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.

Currency Control

For the week ending 09/09/2011, I have included a year-to-date chart showing four lines. The Swiss Market Index (SMI) is in red, the S&P 500 (SPX) is in gold, the US dollar (USD) is in green, and the Swiss franc (FXF) is in black. The media and the market pundits are volunteering all kinds of reasons for everything that is going on in the stock market. I’ll keep it simple. The truth is just that way!

The stock market is nothing more than a psychological tool that is used by the central banks to dupe the worlds’ populous into believing that the economy will survive banking exploitation. Market values are set by central bank meddling and therefore completely correlated to currency valuation. Very simply, relative market valuation can be controlled by currency valuation. The cheaper the currency, the the market becomes valued in that currency. The chart below tells the story.

The Swiss central bank this week stunned the world by announcing that they would no longer tolerate a Swiss franc above 1.20 to the euro. They would by whatever denominations of other currency in whatever volume they needed to achieve this peg. Their reasoning was that they felt the Swiss franc was way overvalued due to the sorry state of every other asset class in the world. Like the US central bank, the Swiss central bank has already lowered interest rates to zero but still, the world has poured into franc given that the central bank of Switzerland can still print francs at will. Many believed this policy would result in the Swiss bank buying euros outright to facilitate the strategy of currency devaluation. 

Allow me to inject the truth. The chart below shows that the Swiss Market Index dipped into bear market territory in August as it had lost 20% of its value from the beginning of the year. Now, as I have been postulating, all markets must move inversely to their underlying currency. The Swiss stock market had been falling because the currency, the franc, had been rising. As I have been postulating , all central banks work for one singular purpose. Their only job is to goose their stock markets. Thus, the Swiss market was down and it could only be righted with a weaker currency. How do they do that?

Taking a look at the US dollar, we have a clue. As I wrote in my last post, I suspected the US markets were goosed at the end of August to make client statements look better. When the calendar turned to September, down they went. The first six trading days of September (closed on Labor Day), were all powerful negative days except Wednesday as the Dow rose and incredible magical 275 points. Anyway, the demise of the US markets was coincidentally met with a rise in the value of the US dollar. Given the pathetic shape of the US fiscal condition, what would cause a rise in the value of the currency? My guess would be that the Swiss have been busy buying every currency on the planet in an effort to devalue their own in a effort to resuscitate their stock market. I don’t care what they say in public. Besides, politicians are nothing more than professional liars. The US dollar is highly liquid and the Swiss can sell francs and buy dollars all day long. 

What does this mean for the US markets? Again, markets can only rise in tandem with devalued currency. If the Swiss continue to buy US dollars and cause the dollar to appreciate, the US markets will likely depreciate. And, it would appear that the Swiss government is serious and just as desperate as every other government on the planet to continue their sham. Behold - the chart below. 

YTD 09/09/2011 - SMI (red), SPX (gold), USD (green), FXF (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.

Theory of Market Relativity

Investing is all relative these days. Economic data is compiled by a government that enlists media shills to perpetuate a positive vibe to everything. Most of the data is contrived and unbelievable. For instance, a week ago the government said durable goods orders were up and manufacturing was declining less than expected. Why don’t we drop the ‘expected’ part because we’re all guessing now. Bernanke said the economic recovery was weaker than he expected so he is guessing like the rest of us. Manufacturing is slowing in general throughout the world. Yet, the news was spun to goose the stock market. QE3 was coming soon. Or, maybe it wasn’t. The markets rallied on the back of either interpretation. If orders for goods were up, someone forgot to tell the companies that make stuff. Their activity was down in August. So too were hours worked, real wages, and zero jobs were created. What could we possibly expect from our government - the truth?

Yeah, I know. I’ll give readers a few moments to stop laughing. 

Ready? Here is the truth. The driving force in the market right now is the client statement. Statements are generated at the beginning of every month and they reflect the markets through the end of the previous month. To keep investor psychology buoyant, it appears that the ruling elites have decided to goose the markets in the final week of every month to pretty up the statements. This has happened in every month of the year so far except for January and February and July. The markets were trading higher in the first two months of the year so there was no need to goose them. In July, the debt debate was raging in the US and the elites were probably vacationing believing that they had already won the psychological battle. The media shills were cheering everything on and the market was up for the year. 

August began and the markets began to drop. Yearly gains quickly turned to losses as Ruler Bernanke assembled his merry men of manipulation in Jackson Hole, Wyoming. They announced nothing but a willingness to visit QE efforts in September. Bad news was good news. Good news was better news. Any news was good news. Bernanke’s sock had a hole in it. Anything. Everything was good and a reason for a stock rally. Up, up, up the Dow went right up to the final trading day in August.

Client statements were printed for the month of August and what was a 14% loss was rallied back to be only a 3% loss. That makes swallowing all the horse manure about economic recovery more palatable. The books were closed and the PPT had done their job. And then, the calendar turned to September and the Dow lost some 450 points in the first two days of the new month. Where did all the good news go? Did reality suddenly set in?

No, the PPT knows that monthly statements don’ t come out for another four weeks so they take time to rest in the first few weeks of a month. Yes, the market is a complete charade run by charlatans without compunction and they use the stock market to manipulate psychology. An economy that continues to decelerate towards a stall with no ability to create jobs could be even scarier if the Dow reflected reality and dropped a quick 25% or so. Isn’t it nice that the PPT cares so much about our fragile psyches? 

Look at the chart. Let me make two points. First, we can easily see that the end of a month is the time to be in stocks and the beginning of the month is the time to be out of stocks. This is the calendarization of the market. It is the theory of market relativity. Nothing, and I mean nothing matters, except where we are in the calendar as far as owning stocks. The ruling elite are in charge of the markets and they obviously have an agenda of manipulation. 

The second point is taken from the bottom of the chart where we find the volume. Notice the sort of ‘London Bridge’ effect as the majority of volume hits the markets at the beginning and end of the trading days. Obviously the machines that do most of the trading now have a predisposition that is programmed in to push the markets in the morning or the late afternoon. When we trade should now be taken into consideration as we don’t want to be on the wrong side of the machines that rule the market.

What will the rest of September be like? My guess is we will continue the selling until Bernanke stops it with the scheduled Fed meeting mid-month. Maybe he will announce QE3 then and maybe not. It doesn’t really matter. What matters is if the Dow is down for the month going into the final week or so, there will be a rally. September is also the end of the third quarter and we all know the end of months and quarters get extra special attention from the manipulators. Yes, the market is a sham but it is a sham that can be profitable. We just have to trade with relativity.

DJIA - Past 12 days ending 9/2/11, 30-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.