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