Rarely do we enjoy a clear message from the Dow Jones Industrial Average. Or rather, rarely do we enjoy a clear message from the powers that govern the Dow Jones Industrial Average. But since September 1, 2010, we have been given a very clear message. That message is, ‘don’t sell’. The key event driving this message was the Fed’s meeting in Jackson Hole, Wyoming at the end of August, 2010. Bernanke emerged from the meeting with a trillion dollars in QE2 money and an unwavering determination to float all boats with whatever amount of money was necessary. The trick is that the act of buying Treasuries and mortgage paper from the banks actually pumps money into the banking system and that money gets expanded by a factor of ten. The result is from September of 2010 to June of 2011, the banking system will pump $10 trillion dollars into the economy. Or, more specifically, the stock market. The past week someone said to me, “I don’t know what’s driving up the market but I know it’s going up.” My response was that I knew very well what was driving the indices higher. The Zimbabwe experiment was a proven success. The stock market does not need an economy nor employment nor capitalism. Don’t concern yourself with any of the data or reality. It just needs money. The more money it has, the higher it goes.
In truth, the Federal Reserve can’t do much to fix a broken economy. All it can do is flood the system with money and credit. All stock markets are the same in that respect. For instance, China is presently trying to slow the expansion of money by raising interest rates and reigning in credit. Their stock market has responded with a negative reaction. The US indices have responded to Bernanke’s call to rally with a decidedly positive push higher. It’s not rocket science. The strategy is simple. The Fed will simply flood the markets with money and the populous will feel richer due to market gains. However, the top 10% of income earners own 90% of the stocks. The effect has been to further expand the gap between the rich and the poor. But it is important to remember this key point. The central bank is not, and never has been, a tool of the poor. The central bank was implanted into the core of the economic system to expand the riches of the rich. It will not fail them no matter the cost.
The cost is of course enormous. The world is witnessing a confiscation and concentration of wealth as a prize to the central banker shill banks. Their leaders are enjoying banner bonuses into the millions while the numbers of the poor are growing and their existence is suffering. Thus, we are also witnessing riots throughout the world as the effects of bankster enrichment drive the populous to the streets in protest. The populous may not as yet fully understand who put the bridle into their mouths. But they do notice when the oat bag tied around their ears is not as full as it used to be. Here is where investors have to keep their minds focused.
The poor people of the world have to get trampled for the good of the bankster bonus. In the US for example, trillions of dollars have been confiscated from the citizenry and their Treasury by various actions of governmental interference as directed by the central bank. The money has been used to enrich the banker elite. The same has happened throughout Europe and the rest of the world and the effect has been two-fold. One, the stock indices of the money and credit expanders have risen nicely. And two, money expansion in any form leads to inflation. Inflation drives up prices for everyone but especially for those who can least afford it - the people that don’t own stocks. When the price of gasoline and food begins to impair already impaired living standards, people become prone to rioting.
The chart below shows the relationship between the Dow and the commodities ETF, the CRX. This is no big secret and again, it’s not rocket science. The Dow is in candlestick and the CRX is in gold. Beginning in September of last year, we can see that commodities have spiked right along with the Dow. Most of us already know this from going to the grocery store or filling our car up with gas. But every time we pay for something that costs much more than it did the previous week, we should console ourselves with one very important realization. That is, at least the CEOs of JP Morgan and BofA got nice fat bonuses. Yes, it was at our expense but we are all idiots by allowing for such through ignorance, apathy, and cowardice. Or maybe, we just can’t find enough rocks to throw. It’s all good as long as the Dow goes up, right? Tell that to the people rioting throughout the world. If we think the world hates America, just wait until they figure out that the higher prices they are paying are because our bankster CEOs are recouping all their derivative losses.
Oh, there’s that word again - derivatives. Let me just give a shout out to the Chief of Bahrain (the latest country to be embroiled in citizenry rioting). I just checked on the credit default swaps tied to your country’s debt, and they are getting more expensive by the day. Sure, no one cares if you abuse your citizens. You can impoverish them, steal from them, and beat them down. But listen, fellow. When the credit default swaps rise and imperil the banksters that deal in derivatives, you have got to go. I’d advise you to leave early next week. It’s over.
So, for us investors, we just need to look at the chart and read the clear message of Ben Bernanke. The Dow will go up and the Fed will make sure it does. Of course, commodities will rise with the Dow. Prices will keep rising so that eventually the rioters will have to go home on account of not being able to afford to buy any more rocks to throw. Besides, aren’t the banksters safeguarded with shatter-proof glass windows? A final word about the chart. Since the Fed’s announcement of QE2, there have been only 5 negative weeks on the Dow. The worst of which followed the mid-term elections in the US. Could the message get any clearer?
Since 9/1/2011 - Dow in candlestick, CRX in gold
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.