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 StockCharts.com