Monday, February 28, 2011

Headlong Into Hyper-inflation

After last week's mini-correction - which is probably the worst decline we'll see for a while - stocks and the Fed are back on track, pumping newly-created POMO dollars into the system for the banking crooks to parlay into stocks. Up, up and away!

According to the Fed's published schedule of monetary injections, today was slated for $6-8 billion in outright coupon purchases. In other words, the Fed is buying back bonds from the Primary Dealers which were purchased just a few weeks ago, presumably at a loss, a small loss, but, nevertheless, a loss, so that the banks will remain willing participants to the Zimbabwe-ification of the US financial system.

These continued injections have become so commonplace that nobody bothers to report on them or even think about them. For those unfamiliar with the process, let's recap:

Step 1: The US Treasury issues bonds in certain amounts and maturities.

Step 2: Primary Dealers (AKA Too Big To Fail (TBTF) banks) buy the bonds.

Step 3: The Federal Reserve buys the bonds from the TBTF banks.

This is the simple process by which our currency is devalued every day and how the banks are shoring up their horrifically-insolvent balance sheets. While the Fed takes a loss of say, half a billion a day, the banks record the transaction as a profit. Viola! The banks are once again sound. The only problem is that the Fed is holding huge amounts of government debt.

Now, if you've been following carefully, you might question the process. Why bother? Why not just give the banks the money directly from the Federal Reserve, since they have the ability to just create money out of thin air?

Ah, what about the government's obligations? They must issue debt, so the game must continue. The auctions, however, conducted in secrecy, electronically, so that only a few people - ostensibly Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner - know who's buying what and for how much.

That's a problem, for obvious reasons, and explains, in part, why some people are beginning to think that the entire economy of the United States has already sunk and is being kept afloat by a massive fraud, perpetrated by the Federal Reserve, Treasury Department and the nation's six to eight largest banks (with assistance from European Central banks who are doing pretty much the same thing).

Nobody is buying US government debt. Nobody could be that stupid. The Fed is buying it all, monetizing the debt, smashing down interest rates and destroying the currency. The tiny little secret nobody wishes to speak of is that the rest of the world had better play along or their currencies will be flushed straight into the toilet along with billions of Ben Bernanke Bucks.

Yes, the Federal Reserve is buying all Treasuries issued, cooking their own books and helping out the banks, because, if they don't do it, we'll just have to liquidate those TBTF institutions and Jamie Dimon (our next Treasury Secretary) and his wealthy friends wouldn't like that. Besides, the Fed and the banks and the politicians they control would no longer be able to sway the American public every which way, as they choose.

Think about it. The Chinese stopped buying our debt at least a year ago. They are trying to unload it as fast as they can without causing a panic. Japan is also no longer interested. Reportedly, the UK has been buying scads of the stuff, but they're even more broke than we are, so that's a gigantic canard.

The Fed is buying all, or nearly all, of US debt issuance. We are a self-dealing, Ponzi-fied, Zimbabwe on steroids. There's no doubt about it and there's also no way out. The Fed cannot stop creating money because it just gets more and more worthless every day. It's being spent as quickly as they can put it into circulation, forcing prices higher and higher, inflating everything on the planet - including stocks - in a very devious, vicious cycle all caused by the bankers who imploded the world's economy back in 2008 when they couldn't figure out a way to cover all their bets without all of them failing.

That is when Hank Paulson, then Treasury Secretary, with Ben Bernanke as his willing accomplice, figuratively held a gun to the heads of the President, George W. Bush, and the leaders of congress and demanded $700 billion dollars with no strings attached. It was the crime of the century, committed in broad daylight, in front of hundreds of millions of people worldwide.

Ever since then, all we've gotten for our time and money is a song and dance, orchestrated to keep us all in line and dong the "recovery boogie." It's such an absolute charade, a sham and a complete lie that a lot - and I do mean a lot - of people are coming to the conclusion that it's not working, that we're stuck in this no-jobs, no-growth, high-inflation limbo until the the bar finally falls to earth.

The big holders of mortgage-backed securities are suing the banks with regularity. They want their money back for all the bad securities issued by the banks, backed by mortgages which were written with no other purpose than to have the homeowner default.

Insurance companies suing banks, with the Fed printing money as fast as they possibly can and prices rising globally because of it results in an unsustainable situation. It's already bad, and quickly getting worse. The rest of what suffices for news these days is just for show.

Think about it. In Wisconsin, they're trying to fill a $3 billion void in their budget. Why, the Fed issues twice that amount through their Treasury purchases EVERY DAY! Oil hitting $100 a barrel? All caused by uncontrolled speculation and outright thievery. There's a glut of oil out there and what the big energy companies are really worried about is people rationing their use of gas, taking fewer trips and buying less. with so many people out of work, they have little driving to do, and the oil companies are just trying to remain as richly profitable as they've always been by CHARGING MORE TO FEWER CUSTOMERS.

QE2, the Fed's gambit to restore economic prosperity by issuing more paper money, is slated to end by June. After that, it's anybody's guess, but the path of least resistance - and most sense, from an OMG mentality - would be to continue printing more. There's no economy, tax revenues have fallen off a cliff, and the Fed, because they've chosen to keep insolvent banks operating instead of closing them down, is powerless to do anything but what they've been doing for 2 1/2 years: print, print, print, and when you're done printing, print some more. Hello hyperinflation, followed by an acute depression, the worst ever seen. See you in Hades, Mr. Bernanke, because that's precisely where you and your policies are sending everyone else.

Dow 12,226.34, +95.89 (0.79%)
NASDAQ 2,782.27, +1.22 (0.04%)
S&P 500 1,327.22, +7.34 (0.56%)
NYSE Composite 8,438.55, +60.51 (0.72%)

Advancing issues outpaced decliners, 4051-2535. NASDAQ new highs: 144; new lows: 21. NYSE new highs: 258; new lows: 15. Volume was back down in the doldrums again, so everything is back to normal.

NASDAQ Volume 2,057,503,500
NYSE Volume 4,593,278,500

Oil prices fell again today, down 91 cents, to $96.97, but the damage has been done. Regular unleaded gas is now at a national average of $3.37 per gallon. Seven states are already over $3.45. Want to see a recession created almost overnight. Push ol to $115 a barrel and gas to a national average of $3.75 and see what happens. The protests in Wisconsin will look more like a picnic compared to the mass outrage that induces. Already, people are reconsidering their choices of paying $75-150 a week to get to and from a job that pays them less than $400 a week, taking home $300-340. For many, it's just not worth it any more.

Meanwhile, gold bugs and silver surfers are loving the chaos. Gold was up again today, but only by 60 cents, to $1,409.90. It was as high as $1,416 in earlier trading. Gold is now being pressured downward, or at least held down, for two reasons. First, the banker's know that everyone watches gold as a proxy to fiat currencies, so they are suppressing demand. Second, the very same banks want to hoard it, because they know everyone is right. The global economy is as close to complete meltdown as it was in the fall of 2008.

Silver got all the gains today, up 91 cents (same as the drop in oil, coincidentally), to $33.80. We're unsure whether or not that's a new 30-year high; we only know that $50 per ounce is the number that stopped the Hunt brothers back in 1979-80. When the bubble they created finally burst, Nelson Bunker Hunt, who purportedly lost more than a billion dollars in one day, said, "a billion dollars isn't what it used to be."

And, so, those immortal words, while the Fed pumps billions into an eventual oblivion, ring more true than ever, today.

Friday, February 25, 2011

Short Attention Span Investing

These days, investors have extremely short memories. The Ponzi system that is running - and ruining - Wall Street likes it that way because they can profit from excess trading and wild swings in prices.

Just four days ago, the world seemed to be about to end. Lybia was exploding and the oil we get from the Middle East was about to be cut off. Panic was rampant. Too bad it was all a lie and the big move in oil prices due more to speculation than the madness of kings and monarchs.

The US gets the vast majority of its oil from Canada, Mexico, Nigeria and Venezuela, though Saudi Arabia is third on the list. Lybia isn't even in the Top 15 and Algeria's contribution amounts to more of a rounding error than a vital statistic.

Like the manufactured gasoline shortages of the 70s, the recent oil scare was purely for the entertainment and profit of the privileged class of investors who rig the game and they did just fine, thank you, now having sold their shares at the top and repurchased at a better price, which, of course, they will pimp and pump to the half dozen retail investors remaining solvent until the next "disaster du jour."

Stocks remain overvalued since the few days of decline did little to deflate the current bubble. There's really no good reason to own any equities at all unless you have a vested stake in a certain company's fortunes or can derive a substantial dividend without any risk (impossible).

Gold and silver have sold off a bit as the week dragged on from panic to placidity, though they remain the best investments and nothing that happens between now and the end of time (2012?) will change that. In fact, one need not even tie up money in precious metals. Cash is still useful, as are some of the things it buys, like hard capital goods, machinery, tools, select art and rarities, for which there will always be a market.

In any case, Wall Street saw fit to end the week on a high note, though they didn't exactly make much of a dent in the big declines from Tuesday and Wednesday. Thank goodness it was a short week or it would have likely ended at new highs.

Dow 12,130.45, +61.95 (0.51%)
NASDAQ 2,781.05, +43.15 (1.58%)
S&P 500 1,319.88, +13.78 (1.06%)
NYSE Composite 8,378.04, +101.75 (1.23%)

Winners led losers by an outrageous margin, 5291-1272, confirming the belief that insiders executed a perfect pump-dump and buy on the unsuspecting, foolish public once again. That kind of disparity is usually reserved for days led by stunning positive news, though nowadays any good POMO from the Fed will suffice, apparently. Volume was once again in the sewer, as has been the norm. There is always higher relative volume on sell-offs than on purely positive sessions.

On the NASDAQ, there were 88 new highs and 22 new lows. There were 135 new highs and 12 new lows on the NYSE. Thank you Chairman Comrade Bernanke!

NASDAQ Volume 1,894,895,125
NYSE Volume 4,380,597,000

Crude oil gained 60 cents, to close at $97.88, but was up 9% for the week. Get ready to start pushing your car to work. Gold lost $6.50 in value, to $1,409.30, and silver was down 27 cents, though the recent run has put the price near or at 30-year-highs.

And just in case you don't actually believe the CPI measures inflation properly, here's one man's figures on how much prices are actually rising.

Ah, well, enjoy the weekend. Spring Training is well underway. In fact the World Champion Giants played the Arizona Diamondbacks in the first game today. No results yet, probably because they play in Arizona, where news travels slowly.

Thursday, February 24, 2011

Turnaround Thursday? Well, Almost

The panic in the markets has subsided for now, even though conditions in the Middle East continue to spin out of control, especially in Libya.

Stocks zig-zagged across the flat line on Thursday, with oil pricing higher in early trade. Closing in on 2:00 pm ET, the equity markets were skidding badly again, but, as has become the norm, all of a sudden word spread that President Obama and Treasury Secretary Tim Geithner - neither of whom have a lick of expertise in the oil business - put out the word that there was enough supply of oil in reserve to withstand any kind of disruption, and, just like that, stocks and oil prices quickly reversed course, with oil dropping and stocks rising.

As an aside, gold and silver were slammed to the earth. Just prior to 2:00 pm, the Dow Jones Industrials were off more than 120 points, the NASDAQ dipped 17 points and the S&P 500 has crashed through the 1300 plateau, dropping more than 13 points.

Trading for the remainder of the session involved insiders scooping up shares on the "supposed" cheap. Still, three of the four major averages finished in the red despite the best efforts of the PPT or whatever we're calling the mechanics under the hood of the stock markets.

Dow 12,068.50, -37.28 (0.31%)
NASDAQ 2,737.90, +14.91 (0.55%)
S&P 500 1,306.10, -1.30 (0.10%)
NYSE Composite 8,276.29, -16.63 (0.20%)

Advancers broke a two-day trend and finished ahead of declining issues, 3630-2902. On the NASDAQ, new highs outdid new lows, though narrowly, 49-41. So too on the NYSE, where there were 83 new highs and just 18 new lows. Volume was nce again heightened, though below levels of the past two sessions.

We're clearly at an inflection point in the markets and considering that tensions in the oil-rich area of the world are still at high pitch, a resumption of a little panic may occur at any time, depending on circumstances and how hard the Fed and other officials pump the "all clear" signals. The Arab nations aren't the only ones experiencing a bit of displeasure. Here in the USA, protests continue to mount over budget and public union issues in various states. This chapter in world history is far from over.

NASDAQ Volume 2,112,375,750.00
NYSE Volume 5,799,687,500

The front end futures contract at the NYMEX - which was playing above 100/barrel prior to market opening, actually posted a decline on the day, dropping 82 cents, to $97.28. Gold posted a modest gain in NY trading, but at this writing is trading down $9.60, at $1402.10. Silver was hammered down all day long, down in the NY session and currently sporting a loss of $1.43, at $32.11. The machinery of chicanery is once again vigorously at work in all markets, propping them up with unlimited resources.

While many average working Joes and Janes may take solace in today's turnabout, it comes as yet another shining example of how the financial elite control everything they please, even entire global markets, or so they believe. The realities of life here in the US and elsewhere in the world are not quite as rosy as the oligarchs and politicians would have one believe. Little by little, freedoms are being eroded, and soon, as we're seeing with the assault on public labor unions, they'll take more money from the middle class, calling it "shared pain."

Many with a better handle on things than most are opting out, refusing to play along and suffer what's almost certain to be an eventful future. They are preparing, saving, planning and divesting, growing their own food and buying up precious metals and machinery for the day the wheels come completely off the train of money printing and manipulation.

Wednesday, February 23, 2011

Oil Tops $100, Drifts Back; Stocks Hammered Again; Bank Runs in S. Korea

At some point, everyone knew this was going to happen. Stocks were so ridiculously overvalued - and have been for many months - that a pullback was inevitable.

The culprits, it appears, are Middle East sovereign despots, losing their grip on their populations which are largely demanding freedom and a democratic voice. But it goes much deeper. Many blame the Federal Reserve, which has fostered a dual policy of federal funds rates approaching zero while simultaneously printing dollars by the billions.

Those cheap dollars flood the markets, causing speculation and inflation, and that's been particularly acute in the poorest nations, where the percentage of income spent on basic survival - food, housing, clothing - is much higher, approaching 100% and often more. Hungry people being angry people, they've taken to the streets in countries where unemployment and government corruption have outpaced the economy, resulting in popular uprisings.

Add to that the declining value of the dollar, as expressed in the rising price of crude oil, and you have today's recipe for disaster. And all of this comes before the morons in congress and the White House and various state capitols attempt to come to some sort of meeting of the minds on their budgets.

The states have to find ways to balance theirs, while the federals fight over how much spending is enough to keep the government just barely functioning, if at all.

If it feels like the United States is running rudderless on fumes, you get the idea and the nervousness has been manifested in trading the past two days. Despite the usual pumping by the Fed, sellers are out in force and it doesn't take much to move stocks hard to the downside. Missing earnings estimates - normally a sin punishable by a few points off the top - has become a mortal wound, such as what happened to Hewlett Packard (HWP), following their quarterly report, released after the close on Tuesday.

Investors scurried out of the stock on Wednesday, propelling a nearly 10% decline. Vloume was five times normal.

Most of the rest of the market didn't fare much better. Holders of gold and silver are grinning ear-to-ear.

Dow 12,105.78, -107.01 (0.88%)
NASDAQ 2,722.99, -33.43 (1.21%)
S&P 500 1,307.40, -8.04 (0.61%)
NYSE Composite 8,292.92, -32.94 (0.40%)

Decliners led advancing issues again, 4470-2093. On the NASDAQ, the flip: there were 54 new lows and only 44 new highs. At the NYSE, 60 new highs and 27 new lows, though it seems the tide has turned, at least for the present. The question now becomes how long will this downturn last before the hoards of money from the Fed overwhelm all fears and make stocks and risk appear palatable again.

Volume, which hit its best levels of the year on Tuesday, topped that on Wednesday, giving a clue that the selling is only gaining momentum.

NASDAQ Volume 2,498,464,250
NYSE Volume 6,623,988,500

Crude oil - specifically WTI (West Texas Intermediate) on the NYMEX hit $100 in midday trading, but backed off to close up a mere $2.68, at $98.10, marking the highest price seen since 2008. Since the US gets most of its oil from Canada and other Western Hemisphere sources, WTI has fallen well behind the pace in Brent Crude, tied mostly to Europe and Asia. Brent prices topped $110. Spot is quoted at $111.83 per barrel.

Gold had another banner day, rising $12.90, to reach $1,414.00, closing in on all-time highs. Silver continues to be the stellar commodity performer, up another 44 cents, to $33.30. Specialists in gold's cousin say this is nothing and $50 per troy ounce is not only possible before the calendar turns over to 2012, but likely. There simply is not enough physical supply to meet growing investor demands, much of which is causing tightness in industrial applications.

If silver demand continues, look for rising prices in many electronic devices, especially cell phones, though the price rise should not be severe since only small amounts of silver go into the overall manufacturing price.

Turmoil and popular revolt in the Middle East and across many states in America over budget issues and union busting don't exactly set up well for smooth sailing on Wall Street. Until the noise quiets, expect fear to have its way with investor confidence. Nobody wants to catch the proverbial falling knife, and with short interest at record lows, a small tumble could easily turn into an overwhelming cascade.

Meanwhile, silver and gold investors are sitting pretty as the strain on fiat currency is being felt worldwide. What nobody wants to talk about in our civil society are the bank runs in South Korea.

Nothing funny about that story.

Tuesday, February 22, 2011

Now, That IS Going to Leave a Mark

Investors take note. You are screwed.

Savers and buyers of precious metals, arable land, tools and staples, rejoice! Today our frugality, honesty and disdain for speculation has reaped significant dividends.

On Wall Street, billions of dollars were flushed in a panicked selling frenzy that appears to be just beginning. One should note that other major declines began in the Winter months, specifically, the bursting of the dot-com bubble which reached its peak on March 10, 2000, when the NASDAQ topped out at 5132.52. Within months, the high-flying tech-laden index was off by more than 25%. Within a year, it had been halved.

While this current one-day selling spree may not auger as much ill (though it could be even worse), it was the largest one-day decline on the markets since August of 2010 and unless Mr. Gadaffi (God only knows how to spell his name) changes his mind about dying a martyr on Libyan soil (remember Mubarak said something similar just weeks ago), this malaise coming from Norther Africa and the Middle East is going to hang over equity markets and oil prices for the foreseeable future.

In addition to the popular uprisings in Libya and across the oil-rich nations of the Middle East - and much less reported - was the release of the S&P/Case-Shiller housing survey (full report [PDF] here), which showed home prices declining for a 4th straight month. Essentially, the housing crisis is not over, despite the artificial stimulus of a federal tax credit to the tune of $9000 for home buyers in various parts of 2009 and 2010.

Those buyers were duped into buying overpriced houses, lured by our federal government. There will be years of pain and more defaults to come, for certain. Las Vegas, Miami, Phoenix and Tampa all reached new lows in median prices. Other areas of the country were similarly down, with 18 of 20 major city areas posting declines. Released at 9:00 am, the report put a further chill into an already freezing futures market.

Stocks gaped down, with the Dow off 120 points minutes into the session, and it didn't get any better the remainder of the day.

Dow 12,212.79, -178.46 (1.44%)
NASDAQ 2,756.42, -77.53 (2.74%)
S&P 500 1,315.44, -27.57 (2.05%)
NYSE Composite 8,325.86, -182.04 (2.14%)

Declining issues slaughtered advancing issues, 5707-975, a ratio of nearly 6:1. The measure of new highs to new lows nearly reversed course, with 85 new highs on the NASDAQ, to 39 new lows. The Big Board remained skewed, with 139 new highs to just 14 new lows. Obviously, with such a paltry number of new lows, there is plenty of froth to be blown off this overheated, artificially-stimulated market. Volume was significantly higher than most recent up-day sessions, a notable development.

NASDAQ Volume 2,272,504,500
NYSE Volume 6,243,551,500

Commodities were raging. Crude oil futures on the NYMEX closed at $95.42, officially $5.41 higher, though it should be pointed out that Friday's close was just a shade over $86.

Gold finished at $1,401.10 and silver at $32.86, both having ramped up on Monday, when markets were closed, though trading volumes were very high.

The handwriting is quite clear. Investors are nervous over developments outside the US, and also inside, as the congress weighs passing a temporary, two-week continuing resolution, raising the debt ceiling only a little, and revisiting the issue again in a fortnight. This is the leadership we are offered, which can't get beyond partisan bickering to actually tackle the fundamental problems in the US economy.

Meanwhile, the stalemate continues in Wisconsin, with other states looking squarely at similar budgetary conditions and issues. 38 states have budget shortfalls which need to be addressed and the rhetoric surrounding the differences between public sector employees and those who pay their wages and benefits, the taxpayers.

If, like many, you've been aghast over the continual money-pumping by the Federal Reserve and the antecedent rise in stocks, you may want to pull up a chair and pay attention the next few weeks and months.

It's just starting to get interesting as the grand global Ponzi scheme by central bankers worldwide begins to unravel at a rapid pace.

Monday, February 21, 2011

Unhappy President's Day?

Just because the markets in the US are closed, doesn't mean there's no economic news from the rest of the world, and there's plenty.

Due to violence in Lybia, where President Moammar Gadhafi - via a videotaped message by his son - vows to fight the insurrection against his 42 years of tyranny, "until the last man standing," oil prices have gone ballistic, with WTI (crude oil on the NYMEX) has shot through $90/barrel and is fast approaching $100.

Americans may awaken from their three-day weekend with sticker shock when they go to fill up their cars, vans and SUVs with petrol.

Elsewhere, precious metals have also taken notice that the global situation has become extremely unstable. Gold is pricing right now at $1,406.70, up a whopping $18.10 just today. But the real story is silver, which spiked on Friday, but is putting that move to shame taday with a nearly 5% move higher, to $33.88, up $1.58! That's quite a rocket ship, there and it's more than just short covering. US investors will likely send both gold and silver higher as congress takes a week off, just prior to the most important vote of the new congress: whether or not to raise the debt ceiling.

Analysts on top of the situation feel the government needs to act by March 4th in order to avert a federal government shutdown, which leaves the congress just five days - after they return from their vacation - to work out their differences, and there are many.

One option is to raise the ceiling gradually, enough to fund the government for another month, and revisit the issue again, and, if necessary, again and again. This could be the kind of circus we get from our "leaders" - an endless game of chicken and "gotcha" while the Republic burns.

Nero would be proud.

Make note to grab as much cash out of your bank account as possible within the next two weeks. There could be fireworks dead ahead, and I'm not talking about the 4th of July variety. If the government does shut down, there could be a bank holiday right on its heels, and even without a work stoppage in Washington, the number of bank failures in the US is already up to 22 and we're not even through February yet. Four more went down on Friday; two in California and two more in Georgia, the bank failure capitol.

There were 157 bank failures nationwide in 2010, 140 in 2009 and 25 in 2008. Smaller banks have suffered the most, but the biggest - the ones bailed out by the US taxpayer - are still not immune.

Friday, February 18, 2011

Silver, 10-Year Note Are New Safety Plays

Let's dispense with the general recap right away:

The first thing that jumps out is how absurdly out of step the major indices are, with the Dow plowing ahead by nearly 6/10 of 1% and the other indices flat. This is as it has been for many months. There are extreme inequities in equities, to coin a phrase and it is a certain sign of manipulation and flights of both fancy and safety.

Dow 12,391.25, +73.11 (0.59%)
NASDAQ 2,833.95, +2.37 (0.08%)
S&P 500 1,343.01, +2.58 (0.19%)
NYSE Composite 8,507.90, +10.49 (0.12%)

Advancers finished ahead of decliners, 3600-2902. On the NASDAQ there were 248 new highs, 14 new lows. On the NYSE, new highs led new lows, 350-8. Volume was well short of being exciting.

NASDAQ Volume 2,123,685,000
NYSE Volume 4,421,542,500

As the Middle East becomes ever more the hotbed of revolution, with uprisings in nearly every country across North Africa and the Persian Gulf, investors are seeking safety and finding a comfortable place to park their money in commodities in general, but silver in particular.

Silver rocketed again today in price as buyers piled in prior to the three-day weekend, pushing the price up to $32.30, a gain of 73 cents, and even higher after the close in New York. By the time markets open in the US on Tuesday, silver could be selling for $35/ounce, so powerful is the short-covering move and subsequent break-out. Gold is closing in on all-time highs again, gaining $3.50 today, to finish at $1,388.60 in NY. Oddly enough, oil futures were down on the day, losing 16 cents, to $86.20, seemingly wanting to settle somewhere between $80 and $85 per barrel, a price with which most - both suppliers and buyers - can live.

The other area receiving an inordinate amount of attention, as Chairman Bernanke nukes the dollar, is the 10-year note, which continued to rally today, pushing yields down to 3.58% at the close. The price of the 10-year is still 100 basis points higher than it was during the summer, thanks to the inflationary effect of the Fed's ZIRP and QE2. Still, money has to go somewhere and the smart money is peeling out of overpriced stocks and into the relative safety of bonds.

For our money, silver still looks like the very best raw investment, bar none. One should be looking for deals on autos and machinery these days, before inflation gets out of control.

A three-day weekend means not having to listen to the talking heads on CNBC for an entire 72 hours. Bliss!

Thursday, February 17, 2011

Stocks Up; Silver at 30-Year High

All attempts to slander, deride or talk down the precious metals as the ultimate store of value have failed. Trillions of Benji Bucks, delivered to market participants by the Federal Reserve and sparking an equity and commodity boom the likes of which the world has never seen has finally defeated the forces holding down the value of gold and silver.

In what can only be characterized as a massive short squeeze, silver spiked to fresh 30-year highs, while gold surge to a one-month high. There is little to hold them back now save the massive short silver positions held by JP Morgan Chase, and they are being buried under frenzied buying.

Uprisings in Middle Eastern countries from Bahrain to Syria to Lybia to Algeria to Saudi Arabia, in the aftermath of the Egyptian triumph over tyranny, have been set off by upward global food price price pressure, the lack of stable employment and corruption in government. If those themes sound familiar to people in the more "developed" world such as the USA and Europe, it is because we are beset on all sides by corruption and inflation, a deadly combination for anyone who seeks to hold positions of political power.

Thus, the Federal Reserve has sparked rebellions overseas and maybe tipped the flobal community past the point of no return. Only the dole in England, food stamps in America and deeply-ingrained socialism in most of the EU has kept the people of these countries from "going Egyptian" on their political masters.

The Westernized nations certainly have a great deal to gripe about, though the impact of the Fed's policies of zero interest rate and quantitative easing are being felt first in the rest of the world. They will no doubt be visiting the shores of Europe and the United States at some as yet determined date. Runaway inflation, high unemployment, dissatisfaction with government policies and widespread fraud should result in tumult of the highest order just in time for the presidential elections in 2012, should the nation still be intact by then.

But, I digress. The most important signpost of the day was the spike in silver, without a doubt. It was, in warrior terminology, a shot across the bows of the ships of states printing fiat money, backed, laughably, by "good faith and cradit" of the issuer. In the case of the United States, unbeknownst to the rulers-at-large, all faith has been shattered and our national credit card has been tapped out. We loan mostly to ourselves, from ourselves, by ourselves, in a Ponzi scheme so deliciously evil that it would make Bernie Madoff look like a boy scout.

Dow 12,318.14, +29.97 (0.24%)
NASDAQ 2,831.58, +6.02 (0.21%)
S&P 500 1,340.43, +4.11 (0.31%)
NYSE Composite 8,497.41, +43.65 (0.52%)

Advancing issues beat decliners, 4118-2402. NASDAQ recorded 212 new highs and 22 new lows. On the NYSE, new highs topped new lows, 361-9, a number so ridiculously out of balance that only Ben Bernanke could love it. There is no downside risk to owning stocks and until there is, one should load up with tight stops on the underside. Volume was back into the abyss of the past two years.

NASDAQ Volume 1,952,032,375
NYSE Volume 4,178,143,000

Oil was up another $1.37, to $86.36 on conflicting reports that Iran was about to send warships through the Suez Canal. Israel is worried and called the act "provocative," while countries all around it are undergoing spasms of freedom and expressions of liberty. The smart money has already left Zion. A couple of Palestinaians were shot and killed by Israeli soldiers on the border of the Gaza strip.

Gold gained $10.00, to $1,385.10, and silver was up more than 2% at the close in New York, higher by 94 cents, to $31.57. Silver, said to be rarer than gold by some accounts, has jumped $5 dollars US in just over a month. Today's final push to new highs marks the beginning of a second phase in the bull rally that has slowly limped behind gold, but has recently outstripped nearly every other asset class, gaining 87% in 2010 alone.

Estimates for how high silver can go and in what time frame range from the reasoned to the impossible, though in today's upside-down economic world, the impossible - such as the S&P 500 doubling in just the past two years - is now possible. A reasonable guess is that silver will reach $50 by the end of the year, which would be "only" a 67% gain in an asset that has no counterparty risk if one holds physical metal and is deeply undervalued by almost every metric.

Now that buying stocks is a risk-less play, expect some surprises in the next downturn, such as it coming out of nowhere, for no particular reason and to be deep and quick. The sheep will surely get sheared once again as gold bugs and silver sleuths sit back and gloat.

Yes, and real estate in selected markets is cheap, but will be cheaper later this year, even cheaper in 2012 and practically fire-sale prices in 2013. Save your silver. In three years time, you'll be able to buy a reasonable three-bedroom home in a decent community for about 200 ounces of silver. I would not kid you about that. Of course, you may not be able to afford the property taxes, especially if the house is in New York, New Jersey, Massachusetts or California.

And, BTW, the banks are dead. They just won't admit it.

Wednesday, February 16, 2011

Tuesday Was an Aberration; Move Along, Now

Didn't I tell you all yesterday that stocks would be back up today. Tuesday was a one-off. Wall Street has to do it every now and then to convince the sheep, er, peep, er, sheeple, like you, that it's all on the up and up.

It's not. It's fed by the Fed. Buy silver. I have little more to say, but, in a nutshell, we're back to feudalism, and the banksters and politicians are the lords and you, me and anyone with either a job or a subsidized existence (it's becoming more lucrative to filch, in fact) are the serfs.

Fuck 'em. And prepare for Amrageddon.

Dow 12,288.17, +61.53 (0.50%)
NASDAQ 2,825.56, +21.21 (0.76%)
S&P 500 1,336.32, +8.31 (0.63%)
NYSE Composite 8,453.76, +70.09 (0.84%)

Advancing issues stomped all over decliners, 4678-1882. NASDAQ new highs: 202; new lows: 32. NYSE new highs: 335; new lows: 13. Volume was solid, for a change. There must be a ramp-up coming. Everybody's all in. Oh, that's right. Options expiration Friday. How could I have missed that? It's where all the money is being made.

NASDAQ Volume 2,289,703,250.00
NYSE Volume 4,453,836,500

Crude oil got a bit of a boost by Iranian warships entering the Suez Canal en route to Syria, up 67 cents to nestle in at $84.99. Gold gained $1.00, to $1,375.10 and silver was down 7 cents, to $30.63. Nothing to see there. Move along.

Tomorrow, the BLS offers the latest in a series of comedy sketches otherwise known as unemployment claims prior to the opening bell, which, in case you haven't noticed, is not a bell at all, but the same sound used in casinos world-wide when a one-armed bandit pays off, even more proof that Wall Street really is one giant casino.

Tuesday, February 15, 2011

What's This? Stocks Down! Say It Ain't So!

Believe it or not, all of the major US indices actually finished in the red today.

This is, of course, anathema to the mendacious crowd which fixes prices on all equities, all the time, so an examination of the carcass may reveal a hidden message.

Peering inside the dumped stocks, we find that today's Tuesday decline was led by basic materials (hmmm... commodities) and technology. Four sectors finished positive: financial (no surprise there), health care, utilities and transportation. The only sense to be made from this is that the big money is doing its rotation dance and taking profits. Markets should be back to their normal ascent by tomorrow's opening bell.

Wall Street continues to be in serious denial over the health of the economy and the value of stocks, which are largely over-priced and carrying general valuations of 14-17X earnings. This morning's retail sales figures may have tripped up the algos in the stock-buying computers, because they missed by a mile - coming in at 0.3% gain when the call was for between .05 and .07.

Not surprising that many of the self-proclaimed experts had this analyzed all wrong, especially considering that much of the retail number is based on same-store sales and omits stores closed within the past 12 months, of which there are many. The real number is actually much worse, but we're all supposed to believe that the US economy is improving, so the data must be fudged to meet the "reality."

Dow 12,226.64, -41.55 (0.34%)
NASDAQ 2,804.35, -12.83 (0.46%)
S&P 500 1,328.01, -4.31 (0.32%)
NYSE Composite 8,383.67, -21.48 (0.26%)

Decliners led advancing issues by a wide margin, 3996-2479. On the NASDAQ, there were still 144 new highs and just 23 new lows. On the NYSE, there were 213 new highs and just 13 new lows. Volume was slack, and that's saying quite a bit, since yesterday was the slowest trading day of the year. The bulls may be getting a little winded after a nearly six-month run.

NASDAQ Volume 2,034,250,500
NYSE Volume 4,396,449,000

What was even more interesting that the minor downturn in stocks was the continued action in crude oil futures, which fell again, down 49 cents, to $84.32, the lowest price in twwo and a half months. Gold moved in the opposite direction, up $9.00, to $1,374.10, along with silver, which gained 16 cents, to $30.70, nearing the pinnacle of the recent range.

Look for another leg up in the precious metals, especially on any economic disruptions or blasphemy to the recovery theme, either from the Middle East or economic data that isn't sufficiently massaged. This bull run has gotten pretty long in the tooth and a major correction could lie dead ahead. In fact, it's long overdue.

Monday, February 14, 2011

MERS can't assign mortgages, judge rules

A personal victory today for me - and possibly hundreds of thousands of homeowners - thanks to U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York, who ruled, last Thursday, that Merscorp has no legal right to transfer mortgages.

Anyone following the fiasco that is the housing market knows Merscorp better by MERS, as they were the "nominee" on millions of mortgages written in the housing "boom" of the 2000s. What the judge's ruling does is essentially invalidate most mortgages written between 2003 and 2008 (and some before and after that), because that was the time period in which the largest lenders - Countrywide (now BofA), JP Morgan Chase, WAMU and others used MERS to end-run the county recording offices and save on fees, then packaged and resold these mortgages to witless investors.

Now, the banks have no standing in courts to foreclose and the buyers of those ugly securitized mortgages want their money back. Banks are being forced into a corner, even after being bailed out by the Federal Reserve, TARP and taxpayer money. The ruling from that bankruptcy court and others should serve distressed homeowners well in fights with the banks over ownership rights as they set strong precedents and are are likely only to be overturned by individual state legislatures.

Even then, any new laws validating the banks' practices would have to be applied retroactively, an activity expressly forbidden by the US constitution (remember that?).

This is, in reality, the end of the game for the big banks, which should have been allowed to fail in the beginning. The American public has spent Trillions of dollars keeping these bodies afloat and they are still sinking, and fast. Little by little, Americans are learning to stand up to the banks, city hall, the states and the federal government and demand their rights.

The ruling from this past Thursday stands as a marker in the struggle for resumption of the RULE OF LAW, which has been kept bound and gagged by the current and former presidential administrations. The American public is tired of being lied to and robbed from and the time has come to choose sides. Either you side with the government, the banks and their crooked politics and practices or you side with the people, and seemingly, the courts and the lawyers.

This is a nation governed by the rule of law, not by force or money or politics. Choose now!

Meanwhile, the circus kept running at Wall and Broad.

Dow 12,268.19, -5.07 (0.04%)
NASDAQ 2,817.18, +7.74 (0.28%)
S&P 500 1,332.32, +3.17 (0.24%)
NYSE Composite 8,405.15, +30.26 (0.36%)

Despite the marginal gains, advancing issues led decliners overall, 3686-2856. There were 286 new highs and 23 new lows on the NASDAQ and 355 new highs and 11 new lows on the NYSE. Selected stocks are clearly stretched to the limits of affordability, though with price discovery a lost art in the algo-following world of computer trading, this alone will not foment an imminent collapse of values. However, the volume on the NYSE made another new low point today, just a week after setting the low mark of the year. Rising indices without full-blown participation is the very first tool in the analyst bag, though the rules have been changed so dramatically over the past few years that nothing is certain today.

Still, market manipulations cannot last forever. The rules of economics will eventually take out all of the excess and malinvestment. It has to or the entire market is a fraud.

NASDAQ Volume 1,985,633,750
NYSE Volume 3,959,988,500.00

Note the divergence in commodities. Oil continued down again today, losing another 77 cents, to $84.81, while the precious metals gained. Watch for oil prices to continue their plunge back below $80 and beyond. demand has dried up once the price for US unleaded gas exceeded $3.15 on a national basis. Since the $4.00 shock of 2008, American drivers have made adjustments: buying more fuel-efficient vehicles, driving less, driving smarter, conserving, car-pooling.

Besides the obvious adjustments, the US economy simply is not strong enough - nor is the world economy, for that matter - to justify high fuel prices. There is little to no growth and slack demand. Ergo, oil and gas prices should fall accordingly.

As for the PMs, well, they've resumed their ominous climb. Gold gained $4.70, to $1,365.10, but still remains stuck in a range, though the bottom is in at $1350.00. Silver popped another 54 cents, to $30.53, approaching the 30-year-highs last seen in December.

The lid is about to come off the entire global system of financial fraud, again.

Friday, February 11, 2011

Mubarak Flees Egypt; Stocks Rally in US

Nothing like the deposition of a dictator to raise the animal spirits of the ruthless Wall Street crowd. The self-proclaimed Masters of the Universe are probably plotting now on how to best liberate the newly-free people of Egypt from their valuables.

Meanwhile, back at the exchanges, stocks started lower again and then rapidly moved up, similar to yesterday's trading, though with a little more lift. In addition to the news out of Cairo, the Primary Dealers were once again treated to a little $7 billion POMO, courtesy of their favorite Central Banker, Chairman Ben Bernanke.

Actually, with an overthrown government in the Middle East and $7 billion in walking-around money, one would think that today's results were less-than-adequate. Then again, stocks were extremely overpriced in October of last year, and it's been straight up since then, so there must be a dearth of new suckers... er, investors.

Dow 12,273.26, +43.97 (0.36%)
NASDAQ 2,809.44, +18.99 (0.68%)
S&P 500 1,329.15, +7.28 (0.55%)
NYSE Composite 8,374.89, +37.76 (0.45%)

Volume was pretty thin again, but advancing issued lambasted decliners, 4637-1883. NASDAQ recorded 237 new highs and a mere 25 new lows. On the NYSE, the numbers were skewed even more, with 318 new highs and only 10 new lows.

NASDAQ Volume 2,074,279,250.00
NYSE Volume 4,690,140,000

With tensions subsiding in Egypt, oil traders took down the price by $1.15, to $85.58. By the same rationale, gold fell $2.10, to $1,360.40, and silver was off by 10 cents, to an even $30.00 at the close of trading in NY.

With the markets up, winter coming to a fast end, Mubarak out and nothing but good times ahead, we evoke the spirit of depression-era impresario Ted Lewis, asking the musical question, Is Everybody Happy?

Thursday, February 10, 2011

Dow Ends Win Streak... Barely; Mubarak to Stay, Same with Bernanke

Houston, we have a problem. The markets are no longer liquid enough even for machines to move them. Today's trade, on the back of a gloomy outlook from Cisco (CSCO) after the close on Wednesday, was pathetic, and fitting, upon the widespread rumors that the NYSE would be sold to the Deustch Bourse and that President Mubarak of Egypt would step down.

None of that seemed to matter very much, as well as the rosy picture painted by the release of the current first time unemployment claims, which came in at 383,000, far better than expected.

The markets (or, those who control the markets) would have none of it, at least for the first half-hour of trading, that is. as all major indices dropped right from the opening bell, hitting bottom right about 10:00 am, 1/2 hour into the session. The Dow shed 83 points, but immediately rallied back up 50 points, shaving off the losses and trapping the retail investors who sold in the early part of the day.

For the remainder of the session, stocks vacillated in a narrow range, finally ending nearly unchanged, with the Dow down, the S&P and NASDAQ barely in the green. The Dow snapped an 8-day win streak with a 10-point loss. Ho-hum. It was a day of futility all around as nothing newsworthy seemed to either occur nor move stocks in any clearly-defined direction.

Dow 12,229.29, -10.60 (0.09%)
NASDAQ 2,790.45, +1.38 (0.05%)
S&P 500 1,321.87, +0.99 (0.07%)
NYSE Composite 8,337.13, -6.86 (0.08%)

Advancers and decliners were nearly at a stalemate, with winners ahead slightly at the close, 3281-3170. NASDAQ new highs totaled 175, with new lows at 30. On the NYSE, there were 180 new highs, with 18 new lows. Volume was dull on the NYSE, but rather strong on the NASDAQ, due primarily to heavy selling from Cisco, which reported nearly flat second quarter earnings, but scared some with downbeat forecasts. The 13% drop in the stock was probably a bit exaggerated as seems to the theme these days. Anything even slightly positive or negative results in big moves one way or the other in the most-tightly-wrapped market ever.

NASDAQ Volume 2,512,622,250.00
NYSE Volume 4,705,256,500

Commodities mostly treaded water as well. Oil gained two cents, to $86.73. Gold was off $3.00, to $1,362.50, but silver shed 18 cents, to $30.09.

Put this one in the books and store it for future reference. One gets the feeling that there's quite a bit of tension out there in the trading pits and something big is about to occur. A major sell-off or resumption of the rally would not be much of a surprise over the next two to three sessions.

Wednesday, February 9, 2011

Miracle Rally Sends Dow to 8th Straight Gain

Over the past two days, I've tried to make the case that I am optimistic instead of pessimistic and that the recovery we've been told over and over and over again ad nauseum is actually real and not fully backed by the free printing of money.

Oddly enough, we have in America a free press, but it is largely the one used by the Treasury and the Fed to create money, not the one that enlightens opinion with words of wisdom. I have tried my best to drink the Kool-aid that says all is well, the Fed has the economy under control and that unemployment really is only 9%, when all along I know there are dangers lurking everywhere, the Fed is actually out of control (lost all control when they dropped interest rates to ZERO), and that unemployment in America is much closer to 20% (maybe even above that) than 10% when factoring in all the part-time jobs, heuristic and hedonic measurements and adjustments made by the BLS and other government statistic-throwers.

I simply cannot profess to any kind of fundamental economic theory that would have me believe that the best way to solve a debt and solvency crisis is with more debt and by keeping insolvent companies (banks, GM, Chrysler) afloat with taxpayer dollars. Neither can I avow to any belief in the Federal Reserve, knowledgeable in the fact that the Fed, since 1913, has reduced the buying power of the US dollar by 97% and that since 1971 - when Nixon closed the gold window - the world has been operating with a fantasy reserve currency, backed only by the good faith and credit of the United States of America, the world's biggest borrower and instigator of costly wars for the national "good."

Label me a pessimist if you must, but not before reading this somewhat over-the-top (but not by much) article on why small businesses aren't hiring.

Then read the comments, including this one:

I am a self employed business owner, and my brother is also a small business owner. Neither of us will hire an employee under any circumstance, even if the economy was improving or even just steady. Here is why; the local, state, and Fed governments are out of their f---ing minds with rules, regulations, fines, direct and indirect ( hidden ) taxes. Hiring an employee is almost a form of self destruction where you are forced to provide guarantees to the employee and the state to provide for their well being. OSHA, Labor dept, DOT, Workers Comp., Unemployment, Health Care rules for Cobra, retirement , EPA, Dept. of Environmental Conservation, IRS, State Taxation, etc. etc. and f--k all of that bull---t. Been there, done that, will not do it again. This article describes myself and almost all the self employed people that I know to perfection. When help is needed, hire other self employed guys and gals, 1099 them and you are done. Keep overhead to an absolute minimum.
Maybe then, you'll begin to understand my anti-corporate, anti-government opinions.

Some of the biggest news today was that concerning the proposed merger of the NYSE/Euronext and the Deutsche Boerse. As it turns out, merger is an incorrect term by which to identify this transaction. Rather, the NYSE is selling itself to the Deutsche Boerse, meaning that even though there will be co-headquarters in New York and Berlin, the Germans will hold the controlling interest - about 60% - meaning one of our most basic institutions, the venerable New York Stock Exchange, will be largely owned by foreigners.

While this is not new nor novel - recall the Japanese buying up most of Manhattan's expensive real estate in the 70s (at inflated prices) - the precedent it sets is troubling. What will we sell next? The Empire State Building, the Statue of Liberty, the Capitol, the White House?

Some may argue that the latter two edifices are already foreign-owned, the title is still officially held by the US government, for now, though, as economics becomes more and more a dark science, that is subject to change. As it is, I am writing from a home heated by fuel supplied by a company based in Spain - a deal backed fully some years ago by Senator Charles (Sellout) Schumer - so, if our energy resources are to be parceled out to foreigners, why not the rest of the country. After all, there's no security risk in that, no?

Maybe having a bunch of rich German bankers running the NYSE is a good thing in disguise. The low volume of trading (Tuesday was the lowest of 2011 so far) is a signal that the exchange may not even be worth what the Germans are supposedly offering, which is about a 10% premium from where the stock (NYX) closed on Tuesday. Maybe it's time for Americans to throw up he white cloth en masse and surrender to the economic forces of the rest of the planet, put up big "for sale" signs in all the harbors and ports, and say goodnight. The party is officially over. Call it a day. Stop pretending that we're "exceptional" and sell us off for parts.

Maybe some of us could actually get a job in the deal. Of course, it would be a wages more commensurate with those in Thailand or Nigreia, but, hey, it's a buyer's market. Maybe the banks can sell off all that unsold REO for pennies on the dollar and retire their debt, along with their businesses. Let's be honest. America is for sale and the parceling out of the NYSE is just one, big, obvious example of just how broke we really are.

Speaking of broke, one thing that the crooks and manipulators on Wall Street simply could not see happen was breaking the string of positive closes by the Dow, which managed, miraculously, devoid of any news, to shake out of its dolorous decline of more than 40 points around 2:45 pm, and close slightly positive for the 8th day in a row. Now I know that America is bankrupt, financially as well as morally.

Strange as it may seem, only the Dow ended in plus territory and it was the only one riding a winning streak. Somebody at Goldman Sachs must have a bet, heavily-leveraged, that the Dow will continue going up for ten straight days. Only two left!

Dow 12,239.89, +6.74 (0.06%)
NASDAQ 2,789.07, -7.98 (0.29%)
S&P 500 1,320.89, -3.68 (0.28%)
NYSE Composite 8,343.84, -36.01 (0.43%)

Declining issues still stomped all over advancers, 4089-2399. New highs outnumbered new lows on the NASDAQ, 162-20; and on the NYSE, 196-13. Volume was down in the pits again, just barely above Tuesday's 2011-low level.

NASDAQ Volume 1,898,219,125.00
NYSE Volume 4,424,957,000

Oil futures finished slightly lower, down 23 cents, to $86.71, as OPEC production reached its highest level in two years and gasoline supplies in the US were at their highest levels in 21 years, due to diminishing demand.

Gold gained $1.40, to $1,365.50, while silver was flat, at $30.28.

In Washington, our comedy channel, otherwise know as congress, proposed some "big" spending cuts in the 2011 budget, which, by the way, is already five months down the road. These cuts of anywhere between $35 billion and $74 billion, are minuscule compared to the overall size of the proposed federal budget ($3.8 trillion) and less than 3% of the proposed deficit.

These aren't cuts, they're a mockery of the American public and the laws of economics.

Lastly, the video not to be missed, in which the difference between homeowners who don't pay mortgages and bankers who cheat at every turn is discussed:

Bankster vs. Deadbeat

Tuesday, February 8, 2011

Stocks Causing a Boom, or a Mirage?

If you're invested in stocks, you'll be happy to know that the Dow recorded its seventh straight gain today. It's been an incredible run from the last day of January through the first six trading days of February, with the most-watched stock index up a whopping 410 points over the seven-session run and up more than 2200 points since this leg of the rally began on September 1, 2010. That's a nifty 22% gain in just over five months - a very neat trick.

Stocks in general have been a great place to be for the last 23 months, since the bottom on March 9 2009, with the major averages all up more than 80%.

Should one argue with such success? Maybe not. Maybe Ben Bernanke knows exactly what he's doing by continuously inflating the money supply, even though his critics argue that he's causing severe inflation and a bubble in commodities or that his practices will eventually implode in a hyperinflationary event that will kill the US dollar.

So far, the commodity trade has been profitable, and it may be nearing bubble status, though it seems to have calmed recently. The long term effects of Bernanke's runaway money-printing policy will not be evident for many more months, since he's planning on continued bond repurchases (his preferred method of handing out the gelt) through June of this year.

Before that, we'll have great gnashing of teeth and showing of fangs by aroused congressmen, mostly of the Republican variety, and a renewed debate over raising the debt limit to something beyond $15 trillion. The show on the hill will no doubt be one for the ages, but in the end will likely amount to little more than theatrics, of which the congress is highly skilled. Many in the chambers of our two legislative branches could have just as easily made themselves famous in Hollywood or Broadway. Arguably, the path to stardom and the ultimate pay scale is much better in Washington, however.

One cannot argue with the stock market performance, however. Whatever your political stripes or economic theory, the gains have been potent and powerful. Whether they will last, once the Fed pulls the plug and stops its endless printing regime, is open to debate.

Dow 12,233.15, +71.52 (0.59%)
NASDAQ 2,797.05, +13.06 (0.47%)
S&P 500 1,324.57, +5.52 (0.42%)
NYSE Composite 8,379.85, +43.21 (0.52%)

As expected, advancing issues soared past decliners, 4978-2538. NASDAQ New highs: 168; new lows: 19. NYSE new highs: 266; new lows: 11. Volume was very low again.

NASDAQ Volume 1,816,377,500
NYSE Volume 4,428,776,000

Commodities piqued some interest today on both sides of the ledger. Crude oil was down 54 cents, to $86.94, continuing a trend. Gold gained $15.90, to $1,364.10, while silver headed again toward recent highs, up 93 cents, to $30.27.

Meredith Whitney has drawn the ire of legislators on Capitol Hill for her call for a Muni bond crash.

Ms. Meredith see looming shortfalls in state budgets fomenting failure in a slew of public works projects, ending in defaulted bond offerings. Others feel there's more to it - like unfunded future liabilities - and that many states face an uphill battle, though their fates could be relieved by a robust economy.

We bring you both Meredith Whitney and James Pethokoukis in the very same video:

Monday, February 7, 2011

Rationale for Optimistic Pessimism

Realists are often mistaken for pessimists, and for that reason and because my views are often considered pessimistic by the average viewer or reader, it's appropriate to couch my ideas in a more palatable form.

By and large, today's data is fully indicative of what I see wrong with the current economic condition and system, and a discussion will follow today's figures.

Dow 12,161.63, +69.48 (0.57%)
NASDAQ 2,783.99, +14.69 (0.53%)
S&P 500 1,319.05, +8.18 (0.62%)
NYSE Composite 8,336.64, +48.14 (0.58%)

As is clearly evident, the stock markets continued to rally on Monday, and advancers finished well ahead of declining issues, 4447-2097. New highs on the NASDAQ beat new lows, 259-20, and on the NYSE, 343-12. These measures are at extremes and have been for at least the past two-and-a-half months. Volume, another semi-permanent feature of the "new" market (post-Lehman crash) was back in the abyss.

NASDAQ Volume 1,782,761,625.00
NYSE Volume 4,389,051,500

Crude oil futures on the front end fell to their lowest level in a month, down $1.55, to $87.48. Gold lost 80 cents, to $1,348.20, and seems to be stuck at that $1350 level, while silver is exhibiting better fundamental value, up 28 cents, to $29.34. Silver is poised for another breakout above $30, and this time, will carry gold higher, but outperform on a relative basis.

Getting back to my optimistic pessimism, a move upward in stocks may be reason for celebration for some, especially high corporate officers and bank executives, though not so much for the average rank-and-file employee.

That's why my commentary on rising values of equities is often layered with considerable doses of cynicism. Gains in the stock market are purely paper trades, which may look great in your retirement account - for now - but we've seen this play before. The true beneficiaries of higher stock prices are speculators with more money than they need and the aforementioned CEOs and higher executives.

I wouldn't be so sour on global corporations if they paid their fair share of taxes, didn't inordinately benefit the top 1% of wealthy people in the world, weren't the worst violators of most environmental regulations and didn't exploit both their own employees and consumers in general every chance they get. Other than that, they're OK.

In reality, not all corporations are inherently evil, though they receive largesse from government that the ordinary citizen is not afforded. Some are better than others, and the world would probably be a better place if we had more Steve Jobs and Apples and less of Jamie Dimon and JP Morgan and their ilk.

So, seeing corporations report above-average earnings while 15 million Americans are without jobs really raises my ire. I like to think I stand for the good values in America, where anyone can get a decent job at a living wage, not be treated as a tax-and-wage slave and where there's some wealth equity, but I just don't see that in corporate America, where greed and outrageous salaries for those at the top of the food chain are the norm.

Besides the obvious reasons to dislike corporations and their Wall Street pimps, the current climate is one in which the entire sector is being fueled by endless money creation by the Federal Reserve, with the dough flowing right to the largest financial institutions while the middle and lower classes are left with the dribble down of inflation and stagnant wages.

The current climate of fascism, which, in its purest form, is a marriage of corporations and the government, to the detriment of the citizenry. This fascist state has been growing for the past 30 years (yes, it started with the great Ronald Reagan) and has been ramped up by both recent presidents: Bush and Obama.

Much of the corporate-government fascism is tied to the military as well, which continues to waste our resources in an ugly spending spree of destructive capitalism. The wars in Iraq and Afghanistan are abominations designed only to keep the status quo and the powerful in power. While America seems calm and secure at the present, the underlying squandering of resources through corporate subsidies and military adventurism are ultimately harmful to society at large.

So, while I may sound pessimistic concerning investments and Wall Street, the death or considerable downsizing of these institutionalized wealth destroyers would be good for the bulk of Americans. The status quo means higher and higher taxes and deficit spending to the moon, debts that can never be repaid and eventual default. Only by changing attitudes and the game itself will America return to being a beacon of hope and good for the world instead of the monolithic monstrosity of domination it has become.

In my mind - and maybe yours - America is about self-determination and freedom. Freedom of speech, of ideas, of movement. We have become so desensitized to our own plight that we allow ourselves to be stopped at roadblocks when driving our cars, patted down and molested at airports and watched by surveillance cameras as we walk our streets.

So, no, I do not wish to see more of the same corporations - hand-in-hand with government - taking more of our freedoms and stifling more innovation. I wish to see an America chock full of wishful, free thinkers, workers, doers and entrepreneurs. Small business is the real engine that runs this economy. The mega-corporations are aberrations, and bad ones. For every Wal-Mart that goes up, 100 small businesses close their doors. For every Citi, Chase or Bank of America branch, more money is stolen from local economies, never to return. For every Exxon-Mobil or Chevron fixing prices, more people cannot do what they please or spend their money on what they want or need and for every tax or government give-away, another would-be entrepreneur leaves for Asia or South America, where economies are growing, where regulations don't stifle competition and growth.

There are plenty of places to park your money for investment purposes, but Americans of this generation have not learned the hard lessons of the Great Depression: that stock certificates are only paper and only worth what "a greater fool" is willing to pay for them. We haven't learned that a home is a place to live, not a piggy bank, should cost no more than three times one's annual income, and shouldn't take 30 years to pay off a mortgage upon one.

Americans of today have been deluded by media, lied to by politicians and robbed by the fractional banking debt system of the Federal Reserve. So, yes, I revel in the failures of Wall Street and the government and their institutionalized lunacy and await their demise, even cheer it on. For once we have purged the system of the excesses, parasites and the unholy alliance of big business and big government can America regain its sense of value, fairness and equality.

America has always stood for the people first, but we've lost our way, through deceit, apathy and payoffs. I see change happening on the fringes. More people are expressing their doubts and concerns openly. Others are making material changes, not satisfied with working only to pay taxes, mortgages, food and utility bills.

Politicians always offer change for the better but haven't delivered a long time. The change surely must come from the people, by the people and for the betterment of the people. I feel we can do it, though the struggle may be long and difficult and that is why I am optimistic.

Friday, February 4, 2011

36,000 New Jobs and 9% Unemployment, Really?

There's an old adage that traders often cite which goes something like: The market can remain irrational longer than you can remain solvent.

This would be applicable today for anyone (present author included)who believes, a) the market is currently overvalued, and b) economic data should matter.

The latest Orwellian absurdity comes from the Department of Truth, otherwise known as the Bureau of Labor Statistics (BLS) which today produced the ultimate statistical aberration in saying that the number of net new non-farm jobs produced in America in the month of January was a mere 36,000, when expectations were for growth of 148,000.

Notwithstanding that number of new jobs doesn't even keep pace with new entrants into the work force (more on that later), the BLS also advised that the official unemployment rate fell from 9.4% to 9.0%.

By just about any measure, this is statistical nonsense. The only way the unemployment percentage could fall on such a low number of new jobs created would be if the labor force had suddenly declined drastically.

Let's check: no major disasters (well, besides a few big snow storms), an entire city was not wiped out by a nuclear blast and there was no mass suicide by employed people ensconced in office cubicles. However, the BLS has concluded that the US labor force declined from 153,690 to 153,186. In other words, more than 500,000 people just dropped out of the labor force in January.

On that topic, we wonder where they went and what they are doing to survive. Maybe they all were abducted by aliens, or since the weather has been so cold and snowy, decided to just leave their jobs. But, but, but, wouldn't that make the unemployment rate go up, rather than down?

Not according to the BLS. The true explanation is that these half million people were collecting unemployment insurance benefits since probably around February of 2009 and their 99 weeks have run their course, so, let's just not count them any more. Simple logic, but terribly, terribly wrong, because if we just dis-employ people, wait 99 weeks and then dismiss them from the survey numbers, we could see the unemployment rate at just 6 or 7 per cent before long, depending on how quickly the government decides that work is optional, and people can just survive on whatever scraps they pick up alongside the roads while they're on their way to... nowhere, presumably.

The BLS figures are so cockeyed as to make the authors blush, but we don't know who it is who puts these figures together each month, so we'll never know who should hold the shameful award for most obtuse statistics, which these most surely are.

Because the numbers are so incongruously incoherent, investors, or the computers running the algos in the market, must have completely overlooked them, because if the first number - 36,000 net new jobs - is true, the US economy is sinking faster than a mob informant in the East River.

But, if the second number - 9.0% unemployment - is the real deal, then corporations and small businesses are hiring at a break-neck pace and the recovery is on track and we should all be eating lobster tails for dinner every night.

(Whew! I need a drink, and maybe some pills and an IV.)

The truth of the matter is that neither number is correct, though the 36,000 figure is probably a lot closer to the truth than . They are both highly-massaged digits from an unreliable sample in a series that is hopelessly flawed in many ways. And so, the markets did what any overinflated, hyped-by-monetary-easing, derivative-driven market would: they ignored them and went higher, mostly (the NYSE finished fractionally lower).

Dow 12,092.15, +29.89 (0.25%)
NASDAQ 2,769.30, +15.42 (0.56%)
S&P 500 1,310.87, +3.77 (0.29%)
NYSE Composite 8,288.50, -0.55 (0.01%)

Losers finished ahead of gainers, narrowly, 3327-3150. On the NASDAQ, there were 167 new highs, 25 new lows. On the NYSE, new highs beat new lows, 221-12.

NASDAQ Volume 1,966,407,750
NYSE Volume 4,477,823,500

In the commodity space, crude took a dive of $1.51, to $89.03, on rumors that Egyptian president Hosni Mubarek would step down, which makes little sense, except if the price was already $1.50 too high to begin. Gold lost $4.00, to $1,349.00, while silver gained 33 cents, to $29.06. We may be witnessing another dislocation of correlation in the precious metals as the gold-silver ratio regresses to the traditional norm of 16:1, though that figure is still a long way off in the distance.

Taking the BLS numbers into perspective, we are reminded of the quotation, "There are lies, damned lies, and statistics," popularised in the United States by Mark Twain (among others), who attributed it to the British Prime Minister Benjamin Disraeli (1804–1881). The two are probably enjoying a good laugh and twirl in their respective graves over the follies of fiat currency tied to nothing but the "good faith and credit of the government, of which there is little of the former and too much of the latter.

The world is not coming to an end, though the world as we know it, is. Metrics and measurements change according to political whim, and we can be relatively assured that most of the statistics and rounding-offs coming from the public sector (and many from the private sector, like bank profits) are fatally flawed and not to be believed.

With this in mind, one should not fret much over the immediate future, for it will look much like the immediate past. Forget economics for the weekend, enjoy the Super Bowl and begin making plans for a radically-different future come Monday.

Thursday, February 3, 2011

The Long Wait

Waiting for anything can be distressing, anxiety-causing, even depressing.

Today we heard Ben Bernanke at the National Press Club explain that increases in commodity prices were not due to his easy money policies, though increases in stock prices were.

Were it true, the principles of economics could be stood on their heads and spit nickels all day long.

The wait for the end of the manipulation, the final, desperate push into insolvency of the nation and the currency, is not for the weak-willed nor for the non-believer.

Egypt is but one manifestation of Bernanke's policies. Higher cereal prices, beef prices, pork, chicken, you name it, are all the result of easy money created daily at the Federal Reserve.

Rather than drone on, as I have for many posts over many months, my sentiments are similar to those of Mike Krieger. And I'll leave it there.

Dow 12,062.26, +20.29 (0.17%)
NASDAQ 2,753.88, +4.32 (0.16%)
S&P 500 1,307.10, +3.07 (0.24%)
NYSE Composite 8,289.05, +16.48 (0.20%)

There were a few more advancing issues than decliners: 3371-3016. On the NASDAQ, 138 new highs, 24 new lows. There were 192 new highs and 7 new lows on the NYSE. Volume was level.

NASDAQ Volume 1,947,644,875
NYSE Volume 4,874,717,000

NYMEX crude moderated, down 32 cents, to $90.54. Gold gained $20.10, to $1,353.00. Silver was up 44 cents, to $28.73. Apparently, somebody sees something in the precious metals.

Tomorrow's non-farm payroll report is supposed to provide some clarity on jobs in the US. Most likely, it will not. Were there any real news we could trust, we might be able to make an informed decision.

Wednesday, February 2, 2011

Flat City

Maybe Tuesday's ramp-up was a little too much, or investors are actually a little concerned about events unfolding in Egypt, but whatever the case or cause, markets didn't do anything other than flatline on Wednesday.

The Dow traded in a 45-point range, while the S&P and NASDAQ were bound by 10 and 5-point ranges, respectively, proving that three's nothing like pushing already overvalued stocks even higher to stall out trading completely.

ADP released its monthly employment report, which suggested private payrolls grew by 187,000 in January, and revised December's report down 50,000, to 247,000. The revision means that the initial report was off by a factor of 16%, making it about as reliable an indicator as anything coming out of the Bureau of Labor Statistics (BLS), which, by the way, is the "official" measure of everything employment-related in the USA.

Market reaction to the number was a big yawn and the rest of the session more resembled churning of butter or grape-stomping rather than orderly markets. The day was a mash, and a dull one, at that.

Dow 12,041.97, +1.81 (0.02%)
NASDAQ 2,750.16, -1.03 (0.04%)
S&P 500 1,304.03, -3.56 (0.27%)
NYSE Composite 8,272.57, -17.52 (0.21%)

Losing issues took control over gainers on the day, 3569-2893. The NASDAQ recorded 158 new highs and 15 new lows, while the NYSE had 255 new highs and 6 new lows. This indicator has been stuck at roughly these levels for the past two months with no signal that they are going to change any time soon, thanks largely to the Fed's easy money policies of ZIRP and QE2. Volume was back at the usual moribund levels.

NASDAQ Volume 2,011,206,000
NYSE Volume 4,553,074,500

Commodities took the day off, especially crude futures, which registered a smallish gain of 9 cents, to $90.86. The precious metals continued to be depressed, with gold down $8.20, to $1,332.10 and silver off 23 cents, to $28.29.

Thursday will bring initial unemployment claims at 8:30 am and Friday will be the big number, the BLS' non-farm payroll report. Of course, none of these indicators really matter much with the Super Bowl on Sunday. As mentioned in previous posts, there won't be any real movement in markets (other than straight up) until after the big game.

Inflation remains a hot topic, with the official government CPI proclaiming it to be hovering in the 1 1/2-2% area, when everyone in the real world knows it's really 5-8% or higher, especially concerning food and fuel.

One area not experiencing inflation are payrolls, which haven't budged much in the last 10 years for most middle class jobs. How long the government can keep the Ponzi scheme of rising prices and stagnant wages going before the USA turns into either Ireland, Greece or Egypt is an open question, though considering the general stupidity and apathetic nature of the American public, it could carry on for some time, measured more in years than months.

But then again, nobody in the "official" world saw the Sub-prime or banking collapse coming, so the next Black Swan could be right around the corner, say, in Pakistan.

Leaders in Washington have been particularly silent of late, focused more on in-fighting than any meaningful, needed reforms, and that condition is unlikely to change. After all the next big congressional and presidential elections are only 21 months away. It's actually quite astounding that nobody from the Republican camp has declared themselves a candidate.

Maybe they're all scared of Sarah Palin, or something worse. But, is there anything worse than the former Alaska governor? Well, there is Michele Bachmann, the woman who keeps John Boehner in tears.

Tuesday, February 1, 2011

Dow Breaks 12,000; Highest in 2 1/2 Years

It's hard to find the words to describe what happened today in the investing universe, because, seriously, if the economy is doing so well, why are 15 million Americans still out of work?

And why are home prices continuing to drop? Why are mortgage applications at their lowest levels in 25 years?

We have no manufacturing base to speak of in America, our federal government is running record-setting deficits and most states face bankruptcy from over-promising retirees.

43.5 million Americans are on food stamps.

There's a real disconnect between Wall Street and Main Street. As for Washington, well, they're doing what the American people have come to expect from them, nothing, except fighting with each other.

Since I don't have a rationale for why the market is so ebullient other than the continuous injection of $8-9 billion daily by the Federal Reserve, all I can say is enjoy it while it lasts.

Dow 12,040.16, +148.23 (1.25%)
NASDAQ 2,751.19, +51.11 (1.89%)
S&P 500 1,307.59, +21.47 (1.67%)
NYSE Composite 8,290.09, +150.93 (1.85%)

Advancing issues decimated decliners, 5218-1383. There were 185 new highs and 25 new lows on the NASDAQ. The NYSE recorded 329 new highs and a mere 8 new lows. Volume was actually fairly robust for a rare change.

NASDAQ Volume 2,281,301,250
NYSE Volume 5,423,585,500

Commodities reversed course completely from yesterday. Oil futures were off by $1.42, to $90.77, while gold added $5.80, to $1,340.30. Silver also gained, up 35 cents, to $28.51. One of the odder headlines ever seen was posted today on Yahoo Finance, saying, "Metals up due to improved economy," which is precisely why I didn't read the story. Normally, precious metals gain during times of unease or uncertainty. The unfolding drama in Egypt would be more a reason for them to gain that a wholly great economy.

It's a conundrum. Grow cauliflower.