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.