that very many people attended the funeral. For most Americans, the US economy is likely still in a recession. Although, we all know that the government propaganda machine will continue to report falling unemployment, slow but steady GDP growth, rising home sales, rising income, rising consumer confidence, and falling inflation. However, none of this seems likely given that Americans suffered a $2 trillion dollar drop in Q3 net worth, real inflation measured by milk and eggs and gasoline is up to painful levels, better than a third of of mortgages remain underwater, home prices continue to fall, no one can actually sell their home unless it is greatly discounted, half the population is either in the low income or poverty percentiles, real income has been falling for years, and, well, everything our government says is just simply a lie. Real people eat and pay bills and they know things are more expensive compared to a few years ago. But money is like water. It doesn’t disappear. When people lose money and drop into the low income stratus or they lose their job or house or investments, where does the money go?

According to channelnewsasia.com at http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/1136826/1/.html, the high net worth population of the world is now larger than it was in 2007. This population is defined as having more than $1 million dollars in investible assets. There are now 10.9 million of these folks with the US having the most followed by the Asia/Pacific region and then Europe. The central banks have done a wonderful job taking assets from the poor and giving them to the rich. Who benefited from all the banker bailouts? The rich. Who benefited from all the government inside information? People like Nancy Pelosi. Who was dealt the bag of manure? The poor people.

But there is good news. As we move into 2012, we should all think and act like the high net worth people. What are they doing with their money? According to the report sited above, the high net worth people had in 2010 a third of their money in equities, 29% in fixed income, and 15% in real estate. So, when the central bankers intervene in the stock casino to stoke a rally in stocks, you now know why. This same group also plans to raise the amount allocated to equities in 2012. Do they know something is up? Well, they know that the central bankers work for the financial elite and there is so much wealth tied up in stocks that the central bankers have to continue to goose up the stocks. Hip-hip- hurah! Let the 2012 stock rally commence! I have total confidence that Ben Bernanke can make it happen. More importantly, the central bankers must tip their hand in advance so the super wealthy can get the inside track.

Below is the 2011 chart of the Wilshire 5000 on a monthly basis. From the peak in late July, the Wilshire 5000 actually fell as much as 21% at its low in September. Yep, that’s a bear market. Miraculously, on the second trading day of October there was a 400 point rally in the last forty minutes of trading that ignited the Q4 rally that brought the indices back to the flat line for the year. We could have the super rich losing all their money now could we? After all, this is why the central bank was established - to make the rich richer. Any other reason is simply for the ignorant to consume. Look at the chart below. The Wilshire is of course the broadest measure of stocks so it is a good representation that without the miracle month of October, 2011 could have been an entirely different kind of year. Incredibly, the strong end of the year comeback happened with an outflow of funds from mutual funds and ETFs. Apparently somebody that can’t be traced mustered a powerful inflow of funds back into the equity market and we will just call that somebody the Federal Reserve. As money flowed out of the poor man’s pocket it flowed back into the pockets of the rich man. Isn’t that nice? The bottom line is this. If the high net worth individuals are beefing up their stock holdings, shouldn’t we do the same? Don’t let all this talk of debt and default and euro disintegration fool you. The central banks have captured our printing presses, our data collectors, and our media. They can shoot a bear and raise a bull anytime they want to. 2012 will likely be kind to the high net worth crowd. It’s like being at the beach and all we have to figure out is whether the tide is coming in or going out. I think the super wealthy want the tide to come in. Happy and prosperous New Year to all!

WLSH - monthly, 2011

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. Advisory services offered through BMF Investments, Inc.

Stocks May Be The Least Of Our Worries

December 23, 2011, 3PM - I looked out my car window and took this photo of the sky over Charlotte, NC. It is 66 degrees outside. Aircraft activity has been extremely heavy, extremely high, and extremely fast over the past few weeks. I am no expert but I read a lot. I also share with the framers of the US Constitution a healthy distrust of government. But please look at this photo very carefully. Then read on below.

12/23/2011 - Photo copyright by Barry Ferguson

Don’t worry about stocks. The central banks have them totally under control. First, they had to get rid of the small investors. They did that by manipulating the stock indices and turning them on a dime such that the little guy always suffered loses. He’s out, he’s broke, and he’s disgusted with the whole thing. With a smaller group of players, the central banks have less to deal with as they continue to push stocks higher. While we are all giddy with stock gains, let’s examine the cost of those gains as 2011 ends.

Stocks should be the least of our worries. Commandant Obama partnered with the 93 traitors in Congress to eliminate the Fifth Amendment from our former rule of law known as the US Constitution. The National Defense Authorization Bill does just that. The Fifth Amendment restrains the government from exercising totalitarian authority over the common man. This part of the Constitution says a person can’t be compelled to ‘witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation’. Mr. Obama and his treasonous Congress apparently beg to differ with only 7 members dissenting including the esteemed Mr. Ron Paul. Now, it appears that the US government can march our ‘heroes’ down our streets, arrest us, detain us, move us anywhere in the world, hold us forever, and deny us access to legal counsel if they so much as suspect us of doing something they don’t like. This has to be one of the saddest periods in the history of the republic. We, the people, are now simply we the subjects of autocratic ruling elites. The government was supposed to have the consent of the people. Now it deserves nothing more than the contempt of the people!!

Again, stocks should be the least of our worries. Please review again the photo above. This would appear to be a classic ‘chemtrail’ in the sky spewed by our military ‘heroes’. Yes, they are all promoted to ‘hero’ status so we don’t question their activities. Contrails of course are normal exhaust trails that condensate and then quickly evaporate in the atmosphere. Chemtrails are laced with chemicals and most observers believe these chemicals to be heavy metals. Specifically, barium. Heavy metals enter the human body through air, food, and water. Humans are affected with alzheimer-like symptoms. Tiredness, confusion, reduced mental acuity. Chemtrails linger for hours and slowly disburse leaving the illusion of a low cumulous cloud. Often they have a pinkish hue and emit a rainbow effect. In the photo, we can see a faint prism just above the tree line. This is hard for amateurs to photograph but their was definitely a color prism in the clouds that I photographed. What is our government really up to? Maybe they want to dumb us up a bit more before they march the tanks down the street. Look what is happening in Europe.

ECB President Draghi has repeatedly said in the past few months that the ECB did not have the legal right to loan governments money. Further, the ECB only had a single mandate of controlling inflation. Bank bailouts were not permitted. Suddenly, that has all changed as the ECB just elected to inject $640 billion into their own version of quantitative easing European style. The ECB is going to lend the banks of Europe $640 billion at 1% interest for three years in hopes that the banks will buy debt of insolvent sovereign nations. Nevermind that this development has nothing to do with the single mandate of controlling inflation through a stable currency. Nevermind that this development is a repeat of the US central bank strategy of bank bailouts forever. What is the real goal? At the end of three years, the banks will still be holding debt that cannot be repaid and the ECB will have even more control of Europe. Just like the Federal Reserve took control of the US, the ECB is slowly taking control of Europe. 

Now, would people that conspire to gain this much control hesitate for one moment to spray us like we were mosquitoes? We all have more to worry about than just stocks. All I want for Christmas is a chemical mask. Merry Christmas anyway!!

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. Advisory services offered through BMF Investments, Inc.

European Union Hits the Fan

Europe’s got a big ol’ debt problem. Euro-land is drowning in debt and unlike the US, they don’t have a means to print enough money to produce a life preserver. The US, of course, is kept afloat by the Federal Reserve and their printing press. By printing and conjuring trillions from thin air, the Fed has fastened a life preserver around the neck of Americans. In the end, they won’t go anywhere because all the land is flooded. But on the other hand, they won’t drown. They might starve to death or perish from exposure. But at least they feel confident that the Fed is their friend and might eventually toss them a crumb of food from time to time. 

The European Union, on the other hand, is dominated by Germany and Germany so far has resisted the printing press idea to a degree. Yes, they have agreed to allow different lenders from the IMF to the newly formed EFSF to the ECB to facilitate paltry loans to keep the leading edge of the debt tsunami from drowning the masses. But the big meeting this week was supposed to offer some kind of resolution. But alas, our German friends find that old habits are hard to break. They have always been a big believer in propaganda and they apparently still follow the J. Goebbels strategy of using propaganda for crowd control. The EU meeting concluded with yet another announcement that the rulers of the EU were hard at work in an effort to solve tens of trillions of debt and derivative suffocation with a one-pint air tank. Yes, they threw a few more hundred billion at the most troubled economies but big deal. They still don’t seem to understand how derivatives exponentially magnify debt like Ben Bernanke does. He and his merry Fed members have manifested anywhere from $7 trillion to $29 trillion in bailouts and loans to keep the US afloat for another day. It all depends on who we believe but I would put the Federal Reserve as the last entity on Earth that I would believe about anything. I found it indicative of today’s real struggle with reality in that Bernanke denied loaning the world tens of trillions. Rather, he protested, the figure was closer to ‘just a trillion and a half’. We know we are dealing with incredibly large numbers when any number followed by 12 zeroes is ‘just’ like any ol’ number. How can $1,500,000,000,000 be minimized and trivialized? These are extraordinary times in which we live and unfortunately, we don’t have any extraordinary leaders on the planet to save us.

So the EU agreed to some kind of ‘pact’ to tighten up EU governance and thus allow the Union to issue ‘sanctions’ against debt offenders. No one knows what this really means and no one has a clue as to how this will be applied. Thus, it would seem that the debt in Europe has hit the proverbial fan. 

This whole thing seems so simple. A fat man needs to go on a diet and eat less food. That’s not good for the grocery store in which the fat man shops. But, the fat man is going to die if he doesn’t lose weight so he needs to cut back his food intake and spend less money on food. The grocery store will therefore sell less food. Economies that expanded with debt can no longer support their debt. Therefore, they need to go on a diet, cut debt, cut spending, and get in better fiscal shape. Their grocery store has been the banks that helped them all get fat on debt. But the banks don’t want the economies to cut back on debt nor do they want them to cut back on spending. The banks don’t care about good fiscal health. And, they are not about to steer economies down the healthy isle of the store. Worsening the problem is the attitude of the economies that are indebted. They don’t want to cut back either. There is no solution but slow death.

What this means to investors is something I have written about over time. The currency of the EU must reflect this economic weakness and it should therefore weaken. After all, this is the strategy of every economy and every central bank on the planet. They all strive for an ever weakening currency to maintain their sham economies and their sham banking systems. The EU’s only course of action is to extend their indebtedness with ever cheaper currency and ever lower interest rates. The central banks will be complicit in this process as it transfers assets and power from the people to the banks. Thus, it is apparent that the euro currency must fall in value.

The chart below is the euro represented by the FXE. The chart is a two-year chart and it shows clearly the bearish head and shoulders pattern that has formed. We are currently sitting on the neckline and look poised to continue falling. Where does it go? Probably at least 15% lower than where it now sits. What does this mean? When the euro falls, the US dollar rises. Since Ben Bernanke commandeered the economy and the stock market years ago, the Dow and its sister indices have become nothing more than inflationary reactions to currency valuations. So, if the euro falls and the dollar rises, US inflation will ease as reflected by stock prices. The Dow should therefore fall by a corresponding percentage. That means the Dow should lose well over 1,000 points over the next month or so. 

A word of caution. Bernanke might seek to arrest any such stock decline by yet another injection of some artificial and temporary central bank boost. This is going to be a long war and investors are going to have to make strategic adjustments to reflect central banker actions. One thing is certain. The Dow tends to mirror the performance of the FXE (euro). 

FXE - 2 years weekly

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. Advisory services offered through BMF Investments, Inc.

Microwavable Rallies

Question: How do you cook a stock rally?

Directions: Empty wallet into a microwavable bowl. Mix in any stock index of choice. Add a cup of central bank intervention and a cup of PPT spice. Microwave on high for five minutes. Eat immediately as spoiling will occur quickly as reality sets in.

There you have it. This is the era of microwave rallies. These rallies are cooked and not grown. They are created and not developed. They are instantaneous and not evolved. They are manufactured and not organic. How investors put money to work in stocks today is far different than yesterday. And yet, the media hasn’t quite caught on. The way the media presented it, investors enjoyed the best weekly rally last week (week ending 12/02/2011) since March of 2009. Let’s look a little closer with our magnifying glass of truth. 

Since stock rallies now come to us in very short bursts of buying, the process of investing is more like cooking with a microwave oven as opposed to cooking with a conventional oven. Today’s rallies spring forth instantaneously and dissipate just as quickly. They also tend to be contrived, connived, cajoled, coerced, conjured, and concocted.

The message investors get from these microwave rallies is that investing in stocks has morphed into gambling at casinos. The gambler has no chance to win until the dealer begins dealing cards or the roulette operator spins the wheel. The dealer, operator, and casino owner are all one in the same. They are the Federal Reserve Bank.

In the past, investors bought and sold stocks in a market where prices were discovered by the participants. Today, the market is closed and the casino is open. The casino operators now determine price. As such, money is exchanged in the casino for chips that represent money. Gambling infers chance rather than skill. Gamblers risk the conversion of money to chips for a chance to collect more chips. Since all stocks, sectors, and indices now move in tandem, their values have been stripped and replaced with chips representing prices assigned by the Fed. Skills to discern value are now obsolete. Prices depend on Fed action and gamblers have to commit chips to play. As with the directions above, the gambler puts the chips in a bowl and waits for central bank manipulation and intervention to cook up a stock rally. And today, rallies are usually about 5 minutes in duration.

This past week is an example of modern investing/ gambling. For the week ending 12/02/2011, the Dow enjoyed its best week since March of ’09 with a 780 point rally. Actually, to be precise, there wasn’t so much a ‘weekly’ rally as much as a ‘day’ rally. Actually, to be more precise, there wasn’t so much a ‘day’ rally as much as a ‘minute’ rally. For a five-day trading week, there are 1,950 minutes of available minutes to buy or sell stocks on a US exchange. This past week, the Dow rallied 250 points in the first five minutes of trading on Monday morning and over 400 points in the first five minutes of trading on Wednesday. So, in truth, the 780 rally points on the Dow happened basically in 10 of the 1,950 minutes of trading. A few other micro bursts accounted for the rest of the ‘rally’. If gamblers didn’t have their chips on the table for those 10 minutes or so, they completely missed the rally. Even worse, without those prosperous 10 minutes, the Dow trended lower for the most part. And yes, these 10-minute rallies were inspired by Federal Reserve action. How does a gambler know when the Fed is about to turn all the colors on a roulette wheel to black?

Thus, the modern investor must embrace gambling as a strategy and the potential gains on the gamble are completely up to the Federal Reserve. Of course on Monday, the casino was greeted with news that central bankers were committed to bailing out Europe. That was good for 250 Dow points at the open. On Wednesday morning, the casino was greeted with the news that Ben Bernanke wore bermuda shorts to work. That was good for 400 Dow points at the open. Actually, the news was that Bernanke’s shorts were cuffed so that got everyone going. No, really there was some kind of announcement about a reduction in US dollar currency swap interest rates from 1% to .5%. Big whup! How this will serve to help the governments of the formerly sovereign nations of Greece or Italy extend and pretend their debt away I have no idea. Probably this was a move designed to free up more dollars so the big banks can add more collateral to their eroding sovereign debt credit default swap positions. And, not that the vast majority of gamblers had a clue about currency swaps, the important thing was that an announcement was made about some kind of central banker action. That just has to be good for a rally, right? Start the microwave!

The question now becomes how do gamblers profit from this new casino? There is no way that anyone can confuse the modern stock casino with a stock market. The term ‘market’ means there is a medium where buyers and sellers set prices. Clearly the central banks now conspire to set prices. They do so in microwave-like minutes of trading. We can adopt the term ‘casino’ now for several reasons. First, all stocks and all indices move in tandem. Thus, they are all simply chips that are used to get exposure to the game. There is no value in the chips. They carry a price and the owner of the casino sets the price. Second, casinos offer games of chance. No one goes to a casino to play a game of pure skill like chess, for example. But rather, casinos offer games that involve playing cards, dice, and balls that roll around a roulette wheel until they randomly fall into a red or black colored and numbered pocket. These games require very little if any skill from the player and winning is a function of chance. Third, casino operators determine winners and losers. Casino operators seek to limit gains but they also manufacture winners occasionally to induce the gamblers to keep playing. As with stocks, whenever they seem poised to fail, the central bankers make an announcement that turns the colors of the pockets on a roulette wheel to all black for a spin or two. Everyone wins! 

The chart below is a picture of the Dow for the week in question on an intraday basis with 10-minute bars. We can clearly see the microwave-like bursts of buying linked to central banker action and manipulation. The extra volume at the bottom of the chart would lend credence to coordinated PPT activity. I have circled the microwave events with green and more minor microwave bursts in lighter green. Bear in mind that this chart is showing 10-minute bars but in actuality, the microwave buying was concentrated in no more than 5-minute bursts. Each burst was Fed inspired and Fed driven. 

So what do we do going forward? How do we answer the question posed at the beginning of this article? Let me answer that by quoting Clint Eastwood’s Dirty Harry character. “You’ve got to ask yourself one question - Do I feel lucky?”

DJIA - Intraday 10-minute bars over 5 days week ending 12/02/2011

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. Advisory services offered through BMF Investments, Inc.

Stock Market Kryptonite

In a world gone mad - in a world gone broke - in a world ruled by the insane - in a world completely disconnected from its foundation - the stock market is now driven by currency valuation. A stock rally must have a weakening currency. A stock selloff must have a stronger currency. Thus, stocks have now become pure inflation puppets. The Dow Jones Industrial average must have a weak US dollar to stoke a rally. Nothing else matters. 

For this week, I again bring back my favorite chart (below). It is an 8-year picture of the USD (US dollar) in green and the FXE (euro currency) in black. Please review it below. 

Why is this so important? Because it looks like the dollar wants to strengthen and thus the Dow will continue to weaken. That is, of course, absent another miracle ‘end of the month PPT rally to make investor statements look better’. The US dollar and the euro are on a collision course. The dollar is at present rising and the euro is falling. I drew in a green line to approximate the expected top in the dollar appreciation. The black line shows the approximate level of the expected euro fall. For investors in the US, it looks like the dollar can rise at least another 5% or so. This will surely produce an 8% or better drop in the Dow. That would put the Dow in the mid-10,000 level where Bernanke and the boys jolted the Dow higher by 400 points in 45 minutes on October 4. If that level is to hold, the dollar (as represented by USD) must terminate its ascension at $84 or so. Otherwise, the rising dollar will function as stock market kryptonite and a bear market will no doubt surprise investors who believe government economic propaganda. 

In the chart below, I also drew in three vertical red lines. All three red lines are approximately equal in length. Their purpose is to show that the USD and the FXE generally only move a certain distance apart before they have a reunion criss-cross. We can all see where we are in the cycle. The USD and FXE look destined to cross again very soon. Again, the ramification is the rising dollar will act as stock market kryptonite. 

Aside from the obvious chart, we can all offer an opinion as to why the USD and FXE chart trends will intersect. 

One, the european politicians are insane if they think the euro can survive without trillions of euros in sovereign debt bailout money. They continue to establish facilities to make this happen but none of the created facilities have the funding or the legal rights to offer trillions in bailout money. The ECB, the EFSF, and the recent IMF addition are all guns without bullets. The EU must follow the lead of the US and ignore established laws and legal rights so they can restore banker capital through the impoverishment of the citizens. The longer they wait, the weaker goes the euro and the stronger goes the US dollar. This is not good for stock markets. Only when the stock markets of the world looked poised to fall into the abyss will central banks act.

Two, which has a better chance of survival - the euro or the federal reserve note? I think we all know that our boy Bernanke has a nuclear powered printing press and he is not afraid to use it. The EU is in a battle with the Germans over the expansion of the money supply due to the fear of inflation. Again, they should just follow the lead of the US and simply lie about inflation. The longer they wait, the stronger will be the dollar. 

Three, let’s see. The two biggest economies in the world, the US and the EU, are both broke and hopelessly indebted by tens of trillions. Neither will ever be able to repay any of their debts and those debts will continue to balloon. The third and fourth biggest economies in the world, China and Japan, loaned a good chunk of that debt to the US and the EU. They stand no chance of ever getting repaid. If central banks choose to print money to rebate the capital depleted banks, we will all end up under one sovereign governance. It will be named, ‘Zimbabwe II’. 

Four, there will be ebullient data released over the next week or so about increased ‘black Friday’ sales in the US. Consumer spending and consumer confidence will be heading in opposite directions as will consumer debt and incomes but nothing matters but the story. And that story will be that the consumer is in great shape, he/ she is shopping their brains out, and the US economy is once again rolling. Well, of course it is. This kind of ‘good’ news inadvertently could work to strengthen the dollar. I guess we can’t have everything. 

In summary, the last few days of November will receive some ‘monthly investor statement’ repair but then it looks like shorting the markets might be the real growth strategy over time to take advantage of a strengthening dollar. However, investors following this strategy must be wary of central bank intervention by way of 1) end of the month (November) rally, 2) PPT manipulation, and 3) ECB bailout announcements. Otherwise, follow the USD - FXE criss-cross and be set to cover the shorts when the USD pushes $84. Of course, I could be wrong. Maybe the PPT doesn’t really manipulate the markets. Maybe the PPT is like Santa Claus. Maybe the USD and the FXE won’t ever cross again. Maybe a strong dollar isn’t really stock market kryptonite. Maybe I really can jump to the Moon and get a piece of green cheese!

Past 8 years - USD in green, FXE in black

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. Advisory services offered through BMF Investments, Inc.

POMO Drives The Market

Okay, let’s be honest. The stock market is a sham and has been rendered such by the Federal Reserve. They carry on what they call the Permanent Open Market Operations (POMO) tactics to manipulate the stock market. The schedule is published on the New York Fed’s webpage. I suggest readers take note.

The so-called ‘operation twist’ is now underway as the Fed seeks to spend about $40 billion a month buying longer term maturity Treasuries and selling shorter term maturity Treasuries. They don’t want to expand their balance sheet any further than the nearly $3 trillion that they currently hold. Where, pray tell, did they get all this money? One only has to look at the mounting debt of the US Treasury to find the answer. Business is good when you don’t have to use your own money! 

In addition to operation twist, the PPT is no doubt staying very active. The October rally was fueled by the monstrous 45-minute 400 point Dow rally on October 4, 2011. But, I want to keep it simple this week. 

The chart below is the intraday, 10-minute bar, weekly chart of the Dow ending on 11/11/11. Wednesday was the only negative day as the Dow fell almost 400 points. What was the problem? Greece? Italy? General debt? Please! I think we all know that Europe has surrendered to the central bank, as did the US, and will accept any form of austerity that the central bank chooses to mandate. Yes, that includes a change of leadership meaning the heads of state that the citizens democratically elected are being replaced by heads of state implanted by the central bank. So much for democracy. So much for sovereignty. So much for freedom. At least the stock market went up! That’s all that matters to anyone, right? Anyway, what happened on Wednesday? The Fed only engaged in the selling of securities on Wednesday. Monday, Tuesday, and Thursday they were buyers. On Friday the rested I suppose so they could reload the ink jets on the money printer. But the Dow jumped 200 points higher at the open and Wednesday’s huge loss was erased in a fabulous 2-day rally. Way to go, boys!

How about next week? The Fed is again a Wednesday seller. Stand clear for that one day. The other four days are scheduled buying days. My sense is we will enjoy another fabulous rally next week and it does not matter if Italy falls in a hole or not. That’s not important. The Fed has decided that their subjects need a rally and a rally they shall instigate. Just look at the chart below for guidance. 

DJIA - Intraday 5 days ending 11/11/11, 10-minute 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. Advisory services offered through BMF Investments, Inc.

The Truth Is Found Between The Keys

Jazz and blues musicians alike have tried to describe the sound that makes their music unique. The great musicians play what is in their heart. They play the truth. How do they express it? They often say it is the notes in between the keys for the jazz piano players. Blues guitar players express the notes between the keys by bending the strings so that the tonal quality of a note resonates somewhere between two true notes. That’s the feel of the music. That’s what is in the heart of the player. That is where the truth is found.

In our world of economics and investments, our government is the orchestra. They play the notes that we hear. And, they have a tendency to play the same song over and over. ‘Zippity do-dah, zippity yea! There’s plenty of sunshine headed my way!’ There may be plenty of sunshine coming our way but I’ve got a feeling our gooberment leaders are just trying to blow that sunshine up ‘you know where’! If we want the truth, we have to look between the notes.

For instance, Canada just announced that their economy lost 54,000 jobs in October. That’s the most since the depths of the financial crisis and the second straight monthly loss of manufacturing jobs. Unemployment increased from 7.1% to 7.3%. The Canadian economy actually shrank in the second quarter. What did they blame for this weak economic data? A weaker than expected demand from the US. Yes, the US is the primary destination of Canada’s goods. 

In searching for the truth, we would obviously not rely on the mendacious propagandists that work for the US gooberment. We have to look in between the keys. We have to get in between the notes. We know what the Canadian government said. Canada’s manufacturers are making less stuff because they see weak demand in the US. Of course, the US economy is a complete ruse and the US needs a stock rally to avert an admission of recession. The stock rally needs some good economic news. Ala-ka-dabra! The US gooberment said third quarter GDP was probably humming along at 2.5% growth. The US economy supposedly added 80,000 new jobs in October and unemployment actually fell to 9%. Nevermind that most of the magical new jobs were temporary (I’m sure these jobs were actually real) and nevermind that unemployment continues to fall even though the economy needs to add in excess of 100,000 per month just to keep up with population expansion (no, the math does not add up). 

Again, Canada said demand from the US slowed and the US said everything picked up. Those are our two notes. The truth is in between them but without a doubt, the truth is not, nor ever will be, found on any note that the US gooberment strikes. So what do we do with the truth when we find it? 

Set is aside. It means nothing to the advancement of the Dow Jones Industrial Average. All the Dow needs is and active Fed, a constant influx of cash from the PPT, and glorious economic news that seems to be more mendacious by the day. The truth is the stock market has no connection to the truth. It is not interested in the truth. Therefore, we should not concern ourselves with the truth either.

At the moment, the Greek debt problem is standing between us and a big stock rally. As soon as the Greek government surrenders to ECB demands that will leave Greece in a perpetual state of depression, the rest of us can take advantage of the stock rally. Greece is only a month away from running out of money. They are desperate for an EU lifeline. Next in line will be Italy. They have a much bigger debt problem than Greece and so the true economic risk goes on and on and only grows over time. The only real solution is to cut back debt and that does not serve the purposes of the central banks. The can only dominate us with debt and the populous is simply too stupid to understand that. 

So, for the coming week, look for the Greek surrender and the ensuing stock rally. Forget about what Canada said. The lie that the US spouts is much more conducive to a rally. 

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. Advisory services offered through BMF Investments, Inc.

A Bullish Month For The Ages

October of 2011 will make the record books as the best October since 1974. It was the best month period since 1987. It was so good that the major US indices are now back in positive territory. Just think, only a month ago we were flirting with bear market territory! Wow! What a difference one month will make! What a difference the PPT will make.

The chart below is this wondrous month of October with 60-minute bars. Obviously the PPT started this rally, as they start all rallies, with the incredible 40-minute, 400-point Dow surge on October 4 as highlighted by the blue rectangle. Like almost all PPT rallies, this one burst forth in the final trading hour of the day. The rest of the month went as the Fed planned. Up, up, up. Yippee!

During the month, many companies reported better earnings than analysts had predicted. The big banks boosted earnings largely from their debt issuance declining in value. Yes, that’s right. In the con game that is our stock market and economy banks are allowed to book declining debt values as earnings. Lowes is closing 20 stores and laying off 2,000. Walmart is dropping health care for new hires and raising premiums for the rest of their employees. Americans are still spending but the latest data indicates they are spending their paltry savings. Whirlpool said demand for their products were at ‘recessionary’ levels. Yet, the US propaganda mouthpieces did their job and reported that all was well. Never mind that Whirlpool makes durable goods but those orders increased. Of course, we had to back out transport and auto production to get a positive number but that’s how the game is played. 

Third quarter GDP was estimated to be 2.5%. New claims for unemployment benefits was just a paltry 400,000. Everything is peachy. 

The big news of the month was of course the solution to the Greek debt crisis announced on Thursday, October 27. The solution of course was to create a fund of some $1.4 trillion dollars with which to issue new debt. Where would the $1.4 trillion come from, the media asked. They are all so stupid. We know where it will come from. Bend over people. The banks need another bailout. Anyway, that news was good for a 330-point Dow rally. The month of October was fantastic. Happy days are here again. The stock market is celebrating. Investors are once again saved by central bank intervention. What could be better? Freedom? Capitalism? Dignity? 

Nah. We can’t operate under capitalism. Big banks would surely fail. Besides, central bank intervention and manipulation draw such pretty charts. Behold for posterity the wondrous month of October. Oh, don’t forget to send Bernanke a ‘Thank You’ card!

DJIA - Month of October ending 10/28/11, 60-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. Advisory services offered through BMF Investments, Inc.

The Bull Market Solution

I am sure that everyone is sick of hearing about the lackluster economy. Unemployment is high, Europe is choking on a debt crisis, and populace demonstrations are popping up all over the globe. But investors only care about one thing - the stock market. They are willing to surrender everything - capitalism, dignity, truth, liberty, autonomy - in exchange for a stock market rally. Luckily, a stock rally is easy to conjure. 

The chart below shows the S&P 500 in gold and the US dollar ETF, the UUP, in green for the past seven weeks. While the Federal Reserve is completely inept in almost everything they do, they are very skillful in one area. They can always stoke a rally in stocks. The problem is that the economy and reality do not necessarily warrant a market rally. The solution is simple. Kill the US currency valuation and inflate the stock market with all other commodities. Inversely, allow the dollar valuation to rise and stocks take a terrible beating. 

The chart below starts with the month of September. The dollar rose and stocks fell. The September plunge of some 8% in the S&P 500 index obviously scared the bejeepers out of the Fed who met the second trading day of October with a blizzard of buying. More accurately, the Plunge Protection Team (PPT) hit the markets at exactly 3:15 PM with a 45-minute barrage of buying that lifted the Dow some 400 points at the end of the day. The ‘bottom’ was in. No further market deterioration would be allowed. Just like that, a rally ensued. How did they do it?

Simple. They killed the dollar. It works every time. Agent Geithner even dashed over to Europe to implore the European central bankers to resolve the Greek debt fiasco as the American central bank had three years ago resolved their own little brush with insolvency. Print money fellows! Create balance sheet credits! Buy up the garbage debt that no one on the planet wants to own! Steal the money from the citizens! Heck, they will never know as long as the stock market rises. That’s all they care about. And please, hurry up and write the check. We need a stock market rally in the US.

And they will. Is there anybody in the entire solar system that doesn’t think the ECB will write a multi-trillion dollar check to backstop the French, German, and US banks that are on the hook for the Greek debt and related derivatives? Come on, fellows. We all know you are bank agents masquerading as benevolent federal monetary guardians who are kind enough to ensure flexibility of monetary supply. Banks can’t fail due to their derivative holdings. We know that. Write the check. Interestingly, when the Greek debt crises first surfaced over a year ago, the central banks insisted that $20 billion would solve the problem. Then it went to $40 billion. $80 billion tops. Maybe $120 billion would eventually be needed. Actually $220 billion but no more. That would clean everything up - okay $440 billion but that would cover any future Italian or Spanish debt problems. Now, the figure is $2 trillion. And that’s probably not enough. Does anybody have a clue about the damage of derivatives when they blow up? Obviously not. 

So why does the ECB need to hurry up and write a $2 trillion dollar check? The result would no doubt be a stronger euro, a weaker dollar, and a stock rally that should put a smile of everyone’s face! The chart below is no doubt reflecting the Fed’s hard work of devaluing the US dollar coupled with the anticipation of Europe surrendering to the central banker mendacious threat of ‘too big to fail banks’ bringing on armageddon. 

While the anticipation builds for Europe’s next banker bailout, the Fed in the US is engaged in the process of manipulating the interest rates lower by selling short-term Treasuries and buying longer-term Treasuries. They do this through their long established practice known as Permanent Open Market Operations (POMO). It is safe to assume that the Fed is also busy buying call options at the same time to produce more of a stock rally than a simple debt instrument offset would produce. The POMO days are generally powerful days for the stock market. Today (Friday) was a POMO day and the Dow rose 200 points. Yesterday (Thursday) was not a POMO day and the Dow rose just 37 points. The month of October has 21 trading days. 11 of them are POMO days. October will be a positive month for investors. Ain’t they smart? The market isn’t rocket science. Intelligence is an unnecessary burden in the investing process. The PPT and the Fed will make all things rise and the POMO days are the strongest. The simple solution to a rising stock market is a devaluing dollar. Just wait until the ECB exerts an even stronger stranglehold around the neck of the poor souls in Europe with a $2 trillion dollar check. US markets will no doubt shoot higher. Inflation. Learn to love it!

SPX in gold, UUP in green - past 7 weeks

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. Advisory services offered through BMF Investments, Inc.

Ignorance and Mania

Ignorance is not knowing. Mania is believing the herd. The stock market turned on the drop of a bear. That is, commentators and pundits simply had to voice the realization that stocks were knocking on the door of a bear market at the end of September. By definition, the bear market is a drop in an index of 20% from its most recent high. As if Ben Bernanke’s Batman alarm went off, the indices burst higher from the cave of the bear market on the second trading day of October with a classic PPT rally of 400 Dow points in the final 40 minutes of the trading day. It hasn’t looked back. Two weeks later, the Dow is nearly even for the year. And to think - all we had to do was mention the word, ‘bear’!

What changed? Yes the PPT clearly decided that a bear market would not be tolerated. But the driving force of the bear market was, and is, too much debt. Has the debt problem been solved? Yes, like always, the banks that extended loans that cannot be repaid will be ‘re-capitalized’ by the central banks. Where do they get the money? Thin air? No, from the tax payers either through monetary inflation or sovereign debt expansion. Presto! Problem solved. Greece is healthy again and the Gulf of Mexico is free from petroleum pollution. Corporations are suddenly gold nuggets again as the debt problems vanish. Actually the debt problems vanish because the central banks are acting so that the derivative world stays healthy. Derivatives are on every balance sheet and contribute to perceived capital and earnings. That’s the real reason debt cannot be defaulted. That’s the real reason Greece will not be allowed to exit the EU. All the while, investors remain ignorant of the precariousness of the world economic environment. Fortunately, the ignorant can survive because the central banks reward ignorance. As long as investors don’t know anything and don’t read articles like this, they can merrily invest their money and be confident that the central bank stands ready to intervene at the drop of a bear. No worries. Just stay ignorant. That’s the key.

That ignorance of course leads to mania. Surely the herd is right. Well, of course they are. As evidence, we can look at the mania in the semiconductor world. Specifically, PPT rallies lift all boats and semis are on the crest of the PPT tsunami of buying. Virtually every company in the business has reported weakness of late. Let’s look at Fairchild Semi. They make chips for the communications industry. Reported in business publications on October 14, 2011, the company said Q3 profit fell 19% versus last year and sales were lower by 3%. True, the earnings beat analyst expectations by two cents. Read on. Sales were below estimates. The company also (like most of its rivals) guided sales estimates lower than analysts’ guesses saying that the economy had slowed. The company plans to ship fewer chips going forward. So? What does falling sales and falling earnings and a weakening economy and falling prospects have to do with anything? In a PPT driven market mania, the answer is nothing. Absolutely nothing. Nada. Zip. This is PPT mania. It’s all good. Get you some. Just close your eyes and buy. You don’t have to know anything. Fairchild was up 10% on the news. No, that’s not a misprint. The stock was up 10% on the wonderful news. Where will the mania end? Don’t ask me. Ask Ben. Below is one of the better performing stocks of the ebullient day of October 13. I include this chart because it is representative of the investment environment. All the roulette players think they have acquired some kind of skill by always betting on black only they don’t realize that the Fed has painted all the numbers black. Tomorrow we will spin the wheel again. I’ll bet the little ball lands on a black number.

Notice in the chart below that the stock price has been in decline to reflect reality. Notice also the explosion in volume on the ebullient news of an eroding environment and dimming prospects. Does anybody care about reality anymore? I doubt it. I’m not trying to pick on Fairchild. I just thought the chart was worth pointing out a little perspective to a completely irrational stock rally. 

FCS last five months

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. Advisory services offered through BMF Investments, Inc.

Dollar Rises - Everything Else Falls

Stock indexes entered this week fresh off a 5-day rally from nowhere fueled by nothing but hope. Momentum was lost on Tuesday of this week as the markets prepared for the Federal Reserve pronouncement on Wednesday. There was all kind of speculation as to what the Fed might do. What they did was their next operation of manipulation. Deemed ‘operation twist’, the Fed will begin selling their holdings of short maturity Treasury bonds and buying longer term maturities. They expect to pump another $400 billion or so into the stimulus pump. It is stupid. It is desperate. But, the Fed is pretty much out of bullets. 

The stock market promptly took a dive late Wednesday. Apparently, investors concluded that the Village Idiots who are charge of manipulating and stimulating the stock markets are clueless and dumbfounded. Thursday left the Dow with a near-400 point loss. Friday brought forth a slight gain with the help of yet another wonderful last ten minutes of the day rally. What happened to the miraculous rally of the previous week? What changed?

Well, nothing really. The two biggest economies of the world are still broke and job prospects are still waning. What happened is the US dollar continued to strengthen. Period. Read my previous posts and it becomes obvious that the stock market is nothing but a commodity. The Fed policy of buying longer term yields has fueled the strengthening trend in dollar. Stronger dollars kill inflation and commodities. Precious metals crashed. Copper entered a bear market. Look at the chart below.

The US dollar gained 1% this week and the Dow lost 5%. The dollar’s big surge coincided perfectly with the Dow’s big plunge. The Fed seems determined to destroy the income stream produced by US Treasuries by manipulating interest rates to zero. Obviously they want investors to put their money in stocks so they can keep the con game going. The con game is the illusion of wealth perpetrated with the distraction of a Dow Jones Industrial Average trading at a level that is pure fantasy. The Fed can only buy so many call options to boost the Dow and they can only promise a free trip to Kansas for Dorothy to return home so many times before even the dumbest investors has to cry ‘BS’. Nevertheless, the rally in Treasuries strengthened the US and everything else in the world fell. 

The question is will this trend continue? 

Most likely, the US dollar is rising in large part because its diametric opposite, the euro, is falling. We all know Euroland is broke and bankrupt as the big banks continue to choke on the derivatives of sovereign debt. The euro will fall until the ECB enacts another bailout program to steal money from the poor citizen suckers of Europe to ‘re-capitalize’ the big banks. When this program is announced, the trend in currencies will reverse. The euro will rally and the dollar will fall and the Dow will again rally. Earnings anyone? Please. Does corn produce earnings on its own? Oil? Sugar? Gold? No. Commodities rise and fall with currency valuations. The stock markets have become pathetic puppets of the banker elites and are now simple commodities. The chart doesn’t lie. The only thing that matters in today’s market is currency valuation. Period.

DJIA = red line, UUP = green line - Intraday, 10-minute bars, 9/19/11 - 9/23/11

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. Advisory services offered through BMF Investments, Inc.

The ShamWow Stock Market

Let us record history as it happens. Let us not let the truth become altered by the hands of time so that it fits a message of those who seek to rule us. Let us make permanent a recording of the week that passed in real time so that generations of the future will be able to look back to the moments that changed the rules that govern their life.  

Week ending 9/16/2011: This just in for the week - jobless claims rose, US median income slipped 2%, mortgage foreclosures increased 33%, Greece edged further  toward debt default,  Bank of America prepared to layoff 35,000, the US Post office announced the same layoff number, stock markets rose! ShamWow!!!. Maybe just sham. Certainly wow! Once again, central cabal banks continued to turn the stock markets into stock shams. The problem is this. The big banks in Europe loaned the weaker sovereign economies of Europe too much money so that those weaker nations could feign prosperity. You know - they all want to imitate the US. Now those sovereign nations, with Greece at the forefront, cannot repay the loans. The solution is this. The big banks will be given more free money by the central banks of the world! Central banks now act like one of those ShamWow towels that clean up spills. It is a sham! It is a wow! It is a ShamWow! 

In fact, the central banks of the US, Europe, Japan, and Switzerland have pledged an ‘unlimited’ amount of US dollar ‘loans’ to the troubled big banks of Euroland. It’s just too bad that the money the central banks are pledging is the money of the US citizens. ShamWow! The big banks recklessly loan money out, leverage it with derivatives and swaps, inevitably face default, and then turn to central banks for a ShamWow towel to mop up the mess. (Interestingly enough, the ShamWow towel proclaims to hold 12 times it’s weight in liquid. Central banks strive to do the same to perpetuate sovereign debt!) This has happened over and over and over again through history. Tax receipts are confiscated, fiscal autonomy is compromised, and capitalism is circumvented all by the hand of central banks. The result is wealth continues to get soaked up by those who extend the ShamWow towel. When will the populous of the world put a stop to it?

Most likely the answer to that question is never. Did I mention that the stock market went up this week? Isn’t that all that counts? The populous is clueless to the role of central banks acting as a ShamWow towel. Besides, the populous thinks the central banks are here to help us. What if the central banks had to use their own money and not ours? Would they still be so quick to extend a loan? Loans go bad sometimes. That is a risk of lending. Why should citizens surrender money from their Treasuries so that central banks can use that money to make lending risk free for the big banks of the world?  

What prompted this latest central banker intervention? The excuse given was there was a need to alleviate fear of runs on bank deposits in Europe. Oh really? Consider something else from the US Fed.

The Federal Reserve also said industrial manufacturing production rose .5% in August. This hardly seems plausible given that the Fed’s New York and Philadelphia regions reported continued slowdowns. However, the Fed did say the increase was almost all due to an auto manufacturing uptick. Pardon me while I inject some skepticism. 

Haven’t we been told over and over that banks in Europe are fine? Aren’t they all well capitalized? Haven’t they all passed their ‘stress tests’? If the answer to these questions is ‘yes’, then why would any of them fear a run on deposits? Now for the big question. Why are the central banks orchestrating US dollar swaps so that the European banks will have ample supplies of US dollars? If there is indeed a run on bank deposits in Europe, would having ample US dollars at the teller windows really help? If the situation was reversed, would Americans accept euros from their banks instead of US dollars?

As we search for the truth in central banker action, we should consider this. First, this is the same deal that got Greece into trouble in the first place. Greece breeched loan limits by working with Goldman Sachs to disguise loans as currency swaps. Second, no lender loans money unless they think they have the default risk under control. Sovereign lending is backed and leveraged with derivatives and swaps. As the risk of default increases, as it has with Greek debt and others, the cost of insuring that default through credit default swaps increases. Generally the collateral on a swap is 20% or less of the notional value and generally the preponderance of such instruments are denominated in US dollars. Thus, we might assume that the real reason for the ‘unlimited’ availability of US dollars is to facilitate an expansion of credit default swaps. As the debt expansion increases, so too does the need for credit default swaps, the amount of collateral to propagate the swaps, and in turn the need for more US dollars particularly in the European theatre. 

Finally, Americans should take note that the Federal Reserve Bank is again engaged in currency swaps that send US dollars abroad. This should further amplify the fact that this currency is the Federal Reserve Note. It is owned and dispensed at will by the Federal Reserve Bank and not the Congress of the US. The Fed did not need to check with anyone before making such deals. Not the Congress. Not the Treasury. Not even the so-called President. 

Let history record accurately the events of this past week. Future generations might want to know why and when their money changed so much from past money. And today, no one raises an objection. Part sham. Part wow. The central bank uses the US currency as a ShamWow towel to mop up uncollectible debt, re-capitalize bank balance sheets, and to proliferate credit default swaps. 

Oh, and one more thing. Whenever anything gets offered in an ‘unlimited’ supply, doesn’t its value trend towards worthlessness? But who cares? The Dow rose this week - right? I wonder who made it rise?  

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. Advisory services offered through BMF Investments, Inc.