Friday, February 1, 2008

The Bizarre World of Wall Street

Evidence of market and media manipulation is rampant these days along with counter-trend trading patterns on the exchanges.

After the MBIA fiasco on Thursday (see yesterday's post), Friday morning brought more bad news to investors when the Labor Dept. reported that the US economy shed 17,000 jobs in January.

Mindful of yet another set of painful numbers indicating the decline of the American economy and an all-but-certain descent into recession, traders would have been deemed prudent had they made a timely exit from equities of all kinds.

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But what they did on Friday - alas, most of the past two weeks - defies any reasonable explanation. Once again, traders engaged in another day of incessant buying, exactly the opposite of what one might expect. Believe me, there are more than just a few analysts out there scratching their heads and pulling out what little hair they may have left.

Dow 12,743.19 +92.83; NASDAQ 2,413.36 +23.50; S&P 500 1,395.42 +16.87; NYSE Composite 9,277.58 +151.42

The 1240-point rally off the January 22 intraday low should be hailed as a marvel of modern engineering - of the markets and the media. It's almost as though investors actually believe that a 1.25% emergency cut in the federal funds rate over an 8-day period is some sort of signal that nothing but smooth sailing lies ahead.

In fact, the rate cuts, while possibly stimulative to the wild boys on Wall Street, are nothing short of disastrous for the average American consumer, a persona inconveniently left out of the mix, apparently. The eventual inflationary pressures and continuing weakening of the dollar should prove critical to the continued viability of two standards: that of living in America and the dollar as reserve currency. Both are under severe assault and the Fed has done nothing to prevent further erosion.

What's really occurring on Wall Street and in the offices of the Fed and at Treasury is a concerted, continuing bailout of a failed banking system. Today, the Fed announced two more February auctions for bankers in distress and promises of more to come. Under Ben Bernanke, who earned the moniker "Helicopter Ben" for his metaphoric dropping of dollars from flying machines, the Fed has indicated that loose credit policies - the exact same ones which got us into this banking seizure to begin with - will reign supreme.

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No doubt the government is in compliance with this policy and will commence bombing the capitol of any central bank which attempts to call in any US debt, no matter how worthless it is or how shaky our ability to pay. We're a bankrupt, third world nation now. Get ready for runaway inflation for essentials (food and energy), combined with stagnation and eventual deflation, without any way out.

The recent moves of the Fed and Treasury and Wall Street's response signals something much more sinister at work than a mere "down" portion of the business cycle. America is headed for the worst recessionary period since the Great Depression and maybe even worse than that.

Buy gold and silver, get your passport and get out of the country before the borders are closed. Remember what America was like in the 1950s and 60s, when we were truly a great nation. America, in its current configuration, is a failed state being run by an international criminal cabal. Market prices for US stocks are not rooted in reality. Wall Street has morphed into the most perverse, disrupted Bizarro World imaginable.

Heaven help us.

On the day, advancing issues held sway over decliners by nearly a 3-1 margin, 4650-1688. However, for three months running, with the exception of two days in early December, 52-week new lows have outpaced new highs and they did so again, 149-110.

In response to Wall Street's curious trading, commodities sold off. Oil priced $2.79 lower, closing at $88.96. Gold fell $14.50 to $913.50. Silver dropped 13 cents to $16.87. Could we be witnessing the beginning of a deflationary trend? It's far too early to tell, but readings from the labor market indicate a growing tidal wave of layoffs and workforce reductions on the horizon.

Enjoy the Super Bowl (maybe that was the real message from the market: can't have a crash just before the biggest game of the year). Take the Giants and Vegas' generous 12-point spread.

NYSE Volume 4,609,755,500
NASDAQ Volume 3,094,480,750

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