Sunday, April 19, 2009

Stock Market Review - 4/18/09

Mark to Fantasy Returns With a Rally!

Go figure. The FASB changed the accounting standards back to the 'Mark to Fantasy' method from the Mark to Market method. Presto! All the ills of the banks have suddenly been cured. Everything is fine. They are all making record profits and the share prices of the big banks are reflecting this sudden shift back to Bush economics. No one questions the method as long as stock prices rise. Who cares about the 'real' story? Haven't we had enough of that over the past two years? Using 'real' accounting makes stocks sink. So, we have gone back to fantasy land. Finally! Whose idea was it to use reality in the first place? Oh yeah, that Bush fellow. I'm glad we got rid of him and brought in a different fellow preaching 'change'. I like fantasy better. So does the stock market.

Two weeks ago the WHO (White House Occupant), Mr. Obama, went to Europe for the G-20 meeting where he sucked up to our pals in Europe, apologized for our 'arrogance', and bowed to the Saudi King. His trip was deemed a success. Well, of course it was. Not that anything whatsoever came out of the trip. But these days, any news that isn't related to more layoffs, corporate losses, or bankruptcies is deemed as 'good news'. So it was. Last week, Mr. O went to the conference of the Americas to hang out with our Latin pals. He shook hands repeatedly with Mr. Chavez of Venezuela and vowed greater cooperation with whatever they wanted us to do. I'm sure the market will deem this as a 'success' as well. So be it.

It looks like Mr. Bernanke would like the Dow to go up and knock out the last lower high of the current downtrend which was Dow 9000. So be it. He has the money and the printing press. As you can see from the chart at the bottom, the Dow ETF the DIA shows a lot of volume at the beginning and end of each trading day. The chart is of 15-minute bars so you can see the trading that ended Thursday and Friday was heavy on the selling. I guess Goldman Sachs or BofA wanted to book some trading profits so Mr. Bernanke allowed them to make gains. I'm sure he will give them the nod when he is about to jack the Dow higher so they can get back in.

Are you shaking your head? This market has dissolved into a 'cartel' of sorts. It is certainly no longer a 'market'. It is manipulated beyond fundamentals or reason. Take gold and silver. Both are heavily shorted and silver so much so that there are more short contracts than ounces of the metal. Who could possibly do such a thing? Probably JP Morgan - the right arm of the Federal Reserve. They hold 90% of the short contracts by virtue of their derivatives. Everything always comes back to derivatives. Why would they short the metals. Well, it seems to me that the only thing the central bank has is federal reserve notes. Most people call this stuff money but it is really indentured notes. The central bank has to keep the profoundly ignorant populace in line and believing that the garbage in their wallets is real money. The biggest threat to this idea is the metals and most importantly, the ascending price of the metals in response to the fiat printing of federal reserve notes. How does the central bank keep the price down? They short it. They want the holders of metals contracts to cave in through margin calls and losses so the central bank can in fact buy up all the metal they can. Why? Because they know that at some point, even the stupidest of the populace that we call our Congress people will realize they have been scammed. The metals take off in price and who now holds the metals? Yeah, that's the way scams work. You know the 'Golden Rule', right? The man with all the gold makes the rules. If you attended my lectures or read my newsletters, you would know why your precious stock market or your real estate or anything else that you think of as an asset is in fact declining in 'value' relative to gold and has been doing so since 1971. The bank is fleecing the population of their gold and the population is allowing this to happen because they are ignorant of the process and greedy for what they believe to be their retirement salvation - the stock market. That greed is also working with the false belief of the masses that they actually understand market investing. They don't and they are losing big time over the past couple of years. But, to complete the process of collecting all the gold and silver, the central bank has to let the populace carry on in the belief that the stock market is their meal ticket. The public has to be led to believe that they know what they are doing and buying stocks is a smart thing to do. So, the central bank lets the game go on. At least, for a while. Hey, it will be announced next week that Mr. Obama was wearing brown socks and the stock market ought to go up 200 points on the announcement. That ought to take our attention away from the fact that one of our biggest manufacturers, GM, is bankrupt, our banks are likely the same if we applied reality, and so too are the people that owe the loans that the bankrupt banks hold. Cheers, and enjoy the rally while it lasts. Has anyone checked the P/E ratio of the Dow lately?

One week DIA - 15 minute bars
Stock chart courtesy

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