Friday, July 27, 2012

Bernanke Blows Big Bubbles

Let’s see. We are at the end of July, 2012 and what do we know?
The US economy slowed to a 1.5% growth rate in Q2.
Previous years’ GDP growth was ‘revised’ down.
Microsoft, Apple, Intel, and Texas Instruments all had disappointing news on their respective businesses.
US consumer confidence is the lowest in a year.
Consumer spending is slowing.
Europe is in a recession that is worsening such that the ECB chief is making statements about doing everything necessary to preserve the EU. Remember kids, if you or me were to manipulate the indices like this we would be put in jail. The banksters have different laws than the rest of us. Just ask Martha Stewart. In addition, the crippled economies of Spain and Italy have banned short selling of the bank stocks.
Spanish unemployment just hit an all-time high.
China’s economy is slowing.
Company-wise, Starbucks is closing stores due to poor sales. Facebook is falling on its face. just reported that net income dropped 96% from a year ago. 
And yet, the Dow has risen nearly 10% from its June 1st low! It is up 1.4% as I write this piece (7/27/12). Why?
Central bank steroids. The US Fed and the EU ECB have both pledged to do everything possible to goose the stock indices higher. Uh, I mean they have both pledged to do everything possible to keep their big banker friends solvent. Uh, I mean they both pledged to do everything possible to carry on the ruse of economic growth. Oh yeah, there was some poppycock about helping economies and blah, blah, blah. But we all know far too well that the real goal of the central banker is to foster investment bubbles. It appears to me that we have entered into perhaps the biggest bubble ever blown! If the US economy was really in ‘recovery’, why would Mr. Bernanke continue to offer stimulus bubbles? If the EU wasn’t staring into a fiscal abyss, why else would Mr. Draghi suggest stimulus bubbles? 
The chart below illustrates the point perfectly. This is a year-to-date look a the Spanish ETF, EWP. Yes, Europe is in a recession and Spain is one of the weaker EU members at the moment. Today the Spanish government announced that the country’s unemployment is at an all-time high. The reported unemployment rate in Spain is now over 25% while the government’s bond yields have risen to over 7%. As has been reported for months, a 6% yield is supposed to be ‘unsustainable’. Does any of that matter? Not really. 
The ECB announced yesterday that they stood ready to do anything necessary to keep the scam going. Uh, I mean they would do anything to keep the EU intact. That means bailouts for the big banks or any other banks that hold derivatives related to Spanish sovereign debt. Now, take a look at the chart below and examine the last two trading days. Obviously we have entered the bubble stage of the central banker economic recovery. And, obviously there is no longer any reason to concern ourselves with news or reality. Between Mr. Bernanke and Mr. Draghi, there is going to be a bubble and that is all that needs to be said. 
Oh, while we all like to think we are still ‘investing’, the Dow was up 1.4% today on central banker comments. The Spanish EWP was up 6.3%. Still think we are ‘investing’? 

2012 year to date - EWP
Chart courtesy
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.

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