Friday, January 23, 2009

Who Flipped the Switch? and, Is the Fed Busted?

The action today on the markets was extraordinary, to say the least. When General Electric fessed up to a major revenue miss and 46% drop in profit, the market futures signaled a steep decline at the opening, which is exactly what happened. The Dow lost 200 points in the first few minutes of trading.

From there on, however, it was all hands on deck for the PPT and the foes of free markets. All but the Dow finished the day with small gains as the interventionists kept stocks from doing what they were supposed to do, drop like stones thrown off a cliff.

Dow 8,077.56, -45.24 (0.56%)
NASDAQ 1,477.29, +11.80 (0.81%)
S&P 500 827.68, +0.18 (0.02%)
NYSE Composite 5,195.55, +23.87 (0.46%)

I may sound pessimistic to many, and I'll admit that I don't see much but doom and gloom ahead, but that's for stocks, mostly. If you like shiny objects made of gold and silver, the future looks better. But, the backdrop of millions of jobs lost, families being put out on the street and people just plain afraid to spend money, does have a sobering effect. Stocks should head lower, below the levels of November 20. The p-e ratios of most of the S&P (sans financials) are still high, not indicative of stocks in a recession. But, despite my desire for a quick, painful revaluation, the Fed and the federal government will continue to unwind matters slowly. Stocks have fallen, and they will continue to fall, just not quite as quickly as some (me) would like.

So, right around 9:15, somebody over at the secret PPT bunker kicked the switch-flipper awake and things got going. Ben Bernanke's grubby little fingers were all over this particular episode.

On the day, advancers and decliners were virtually even, with the winners ahead slightly, 3223-3211. New lows maintained their edge over new highs, 315-13, actually expanding their advantage, yet another indication that a lows retest is upon us. Volume was eerily the same as it's been all week.

NYSE Volume 1,410,774,000
NASDAQ Volume 2,182,405,000

Whoever flipped that switch this morning, must have tripped the inflation lever as well, as commodities, mired in a deep recession, suddenly emerged as the big winners of the day. Oil gained $2.80, to finish the week at $46.47. Gold was up $37.00, to $895.80, briefly trading above $900. Silver rose 58 cents, hitting $11.94 an ounce at the close of NY trading. The big loser of the day was natural gas, down 17 cents to $4.49. While this may seem like a boon to householders heating with natural gas, the reality is that most utilities locked in higher prices months ago, so Mr. and Mrs. Average Joe and Jane won't see any reduction in this month's utility bill. Maybe next month, maybe not.

Yesterday, I promised something called a "blockbuster" report on the Fed and I've managed to piece together most of the salient facts and articles which lead me to believe that the Federal Reserve Bank, which has provided nothing less than massive inflation and destruction of the dollar over it's 95 years of existence, is, in fact, one big Ponzi scheme, making Bernie Madoff look like a piker by comparison. We begin with a tame somewhat mainstream video clip and proceed to the meat of the story of the Fed

The following video features Christopher Whalen of Institutional Risk Analytics, proposing that the bailouts of banks end and the government allow Sheila Bair of FDIC to do her job, which is, take the Citigroups and Bank of Americas of the world into receivership, liquidate the assets and move on with new, stronger entities. Naturally, this sensible approach will be completely ignored by our financial masters at the Fed and in the higher reaches of "our" federal government.

This concept actually dovetails nicely into the creation of a "bad bank" as a repository for all the toxic debt weighing down the balance sheets of financial firms. The concept is neatly outlined, defined and debated in Bad Bank Regains Favor As Solution for Toxic Debt.

A "bad bank" is exactly what the world's money masters need. It is likely to be the biggest bank in the world, as companies, governments and central banks deposit all of their crookedness into one big cesspool. Naturally, the assets and liabilities will never be made public, nobody will have to come clean, and all the world will be better off, especially the rich, greedy manipulators of finance.

Moving on, the details of how the Fed creates money out of thin air are boring in their detail, but suffice it to say that they have many means available to them to create wealth for themselves at the expense of the American public, and they use all of them in gross excess almost all of the time.

The most interesting articles, were this one, The Federal Reserve’s Blueprint for Market Intervention, by James Turk, in which he follows the sleuthing of researcher Elaine Supkis, who uncovered a 1961 TOP SECRET FED RESERVE GOLD EXCHANGE REPORT.

The details of these two articles compelled me to make them more widely available before somebody from NSA comes along and scrubs them from the web. They partially describe how the Fed is an unruly, corrupt organization, with black holes in their books and secrecy and deceit all around. Both are exceptional reads.

Finally, here's John Maudlin, suggesting that we "muddle through" for another decade or so, but he does offer a couple of other, more interesting scenarios.

From John Maudlin, in an article entitled, The Endgame:
The US (and indeed soon the whole world) is in a deep recession. The US is going to try and combat that recession with stimulus on a scale never before tried. It is a grand experiment. On the one hand is the theory that you can allocate stimulus and keep the velocity of money from falling. On the other hand is the theory that once the deleveraging process starts, there is not much you can do about it: it is going to work its way through the economy. We are about to find out which theory is correct.

While the Fed and Central Banks around the world are simply dissatisfied with stealing most of people's wealth and labor (They want it all!), they'll be betting on the side of the argument that keeps liquidity and money flowing at a high velocity. The US population, scared to death by Wall Street, trillion dollar deficits and the Fed running the printing presses around the clock, are going to be a serious counterbalance to any reflation effort. So, choose your poison: deflation or inflation. I'll bet dollars to doughnuts that it will be deflation first and inflation later: my few dollars will buy lots of doughnuts today and later, I'll sell the stale ones for 10 times what i paid.

We've already seen what $350 billion did to re-inflate and stimulate the banking sector. It cratered like a punctured beach ball. More money thrown at it will have a similar effect because the banks and the Fed and central banks around the world are so deep in debt and sunk by credit default swaps, debt reconstituted into securities, resold and defaulted again, that they will find no way out short of armed conflict, devaluation of currencies (starting with the US dollar).

So, that's it for the week. It's Friday; go have a beer or seven. I am on my way out for a couple gulps of Steel Reserve, a high gravity lager, which, considering the height of the "gravity" we face, only seems appropriate.

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