Friday, January 18, 2013

New Year For Stock Price Manipulation

For stock investors, a new year brings hopes for capital gains. The US government is hoping for capital gains so they can generate more taxation. Central bankers just see the new year as more opportunity to manipulate the stock price higher so investors stay happy, the US government gets more tax money, and the average person on the street stays blissfully ignorant of the new elite order that dominates their lives. Same story, same worries, same stock game. Push the Dow higher and no one will question the price to be paid for that push. Except for me.

The fourth quarter of 2012 was a downer so the Fed saw to it to get the new year started with a bang. The Dow leapt 200 points in the first few moments of trading on the first trading day of the New Year. This was not a surprise. The economic data that the government puts out would justify a stock price rally. Home sales and prices are improving, unemployment is falling, bankers are richer than ever, and the fiscal cliff was averted by a tax increase. Yippee! Everything is great again! Well, except that the US has again run out of money and needs to borrow another trillion to pay her debts. Congress remains completely infested with mental midgets of mendacious motivation. They answer every challenge with tax increases. They fill their constituents with fallacious blabber. They continue to destroy the country from the inside out with each stroke of their profanely stupid legislative pen. So to keep the oafs in line, the Fed has to work their black magic by pushing higher the ultimate barometer of economic deception - the Dow Jones Industrials. 

2013 will no doubt be another superior year for stocks. Mr. Bernanke will see to it. Meanwhile, the assets of the US continue to be stolen from under the ignorant noses of the populace. For instance, a solution to the debt ceiling was bantered about in that the Treasury could issue a trillion dollar coin, give it to the Fed, and they could buy a trillion in debt. Say what? No one on the planet raised this question but me. But here is what we should realize. The Fed is once again in the equation as the buyer of US debt. With what are they buying the debt? Their own money? Ha! Don’t be preposterous. No one on the planet wants to buy US debt yielding 2% or less with their own money. The country is broke. There is no way it will ever repay the current $17 trillion in debt. And, the Treasury is in a race with the rest of the world to devalue its currency so whatever debt it does repay is with cheaper dollars. So, the Fed has to buy the US debt to keep interest rates down. Clearly, higher rates would put an end to the Fed con game and the rigged stock indexes. Most assuredly, the faux economic recovery would vaporize with higher rates. So at the end of the day, should this option come to fruition, the citizens of the country would be another trillion in debt, the Fed would have another trillion in assets that it did not pay for, and the idiots of the world would cheer the rally in stocks. The Federal Reserve currently has $3 trillion of assets on their books. Did they pay for any of it with their own money? Of course not. That used to be called ‘stealing’. Not when the Fed does it. It is called stimulus. 

This behavior will continue. There is no political intellect available to stop it. But, this will aid the stock indexes. Yippee! Get on board or get destroyed.

The word of the new era is ‘manipulation’. There aren’t any real ‘markets’ any more. We are not allowed to set our own prices for anything - stocks, bonds, nothing. I call the current era the ‘Age of Insanity’. One reason is the manipulation and influence from the hands of the central bankers. For instance, every central banker on the planet is printing currency, manifesting electronic currency, and ballooning the money supply of their country of dominance. Who would have known? This is one for future economic books. Apparently, the way to fix an economy is to destroy the value of the currency used in that economy. How about that? 

But again, please remember the real reason for increasing the monetary supply. GDP equals money velocity times money supply. Money velocity is the turnover rate of currency as it buys goods and services during a year. Money velocity across the world is at all-time lows. That means that the true state of economics is lousy. A low money velocity rate would also serve to lower GDP. Uh-oh! Falling GDPs might alert the dope on the street that one, the data that governments put out is a ruse, and two, the dopes on the street really can’t live as lavishly as they hoped. And three, government can’t bring economic utopia to the masses without bankrupting the rich people. Reality bites! Truth burns the soul of fantasy lovers. 

So here is the truth. A falling money velocity (bad economy) can be offset by a rising money supply (the deception) so that the GDP can rise (the con). The end result is that sovereign debt must increase as an excuse to inject more currency. A depreciating currency spikes inflation. Inflation pushes prices higher for everything including stocks. Yippee! Food prices are up. Insurance rates are up. Cable prices are up. The currency buys less and less. Stock prices are up. Yippee!!

How insane are we? How much manipulation is there? I would like to answer both questions with a chart of Intel. Intel makes chips that go into PCs. PC makers are struggling to keep the doors open. It makes sense that Intel would suffer along with PC makers. So, let’s look at Intel on a two-day basis on the day they announced earnings, January 17 after the NYSE close and the day after. The chart below shows the action for every two minutes of trading. Take a look at the end of the day in the last five minutes of trading on the 17th. Everyone knew earnings would come at the close of trading. Everyone knew PC sales were very slow. Yet, Intel’s stock price moved higher at the open of trading. At the very end of the day, some selling began to pull the stock price down. Suddenly, at 3:54 PM a massive buy program (as evidenced by massive volume at the bottom of the chart) jolted the price higher. Who in their right mind would have been buying this stock with such conviction? Maybe someone who wanted to ensure stock gains for the day. Intel is, after all, a Dow stock. At 3:58, a strong sell program took advantage of the higher price afforded by the previous two minutes of trading. The exchanges closed for the day. Intel announced their earning results. They were terrible. The next morning, the stock price caved in. Who could have guessed? More importantly, who was manipulating the price of Intel higher at the end of the day on the 17th? I refuse to believe that anybody was stupid enough to think that Intel would report good earnings. 

But give the Fed some time. They will have Intel higher by next week. The indices will comply and follow. Yippee! Enslavement is enslavement. Only the Fed uses velvet shackles. Most likely, the stock indices will rise until the realization that the US is broke and must again raise its debt ceiling. Until then, enjoy!

INTC - 2-min bars, 1/17/13 - 1/18/13
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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