Monday, March 15, 2010

Oil Lower, Stocks Mixed, Senator Dodd Confused

Markets continued their pattern of going nowhere in a hurry on Monday, but oil futures traders may have tipped their hands, sending the slippery stuff back below $80/barrel.

In Washington, meanwhile, Senator Dodd doodled with the financial reform bill, making the Fed the ultimate protector of consumers, a laughable situation. Remember, it was Dodd, along with his house counterpart Barney Frank, who oversaw the destruction of Freddie Mac and Fannie Mae, watched with gaping jaws as Goldman Sachs and Wall Street hijacked the nation's economy and now thinks anointing the Federal Reserve as the head of a consumer financial protection agency is a grand idea.

Actually, the politics of the situation speak more boldly than the white-haired Senator from Connecticut (many of his constituents are in the financial industry). Having the Fed as a consumer protector is akin to hiring Tiger Woods as a marriage counselor. It may appear good on the surface, but the reality is that only the banks will be protected since they're the ones to whom the Fed is tied. The Fed is not a government agency. It is a PRIVATE BANK. Dodd's bill suggests self-regulation again, the very concept that dynamited the underpinnings of the financial industry over the past ten years.

In essence, Dodd's bill is about as useful as a fire extinguisher in a forest fire. Consumers will be protected to the extent that they distrust the banks and financial companies with whom they deal. If Dodd and his congressional playmates were serious about financial reform, the very first thing they'd do is re-institute the usury laws they helped decimate in the 90s, but that's a pipe-dream in today's environment. Congress is merely a patsy for the banks and the Fed. Consumers are pigeons, to be taken and swindled at every opportunity, including at the teller window and the voting booth.

The legacy of this and the past 12-15 congresses will be one of patronage and passivity. Not a single piece of financial or regulatory legislation passed in the past 15 years has improved the lot of everyday Americans. Banks and Wall Street have flourished while Main Street and the middle class has floundered in a sea of red ink, debt and tiresome politics.

Generally speaking, anything passed by congress these days should be ignored, especially since they can't seem to find a copy of the constitution anywhere in the Capitol. Dodd's proposed bill, like the health care legislation, protects the people who pay for their election campaigns. In Dodd's case, the financial industry; in the matter of health care, the pharmaceutical companies and health insurers get all the benefit, just like they did with Bush's prescription drug bill.

As mentioned in a post over a year ago, we have entered the post-government era in America. Real progress is being made behind the scenes in the underground economy which doesn't pay taxes, doesn't follow local, state or federal mandates and deals largely in cash. It now comprises most small businesses, home businesses, illegal operations such as drug dealing, prostitution, gambling and work-for-hire operations. If government would step back and get the hell out of the way, the American engine of progress that is the able-bodied unemployed, underemployed and off-the-books employed could set sail on a new chapter in economic history.

Americans are so keen on getting government out of their lives, off of their backs and away from their employment that more and more people are simply playing the non-compliance game. The number of individuals not reporting income, cheating on their taxes and/or simply ignoring all of the paperwork and hassle involved in dealing with government regulations is swelling by vast numbers. It cannot be tracked, it cannot be traced and it cannot be stopped. Quietly, Americans have begun their own revolution, in a very stealthy, entrepreneurial and innovative manner.

Fed up with Washington's political bickering and squabbling which produces worthless legislation, government employees who are paid 50-100% more than private sector counterparts with benefits far in excess of what they could even imagine to afford, and lack of prosecution of bank thieves in pinstriped suits, small business Americans will and are striking back at the heart of the government's grand swindle. Without money in the form of tax receipts, government ceases to hold power over individuals. Without funds, their projects will run into more and more deficits, eventually resulting in wage and benefit cuts to the rank-and-file, or layoffs, which will engender strikes, walk-outs and a final breakdown of the entire government/industry/financial complex.

The movement is well underway. Groups like tea parties are only the beginning, the euphemistic tip of the iceberg. This revolution will not be televised. It is hardly even spoken of, much less broadcast, but it is growing daily as pent up disgust and hatred of institutionalized mediocrity seeks an outlet. Americans always have fended for themselves and joined with others of like minds, whether the enemy be Germans in submarines, terrorists or well-tailored officials. Washington and Wall Street will have only themselves to blame when the realization of lower tax receipts becomes clear and evident. They have overstepped their bounds by an order of degree and the American public has begun to lash back with a fury usually reserved for rapists and traitors, of which congress and Wall Street has in ample supply.

Let there be no doubt. The American public is willing and able to break laws and conventions in order to save democracy and this current struggle - largely a financial one - is no different than the labor movements of the 30s or the war protests of the 60s. By November, with rancor drowning out campaign rhetoric, the voice of the people will wail the loudest by either disposing of incumbents or eschewing the polls altogether, as the issue is not Republican or Democrat, but politics as usual, which doesn't work, hasn't worked and never will work.

The struggle continues.

Meanwhile, in the caverns of Wall Street, confusion reigns supreme. With two of the major indices up and two down, there's an obvious lack of direction, though, just in case anybody cares to notice, the Dow Jones Transports and Industrials have diverged, as has the Dow and the NASDAQ. The NASDAQ cannot lead other indices higher. Every instance in which the NASDAQ has exceeded a previous high and the Dow did not follow has produced a nearly-immediate sell-off in all indices. Worse, the Dow Transportation Index, which broke to new highs last week, was not followed by the Industrials, a classic non-confirmation which spells disaster for the now over-extended bear market rally.

Thus far, the markets have resisted corrections, first, in June of last year and most recently in February, never falling into the -10% area that would indicate true corrective activity. Instead, the few players remaining in the bowels of the markets have intervened, producing a rally that is neither believable nor sustainable. However, since most Americans are now cheating the government in order to keep food on the table and heat in the furnace, don't be surprised if corporations haven't devised equally devious manners to inflate profits, hide losses and artificially grow earnings. The Ponzi scheme has become the norm for finances in the USA.

Dow 10,642.15, +17.46 (0.16%)
NASDAQ 2,362.21, -5.45 (0.23%)
S&P 500 1,150.51, +0.52 (0.05%)
NYSE Composite 7,350.96, -11.89 (0.16%)

Giving credence to the falsity of the markets, advancers were beaten badly by decliners on Monday, with losers ahead, 3791-2689. That's a notable divergence and should set off alarm bells in brokerages. The long-anticipated selling spree is about to commence. New highs moderated down to 475, but new lows fell to a mere 32. Trading volume was dismal, as befits an overbought market that cannot climb to new heights because the underlying fundamentals simply aren't there.

NYSE Volume 4,680,055,500
NASDAQ Volume 1,909,806,375

In another sign that the gloves are off and it's every trader for him or herself, oil slid $1.44, to $79.80, abruptly ending the three-week rally that brought it all the way to $83. The price of oil is inexorably tied to economic conditions. Despite the best work of hedge funds and market interventionists, the price of oil will someday revert to following supply-demand dictates from the market. That day cannot come soon enough.

Gold gained $3.60, to $1,105.10. Silver was up 6 cents, to $17.08 per ounce.

On Tuesday, the FOMC releases their latest policy dictate. They will change nothing and the market will, in turn, not react. Stocks are already pricey and cash is king. Sooner or later, the Wall Street moguls will find out that much of the paper they're trading is pure nonsense.

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