Same Old Story

What an interesting week we just experienced navigating the new gambling medium we used to call a stock market. Clearly the idea of a ‘market’ has been dead for some time now. Investors no longer ‘set’ stock prices nor do they ‘discover’ prices or values. They are not allowed to do so. The reason is very simple. Let’s look at the week that just passed. 

The previous week ended with a report that the US economy only created some 115,000 new jobs. Supposedly. Like we can believe anything what-so-ever that the US regime says. A look inside that report listed 23,000 new retail jobs. Great! Minimum wage jobs generally make up retail work so we are expected to believe in an economic ‘recovery’ built on 20% of new jobs being retail. Sounds a bit nefarious to me especially considering that retailers just reported a weak month of April. So, the indices appeared to be resting on quicksand as the new week began.

Then the bomb shell. Greek and French voters ousted austerity-minded leaders in favor of less austerity-minded leaders in weekend elections. The very idea threatened to unravel all of the hard work over the past year or so of the Germans and the ruling elitists to enslave the rest of Europe. The austerity plan is really nothing more than a plot to enslave nations with debt that they cannot repay while engorging big banks with bailout money. The key is the banks loan the money to the sovereign nations, the nations can’t repay the debt, the central bankers steal money from the oafs that live in the land, and then the central bankers peel off a fee and hand over the booty to the banksters. Only, the citizens of these countries are beginning to clue in. They voted against their politicians that fed the citizens to the central bankers. Why are the voters so mad? Because no money is getting funneled to the people or the economy. All of it is going to banksters who simply perpetuate debt while suffocating prosperity. So on Monday, the indices looked poised to fall off a cliff given that European austerity had suddenly become more vulnerable. Without ‘austerity’, the broke banks will soon be revealed as simply broke. And of course, a failed banking system in Europe would surely leap across the ocean and take down the US Ponzi-banksters and then the stock indices would fall. Egad! What to do?

Well, we all know the Plunge Protection Team (PPT) has been very aggressive in arresting stock plunges but like vampires, they had a preferred time of the day to go to work. It used to be the magical and wondrous 3 PM hour but I think too many people became aware that the interventionists would always give the indices a boost in the last hour of the day if it looked like the bear was on the prowl. Now, the stock indices look weaker than ever before and traders bail out of positions immediately on the open of trading. The PPT can’t wait until 3 o’clock every afternoon to intervene or 1) they would have to arrest gigantic triple digit plunges and, 2) eventually even the dumbest of dumb would catch on and recognize that the US of A no longer functions as a free market system and capitalism has been extinguished. When the economy becomes over indebted, over leveraged, and over inflated, the banksters are the ones that really suffer. The Fed can’t tolerate stock price discovery amongst the big banks as most of them would be in the junk heap. So, the Fed now steps in at 11 o’clock every morning to intervene in the indices. Of course, we know they are busy with the current bond and interest rate manipulation plan known as ‘Operation Twist’ as they post their schedule of intervention on their website. They commence every morning at about 10:30 AM in their plan to manipulate bond prices. Now, I think we can all agree that the PPT comes to work at the same time given the weakness of stocks.

Sound crazy? We must ask ourselves a question. Given what we knew on Monday morning, who would be buying stocks at 11 AM? Greece is still a basket case and will either become an orphan EU member or they will receive perpetual life support. France has broken from its alliance with Germany and spending cuts will not come as easily as the previous leaders pledged. That means debt will only grow. Spain has unemployment of better than 20% and bond yields above 6%. Operation Twist ends in June. What reason is there to buy stocks? What reason is there to step in front of a falling index? Of course, the indices got a jolt higher at the eleven o’clock hour. Of course, the PPT doesn’t have to use its own money.

A quick look at the chart below shows us that traders still had great fear that the indices would further melt and that Monday’s trend re-direction was fake. Presto! The Dow sold off from the open at 9:30 until 11 AM. Right on time, a small rally ensued. 

Wednesday was a repeat of Tuesday. The Dow was sold in force until the Fed started its activity at 10:30. The index went straight up for the next hour. Again, in the afternoon, no Fed - no rally. Down went the Dow until someone came in in the last five minutes of trading and boosted the Dow by better than 50 points.

Thursday was greeted with more news of economic contraction in that China reported very weak numbers. So did India. The US regime just continued to lie about their numbers but no one believes the regime anymore. Down went the Dow. Well, at least until 11 o’clock. Poof! A rally started. It died at the end of the day.

The Fed didn’t wait around on Friday. JP Morgan announced on Thursday evening that they had lost some $2 billion trading derivatives and the losses could mount. By announcing on Thursday evening, they gave the PPT time to print up some buying cash. They would need it. They hit the indices with a strong buying bias. Of course, traders dumped stocks in the first five minutes but no matter. The Fed has a printing press. Apparently they wanted to take the afternoon off as they clearly went to lunch at noon and never came back. The Dow continued to melt and lost everything.

So let’s recap. Every piece of real economic data points to a worldwide slowdown. The tech giant Cisco warned that tough times lie ahead. Q1 GDP looks like it will have to be revised downward. Most of us knew it was a lie when it was first reported a few weeks ago with the sole reason to give the Dow a boost. How did we know the original number was a lie? Because the regime’s lips started moving. The US unemployment rate is listed at 8.1% and everyone on the planet knows this to be a lie. The number is produced by eliminating 300,000 workers from the roles every month. And now JP Morgan bank has lost another $2 billion trading derivatives. Same old story. Banksters do what banksters do. They game the system and they are never held accountable for their offenses. What would happen if the PPT stood down and stopped intervening? What would happen if the Fed let investors determine bond prices and therefore yields? I’ll tell you what would happen. We would clean out the garbage and the excesses and we would eventually heal and return to true growth. But that’s not going to happen. Just look what happens every day at 11 AM.

DJIA - 10-min bars 5 days 5/7/12 - 5/11/12

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.