Thursday, January 13, 2011

No POMO, No Follow-through, BTFD

For the uninitiated, BTFD is an acronym for Buy The F---ing Dip, as relates to stocks in the Bernanke free-money era in which we are currently ensconced. Today's dip, though not great, may be yet another buying opportunity for the momentum-chasers still convinced that buying stocks presents the best profit potential with limits to the downside.

One can hardly argue with the reasoning of the Mo-mo crowd over the past 4 1/2 months, as stocks have been on a tear since Labor day, 2010, and are up whopping amounts from their March 9, 2009 lows. Since it's still smartest to buy low and sell high, any decline, no matter how tiny, represents another chance to cash in on short-term trades, especially those of long duration, which today means a day or longer.

What may have riled markets today were a raft of displeasing data, beginning with a ramp up in initial unemployment claims, reported at 445,000 for the week, as opposed to the "expected" 415,000 and prior week of 410,000. Those figures are seasonally adjusted, with non-seasonally adjusted coming in some 230,000 higher, thus laying sufficient ground that the BLS figures are mostly for show and have not been trustworthy since the early days of the Bush administration.

While the mainstream media continues to drone on about the nascent recovery of the US economy, more than just casual observers are noting that said recovery has never much existed on Main Street and the various stimuli applied to the economy have benefited most Wall Street bankers and politicians who favor the status quo over real action or reform.

On top of the sorry-looking unemployment claims numbers came a PPI that was not very surprising, up 1.1% in December, with the core, which excludes food and energy, up a mere 0.2%, again unsurprising since just about anyone who drives or eats - and that would include just about everybody - has seen rocketing prices at the pump and the checkout counters in supermarkets. Food and fuel prices are accelerating far faster than the economy is growing, which is the express intent of Ben Bernanke's QE efforts, so we are now seeing the first signs of runaway inflation, with surely more to follow.

Stocks took a nose dive at the open, recovered, fell again and then raced higher into the close on short-covering by deft day-traders, which is just about everyone these days. Buy and hold and the former principles of investing have long ago been thrown unceremoniously out the window along with transparency and fair markets. The pre-planned hike by the Fed and Wall Street is working according to plan, and that plan is to squeeze every last dollar out of the middle class until they are on the verge of bankruptcy, starvation or revolt, or a combination of all three.

It is widely assumed that once the middle class is put under such dire conditions, the Fed will ease off the monetary gas pedal and all will return to the normalcy of peace, prosperity, milk, honey, wine and roses. This is assuming much, including that the bankers and other .01% of the population that benefits from the deprivation of the middle class will be sated and allow prices to lower and people to eat, breathe and drive freely without undue economic or political restraint. That is a rather large and unwieldy assumption and the Fed is asking for major trouble should they not know when to apply the brakes, which, if we are to take the nearly 100 years of Fed history as a guide, will not occur as planned, sending the economy careening into a wall of higher prices, stagnant wages, permanent high unemployment and lowered standards of living. Of course, this is all well and good, if you are a globalist, which our leaders in congress, the White House, on wall Street and at the Fed most certainly are.

Dow 11,731.90, -23.54 (0.20%)
NASDAQ 2,735.29, -2.04 (0.07%)
S&P 500 1,283.76, -2.20 (0.17%)
NYSE Composite 8,119.43, -3.55 (0.04%)

As one would expect, declining issues led the charge over advancers, 3530-2909. There were 208 new highs and 10 new lows on the NASDAQ; on the NYSE, 246 new highs to 108 new lows was something out of the ordinary, with the new lows ramping up to levels not seen this year. Volume remained stagnant at low levels as usual.

NASDAQ Volume 1,960,601,750
NYSE Volume 4,822,930,000

Commodities trended lower, except in the agriculture space, where all grains were higher. Crude oil for February delivery shed 46 cents on the NYMEX, to $91.40, still at elevated levels despite storms slowing the rate of travel for the past three weeks. Gold took a major hit, down $14.00 late in the day, to $1374.00. Silver also was bombarded by selling, losing 91 cents, to $28.74. The metals, not conforming to a massive drop in the dollar index - off 0.85, to 79.20, are telling us nothing about current conditions except that the markets simply aren't making much sense right now. Stocks normally would have been up on such a large (>1.0%) move, though the effects of the unemployment condition and inflation gauge may have ameliorated such effect.

Global populations are in for a double-kick of inflation, with energy and food prices leading the way. If this is somehow good for global growth - a starving, immobile mass of humanity - it is beyond the scope of most economic experts. It is only in this new age of never-ending money supply inflation that the world now turns, for better or for worse, 'til death, taxes or $4/gallon gasoline do we part.

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