Monday, December 15, 2008

The Dance - and the Fraud - Continues

Wall Street continues to dance to whatever tune is set before them. On certain days, they change partners, some doing tangos replete with dizzying dips and turns, while others waltz casually or two-step through the day. Yes, there are day-traders and buy-and-holders, investors and charlatans, but today they all took a turn at the tango, precisely at 3:30 pm, with just one half hour left to dance.

At that point, with the major indices all at or near their lows of the day, it was time to tango, and, as the band played a warped version of Bolerostocks rose dramatically, with the Dow rising almost 150 points in about 7 1/2 minutes. A lovely dance it was, and such an abjectly fraudulent one. Whatever the purpose, to salve the wounds of the already harmed, or keep the masses outside the markets from rioting, the players, and dancers were the same. The Fed, Goldman Sachs, the PPT, banks playing with TARP money, day-traders and outright louts and thieves were all in there making - or losing - a buck or two or a billion or more.

Any gains under the current market conditions are likely to be fake, as phony as the money backing them, or backing away from them. We have no economy any more, no market system, no trading regime. What we have is the remains of a corrupted, defunct, defeated grand Ponzi scheme, one at which Bernie Madoff would stand in awe. we are witnessing the end of the Wall Street capitalist money machine, but the dancers don't want to stop dancing just yet. No, it's all happening too fast for them, too suddenly. Why, the little people are demanding that CEOs not receive bonuses and that their pay be cut. The nerve!

It's what we've got, folks, like it or not. As individual investors already know all too well, the little guy has no chance against the megalithic monstrosities created by the wizards of Wall Street. Their bets are hedged, while the little guy goes naked, believing in the "system." But the system is broken and the evidence of it grows daily. Today's little dance was just a warm-up to the Zulu death spiral this spring. They'll be dancing and spinning right into the fire pits then.

Dow 8,564.53, -65.15 (0.75%)
NASDAQ 1,508.34, -32.38 (2.10%)
S&P 500 868.57, -11.16 (1.27%)
NYSE Composite 5,497.90, -46.06 (0.83%)

On the day, the internals were far worse than the headline numbers might suggest. Decliners absolutely overwhelmed advancing issues, by a score of 4857-1821. New lows bested new highs, 222-15. Volume could best be characterized as pathetic, more like a mid-summer session than a Christmas and tax-selling one.

NYSE Volume 1,214,382,000
NASDAQ Volume 1,671,975,000

Meanwhile, some of our favorite commodities diverged. Oil fell $1.77, to $44.51, though gold gained $16.00, to $836.50, and silver pushed ahead 32 cents, to $10.62. This is not surprising, though not everyone is still sold on the argument for precious metals, though it is a compelling one. In a deflationary environment, such as we are in, oil could fall as low as $20 per barrel. The metals have weathered the storm better than almost all other investments, and will retain value no matter what. Gold seems especially overpriced today, though purists will tell you it's cheap, even at these levels.

Nobody really knows, though. But, if all other measures of wealth go by the wayside, gold will return to prominence and that seems like a bet worth taking, or hedging.

Note that industrial production fell 0.6% in November, as did Capacity Utilization, which dropped to 75.4% from 76.0% in October. Slowly we turn...

No comments: