Monday, December 28, 2009

Stock Market Review - 12/27/09


As the year of 2009 and the 'decade from hell' come to a close, investors have to be looking forward to the future. Without question, we enter a new decade under completely different rules. The director of the stock market is now the Federal Reserve. Their money machine will continue to pump money into the market else the market will fail. The Fed knows this. And now, they have no choice. They have kept all the stupid people in their portfolios believing that somehow the magic of appreciating monthly statements will continue as long as they don't withdraw. The smart people know the market is broke and the Dow should be in triple digits. However, Zimbabwe has proven that markets can be grown to the clouds as long as money is flooding the streets of the exchange. So, we all play along with the con men that run the banks. If the Fed ever loses its grip, look out below.

Printing money erodes its value. The chart below shows the rising dollar etf, UUP, in candlestick and the 10-year Treasury bond yield in green. It is easy to see the declining dollar. It really accelerated in March when the Fed revealed themselves as the savior of portfolios. It is, after all, their only job. Stock market manipulators to benefit their banking shills so they can control the world. Pitiful. The important thing for investors is the TRUTH. It is something that our government can't even fathom. The government lies about absolutely everything. This will continue. They cannot tell us the truth. The TRUTH is that they are broke. Maybe that's why the dollar keeps descending toward worthlessness. Maybe printing to infinity does this. What is interesting is we can see that in December the dollar suddenly appreciated. Why?

No, the world does not suddenly think the dollar is of any value. The bond yield is moving higher and will close the decade pushing 4%. Ruh-Ro! We are a debtor nation. Congress just approved a raised debt ceiling to something like $12.4 trillion. Debtors don't handle rising rates very well. Without debt, we have nothing. So, it appears that the Fed and their friends are trying to buy dollars so they can try and tamp down interest rates by buying Treasuries. Good luck fellows. The Treasury is going to issue another $500 billion in new debt in the first quarter of 2010. This worry is born out with the very heavy volume in dollar buying that can be seen in the UUP at the bottom of the chart. The question going forward is how many plates of manipulation can the Fed keep in the air? They now must manipulate the stock market, the bond market, the currency market, the mortgage market, economic data. ...

Will they soon drop a plate? Ruh-Ro!!

2009 Ytd - UUP in candlestick, TNX in green
Chart courtesy

Monday, December 21, 2009

Stock Market Review - 12/21/2009

'Selling' the Real Estate Recovery

Our government is pitching 'economic recovery' and that means real estate too. We all know the story of real estate and how it has been ground zero for the terrible economics of the past decade. We all understand too, that for real estate to recover, it needs rising interest rates. What's that? Oh yeah, that's insanity talking. But look what's happening. If you 'sell' recovery long enough, some people begin to believe. If you 'manifest' happy news long enough, some people begin to believe. If you make the stock market rise long enough with free money and insider manipulation, some people begin to believe. Under that belief, the stock market is paved with riches and bonds are a losing bet. Investors and believers sell bonds pushing real interest rates higher. I was in the bank this morning and the manager literally erased the past week's 30-year mortgage rate of 4.75% and changed it to 4.92%. Yes, that's still historically low but debtor nations need low interest rates. Rising bond yields will pressure mortgage rates higher and that can't be good for real estate. Unless of course, the Federal Reserve wants real estate to go higher. I believe they do and they will 'assist' it in a move that will defy logic in the coming year.

The chart below shows the UUP etf that corresponds to rising US dollar valuations. You can see by the lower green vertical bars that volume has been increasing noticeably on days that experienced hard bond selling. The war is on. Investors don't want to hold bonds when rates are rising and inflation is soaring. The Fed has done a good job selling the recovery so we all believe it is true. Down with bonds and up with stocks. Why include the UUP? Our Asian friends hold a lot of Treasuries and they no doubt get nervous when their portfolios fall. Our Federal Reserve friends know that we are now dependent upon our Asian friends to loan us money to give to our big banks like Goldman and Citigroup so they can buy larger chains with which to enslave us. So, the Fed no doubt jumps in with massive buy programs for the dollar and the bond. The war is on between the buyers and sellers. Who will win?

The Treasury is scheduled to issue another $500 billion in fresh debt in the first quarter of 2010. The Senate will pass the trillion dollar tax package they call 'health care reform' in another week. I have to believe that all this selling pressure will eventually win and interest rates will rise. I have to believe that our government will continue to lie about every single economic statistic to keep the recovery sales job going. After all, they are not battling an intelligent population. Look around. All you can see is clueless as far as the eye can focus. Remember this. Health care from our government is a tax. It is a political sham. Senator Nelson from Nebraska threatened to vote 'no' until the authors of the pilfering agreed to let the other 49 states pay for Nebraska's portion of Medicare. I would urge everyone with a functioning brain cell in America, although that is a very small minority, to go to the polls and vote against every politician in office. Vote everybody out on both sides. Vote 'NO'.

Our government has turned on us. This much is clear. They are coming for everything we have. They will tax us to poverty and impose eminent domain over our land and take that too. Let me give an example of the preposterous governmental lying concerning inflation. A local restaurant serves a chicken dish that I like. The menu I have from last year has a price of $6.95. I just ordered the same dish last week and the new menu lists the price at $8.75. That's not only inflation. That is an increase of 26%. As I have been saying for years, inflation is running in the 20% plus range. How much longer will even the stupidest American listen to the lying idiots in Washington? Meanwhile, the average pay is dropping and living standards are falling. Bernanke's printing press is killing Americans and destroying a country from the inside out. Surely the Brits will 'Knight' him too like the did the last imbecile that held his post. Just look at the chart. This is the battle that will determine stock direction in the coming year. Be prepared for a roller coaster of a ride.

Like everything, let me solve a problem. Health care reform. We already have the greatest health care and health care professionals in the world. We just can't afford it. Like my chicken dish, it just keeps getting more expensive. Like my chicken dish, let me solve the problem of 26% inflation. STOP PRINTING SO MUCH MONEY!!!!!!! Geeze - do I have to think of everything???

3mth UUP
Chart courtesy

Monday, December 14, 2009

Stock Market Review - 12/13/09

Santa Has a Problem

The chart below is all you need to know about the market of late. It is probably all you need to navigate the future. It seems that Santa has a problem. He wants us all to be happy and have a nice Christmas stock market rally while he steals everything from our garage and bank account. So, Santa keeps printing and manipulating but for what?

The chart tells the story. Debtor nations can't remain debtor nations if interest rates rise. They then become 'default' nations. We don't don't want that, do we boys and girls? Santa could surely get the likes of Pelosi and Reid to sign surrender papers with an ink pen inserted in their you know where. The red line is the 10-year US Treasury bond. This is the needle used to keep the debt heroin flowing to US dopers. I have dubbed this the 'Asian Phone Call' because when the yield hits 3.5%, it appears to illicit a frenetic action from the bond manipulators. Why? A rising yield says bonds are selling off. Our Asian friends own several trillion of these IOUs. They don't appreciate Santa's debasement of the US currency and the constant devaluation process. Surely they phone the Treasury Secretary, Mr. Gaithner, and demand action. The candlestick line is the UUP - and ETF that correlates to the rising US dollar. In this 2-month chart, there are 3 very clear high volume days that indicate nearly 3 times the normal daily volume. On these days, the dollar had very strong days. The latest was Friday. On each of these days, the Treasury bond yield drifted to the 3.5% yield level. What can we draw from this?

Currency and bonds are no longer assets nor investments. They are tools of manipulators. It is obvious that with the US tens of trillions in debt and a Congress and House that brings to the floor another trillion dollar spending bill each month, that the dollar should be plunging and bond yields should be rising. If there was a market, it would be trying to sell bonds faster than Congress could spend and throw another trillion down a rat hole. Ah, but Santa knows a debtor nation can't handle rising interest rates. Even an ignoramus on somebody's network news might realize that this wouldn't be good for the 'recovery'. So, Santa has a problem. The world wants to sell the crap that Santa sold them and Santa has to buy the crap with more crap he gets from his printing press. This battle will determine success or failure for all portfolios over the next few months.

2mths ending 12/11/09 TNX in red, UUP in candlestick
Chart courtesy

Friday, December 4, 2009

Stock Market Review - 12/4/2009

Pull My Finger

You know the old gag. Someone walks up to you, extends a forefinger, and insists that you pull their finger. Upon doing so, they emit a noxious odor accompanied by the sound of a tired bugle. You know the gag. You know the result. It's annoying and you really don't want to play. Yet, whether or not you pull the finger, you still get the stink.

A week ago on Friday the market was all in a dither about a fund in Dubai asking for a six month extension on a debt payment. Money supposedly rushed to the US dollar for safety and when the dollar rises, the stock market falls. Is the world so confident in the dollar that is printed night and day by a government tens of trillions in debt? No, it's about liquidity. The market is all about liquidity these days and the Dow is the ripple effect of this liquidity.

I give you two charts to review this week. The first one is a 33 month weekly look at the IEF (iShares 7 to 10 year bond ETF fund) in blue and the US dollar in green. As you can see in late 2008, the dollar appreciated and the bond ETF sank. This continued until March of 2009 and following the Fed's master plan, the dollar resumed its descent and bonds rallied. This is the Fed at work. To save the big banks, they went zero with interest rates. Temporarily, this results in a renewed bond interest since bonds were still paying something. The real meaning is money is worthless if it bears no interest coupon. Investors are therefore willing to hold almost anything other than the dollar. It's like the Fed saying, "We can fix everything if you will just pull my finger." But in general, the bond ETF and the currency are trending in the same direction - down.

33 month - TNX in blue, USD in green
Chart courtesy

The stink then begins to waif through the air when investors realize the dollar destruction also destroys everything around it. You would think that a falling dollar would instigate inflation and bonds would sell off as the dollar falls. When we look closer at a 6 month chart of the same two contestants, we see this is true. The market is trying to find balance but the Fed just won't let it. They continue to manipulate the bond market in an effort to tamp down the natural tendency of interest rates to rise in a falling dollar era. This is due to monetary inflation. Of course, our pitiful government cannot admit to inflation. They leave that for each of us to discover at the grocery store, the post office, Fed Ex shipments, taxes, and virtually every monetary exchange point as we know a Federal Reserve Note buys less and less. But, no inflation means no cost of living adjustments to social security recipients. And of course, Obama's boys know a measly $250 appeasement check will quell the senior anger. This is mearly another link in the shackle of ignorance that has incarcerated America's cognition. Many of them are still infatuated with slayer of capitalism. In fairness, the last White House occupant was doing the same thing so we can all be confident that the government is now only a government for the banks and not the people. Anyway, the next chart shows the relationship of bonds and currency. The key point for investors is that we must all remember that foreigners own us now. They own trillions of dollars worth of our debt and they get nervous when bonds sell off violently thus driving up interest rates and drawing down their treasury portfolios.

So a week has passed and Dubai is in our rear view mirror. They played the derivative trump card and central banks no doubt pledged rescue efforts with worthless money. To keep the party going, the US government claimed job losses to the US economy drew down to only 11,000. Unemployment fell to 10%. The markets rallied. The dollar strengthened. Okay kids, what did I say happens when the dollar rallies? That's right, the Dow falls. Besides, no one really believed the numbers. The rally caved in. Certainly the Fed stepped in late in the afternoon to put the market back in the black. In fact, the volume in the IEF was 756,604 for the day. It traded a bit over 100,000 shares in the final thirty minutes of trading as the price surged on Friday afternoon. This of course should serve to lower the Treasury yield which soared over 3% on the day to 3.84%. Of course, IEF is an ETF and it traded up until 4 o'clock. Treasuries shut down at 3. As you know, a 10-year Treasury yield at 3.5% is what I call the 'Asian Phone Call' pattern. This is when Bernanke and the Fed buy the yield down to appease our Asian creditors. Now, who would buy such a large block of bonds at the very end of the day? Who would buy so many bonds late on Friday afternoon knowing that the Treasury is flooding the market with supply next week to the tune of $74 billion? Pull my finger.

6 months - TNX in blue, USD in green
Chart courtesy

Sunday, November 29, 2009

Stock Market Review - 11/28/2009

Musical Chairs - Economically Speaking

The chart below says it all. If investors want the stock markets to go up, the denominated currency has to fall. The chart shows four lines. The red line is the Japanese Yen and the blue line is the Nikkei 225. The green line is the US dollar and the gold line is the S&P 500. It's not just a US phenomena. Stock markets are driven by their currency either appreciating or depreciating with their correspondent markets moving in the opposite direction. Maybe this is true of debtor nations and the US and Japan are two of those members. The point is the 'markets' are a farce. They do not represent value or even a market. They are simply reactions to currency. Why is currency the lone driving force?

Well, let's be honest. the world economy is a 1974 Chevy Vega sitting on a hydraulic lift in a mechanic's bay. The mechanic has the manual in his hand and a puzzled look on his face. The owner is depressed and apprehensive. Yes, I know. The government says the 'recovery' is here and the recession is over. Funny, 1 in 8 Americans receive food stamps, 1 in 4 mortgage holders are under water, over 1 in 10 mortgage holders is in either in foreclosure, delinquency, or default, 2 in 10 are without gainful employment, and more than 50% of our local (in my county) public school children qualify for lunch assistance (euphemism for poverty). Is it even possible to use the word 'recovery' with respect to the real world? Only our government can espouse such blarney. The rest of us know better. Anyway, our new leader, the Federal Reserve, had to engineer a stock market rally to help their banking brothers weather the storm of the century in derivative losses. They also engineered the 'happy news' that went with the 'recovery' news but I think we all know there has been, and still isn't, any good reason to buy stocks since March of '09. Yet, markets rally and investors have for the most part participated. Some blindly. Some stupidly. Some ignorantly. Some because they knew the Fed had a printing press and a hankerin' for a bubblicious rally. Most investors never knew anything about anything anyway so they never saw a bus coming straight at them. In fact, most investors never even knew they were in the street. And still, they don't know that the central bank rescued them from financial peril. Thus, the 'market' is no longer driven by 'investing'. It is now a function of money from the central banks and their conspirator sister banks. Further, the markets are a function of inflation instigated by the printing of said money. Sort of.

In truth, there has been very little printing. Money is mostly created these days by the electronic methods that essentially create credits on balance sheets of the Fed's friends. The TARP money was given to AIG to give to Goldman Sachs to wash away derivative losses, for instance. Credits work the same as real money only better. They don't leave as much of a trail and the stupid people never even know the deed happened. For instance, where did the 'toxic illiquid assets' that were 'gumming up the financial system' according to then Treasury Secretary Paulson go? Anyway, I'm sure Nancy Pelosi knows and she is watching out for us.

Credit is easy and interest rates are zero. That combination produces waste and excess. Dubai is the latest contestant to not find a chair when the music stopped in the silly game of economic musical chairs. They have been busy over the past few years building buildings to the moon of which no one rents. On November 27, 2009, one of their sovereign funds was left a little short in a bond repayment. Something like $60 billion if you are counting. This little announcement worked to tank the markets for the day but it was noteworthy that the indices all climbed back almost from the opening minutes. No doubt, plunge protection teams all over the world immediately jumped into action. The shock was of course that everyone thought that Dubai was a bottomless well of wealth. Nope. Broke like every other country. Their economy, like ours, is an illusion of wealth. Without government 'stimulus' and subsidy, it all vanishes. But don't be misled. $60 billion is peanuts. Government printing press machines can cover that note in the blink of an eye. Read further.

I saw a news article that said that credit default swap spreads on the debt were widening. Ah, derivatives. I knew they were in there somewhere. $60 billion in notes were real. That's the money borrowed to build the buildings and projects for the illusion of a vibrant economy. If you're interested, Dubai has an unemployment rate of 20% as issued by their government. Anyway, those projects under construction were no doubt leveraged up with derivatives and backed by credit default swaps and insured by some insurance company that didn't have one billion much less sixty. And no doubt, no one knew who held any of the insurance or swaps or derivatives. And no doubt, the real dollar figure at risk was many times $60 billion. Of course, the media isn't going to catch on to that little tidbit. Otherwise, the chart below wouldn't make any sense. Specifically, when the news broke of the possible default, investors ran to the dollar to minimize risk. The dollar went up. The stock market went down. The music had stopped for the Dubai fund. The music will start again on Monday morning. The game will continue. The dollar will resume its slide. The markets will go back up. This gets boring. This is our 'market'. Want to play? Then understand the new rules!

Chart courtesy
Blue line = $NIKK
Red line = $XJY
Green line = $USD
Gold line = SPX

Monday, November 9, 2009

Stock Market Review - 11/10/09

Ring, ring, ring - It's Asia Calling!

I have introduced my readers to the new chart formation (that I invented) called 'The Chinese Phone Call'. I would like to change the name to the 'Asian Phone Call'. Do I hear a 'Yea'?

Here's the deal. The stock market in the US is now a slave to the 10-year US Treasury yield. When it gets to 3.5%, the Asians, primarily the Chinese and Japanese, pick up the phone and call our Federal Reserve or Treasury Department for help. Japan and China own trillions of this garbage spit forth by the Treasury's perpetual printing machine to satisfy an economy that used to hinge on manufacturing but now just debt. It should also be apparent to everyone that the US economy cannot tolerate higher interest rates imposed by higher bond yields at this point in the 'recovery' (I'm using that term a loosely as does our government). If US bonds have to be bought, they have to be bought with US dollars. Take a look at the chart below and see if you can spot a massive volume spike in the UUP. The UUP is of course, an ETF that correlates to a rising US dollar versus other currencies. It is the blue line and the 10-year Treasury yield is the red line. The gold line is US Bancorp and I included it so we can see how some bank stocks can be helped by a lowering of the Treasury yields.

What can we learn from this relationship? First, the US dollar is not in 'free fall' but it is slowly declining relative to other currencies. Perversely, the demand for dollars to buy bonds to dampen rising interest rates spiked by constant debt issuance has muted what could be a worse decline. Two, the massive US debt will likely continue the dollar demand for the foreseeable future. Three, while it looks like the Dow has been rising in dollar terms, the past few months would show a different picture in other currency denomination. It would be far less impressive. Fourth, the dollar has lost some 15% or so against other currencies this year. Why would anyone by the US bond for a 3.5% yield and risk a 15% principal loss? Does that sound wise? Lastly, this is the foundation of the current market. Wise investors have been warned that this is unsustainable. Sooner or later, somebody is going to run out of money or tolerance for debt.

5dy ending 11/09/09 - TNX in red, UUP in blue, and USB in gold
Chart courtesy

Sunday, October 25, 2009

Stock Market Review - 10/23/2009

We the Sheeple

Do not go any further until you review this video on YouTube:
You have just witnessed Mr. Bernanke talking economics. Seriously. The tape don't lie.

Now go to this link and pay close attention to what Mr. Bernanke says at the 1:24 mark of the interview:
Mr. Bernanke says that 'the American public doesn't want Congress setting monetary policy. Now read the Constitution. Under Article I, Section 8, it clearly spells out the responsibility of coining money and setting its value to be that of Congress and Congress only. However, Mr. Bernanke and I agree on one thing. I don't want Congress setting the policy on anything. Everything they have ever done has been to the detriment of the average US citizen. Incompetence has never climbed a higher mountain. I would prefer they leave all of us alone and ditto for Mr. B.

Hey, did you see the US pay Czar has cut the pay for leaders of financial institutions that still owe TARP money? Great. Now if they would cut the pay for all the other people that were involved and complicit in the financial sewer that now runs down every street in the world. How about cutting the pay of Barney Frank, Chris Dodd, and even Bernanke himself? Why don't they also share the responsibility? And now, Dodd and Frank are still at it crafting regulations that will surely be circumvented by the elite while the same players turn their heads in deference. Yeah, this is 'recovery'.

Maybe we need a new Constitution. Since we continue to be led by the incompetent, maybe it should start with 'We the Sheeple'.

Friday, October 16, 2009

Stock Market Review - 10/16/2009

A Stagger at 10000

BofA, IBM, and GE disappointed investors with sub par earnings this week. Yet, the Dow pierced 10000, but just couldn't hold on as it closed Friday at 9995. What is the significance of Dow 10000? Probably not much. It is a big round number and over the years, we have danced around this number quite a bit. The key now is to finally surmount the big round number and then hold it. Then the bulls can pump their chests out a bit.

Most economists have declared the recession 'over'. Maybe. Depends on the definition. Unemployment is still double digits and climbing. Foreclosures are still high. 99 banks have failed this year. The trio of companies mentioned above give a pretty good snapshot of reality. Banks are still struggling to find credit-worthy borrowers. IBM is of course the gorilla of technology and business. They are still not strong. GE? I read a stat one time that one out of every $100 dollars spent in the US went to GE. If things are really picking up, why are they not beating expectations?

Absent stimulus and subsidy, it still looks like a slippery slope back to prosperity. Maybe we can borrow our way back to the top of the mountain. Maybe we can print enough money to buy a ladder to get there. Maybe once our esteemed Congress and House manage to turn health care into a gargantuan taxation program the economy will respond for the first time in history with growth in the face of higher taxation. Maybe we should all believe in miracles.

In the meantime, patience is in play for now. We will have to see how the market responds to the 10000 level. So far, it has managed to ignore reality and valuation. Who knows - maybe the new market will decide that double digit unemployment is a good thing? Well, at least if we wait long enough, all those unemployed people will eventually run out of benefits and then they will just disappear. It's a patience game.

Monday, October 12, 2009

Stock Market Review - 10/10/2009

Sellers Remorse

You may be familiar with the term 'buyers remorse'. This is when a buyer suffers anxiety and remorse after a purchase. Maybe they bought the wrong item. Maybe they paid too much. Either way, the buyer is sorry they handed over their cash. In the stock market, we are seeing sellers remorse. This has occurred every time investors have looked through the microscope of reality and pulled money from the stock market. We all know the drill. Real estate is bad and getting worse. Unemployment is horrible and getting worse. We have allowed manufacturing jobs to relocate abroad. We have a new administration focused on 'spreading the wealth around a bit' through higher taxation. The central bank is focused on ruining the currency to save their big banker friends while they watch small banks drown and vanish. But each bout of reality based selling has been met with an exuberant stock rally fueled by the Federal Reserve. Either they bailed somebody out or they injected trillions or they exchanged trillions for toxic assets. The bottom line is that selling stocks has become a losing strategy.

Fundamentals are a complete waste of time. Yes, the stock market indices have risen smartly since the Fed through in the kitchen sink on March 9. But so too has the home builder index and none of them have made a dime in the last year. The point is selling is for losers. All we have to do is buy stocks and wait for the Fed to blow the wind in our sails. Up, up, up we go. Bubbles are delicious and they are the specialty of the Fed. The chart below is a one-week look at the Dow in candlesticks and the 10-year US Treasury yield in green. The bars are 60-minute bars. Obviously the rally in the Dow is still in play. Look at Friday. Each hour was a positive hour. There was hardly a seller to be found at the exchange. Tuesday, Wednesday, and Thursday found the Treasury issuing tens of billions of bonds to pay our country's debt. Of course, this required the attention of the so-called primary dealers to acquire this paper as is their duty. The market staggered a bit for those three days but as soon as the manipulation of the bond market ended, they went back to manipulating the stock market. Isn't it odd that the bond yield fell each day debt issuance? Isn't it odd that the yields went up on Friday when there was no issuance? If there was really demand for the debt as our government would have us believe, wouldn't owners of such debt hold on to it? No, the bond world is not real and it is now driven by derivatives, market manipulators, and a Fed determined to keep interest rates at record lows. Mortgage rates continue to fall and fixed rates are now below 5%. I suspect they will continue to fall as the Fed subsidizes housing. They already do to a large degree with Fannie and Freddie but also with the $8,000 housing kick back for new buyers. The government has ventured into the car business by subsidizing new purchases in the 'clunker' program. Now it appears they are subsidizing the stock market as well. Absent any sellers, the sky is the limit.

Dow in candlestick, TNX in green - 5 day hourly ending 10/10/09
Chart courtesy

Monday, October 5, 2009

Stock Market Review - 10/2/09

Don't Eat the Brown Acid

Remember the announcement at Woodstock over 40 years ago? Apparently there was some bad LSD getting passed around so the announcement was made at center stage to 'don't eat the brown acid'. Why do I bring this up? The job loss number was released on Friday morning and it was half a million plus. That was 'worse than expected' and the stock market headed south. Bloomberg television always brings on my favorite comedian, Christine Romer (White Economic Advisor) to chat about the number. As usual, Ms. Romer had me in stitches babbling on and on about how the number really wasn't so bad and certainly not as bad as the numbers released in the previous administration. You know the one. Bush was responsible for everything bad and poor Obama has been trying to right the ship ever since getting his key to the Oval Office. Ms. Romer explained that it could be worse but this was typical of any economic recovery. She was grinning and cooing and selling the 'recovery' story like Zig Ziglar selling condoms at the South Carolina Governor's Mansion. However, instead of the usual brain dead talking head media pretties they have on the set they happened to have Kenneth Langone (former co-founder of Home Depot) sitting there. He didn't waste time. He launched right into this cock-a-mamee nonsense and told this poor disseminator of disingenuousness that if the leaders of public companies intentionally misled the public the regulator bodies would pounce. There was of course more but I have to say it is nice that I am beginning to see other people swim over to the island of Barry and join me in embracing the truth. Yes, unemployment is rising. Job losses are growing. The government is still lying about everything. Brothers and Sisters, we are all alone. Our country has abandoned us and has sided with the central bank who now pulls their strings. We must ignore the government talkers as they are not capable of addressing the truth. They think they can lie and print their way out of every bad situation.

Timmy Geithner also kills me. He was babbling about some insanity concerning our government's desire to keep the dollar strong. Excuse me a moment - I'm still laughing about that one. Whew! What a funny guy. He really should put one of those arrows on his head like Steve Martin used to use when he used to be funny. If you listen closely when Geithner and Romer speak, you can almost hear the entire world laughing at their buffoonery. So, all I can tell you is 'don't eat the brown acid'.

If you want to believe an economic recovery is underway, then God bless you. Everyone should always strive to be as positive as possible. However, printing money and giving it to broke bankers always weakens the dollar and destroys the economy. This is why the Chinese are so mad with the Fed. People like Geithner are brown acid pushers. Economic recovery? Please. Rail car usage is down 20% from a year ago. If we produce and consume, we have to ship the stuff we make and consume. The chart below is the Baltic Dry Index. This index tracks the price charged to ship dry goods like coal, copper, wheat, and so on around the world. As you can see, one of the lines is the BDI and the other is the Dow. They follow each other very closely and the BDI is now in a steep dive. The Dow is either hesitating in its current rally or showing signs of rolling over. If the BDI keeps diving, it is almost inconceivable that the Dow could keep going up. Beware - reality is telling us something far different than what governmental propaganda puppets are selling.

5 year - Dow in candlestick, BDI in green (weekly)
Chart courtesy

Saturday, September 26, 2009

Stock Market Review - 9/25/2009

Bernanke Sells the US to the Chinese

Continuing from previous posts and writings, while all the idiots are watching CNBC and debating 'health care reform', the real story of our lives is being played out in the bond market. Members of Congress and the House have obviously been put in place based on their profoundly diminished cognitive abilities due to the affects of intellectual de-evolution. They are helpless and hapless to recognize the real assault on the free world launched by the Federal Reserve. In an effort to carry on their strategy to destroy capitalism, and perhaps with massive and fatally flawed egos, they have attempted to wrestle control from dimwits that sleep in the White House and nitwits that march up and down the halls of the Capital Building. Well, that was easy. What are they up against - Nancy Pelosi? Reid? Dodd? Frank? How pathetic are we as a people that these are our elected leaders? How and why do they surrender the country to the Federal Reserve and their banking cartel? Why on God's green earth do they rely on the ignoramus of the Fed to solve economic problems? The Fed creates problems - they don't 'solve' them. Why on God's green earth does anyone expect the likes of Dodd or Frank to formulate intelligent financial reforms? The bottom line is we are toast.

The Fed's main weapon is ignorance steering the chariot of stupidity. The average fellow on the street is in such a stupor that they are easily swayed by the ebbs and flow of the stock market as if there really existed a true 'market' since the Fed coup. The best way to control a mass of people is to keep them ignorant and distracted by things like stock rallies. So let's get to the main point this week so we can stop slapping our flippers together every time the ring master tosses us a fish.

The Fed is currently trying to sell the idea of economic recovery to a mass desperate to hear anything that resembles Polly Anna. Of course, the Fed collects economic data from the government. Of course, it's all a lie but they can fool all of the people all of the time as long as they back up the lies with 'stimulus' and manipulation to drive the stock market higher. The idiots that speak for the Fed are talking about winding down 'stimulus' and even raising rates at some point in the future. Really. Maybe they are smoking crack but the economy in the US (and the rest of the world) is a walking zombie and it's walking only because of the magical Federal Reserve printing press captured from the Treasury Department. The government juiced the car industry temporarily with the cash for clunkers but since the program ended, sales have again resumed their steep down trend. Housing has been juiced (for whatever pathetic activity is out there) because of the $8000 subsidy program that apparently has accounted for 80% of sales. This is backed up by the vast preponderance of sales being at the low end of the pricing scale. All this is done to excite the stock market. The rally from the March lows has been a bogus rally from the beginning and looks poised to roll over. Why?

This past week is a perfect window into the real story. Since our government decided that the prudent thing to do in response to our banks bankrupting themselves by becoming unsuccessful derivative traders was to give them there money back. Why? They are bankers like the Fed and the Fed needs them to carry out their plans for domination. Of course, we had to print the money and borrow from the rest of the world. As a result, the national debt in the US is fast approaching $12 trillion. This requires borrowing in the form of US Treasury bond propagation. So, like most weeks this year, the Treasury had to issue some $119 billion in bonds on Tuesday and another $69 billion on Wednesday. Our foreign friends, along with the Fed, had to buy up all this garbage. The trick is, in order to by US bonds one needs US dollars. Check out the chart below. This is a 5-day chart ending on Friday with 5 minute bars. The Dow is in blue, the etf UUP is in green and the etf IEF is in red.

Now, the Fed held their meeting of village idiots to discuss interest rates and announced on Wednesday that all was well and rates would stay at zero for the foreseeable future. Duh. Yes, they claim that the economy is recovering even though the evidence suggests otherwise. Durable goods declined 2%, new home sales were down similarly, and worse, rail car shipping was some 18% below last years' volumes. Anyway, lying is the Fed's policy so what do you expect? The stock market reacted by rallying into Wednesday afternoon and then something happened. The phone rang in President Bernanke's office. It was the red one. That's the one that the Chinese call in on and I think they use speed dial. You see, if all is well and stocks are going to the moon, investors sell bonds and buy stocks. You can see the red line that is the 7 year bond eft IEF descend sharply with the Fed announcement. You can see it immediately reverse as soon as the Chinese rang up Mr. B. It seems they hold a trillion or so in US bonds and they don't take kindly to their portfolio being dissolved. Mr. B had to make a choice - us or the Chinese. He knows who the real master is now so he threw us to the curb and sold the market out for the sake of the Chinese.

Here is all you need to know. There is no 'stock market'. Its valuation is determined by money and Fed intervention. Remember what I said about bonds? They have to be bought with US dollars. When the Treasury issues $200 billion in a two day span, that's a lot of dollars that have to be bought. Thus, the green line, represented by the strengthening dollar etf, UUP, moved up immediately with the bond etf. Since the stock market is a function of the dollar and thus a pure reflection of inflation, the dollar turned higher while the Dow turned lower. If you are counting, the Dow lost 200 points in the last 90 minutes or so of trading on Wednesday. Yep, that was right after the Chinese called and Bernanke sold us out. So, now you know what to do. Forget earnings. Forget valuations. Forget fundamentals, bankruptcies, and insolvent banks. If you are counting, 95 have now failed this year as we 'recover'. Hey, I had to put that in for some comedic relief. By the way, no one, and I mean 'no one' believes this poppycock line of 'economic recovery'. Well, maybe the crack smokers! No, all we have to do is watch the dollar and we will know which way the Dow is headed. It is crystal clear that the Dow and indices of the world can only move higher on the back of a weakening dollar. Welcome to Zimbabwe!!

I don't think the Treasury is issuing debt next week so it should be happy times again for the stock market. Yippee! Enjoy what we have left as we march to zero. Think about this the next time you go to Walmart and buy those Chinese products. They control us now because of our strategy to print and borrow our way out of the recession. Of course, with a nice rally next week, all of the above will quickly be forgotten. But again, as Zimbabwe found out, the dollar can't fall forever. When it hits zero, the game is over. Or should I say, 'the scam of the Fed' is over. Maybe Chris Dodd is working on some kind of financial reform to keep this from happening? Hey, I thought I'd leave you with a joke that would leave you in hysteria!!!

5 days ending 9/25/09 - 5 minute bars - Dow in blue, IEF in red, UUP in green
Chart courtesy

Saturday, September 19, 2009

Stock Market Review - 9/18/2009

Recession Ends with a New Bubble in Place

The Dow will hit 11,428 by the end of 2009. How's that for a prediction? Well, it's not so much a prediction as much as a realization that that's where the Fed wants the Dow before year's end. Why? Below is a seven year chart of the Dow. It shows the second hump of the enormous double top suggesting a reading of zero for the Dow eventually. But for now, our bankers need to get their stock options back in the black so the PPT needs to run the markets a bit higher. Since fundamentals have long been deemed useless and unnecessary, we have to turn to technicals. Fibonacci retracement levels are Ben's target so they are now mine as well. Ben can't just buy the bank stocks or even the stupidest investor will catch on that the market rally isn't really about 'economic recovery' or 'market rallies' or any of that crap. It's all about bank domination and banks can't dominate until they have everything. They soon will including CEO options.

I take Dow 7000 as a low and assume that the 6500 mark was just a shameful low that Bernanke and company let slip through their manipulative hands. Long story short, a 50% retracement puts the Dow at about 10588. They should have that by mid-October. Now, remember, Dow 10800 was a tough level to penetrate on the first bubble the Fed blew in the markets but we finally blew it out to 14000. 11428 would the magic 62% retracement but more importantly, that level would break up the downtrend line. Even more importantly, the banking con men will all have their stock options back in the black. Who says, 'crime doesn't pay'? All they had to do was to get the Fed to give them their money back through stock manipulation and give their banks their money back through the Treasury stealing the money from the country. They didn't even have to use a gun. All they had to do was threaten stock holders with further losses. Stock holders have literally given up everything for the current rally. Anyway, look for the next jolt to push the Dow to the mid 10000 range and then the final push to over 11000 that will of course be based on some ridiculous lie conjured by government incapable of truth.

This past week enjoyed yet another week of market gains. As you can see from the chart below, the kitchen sink was thrown at the markets in March and April with the Fed taking center position in stock purchases. Just look at the volume. Who else had that kind of money to throw at a market plunging to zero pushed by a bankrupt financial sector? Every week since, every month since, has seen less and less volume. Worse, almost half of the daily trading volume of late has come from government owned and government bought and government manipulated stocks - Citigroup, Fannie and Freddie, and AIG. The bottom line is that the Fed has killed the sellers. Onward and outward with the next Fed bubble. When it pops, it will be and it will feel just like 2000 all over again. Ebulliency turns to depression in a nano second. We will likely experience an unabated 60% plunge from the popping point. What will instigate it? Perhaps truth and reality.

Heck, government has yet to impose the new government insurance tax. It is incredible that the new government led by some of the stupidest people that have ever walked the planet are so convinced that government can cure anything and that government needs to control everything but they don't see the need for government to control one thing. The currency. They leave that to the real power - the Federal Reserve. I would suggest, as many before me have, that if you don't control your currency, you don't control your destiny. Doesn't it seem incredible that the Fed head, Bernanke, declared the recession dead this past week yet hints that interest rates will remain at zero forever? Isn't it incredible that the recession has ended while members of dumb and dumber Congress are contemplating expanding house buying subsidies to as much as $15,000 per purchase? Are they purposely trying to spiral us into a depression by depressing asset values for everyone that played by the rules and saved and invested? Are they purposely trying to devalue the currency to a point of worthlessness?

Speaking of worthless currency, the stock market is obviously rising as the currency is falling. The bad news is the currency can only fall to zero and it is getting there fast. Gold and silver have awakened from their slumber and now look to be joining other metals in a race to the sky as currency alternatives. Again, if the dollar is worthless, it will be reflected in the interest coupons attached to currency debt. If you borrow the worthless dollar from the worthless Fed at zero percent, you can then sell it and buy another currency like the Aussie that pays an interest coupon. That's called a 'carry trade'. That's how you know that crap in your wallet is useless. It is merely a tool that is used to blow bubbles. All the stupid people like bubbles because they don't know they are bubbles. All the people looking to make a buck on the con job like bubbles because all you have to do is be on the right side of the con men blowing the bubbles. Blow on, Ben. Blow on...

Dow 7 yrs ending 9/18/09 (weekly)
Chart courtesy

Saturday, September 12, 2009

Stock Market Review - 9/11/2009

The 'Real' Action

While everyone is busy debating the merits of health care reform, the prospects of 'economic recovery', and the stock market rally, it seems that no one is watching the real action. Our fate does not lie in the thin air of a stock market rally built on hope and, well, lies. Nor does our fate lie in the fields fertilized by government manure sprouting supposed 'green shoots' of economic recovery. Stock rallies can turn to nightmares in a hurry and manure has to fertilize a seed - not just more manure. Government legislated and imposed health care is nothing more than another tax for a service provided by Uncle Sam. For the folks that can't afford health care insurance premiums, they have to be loving an administration that is trying to make them an outlaw for being poor. Just wait until a few million citizens get a bill for that which they cannot afford right now. Just wait until the rest of the population gets the bill for the premiums that the growing class of poor people in the US can't pay. There are only three things that are sure in life - death, taxes, and idiots will always run governments. The ultimate bill for the government spenders who don't realize that revenue production has been permanently crippled by bureaucratic intellectual de-evolution will serve to drown a free society in shackles of cognitive ineptitude only possible from the likes of the Pelosi's and Reid's and Waxman's of the world. These Neanderthalic thinkers don't realize that they are suggesting the process of extinction to a society that can't afford the cost of insurance - much less the cost of insurance plus interest as it will have to be borrowed. Unfortunately, that same society has been dumbed down by an educational system and a media that can't deal with truth because truth offends some people. That same society is now enamored with the prospect of gaining some of their lost investments in the current rally. It cares not at what price the rally eventually tallies. The central bank that now controls the US knows this. They give us a rally and we are pacified.

I have postulated that ignorance and stupidity are now skills that a modern investor must master. For instance, reading a piece like this will render an investor less apt to turn a profit for a week or so until the babbling media washes intelligence from the brain and replaces it with rally gibberish. As evidence, the Harvard Endowment has reported a 27% loss for their fiscal year ending in June of '09. They have beaten the dickens out of the market over the years to amass a portfolio of well over $20 billion dollars. This is their worst performance in 4 decades, they say. What's their problem? They're probably too smart. They know too much. They know the house of cards is about to be subjected to an earthquake. They have taken the appropriate strategies to defend their portfolio. Oops! This market is for dummies that don't know anything and never make adjustments. The Federal Reserve is over-powering everything with their PPT actions and their credit production machine we call derivatives.

Everybody thinks the Fed is busy printing money every day. Only a few percent or so of all the money created is physical money. The rest is manifested in the credit creation process. When any institution deals with credit, it must have some mechanism to deal with the associated risk. Enter derivatives and credit default swaps. This is supposedly a world that exceeds a quadrillion dollars in notional value. Now, to make a long story short, much of this business is underpinned by an asset like US Treasury bonds. They are leveraged and margined out the wazoo so that everyone thinks they are covered like they have some kind of insurance. As we found out last year, the only insurance anybody has is that the central banks of the world stand ready to print and or created enough money to to make Bill Gates look like a pauper. What does this do? Creating huge sums of money with the click of a mouse serves to disrupt currency valuations that are important to institutions and governments that hold large portfolios of debt. Currency valuations cause interest coupons on said debt to vary more than the debt holders would like and they thus turn to derivatives and swaps for stability and insurance. These derivatives and swaps are created from bonds, to a large degree, and therefore inject undue and artificial demand in the marketplace for bonds. So, oddly, and perversely, creating money from thin air so that central bankers enjoy nice bonuses for being idiots and running their institution into the ground serves to lower interest rates via increased bond purchases.

So here we are. This is the real action. It is the bond market. The chart below shows the US Treasury 30-year bond in blue and the corresponding yield in red over the last 14 years. You can see that there was an enormous spike at the beginning of 2009 but that was in response to the realization that the economies of the world had imploded. Again, I won't debate the silliness of 'economic recovery' because it distracts the observer from the real story. The trend lines are easy. US Treasuries are appreciating and yields are dropping. What does this tell us?

It tells us that the US bond yields will eventually drop to zero. That alone is reason to buy bonds now. The problem is the culprit driving yields to zero is a devaluing dollar courtesy of the Fed monetary creation. Think about it. Zero percent interest means the Fed can then literally print off whatever amount it needs to retire its issued debt. The money is then worthless. Zero interest means that no one can make money on borrowed money and therefore has no use for the process any longer. If money is worthless, what would the Fed want in return of all the money that it has lent us? Yes, at that point, they take your house, your car, your gold, and they charge you rent just like slave owners used to. Oh, did you see that gold went over $1,000.00 dollars per ounce this week? I wonder why? The idiots in charge have created so much money that it is quickly becoming worthless. So is everything denominated in that currency including stocks. When the rally ends, don't be the last one on the dance floor. Come close. I need to whisper something to you. 'It's all a scam'. I'll let you get back to your thoughts on important stuff like health care taxes. Uh, I mean health care 'reform'.

14 yrs - 30-yr. US Treasury bond in blue, 30-yr. US Treasury bond yield in red
Chart courtesy

Monday, September 7, 2009

Stock Market Review - 9/5/2009


I was buying groceries the other day and I noticed the price of 'Souse' was $2.00 per pound. If you don't know, souse is a spam-like mixture of pig rinds and pig snouts. Yummy! Most people wouldn't touch this stuff but in hard times, we can't afford to waste anything. But $2.00 per pound? My mercy, is inflation a beast!! Yes, I know the liars that we elect to govern us claim that inflation does not exist but these are the same people that perpetuate the myth of a 'strong dollar' policy while they do everything in their incompetent power to destroy the buck's power every day. This results, of course, in inflation. Count it or not. Reinvent formulas to say there is none. Whatever. Our government is a lie. Everyday. All day. Lies, lies, and more lies. If there is no inflation, how in the world does a package of souse, at any weight, deserve a price of $2.00 per pound?

The reason for inflation and the denial of such inflation is simple. The economy is stuck in a rut and looks destined for a slow-bleed death. Our government could pull us out of the economic death spiral but that would require all of Congress, all of the House, and all of the White House to disband and go home for good never to bother us again. They are all incompetent idiots void of intellect or economic understanding. Our only chance is for them all to lose their path to the capital building and never return. Maybe they should all convene at Pelosi's wine ranch to contemplate the sequence - destruction of California, destruction of America, destruction of the entire Western Hemisphere, etc... Well, Pelosi can already click off the first two. There's a real 'jenuis' at work! The truth is, our government is trying to revive the economy with good old fashion inflation. The Fed is supplying the exorbitant supply of money and credit. Our elected officials have abandoned responsibility to their constituents by becoming a lap dog to every wish of the Federal Reserve. No one knows anything. The only strategy employed at the moment is to throw money at the problem. Number one, that won't help. Number two, it causes inflation. Number three, it is an exercise in stupidity. At best, all the extra money will only blow a stock market bubble even bigger. At worse, our money becomes worth less than the paper on which it is printed.

Isn't it curious that the dunderheads running the show are trying to expand debt when debt has already drowned the American public? Soon, half of all mortgages will be under water and the government thinks it is a good idea to boost home ownership through first time buyer credits. That will only accelerate the drowning. Of course, the government does have ownership in the lenders. Isn't it curious that the government instituted the 'cash for clunkers' program to spur auto sales at a time when auto loan delinquencies are rising. Of course, the government does have ownership in the car makers. Isn't it curious that the government has their talking puppets out touting economic recovery when unemployment is growing by the tens of thousands every week? Of course, government employees now make two or three times the salary of the luckily employed private sector populace. The elite have arrived. Now they need to placate the serfs. So they lie and cheer us on while we dig our debt graves deeper.

The chart below is a look at the Dow last week with 10-minute bars. You can see that the PPT kept the market higher to lock in the August gains that ended Monday. Tuesday was met with an immediate and harsh selloff. The PPT wrestled control of market direction from the sellers on Wednesday and then bolted the indexes higher on Thursday with classic PPT micro-thrusts of buying at the end of the day. Obviously wanting to get started on their Labor Day weekend a bit early, the PPT elected to pop the markets higher on Friday at 11 in the morning rather than wait till their prescribed 3 o'clock rally hour in the afternoon. Bravo! Well played, gents. But, next week is yet another week and the picture ain't getting any brighter. Each rally carries us higher and higher to bubblicious territory and the real news is really not good. The clunker stimulus is over. The housing stimulus soon will be as well. Souse is $2.00 per pound and climbing. The average American is losing their footing on the mountain of affluence.

My best advice is don't fight the PPT. They have the only legal right in the world to use counterfeit money. Hey, maybe that's what we should call the new market - a 'counterfeit market'! Enjoy! Just send me royalties on the copyright usage. Next stop - Dow 10,500. Why? Because the PPT wants us there!

DJIA 5 days ending 9/4/09 10 min bars
Chart courtesy

Saturday, August 29, 2009

Stock Market Review - 8/28/2009

The Man with the Golden Printing Press

August, 2009, closes with the Dow closing in on a monthly Fibonacci retracement level of 38%. The chart below shows the Dow in black and the Shanghai Composite in candlesticks. The Shanghai hit its 38% retracement at the very beginning of August. Coincidentally, this coincided with a record 700,000 brokerage accounts opening in a day in China. Some things never change and some things are always right in the stock market. The little man is always wrong at the worst times. And give China credit. They call their rally from March a 'bubble' while we call ours a 'recovery'. But what would you expect. Our government is the lieingest group of people in the history of man. Their latest is there is no inflation in the US. Therefore, social security recipients will not get a cost of living adjustment in the coming year. Really? This is the same government that contends that we need government run health care to control cost that have doubled in the last ten years. Since health care is a fifth of our economy and seniors generally use more health care than non-seniors, this seems to me to be a rather pathetic use of truth when you need it and lie when you don't. Anyway, The Dow maintains a rally. Is it a bear market rally or is there room to go?

Clearly, the stock market is firmly in the hands of the government and their shills. For instance, high frequency trading has been in the news of late as a technique used by big brokerage houses like Goldman Sachs to make tons of money without investing. Did I say 'brokerage house'? Well, they are actually a bank. Well, they became a bank when it was convenient enough to avoid bankruptcy and at the same time, get in on the heist of trillions orchestrated by our Treasury and Federal Reserve. High frequency trading is illegal and it is referred to as 'front-running' in compliance vernacular. It happens when a trading firm picks up a high volume of trades coming to an exchange and the firm uses computer trading to then beat the original trade to the exchange, buy the stocks ahead of the real buyers, and then sell the newly acquired shares at a slightly higher price to the unsuspecting suckers. Well, this used to be illegal before banks ruled the world. Now, it's just more profit for the Fed shills.

Let's get back to the question of the rally. Is there more to come? I believe there is because absent a strong stock rally, there is no economic recovery. Remember, stock gains add to GDP. So does massive government spending. This will allow the government to pretend that there is real growth going on. Other than the areas of the economy that are being subsidized like autos (cash for clunkers), housing (buy now and get $8,000 back in subsidy), banking (make up your own accounting rules to show profits), or big salaries for insurance execs, the average American, from what I see, is still eating spam and pretending it is steak. We are still indebted on a personal level and indebted on a national level such that we are adding an extra million to our debt every seventeen seconds. If debt were the magic seed of prosperity, each of us should have a hundred credit cards and every one should be maxed-out! So, fundamentals are not behind the rally unless we pretend. But oh, what a rally so far. I suspect this bear market rally will peter out but not until the PPT runs the Dow to close to 11,000. Why? This is above a 50% retracement level and it would put the S&P 500 at 1,200. That's the level it was at when former Treasury Sec. Paulson aided the monopoly of his firm, Goldman Sachs, by burning Lehman Brothers to the ground. Granted, all the financials were bankrupt and likely still are if truthful accounting were to be employed. But that's reality. We are not living in reality. We need fantasy to keep the rally going and fantasy is what we'll get.

But right now, Bernanke is serving two masters. The stock market is now purely a function of inflation. Bernanke clearly thinks the golden printing press is the answer to all problems. When the PPT pumps money in, the market rallies. That makes the US dollar fall. That makes bonds sell off and the Chinese don't like that. They hold nearly a trillion so they call up the ignoramus standing at the printing press and demand support. So, Ben has to run over to the bond market and manipulate the yields lower by buying large quantities of Treasuries. He has pledged to buy $300 billion of the garbage by October and he is almost there. After that, hold on to your seats. Who knows what this Chinese puppet will do then. So anyway, when Ben and the boys are busy buying Treasuries, stocks fall because no one with a functioning brain cell thinks any of that crap is worth buying. Ben has to hurry up his Treasury purchases so he can run back over to the NYSE and keep the stock bubble inflating. Did I say 'bubble'? I meant, 'recovery'. Sure, that's it. I say we 'recover' right along with Ben until he gets the Dow back to around 11,000. Then, let's see what other lies these people will tell to perpetuate the biggest scam ever perpetrated on humanity. Look at the chart. With world economies so intertwined, is it possible for the US market to continue to rise while the Chinese market falls? One of these charts has to be wrong. Stay tuned...

6-mths ending 8/28/09 - Dow in black, Shanghai Comp in candlestick
Chart courtesy

Monday, August 24, 2009

Stock Market Review - 8/21/2009

The Less You Know, The Better

Our present day stock market is one that is difficult to navigate for the informed. It is fairly easy for the dumb and uninformed. If you know the truth, you would short this market with all you've got. You would also be losing money. The truth is the banks have a lot of toxic assets still on their books and they are not getting any less toxic as time moves on. Unemployment is still moving higher even as many recipients of unemployment insurance exhaust their benefits and 'disappear' from statistics. The consumer is still heavily in debt and the country in which we live just raised the estimated indebtedness over the next ten years to nine trillion. Since the government put that figure out, I suspect you could double it and get closer to the truth. The only parts of the economy that show green shoots are heavily fertilized by 'stimulus' and government subsidies. 'Cash for Clunkers' has been good for the auto industry but this is merely a subsidy program to get people into cars that they could otherwise not afford and after a year or so of payments, will realize more debt is not their answer to prosperity. Home sales are showing monthly increases while yearly comparisons are still bleak. Sales are up because foreclosed properties sell on the cheap and the Federal Reserve is buying hundreds of billions worth of US Treasury notes to force interest rates lower than they would normally be thereby subsidizing the real estate industry. To date, 81 US banks have now failed and those that haven't, are standing largely due to Federal Reserve subsidies. Ditto for the insurance industry. Let's not even talk about Freddie Mac and Fannie Mae. Both are allowed to report fictitious earnings while hiding potential and eventual losses under the 'AOCI' column as I outlined in the last post. Ditto for banks. And now the Federal Reserve has amassed trillions of agency and government debt on their balance sheets. China and Japan are both closing in on a trillion in US debt as well. The way the Fed raises rates is they sell paper. Uh-oh. That will destroy balance sheets that hold that paper. Talk about a rock and a hard place. Wow! Fed stupidity is infinitesimal. So, the consumer is still broke, foreclosures and bankruptcies continue to rise, we have the world's largest collection of morons for politicians, and most companies would be hard pressed to show profit growth if they had to use honest accounting. Sell, sell, sell.

No, no, no. That's only if you know anything. If you are dumb and blind to the current policy of cheating and scamming, then party on. There is a bull market raging and making money is all investing is about. Since there really isn't anything constructive to point to, the Fed has to goose the stock market higher to sell their notion of economic recovery. See, the stock market is up. The economy must be getting stronger. That's all you have to know. Just buy. Ben and the PPT have your back. And no, you don't have to know anything about anything. What do you buy? Does it matter? Market rallies that are subsidized with a flood of money push everything higher. Yes, even oil. Did I say that? Never mind. You are not supposed to know anything.

The one thing you need to know is who's throwing the party. Like a good guest, we need to know who to thank. The Federal Reserve is of course, the man. Sure their banking buddies and Treasury Department shills are with them but the Fed is stoking the rally flames. Notice the chart below. Last week was a good week. President Ben was distracted a bit with his visit to Jackson Hole, Wyoming and he couldn't stand at the monetary printing press all day to pump up the market. So, other than about an hour or so of trading, the market went down or sideways. There were a couple of big bursts higher that only lasted for a few minutes but that's all it takes. The PPT has put sellers on notice. They are not welcome at this party and they will not be tolerated. So, if you don't know anything about anything, this is your market. Party on. Keep buying right alongside Ben and the PPT and watch your portfolio grow. Nevermind that the fallout will be higher oil prices, higher inflation, higher taxes, and less control over your life. But hey. Sacrifices have to be made. Don't you want the stock market to go up? It's not like it will go up on its own! Ditto for car sales, house sales, banking, insurance...

Oh, you weren't supposed to know that stuff. That could interfere with your 'investing'.

DIA one week ending 8/21/09 (15 minute bars)
Chart courtesy

Sunday, August 16, 2009

Stock Market Review - 8/14/2009

Knock, Knock.

'Who's there?'

Uh-oh. It's the Chinese. And boy are they mad! It seems that they are catching on to our economic scam. You know - in order to report a pretend positive GDP number the United Banks of America print and manufacture money to lend to people that can't repay the loan so they can continue spending at unsustainable rates mainly buying cheap Chinese manufactured products. See the last ten years. We can only expect one of two outcomes. One, we finally buy so much stuff that we don't need anymore and suffer a deflationary spiral fueled by too much capacity and too little demand. Two, the money printing catches up and inflation bursts forth. Either way, the lenders get screwed. The Chinese are finally on to us. What will the Federal Reserve do now?

To become the world's largest debtor nation and beg the world to keep lending is one thing. But then to continue to manifest money out of thin air is another altogether. Our governmental witless nitwits will need to issue a couple of trillion of notes and bonds just this year alone! To put that kind of indebtedness in perspective, two trillion is more than the annual GDP of every country in the world except the top seven - the US, Japan, China, Germany, France, the UK, and Italy. If California was a country, they would be eighth but they are so broke they are issuing IOUs. All this debt and all this printing and all this bank saving and all this insurance and car takeover by our government should have one consequence. Our excessive borrowing should be costing us more in the form of higher interest rates required from our creditors for them to continue to feed our debt addiction. The bond yields should be rising like Jack's Bean Stalk. But, it is becoming very apparent that every time the 10-year yield rises toward 3.9% or so, something dramatic happens. Now, let's see. Who is the biggest sucker in the world? Who is on the hook for nearly a cool trillion in our junk debt? Oh yeah, that would be the Chinese. My guess is they pick up the phone and call the keepers of the US government, the Federal Reserve, and demand action. The Fed and their PPT arm spring to action and buy the yield down. Back to 3.5% or so we go and the Chinese calm down. Of course, the PPT can't manipulate all markets at the same time so when they are busy manipulating the bond market, the stock market suffers. So went this past week.

The Fed had a meeting and declared no change to the zero percent fed funds rate. I suspect this will be the same line 20 years from now. They will never again raise rates. Why? You need a real economy that can actually pay to borrow money. That means that the borrowers have to be able to make money on the money that they borrow. Dig it. We are subsidizing the banking industry, the insurance industry, the car industry, the mortgage industry, and the obamanistas are coming for the health care industry. Under this policy of idiocy, our government claims that GDP was down only 1% for the second quarter and most importantly, all the village idiots stepped forward to declare either an end or an eminent end to the greatest recession since the 'Great One' of the '30's. Hallelujah, the recession is over! If you believe that, then you must also believe that the Fed had to take over the banks for the good of us all. Step back and think about it. What would really have happened if the troubled banks had been allowed to tank? Sure, the FDIC would have been in scramble mode but we all know this is a sham of an insurance provider. They don't have enough money to insure deposits and had to get our real life 'Wizard of Oz', the Fed, to promise access to the printing press to stay alive. Really, what would have happened? I'll tell you what would have happened. The derivatives world would have vanished and all the carnies and con men would have been vanquished from our landscape. Also, the Chinese, the Japanese, the South Koreans, and so on, would have been left holding a balloon full of Federal Reserve bubbles and would be a little more prudent in whom they choose to lend money in the future. Lastly, we would have to go back to buying with cash. If we don't have it, we don't buy it. As a country, if we can't collect it in tax, we don't spend it. The Pelosi's and Reid's of the world seem even more ridiculous than they already are. In the end, we, our economy, would recover because it would again be rooted in assets and not 'conceptual' assets like derivatives. But I digress.

Isn't it odd that this past week was not a good week for the stock market? We celebrated the 'statistic' issued by 'our government' that claimed fewer job losses. The recession was over. Inflation was supposedly lower in July even though gas went from $2.30 or so to $2.50 a gallon. I know, I know. Our government has been pathological in their lying about everything for so long we have no basis anymore to determine reality. All we can do is rely on the markets and charts. The chart below is a ten-year chart of the Dow and the US dollar. The Dow is in blue and the dollar in green. Notice the phenomenal volume the PPT threw on the market in March of this year in an effort to convince us that TARP was good! Wow! What I want to get across is the obvious inverse relationship between the two. For the Dow to rise, the dollar must fall. Why? The Dow is function of inflation. It is not a function of value. We are now Zimbabwe. Zimbabwe is us. Like I previously mentioned, we need to issue more debt this year alone than anyone in the world can absorb. Now, our Federal Reserve has had to step in and buy the Treasury auctions of debt so we can pretend that demand is still strong. It is not. That knock at the door is getting louder and louder. The Chinese are not stupid. They know we are purposely devaluing our currency because the only way to repay our debts is to do so with cheaper currency. We have borrowrd the cow but want to repay it with a 10 ounce sirloin. The Chinese want the cow back. Our Fed knows the American populace is ignorant of all things economic so they distract us with a stock market rally. They occasionally bring forth things like health care reform to woefully and totally distract the idiots that report the news to the idiots that view the news so we won't pay attention to the theft of the country's assets at the hand of the Fed and their banker right arms. Oh, did you see that the big banks all reported grand profits? Hallelujah! Our bankers can reward themselves with billions in bonuses. To the people of the US? More job losses, more asset deflation (houses continue to fall in value), more mortgages under water, higher prices for non-assets, and a currency that will continue to fail. Follow the green line in the chart. There are three distinct triple tops right before plunges in value. We are about to exit the third as I write. What does it mean? Probably, a further stock market rally. Are you happy now? At least we know that interest rates aren't going up. Knock, knock!! Hey, Ben. Get to work. You know who you work for now. Who's your daddy? Who's our daddy? I wonder how you say that in Chinese?

Dow in Blue; US Dollar in Green - 10 yrs
Chart courtesy

Monday, August 10, 2009

Hide and Seek 101: AOCI - Accumulated Other Comprehensive Income

The mortgage-for-all enabler, Freddie Mac, just reported earnings on Friday, August 7, 2009. They claim to have made $768 million for the second quarter. Cheers!! Even a standing-O from Wall Street! Okay, let's talk truth.

After they repaid the TARP extortionists their dividend, Freddie really lost eleven cents. They say they don't need any money from us at the moment as they are issuing debt that they call 'Reference Notes' to the tune of $45 billion so far this year to bring the total to $259 billion. So let's see. They say the made $768 million but they have debt of $259 billion. We have a winner!!

Check the chart below and see if you would like to buy debt in a company like this. Apparently, a lot of people do. But, apparently as well, a lot of people are idiots. As the price of the stock fell from the sixties to the pennies, volume didn't really spike until single digits were reached. We are not dealing with 'jeniuses' here.

So has the mortgage business suddenly gotten better? Even the company admits that their earnings were "driven primarily by $4.3 billion in net interest income mainly due to lower funding costs, as well as $4.2 billion in gains on the company's derivative portfolio and guarantee asset, which were primarily driven by net mark-to-market gains due to increases in long-term interest rate". In other words, through the sorcery of accounting adjustments and invention, they turned a profit. Two things.

First, they are suddenly expert derivative traders. They made over $4 billion in the quarter trading derivatives. They bankrupted their company trading derivatives in the past few years so why the 'steroidal leap' in derivative skill? As I postulated in my newsletter, it helps to be the Federal Reserve's best friend and shill. The Fed trades derivatives and default swaps and they happen to know interest rate movement better than anybody on the planet given their bond market intervention activities. Okay, so the Chinese call the Fed when they get nervous about increasing yields and disintegrating bond values which prompts our Fed to intervene. They pull our chain and we respond. Anyway, don't you think the Fed passes on a little info as to when they are about to intervene so their buddies can front run with their own swap activity? You bet.

Second, since a lot of companies like Freddie have massive bundles of losing security positions on their books, they need to find a way to hide them lest we idiots learn of their pathetic fiscal condition. So, we have changed the accounting rules to allow for as yet unrealized losses to be hidden under a column called 'Accumulated Other Comprehensive Income' or AOCI for short. Got it? Understand the title? The scammers that run our country are counting on your stupidity to first, not to seek the truth, and second, to gloss over this arcane column title. But, some of us are relentless truth seekers. Come to find out that Freddie put another $34 billion under that column for the second quarter and they had $28 billion there in the first quarter. The beauty is that under our new 'accounting rules', that column does not count in the income statement. Isn't that beautiful? That way, even if you have $34 billion in losses, you can still pretend to earn $768 million and stupid stock investors rejoice. So too does the Obama administration as this helps sell their 'economic recovery' story being the administration of change and and transparency they are. The crap is still there. It is just in a column that we no longer count.

Now, look at the chart. Would you lend these people $250 billion? What kind of an idiot would sign up for that? Oh yeah - our government buys this stuff like hot cakes. Hide and seek. Tag. You're it!

FRE 3-year ending 8/7/09
Chart courtesy

Monday, August 3, 2009

Stock Market Review - 7/31/2009

Insanity and Perception Meet

Another week - another record US Treasury issuance. $235 billion this week, to be exact. And no, interest rates are not going up as the 10-year Treasury yield held steady at about 3.5%. Are investors that hungry for bonds? Hardly.

There are several things going on here that are very important. One is that our government has run out of ammunition. The Fed Funds rate is at zero and will likely stay there for a generation or two just like Japan. And now the US descends further and further into debt to keep the 'economic recovery' con game going another week. To continue the debt issuance, the US Treasury needs buyers. When you consider that the Treasury must issue $2 trillion to pay the bills just this year alone, that's a lot of buyers. Only the top seven countries in the world even have a GDP of more than $2 trillion per year (World Bank data, 2008). Who is even capable of buying this much debt? We know our friends in China have now accumulated close to a trillion by themselves and Japan and South Korea continue to support our habit of spending more than we make. Mainly, they support our spending because it is mostly their crap that we are buying and we need credit to continue. Now they are wondering how long the print and borrow game can go on before they are left with a bag of worthless paper with pictures of Americans that would mostly be turning in their graves if they saw what the past few administrations have done. But, they buy. So too does our very own Federal Reserve. But where do they get the money to add a few extra trillion to their balance sheet?

Sure, they make money lending to our Ponzi financial system that we call banks. But I'm talking 'trillions'. As I postulate in my newsletter, it would seem that we could make a few inferences here. The Fed is like a low level drug dealer that smoked the crack they were supposed to sell. They will soon have to face the people that fronted them the drugs and it won't be pretty. Their only recourse is to turn to crime for the cash. Now, we know the Fed deals big time into the credit default swap world of derivatives that now have nominal values north of a quadrillion. We also know that the majority of swaps are interest rate driven and who knows better as to which direction interest rates are going than the Fed? They know how much of the bond offering they are going to buy and they know what time of day they are going to strike. To get a little help, it is possible that they pass this information along to their buddies at the big banks. Follow me here. All the big banks traded themselves into insolvency trading derivatives in 2008 so we know they are all idiots and have no idea what they are doing. During their 'cash crunch' and bailout periods where they were 'raising capital', it is thought that derivative trading dropped by 97%. Now, we learn that these same idiots are earning record profits for the second quarter at the same time that our Fed is buying Treasuries by the hundreds of billions at a time and derivatives trading is back. Suddenly, they are all making gobs of money. Gee, I wonder how?

The other thing that is very important is the Bush administration is closely controlling perception. Uh, I mean the Obama administration. I get the two mixed up. Since they are both identical, why don't we just call Obama 'Bush II'? Anyway, they use the same Nazi-like propaganda tools to continually 'sell' the story that they want us to believe. And that story is 'economic recovery is at hand and we are past the bottom of the recession'. Just listen to our politicians. They are like robots repeating the lines of recovery like they were programmed by whatever source brainwashed them to think Obama was improvement in our political timeline. But here is where sanity meets perception. Sure, it's a nice sentiment to believe that all is well and getting better by the minute and six months of Obama cured all the ills of 20 years of Wall Street stupidity and greed. Second quarter GDP was clocked at minus 1% even though consumer spending (70% of GDP) came in slower than first quarter GDP which was revised to an even slower minus 6.4%. Huh? No, don't even search for logic. Every category of GDP was much worse than minus 1% except for the all important 'government spending'. In other words, any improvement or any slowing of economic deterioration is due to government spending by virtue of debt. In other words, the ultimate economic life support system is the only thing keeping the patient alive.

In contaminating the world with our real estate Ponzi scheme, every country has felt obligated to do the same as us - stimulate, stimulate, stimulate. Of course this means that governments are simply throwing money at economies like frat boys throwing girls in the pool at a keg party. This is insane behavior as Zimbabwe has already proven. Yet, here we are. Now, let's look at the chart below. The two lines are the Shanghai Composite in red and the Dow in blue. I think we would all agree that our two economies are tied together so one cannot prosper without the other and one cannot fail without the other. Likewise, our stock markets have become very similar. In fact, all asset classes are now similar as the governments of the world seek to control the markets to keep our minds off the idea that the banks are relieving us of our gold and real assets. We are stupid and easily fooled. Anyway, you can see that the two indexes are moving in lock step. 2009 is showing a powerful rally from the 2008 lows. Here's the rub. The Chinese government is calling their market a 'bubble' and the US government (the Federal Reserve) is calling theirs a 'recovery'. We are all insane in that we think we can do exactly what Zimbabwe did and expect a different result in the end. No one prints and borrows their way out of an economic abyss. The difference is perception. Look at the chart. One man's 'recovery' is another man's 'bubble'. Who is right? Me personally, I no longer trust anyone that speaks English. All I hear is lies.

5yr monthly - Dow in Blue, Shanghai in Red
Chart courtesy

Sunday, July 26, 2009

Stock Market Review - 7/24/2009

Planes, Trains, and Automobiles

Plane companies are fairing poorly right now. Boeing is delaying their new 747. Airlines are cutting back and some are announcing more layoffs. Train companies don't see signs of economic recovery as that include that tidbit in their earnings releases. Automobile companies? Well, you know their story. Ditto. Do you think the market cares? Nah. The stock market senses a rally but that's just because the stock market has had its senses beaten out over the past eight years. It has also been taken over by central bankers who have nothing to offer but money and market rallies. So, we have a rally. Is the central bank a genius for engineering a 'turn around'?

Hardly. The chart below is the DIA ETF and it shows the week's action. Friday was again interesting because Microsoft and Amazon announced poor earnings results and less than stellar guidance. UPS continued to see a weak economy and so did a few train companies. The market sagged on early Friday morning after an ugly futures market overnight. So what. We have the PPT and they were simply not going to let the market, or at least the Dow, fall back below 9000. Who needs earnings anyway. Besides, the PPT has to keep the rally going as we look forward to a record $115 billion in Treasury issuance this coming week. I've said a lot so let's break it down.

The Federal Reserve runs the market now and they don't need earnings and they don't need an economy. Both are just noise. All they need is money and they have a lot of it. To play the con game of 'economic recovery leading to market recovery', they need shills. Enter Goldman Sachs and JP Morgan. Since the Fed gave them their money back from all their real estate Ponzi scheme losses, they assist the Fed in buying up stocks. And, they all make a killing do so. Are they all geniuses? Again, hardly.

One only has to ask where the Fed gets all the money to buy half of the Treasury action while manipulating the markets. Again, notice the volume in the last 20 minutes of Friday afternoon. It picked up significantly and that is not 'normal' for a July Friday. Guess who was buying the rally? Okay, we know the Fed plays the ETFs. We also know they dominate the derivative market. They even admit this. Now, we also know that the preponderance of derivatives and swaps are interest rate oriented. Who knows more about interest rate direction than our very own Fed? How much of the coming $115 billion in Treasuries will they buy and what will be their timing? Insider trading is not genius. Criminal, maybe. But not genius. Of course, they likely call their buddies Goldman, JP, and BofA up beforehand so they can all get in on the action. Hence, all the great earnings reports from the Fed's right hand men. As in the case of BofA, they lost $2.5 billion in credit cards and lending. However, in 'global banking' and 'investment banking' their piles of profits grew to the clouds thus producing a smackdown second quarter that will no doubt result in big bonus checks for the swindlers. Isn't that nice. Two quarters ago they were all headed for bankruptcy. Turn back the hands of time, allow mark to fantasy accounting once again, liar loans, 125% financing through Fannie and Freddie, cook the books, steal from the tax payers, enlist of the help of the dumbest people ever to walk the planet Earth (Congress and the House of Reps - Pelosi, Reid, Dodd, Nit, and Wit), and engage in insider trading and frontrunning and presto! Back to record profitability and executive bonuses! Ain't Americans stupider than a bucket of retarded nails. Who says crime doesn't pay. Hey, enjoy the rally. The Fed sure is. Oh, by the way, the next target to bust up the downtrend on the Dow is 9600 and then 10500. What the heck. We may never even have another down day in the market!!!!!! Rock on, PPT.

5 day, 10 minute bar chart DIA ending 7/24/09
Chart courtesy