The Grand Charade Continues

Prior to the market's opening, Bank of America (BAC) released a dismal set of numbers for the 3rd quarter. The nation's second-largest bank posted profits of $3.7 billion, down 31%, and far short of analyst estimates. The bank's profits in investment banking plummeted 93%, to $100 million, thanks to a $607 million trading loss, another $527 million loss related to mortgage and credit derivatives, and a $247 million write-down for leveraged loans.

Washington Mutual (WAMU) also released similarly-ugly 3rd quarter results prior to the open. eBay reported a loss the previous night.

At the open, the Dow and other indices went straight into the tank. The Dow was down 90 points by 10:00 am. However, the diligent idiots at the Fed repo window were hard at work, granting $28 billion in liquidity to various members. See here.

For the remainder of the trading session, instead of the all-out plunge that should have occurred, traders were treated to the tantalizingly delicious prospect of a completely manipulated market. $28 billion goes a long way towards keeping markets liquid and avoiding catastrophe. Our resident geniuses at the Fed and major brokerages have now managed to not only avoid collapse, but keep honest participants out by constantly pumping in new money and, in some cases, posting gains!

Dow 13,888.96 -3.58; NASDAQ 2,799.31+6.64; S&P 500 1,540.08 -1.16; NYSE Composite 10,174.61 +9.31

I actually began a thread on the Fed's $28 billion in repos. Some interesting commentary followed my lead.

What does this mean? Essentially, the Federal Reserve loans out funds to various member banks, who then turn the money loose - through their brokerage arms - on the general market. This causes a large amount of dislocation in orderly trade, call it manipulation. The brokerages and the Fed have a vested interest in avoiding "events" that could cause panic. But what they are doing is eroding not only their own credibility, but that of the US dollar with capricious market intervention at any sign of trouble.

Orderly markets need to correct when there has been systemic dysfunction, like what we've seen in the sub-prime mortgage market and the spillage into the general credit system.

In August, the market was correcting, on heavy volume, though the Fed decided to change the game by lowering the discount rate (twice) and the Fed funds rate by 50 basis points at their September meeting. Everything since then - including the incredible 1000+ point gain from August 18 to October 1 - has been pure fiction, built with Fed money, essentially OUR money, the public's money, which the Fed and Treasury see fit to debase freely in order to bail out their friendly bankers and corporate CEOs.

The entire scheme only gets worse, and eventually these short-term bandages will cause a complete and total collapse of the economy. We're actually quite close to that now, but don't worry, because if the economy implodes, and prices for milk and gas and heating fuel reach levels where only the rich can afford them, your stocks will continue to go up and up and up.

Thanks, Mr. Bernanke. I thought your predecessor, Mr. Greenspan was a bubble-inducing tool of politicians. But you have shown that he was nothing more than a piker. You, sir, have no scruples and pray at the altar of Wall Street and Broad. You are a complete traitor to the United States and should be in prison along with most of your banking "buddies." You are a complete fraud and a wastrel, a pimp for corporations and politicians. You are, in a word, deficient.

It's almost futile to cite the internals of this twisted market, but in any case, they prove instructive. Declining issues beat advancers narrowly, 16-15, while new lows overcame new highs, 278-223. In other words, this market continues to want to sell off.

Oil for November delivery hit yet another record high, gaining $2.07 to $89.47 per barrel. Gold shot up $6.40 to $768.70. Silver was higher by a nickel to $13.80.

After the close, Google (GOOG), Wall Street's tech darling of the moment, posted third-quarter net income of $1.07 billion, or $3.38 per diluted share. Wall Street was looking for a net profit, on average, of $3.22 per share. Gross revenue rose 57 percent to $4.23 billion. The stock traded higher in the regular session by 6 points and had added another four points in early after-hours trading. Last print was above 644.00.

With today fully divorced from reality, Friday's session could go either way, though betting against the Fed and the Plunge Protection Team's (PPT) pumping strategy, could prove risky to bears who believe the entire market and credit structure to be on shaky ground.

Apparently, the entire planet could be blown to bits, yet the Fed would still pump more money into markets, gaily ringing the "all clear" chime.

NYSE Volume 2,895,854,250
NASDAQ Volume 1,973,083,875