Wednesday, May 20, 2009

Banks Raise Cash... Probably From Each Other

Even before the release of last month's Fed meeting minutes, stocks had been stumbling off earlier highs, but the word from the Fed did little to assuage fears that recovery may not be so swift or as robust as some had predicted.

After the 2:00 pm release of the Fed minutes, stocks vacillated before finally giving way in the final hour. Whether the decline has any meaning in the larger scheme of things remains to be seen. It was, however, the second straight losing day for the Dow, with Wednesday's loss larger than Tuesday's.

Two days do not make a trend, but there is evidence enough that stocks have reached at least a temporary apex, though that sentiment has been expressed - incorrectly - plenty of times during the course of this rally. Stocks could go anywhere, so long as the corrupted banksters are in charge. Having taken control of the federal government from the elected pols, the mighty of Goldman Sachs, JP Morgan Chase, et. al., have engineered the recent rally and have enough power to direct the stock market in any direction they choose.

The economy is a vastly different beast, controlled by real people in real cities and towns with real money, not the phony, borrowed, decrepit electronic dollars that populate the Wall Street world. That is why there has been such a dramatic disconnect between the stock market and the real economy. Wall Street has rallied 30% in recent months, while the economy continued to decline, or, at best, slowly deteriorate.

Stocks got something of a boost from news that Bank of America had raised some $13.5 billion over the past two weeks via sales of common stock. Naturally, selling 1.25 billion shares is going to be dilutive, so shares of BofA (BAC) have fallen from just over $15 per share to roughly $11.50 today. That part makes enough sense, but one really has to wonder just who it is buying all these shares. As with the TARP, TALF, and other government inspirations, word of self-dealing has never been raised, for obvious reasons. If Citi, BofA, Goldman, Morgan Stanley and JP Morgan all need to raise capital, what's preventing them from buying each other's stocks? Nothing, exactly, nothing, and in this environment, one has to assume that's what's occurring. Time will tell.

Dow 8,422.04, -52.81 (0.62%)
NASDAQ 1,727.84, -6.70 (0.39%)
S&P 500 903.47, -4.66 (0.51%)
NYSE Composite 5,870.39, -1.83 (0.03%)

On the day, advancing issues beat decliners, 3296-3179. New lows beat new highs, 76-68. Volume was once again muted.

NYSE Volume 1,651,344,000
NASDAQ Volume 2,308,490,000

Oil jumped another $1.94, to $62.04. Gold gained $10.70, to $937.40. Silver was up 16 cents to $14.28. The commodity rally may be underway, but it also may be a bit premature. In the case of oil, that's more than likely a manipulated price, since the market is so heavily controlled by the five major oil companies.

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