Monday, May 17, 2010

Dow Drops 180, Finishes with Gain: Complete Scam

Let's not mince words any more. The stock market is a complete scam, engineered to maximize profits for the banks, brokerages and well-heeled investors. Period.

Individual investors have no place in this magnificently-rigged charade. Second, third and fourth quarter comparisons will be impossible for most traded companies to meet. Expect stocks to fall at least 40 percent over the next 12 months.

Dow 10,625.83, +5.67 (0.05%)
NASDAQ 2,354.23, +7.38 (0.31%)
S&P 500 1,136.94, +1.26 (0.11%)
NYSE Composite 7,063.83, -13.81 (0.20%)

Internal numbers tell the entire story of today's panicked selling and short-cover rebound into the close. Declining issues overwhelmed advancing ones, 3705-2873. New highs and new lows were almost on equal footing, with the highs taking a slim edge, 113-108. The new highs to new lows indicator is screaming for direction, and the most likely aim is down. If this indicator flips - which it almost surely will, considering the absurd gains from 2009 - a complete reversal will be unstoppable. Volume was moderate, though with options expiring this week, any movement to the upside in terms of trading volume will carry the distinct odor of burned investors.

NYSE Volume 6,799,444,500.00
NASDAQ Volume 2,416,696,250.00

Even the mainstream is calling stocks risky and overpriced, as in this Fortune/CNN Money article.

Stocks are almost certain to decline, along with almost all commodity prices, because almost everything is overvalued. Price discovery is the very first and most important aspect of market discipline. For the past 20 years at least, the equity markets have displayed less-than-rigorous pricing models, which has led to one bubble after another, to the point at which not only the global economy is at risk, but the nature of currency is being challenged. Major, catastrophic consequences, bourn out of years of market manipulation, deceit, sloppiness and fraud cannot be discounted in perpetuity. Eventually, some semblance of honest price discovery and balanced economic principles must come to bear upon all markets. For equity markets, that time is overdue.

Commodity prices continue to foretell the fate of nations. Crude oil prices continued to decline on the day, reaching a five-month low by losing another $1.53 per barrel, to $70.08. Oil's decline is symptomatic of the overall deflationary environment which has persisted since mid-2007 and has not abated, despite the massive printing of money by the world's central bankers. Gold could barely muster a bid, rising only 30 cents, to $1,227.70, itself under pressure as a traded commodity, but with the slight argument that it is a store of wealth. Silver also fell victim to both market maneuvering and selling pressure, slipping 37 cents, to $18.84 per ounce.

In an economic downturn as enormous as the one currently underway, there is no safe haven, though the metals may prove more steadfast than almost all other asset classes. Their status as commodities, and their prices being largely unavailable to the average man and woman, make them vulnerable to huge price swings, as has been the case over the past three to five years.

The breaking point is nearly upon the world's economies. Either the Euro's demise or an unanticipated collapse of oil and distillate demand (caused primarily by the swirling deflationary pressures) may prove to be too much for markets to handle.

Nobody who follows economics or markets should be surprised if a massive collapse is equities occurs at any time during the next six to twelve months. Such an event should not be viewed as a possibility, but rather a near-certainty.

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