Friday, December 31, 2010

Happy New Year Wall Street Cheats; Silver the Big Winner

Equity traders and other market participants are probably happy this week is over.

Finishing up with the worst volume of the week - a week that witnessed the slowest level of trading activity in ten years - indices finished with a split decision once again.

Eschewing with the normal banter that would accompany a normal trading session, since today's was anything but normal, let's just move on to 2011. Beginning Monday, January 3, this column will feature predictions for 2011, as most of the mainstream predictors have fallen into the Kool-Aid drinking bullish category, we will offer some contrarian views.

Dow 11,577.51, +7.80 (0.07%)
NASDAQ 2,652.87, -10.11 (0.38%)
S&P 500 1,257.64, -0.24 (0.02%)
NYSE Composite 7,964.02, +12.11 (0.15%)

Advancing issues and decliners were almost evenly split, with gainers taking a narrow edge, 3257-3189. There were 86 new highs on the NASDAQ, to just 8 new lows. New highs on the NYSE numbered 104, while only 4 issues touched new lows.

NASDAQ Volume 959,300,187.50
NYSE Volume 2,148,760,500

The short-term shake-out in crude oil futures didn't even make it until the end of the year, with speculation taking the front-end contract up $1.54, to $91.38, something of a portentous final trade leading into the new year.

Gold finished with a nice gain to close out the year, up $17.50 on the continuous contract, to $1421.60, just ten dollars from its all-time high. Silver turned in the best performance of the year, a gain of 45 cents today sending it to $30.91, its highest point since 1980, and good for a gain of 83.7% on the year.

Gold and silver have been recommended so often here that it hardly needs repeating, but all prospects appear ripe for continued flight, away from fiat money and paper securities and directly into commodities and hard assets. Silver's massive run-up in 2010 might only be a precursor for a long, durable rally that will take the second precious metal to unimagined heights in 2011 and beyond.

Silver's rally, having started later than that of gold, may have more juice for steadfast holders and even new buyers. It is shaping up to be the century of silver. With sovereign fiat paper money stressed around the globe, even small, casual investors are making their way into the precious ore that seems ready for another monster run in coming months.

Farewell, 2010. Happy New Year!

Thursday, December 30, 2010

Data Ignored as Stocks Take a Rare Step Back

Another exceedingly dull session marked the penultimate trading day of the year, but, unlike the tree previous days, all indices finished in the red, showing marginal losses.

Initial unemployment claims came in at a seasonally-adjusted rate of 388,000, beating expectations (418,000), but the data set is marred by the non-seasonally-adjusted number, which came in at a whopping 521,834. Obviously, the BLS is doing a bang-up job at keeping the truth about the employment condition in America almost out of view.

Elsewhere, Chicago PMI surged To 68.6 on expectations Of 62.5, the highest since July 1988, another badly skewed statistic from the government's statistical fantasy factory.

If one were to believe these two reports (are you getting the idea that we don't?), the take-away would be that very few people were laid off following the holiday shopping season and our manufacturing base is vibrant and growing. The truth of the situation is that jobs are being shed as quickly as number-crunchers can adjust their bottom lines on excessively hyped same-store sales figures and the PMI is being fueled largely by cost inflation.

So, with one more dreary day ahead in the lowest volume week in ten years, traders, pundits, analysts and economists can hardly wait to put 2010, the year of the little lie, finally to rest. Without a doubt, 2011 will be better known as the year of the bigger lie.

Dow 11,569.71, -15.67 (0.14%)
NASDAQ 2,662.98, -3.95 (0.15%)
S&P 500 1,257.88, -1.90 (0.15%)
NYSE Composite 7,951.91, -9.57 (0.12%)

Declining issues edge advancers, 3282-3152, while NASDAQ cheered 152 new highs and jeered 17 new lows. The pattern was the same for the NYSE, with 149 new highs and just 8 new lows.

NASDAQ Volume 1,036,465,812.50
NYSE Volume 2,292,664,000

Crude oil finally took off some of the froth, dipping $1.28, to finish just below the $90 mark, at $89.84. Gold eased $7.60, to $1404.40, while silver also slowed, down 13 cents, to $30.47.

Wednesday, December 29, 2010

How High is Up? Stocks Continue Relentless Rise

It's absolutely amazing to anyone who's followed the markets for the past twenty years or more, how this current rally, based entirely on free money flowing from the Federal Reserve to the Primary Dealers, continues to defy the gravitational pull of low volume.

Just like the first two days of the week, Wednesday was full of nothing but hot air and the pretentious attitude that the US and the rest of the planet are in some kind of economic recovery and not being lifted by fumes, happy talk and a lack of market participants. This week should stand the test of time as the lowest volume week of at least the past 10 years.

Those few remaining players - the Primary Dealers, select hedge funds and some high-wealth individuals - managed to wring out even more gains as the Fed delivered the final POMO of the year, a mere $5.4 billion, though an amount adequate enough to lift this listless market significantly.

Dow 11,585.38, +9.84 (0.09%)
NASDAQ 2,666.93, +4.05 (0.15%)
S&P 500 1,259.78, +1.27 (0.10%)
NYSE Composite 7,961.48, +29.81 (0.38%)

Advancing issues swamped decliners, 3991-2544. NASDAQ new highs were at 120, with 15 stocks hitting new lows. On the NYSE, there were 189 new highs and just 16 new lows.

NASDAQ Volume 1,079,771,000
NYSE Volume 2,318,948,250

Commodities continued their path higher as well, as gold added another $4.70, to $1410.90 at this time, and silver gained 29 cents, eclipsing its previous 30-year high (Dec. 7, $30.50), now trading for $30.58 per ounce.

Crude oil for February delivery, the front-end contract on the NYMEX, took a 37-cent haircut, but is still dangerously high, at $91.12 per barrel.

We'll get unemployment claims before the opening bell on Thursday and no other data on Friday, the final trading day (and final day, period) of 2010, putting to rest a very painfully-slow post-holiday series of sessions.

One final note for the day. There's a duopoly that is just begging to be resolved. Short interest is at record lows while margin debt is at its highest level since the collapse of Lehman Bros. in 2008. Those two data sets cannot exist side-by-side for long without something breaking out somewhere.

Tuesday, December 28, 2010

With Stocks Stuck in Near-Neutral, Precious Metals Break Out

It's been a while since there was any excitement in the precious metals space - about a three weeks to be exact, when silver popped to a multi-year high at $30.50 and gold marked an all-time record high of $1420.00 on the London Fix. Both of those numbers were made on December 7th, and since then both have seen pull-backs in price, though nothing any serious gold bugs were losing sleep over.

Since then, talk of a gold bubble have been bandied about by the numbskull financial press, the case against JP Morgan and HSBC manipulating the silver market has expanded and stocks have done what they usually do in December, appreciate, though on close to record-low volume across the board.

With Christmas season over and stock pickers jubilant over what's being called the best holiday shopping season since 2007 (not that big a deal, since 2008 and 2009 were, by most accounts, stinkers) there may be a little bit of sanity re-emerging into the markets. Bond auctions in the EU and here in the USA have not fared particularly well, and a failed short-term government bond auction and a 25 basis point hike in China have put the fear of inflation squarely back on the table as holiday cheer and the cheering over retail stocks fades into the background.

Gold rocketed higher, up $21.30 on last check, to $1405.40, which, if it holds above $1403.50 until 5:00 ET, would be the third-highest closing price ever on the NYMEX, all recorded this month. Silver will finish with its second-highest close since the attempted cornering of the market by the infamous Hunt Brothers back in 1979-80 when it topped out at $54/ounce. Today's price is up $1.00, at $30.28, only the second time silver has closed over $30 per ounce in 30 years.

There's currently so much doubt and fear involved with trading stocks and bonds that investors, gamblers and speculators of all kind and size are bidding up the price of both gold and silver, which have traditionally performed best in times of uncertainty. To believe that sovereign economies are solvent and secure would be tantamount to believing that some mythical fat man in a red suit delivered all those nifty iPads and colorful sweaters a few days ago.

Nations are on the brink of economic collapse, and not just Greece and Spain, but larger ones such as the United States, France and Great Britain. Decades of mismanagement of government budgets have stretched the credibility of central banks and politicians to the point that smart money is moving away from the paper chase of currency and securities and back to the old standards of real money - gold and silver.

Today's moves in the precious metals may have been caused by some expiring options positions, though the past three weeks have witnessed more consolidation in the metals market than outright selling. The pullback from the December 7 highs has been brief and not particularly deep, with the move covering all of 5% in the gold price and roughly 7% in silver.

If anything is certain heading into the new year, it's that the global recovery or crisis (tke your pick) still has more to play out, and the main beneficiaries of uncertainty will be the precious metals, heading into the 10th year of an historic bull run.

Stocks and bonds will come and go, rise and fall as they always do, but the permanence of gold and silver appear to be headed for a bright and glorious future.

The day's action in the equities space was as usual: little movement, split indices and extremely thin volume. If not for the HFT computers pushing electrons around, US exchanges might as well have been closed the first two days of this week and probably won't look any better after the next three.

Dow 11,575.54, +20.51 (0.18%)
NASDAQ 2,662.88, -4.39 (0.16%)
S&P 500 1,258.51, +0.97 (0.08%)
NYSE Composite 7,931.67, +10.73 (0.14%)

Losing issues outpaced advancers for the session, 3505-2977, and there were more new highs than lows across both exchanges: 135-12 on the NASDAQ and 130-14 on the NYSE, a kind of reverse-Hindenburg indication. The volume figures should be starkly defeatist to any bulls.

NASDAQ Volume 1,144,227,750.00
NYSE Volume 2,461,884,250

A couple of key economic indicators shed some light on the US economy, which remains mired in the quicksand of bogus bailouts, high unemployment and moribund housing prices. The Case-Shiller 20-city index declined for the 4th consecutive month, making a residential housing double dip a fait accompli. Consumer confidence, as measured by the Conference Board, tumbled from 54.3 in November to 52.5 this month, a clear sign that, despite the howls of excitement over prospects for 2011 from the likes of Jim Cramer and Larry Kudlow, along with a roster of economic forecasters (charlatans) too numerous to mention, economic conditions in America continue to be just a hair's breadth from desperation.

Those wise enough to be already entrenched in niche markets, rarities, precious metals and arable acreage are sitting comfortably in the proverbial cat-bird's seat.

Monday, December 27, 2010

Slogging Along Toward a 2011 Disaster

Just for kicks, here's the opening line to this post without benefit of having seen as much as a stock quote all day:

Stocks flat on low volume.

Let's see how we stack up:

Dow 11,555.03, -18.46 (0.16%)
NASDAQ 2,667.27, +1.67 (0.06%)
S&P 500 1,257.54, +0.77 (0.06%)
NYSE Composite 7,920.94, -4.42 (0.06%)
NASDAQ Volume 1,067,840,625
NYSE Volume 2,203,177,750

Well, prescient, no?

Amazingly, advancing issues swamped decliners, 3637-2817. On the NASDAQ, there were 147 new highs; 13 new lows. On the NYSE, there were 106 new highs, to just 13 new lows. Trading was exceedingly thin, the lowest volume of the year, due to a fierce snowstorm which kept many traders from reaching the floor of the NYSE and the time of year, which always has a negative effect on volume.

Crude oil dipped to $91.00, down 51 cents on the day. Gold bounced around, finally going down 20 cents, to $1384.20 as of this writing. Silver is currently up 7 cents, to $29.29.

There's really no good reason to bother with these thinly-traded equity markets. For much less risk one should be investing in precious metals or one's own business, where the rate of return should easily outperform stocks and/or bonds in good times and especially in bad ones. If one is a good business manager, there is boundless opportunity. Just spare the overhead, keep employees (if you even dare to hire one) to a minimum, work diligently and watch the bottom line.

Any business, unless one is in the wrong line of work or a completely illiquid market, should thrive without much interference from government. That seems to be the major trick - keeping the regulatory agencies and taxing authorities off your doorstep.

America was built on entrepreneurship, vision and perseverance, the last of which is probably the most important. Most businesses fail from lack of persistence in the face of what usually appears as various impediments to survival. In these sad days of the new century, Americans are beginning to suffer from lacks of education, nerve and business acumen. There may be no better time to bootstrap an organization from the ground up, as the politicians are too busy trying to save their jobs and the banking conglomerate is desperate.

With a little pluck and not much capital, Americans may find unique ways to free themselves from wage slavery, the scourge of the nation. All it takes is an idea, some grit, some spit and some attitude. Every household in America should double as home base for a business. It doesn't matter if the business thrives or loses money in the beginning, because the enormous tax benefits of hoe-based businesses will free up more of YOUR money, which the government takes up front in the form of payroll taxes.

Those still treading on the payroll train to nowhere would do well to file a DBA (Doing Business As) with their local county clerk and begin receiving the vast benefits proffered by the US tax code. There are no more home-business-friendly rules in the world.

Just as a hint - and I'm not going to give anyone the entire scope of why having a home-based business is a MUST in these times - start with the deduction from income on the costs of one room (the room which you dedicate to your business). If you live in a two-bedroom apartment with a kitchen, a bath, living and dining room, paying $500/month, making one of those two bedrooms an office - even if you make ZERO net income from your business - allows you to deduct 1/5 of your rent, or $1200 per year, from your gross income. Just this alone, if you're in a 28% tax bracket, will save you $336 in taxes, and that's just for starters.

Imagine if you actually made money from your business. Someday, you might find yourself not worrying about taxes at all, except to shield them from the government like big businesses do, and there are ways.

Wake up and grow up, Americans. The resources are there, the money is out there, what's lacking is the will.

Thursday, December 23, 2010

Oil Surpasses $91/Barrel; Otherwise, a Whole Lotta Nothing

The major story today was in commodities, since equities were witness to the slowest trading day of the year. Oil spiked above $91/barrel as gold and silver slid, though not by much. A slew of mostly inconclusive economic data failed to move markets as traders peeled away for an early start to the holidays. US equity markets are closed on December 24.

Dow 11,573.49, +14.00 (0.12%)
NASDAQ 2,665.60, -5.88 (0.22%)
S&P 500 1,256.77, -2.07 (0.16%)
NYSE Composite 7,925.36, -6.40 (0.08%)

Decliners beat gainers, 3464-2990. The NASDAQ saw 127 new highs and 14 new lows. There were 146 new highs on the NYSE, to just 11 new lows.

NASDAQ Volume 1,272,585,375.00
NYSE Volume 2,831,742,000

February crude oil futures on the NYMEX spiked $1.03, to $91.51, just in time to raise gas prices on one of the busiest travel weekends of the winter. Gold fell $6.90, to $1,380.50, while silver shed 6 cents, to $29.33. If anything, the precious metals are screaming "buy, buy, buy" at the tops of their lungs. Gold, silver, platinum and palladium have stalled out at elevated levels and are consolidating.

In addition to oil over $90/barrel a death stroke for any kind of economic recovery, the precious metals once more appear to be in a very sweet spot, within percentage points of recent highs, and in the case of gold, an all-time high. They could explode to the upside without any advance notice from their current plateaus. If oil remains persistently above $90 per barrel, watch the PMs advance quickly.

That's all there is. Stocks are a fool's game and fools and their money are soon parted, as the old saw suggests. Gold, silver, arable land, collectibles and rarities and tools of trades are the only safe investments (yes, and canned foods).

Merry Christmas!

Wednesday, December 22, 2010

Year-End Melt-Up Continues on Low Volume Trading

The monotony of the Fed's POMO-induced stock market rally must be, by now, be putting some investors into a zombie-like coma, wherein they go to their computers and mindlessly punch in more stocks to buy, at market prices. None of them perform any due diligence, glance at fundamentals or look for patterns in the technical charts.

Stock. Buy. Done. Rinse, repeat. Simple as that. There's no other explanation for the unprecedented rise in equities since the beginning of September, but more pronounced in the final month of the year, one which is normally not very volatile.

There are, of course, very few doing this zombie trading. Volume has backed off to some of the lowest levels of the year, in a year that has been branded as one of extremely low volume and interest. Yet, stocks still rise, and, as we mentioned yesterday, some of the biggest gainers are the financial stocks, for reasons still unexplained. The movement in the financial sector is truly from theatre of the absurd. Bank of America, for no apparent reason, gain a full 3% today, putting its December gain at a whopping 18%. That's extraordinary for a company which still has loads of non-performing mortgage loans on its books (somewhere, we're sure of it) and needed $45 billion in TARP money from the government just to stay alive just a year-and-a-half ago.

Dow 11,559.49, +26.33 (0.23%)
NASDAQ 2,671.48, +3.87 (0.15%)
S&P 500 1,258.84, +4.24 (0.34%)
NYSE Composite 7,931.76, +25.66 (0.32%)

Advancing issues led decliners by a wide margin for the second straight session, 3777-2739. NASDAQ new highs stood at 210, to a mere 25 new lows. On the NYSE, there were 215 new highs, 15 new lows. Those daily new high-low figures have been remarkably similar for the better part of the month, and for good reason. Traders (or computers running arb algos) have ramped in and out of the same stocks for the past few weeks and they have been primary contributors to the upside, which also explains how the indices rise on such paltry volume.

NASDAQ Volume 1,627,216,375.00
NYSE Volume 3,900,822,250

Commodity markets were moribund, with the exception of oil, rolling into the February contract up another 66 cents on the day, to $90.48. The pricing in oil is absolutely sick, running $20-30 over normalized pricing due to rampant, unchecked speculation. The attendant rise in the price of home heating oil and gasoline are nothing other than outright theft of American dollars by the oil cartel, comprised not of OPEC nations, but rather gigantic conglomerates, BP, ExxonMobil, Chevron and Royal Dutch Shell.

Gold spent most of the day straddling the flat line, currently down 60 cents, to $1384.90. So too, silver, 15 cents lower, at $29.22.

With just six trading days remaining in 2010 (Markets are closed December 24, but open for a full session on December 31), it appears certain that all of the major indices will end with sizable upside of at least 10% (Dow) and closer to 15% or more on the NASDAQ and S&P 500.

Tuesday, December 21, 2010

You Owe the Fed $312,606.56; Net is Still Neutral; NJ vs. BofA

As Wall Street slowly wends its way to a year end with a blow-off topping Santa Rally, a few news items - that you won't get on CNBC, promise - were worth noting.

First, the Federal Reserve bought another $9.5 billion in Treasuries today, bringing their total to over $1 Trillion, or, for those who like lots of zeroes, $1,000,341,000,000. The Fed passed China as the largest holder of US government debt a few weeks ago, and now has surpassed the magic $1 Trillion mark, making everybody in the country indebted to the Federal Reserve (well, if you believe we are the government and thus responsible for their debt) to the tune of $312,606.56, roughly speaking.

So, rube, pay up!

The second of the day's big issues was the proposed FCC rules on Net Neutrality, or how the government will allow the big media companies to slice up the internet. What the FCC board did was pass, by a 3-2 vote, new rules, which are essentially the same as the old rules, except that they didn't publish them (rumored to be 100 pages long) and they don't apply to wireless services (phones, iPads, etc.). So, really, what they did isn't really news at all, but might be some day, like when the FCC gets sued again because most people don't believe they have the authority to regulate the internet at all. Larry Downes' guest column on Cnet has most of the dirt.

Our third newsy item is really juicy, however. It appears that some judges in New Jersey's Supreme Court haven't taken kindly to being abused and hoodwinked by some of the nation's largest banks.

The court has ordered a halt to all foreclosure proceedings in the state and has given the largest lenders, Bank of America, JP Morgan Chase, Citigroup, GMAC, Wells-Fargo and OneWest, until the 19th of January, 2011, to “show cause why the processing of uncontested residential foreclosure matters they have filed should not be suspended.”

Apparently, the judges are not convinced that the robo-signing and other frauds perpetrated on the state's courts were mere technicalities and wants the full mea culpa from the banks along with admissions of guilt. This really puts the banks in a tough spot, because they have to honestly and steadfastly assert their positions, which are largely lies and falsehoods about their fatally-flawed foreclosure practices.

Should they fail to convince the justices, they'll face a very long uphill road to ever be heard without prejudice in New Jersey courts. This also opens up the possibility that hundreds of thousands of flawed - and already settled - foreclosures could be reopened if New Jersey's stand becomes a precedent, not only in the state, but across the country.

Get ready for round two of fraudclosure-gate, or whatever they're calling it these days. In a similar vein, the 50 state Attorneys General investigating the foreclosure practices of the biggest banks, have said nothing since rumor broke three weeks ago that they were nearing a settlement with the offending and offensive banks, thus making the current rumor that all deals are off the table, especially since the states of Nevada and Arizona have separately sued Bank of America and Iowa AG Tom Miller, who heads the 50 states' AG investigation, has, together with the US Attorneys office, formed the Iowa Mortgage Fraud Working Group.

The Working Group will "identify and investigate targets for criminal prosecution" and, on the federal level, "will utilize the investigative expertise of agencies such as the Federal Bureau of Investigation (FBI) and U.S. Department of Housing & Urban Development--Office of Inspector General (HUD-OIG). Other federal agencies that may participate in the working group include the Secret Service, Internal Revenue Service, United States Postal Inspection Service, and Social Security Administration."

Ouch, double ouch and triple ouch! Of course, Julian Assange, the operator of WikiLeaks, also contends that he has information that could bring down executives from a major bank, widely assumed to be none other than Bank of America, which, from all appearances, may be in need of a bigger bandage. The bank is currently involved in no less than 35 major lawsuits, most stemming from their mortgage business.

The question then arises, why are people buying Bank of America (BAC) stock, or, the shares of any of the big banks embroiled in the mortgage business, like JP Morgan Chase (JPM), Wells-Fargo (WFC) or Citi (C)?

One would assume, with all of the aforementioned issues, that investors would shun these stocks, yet the reality is that they have been leading the December rally. Since November 30, Bank of America is up 15%; JP Morgan up more than 9% and Wells-Fargo and Citigroup are both up 13%. Either the investor class is being sold a phony bill of goods (wouldn't surprise anybody) or they know something most of the casual-viewing public don't.

They were all up better than two per cent today, leading a broad-based rally.

Dow 11,533.16, +55.03 (0.48%)
NASDAQ 2,667.61, +18.05 (0.68%)
S&P 500 1,254.60, +7.52 (0.60%)
NYSE Composite 7,906.10, +59.14 (0.75%)

Advancing issues trampled decliners, 4680-1871. NASDAQ new highs were 213, to 26 new lows. On the NYSE, new highs led new lows, 257-34. Of course, all of this movement was on dismally-low volume levels.

NASDAQ Volume 1,680,521,625.00
NYSE Volume 3,925,677,000

Oil pushed higher by 45 cents, reaching $89.82. Gold was held in check, losing 30 cents, to $1385.50, while silver posted a two-cent gain, to $29.37. Copper reached an all-time high of $4.3626 per pound, making pennies minted between 1909 and 1982 worth $0.28, nearly triple their face value.

Time to break out the kid's piggy bank?

Monday, December 20, 2010

Another Nothing Day on Wall Street

Why the market is even open this week is a reasonable question. Trading volumes have been so low for so long that this week will just put a punctuation mark on one of the most tenuous rallies of all time. Stocks on the major indices are all in solidly positive territory for the year, so now is as good a time to ask as any: With stocks up two straight years, what are the chances that 2011 will be another positive?

Well, if you ask some of the heavies on the Street, they'll all give you the same answer. They're 100% positive that stocks will see further gains in 2011, from a low reading by Citigroup with the S&P 500 at 1300, to a high of 1420 by Barclays Capital, other forecasters see gains of 5-14% in the coming year.

Mark Twain once famously said, “Whenever you find that you are on the side of the majority, it is time to reform.” So, since I don't want to be on the wrong side of this issue and since almost everybody in the world believes stocks will have another upside year in 2011, I'll put forth the prospect that stocks are currently 12-15% overpriced and 2011 will be a year in which we will witness a rather healthy decline of 20% or more on the major indices (and I'm being conservative).

Anecdotal evidence shows that since World War II stocks have traded higher three consecutive years only twice, and the gains were quite small. All other times, the markets showed losses in the third year. There are good reasons for this, many of them having to do with the business cycle and nothing to do with the concept that the US hasn't really made it out of recession and is still struggling, though that could be a good argument on its own.

Dow 11,478.13, -13.78 (0.12%)
NASDAQ 2,649.56, +6.59 (0.25%)
S&P 500 1,247.08, +3.17 (0.25%)
NYSE Compos 7,846.96, +11.65 (0.15%)
NASDAQ Volume 1,728,535,625
NYSE Volume 3,973,126,250

For the session, advancers narrowly topped decliners, 3313-3227. New highs on the NASDAQ totaled 226, to 28 new lows. On the NYSE, there were 208 new highs and 23 new lows. Volume was absurdly low, though expected, this being less than a week before Christmas.

Oil gained 79 cents, to $88.70. Gold added $9.60, to $1385.10, while silver kicked ahead 18 cents, at $29.37.

Friday, December 17, 2010

Just in the Nick of Time, Politicians Save Economy... Again

As this is being written, the voice of President Barack Obama is monotonously rattling off the bullet points in praise of the $898 Billion (do the numbers even matter anymore?) tax extension and cut package approved by congress over the past few days and signed into law by Mr. Obama today.

Politicians love to make us believe that they are doing some good for the country, for us, for our kids, dogs, cats, parakeets and the rest of the little creatures who inhabit the vast expanse of the United States of America.

Reptiles that they are, congress and the president are making the world a better place for lizards, snakes, turtles, crocodiles and the ever-vigilant alligator. The vultures are ensuring the future for untold generations of crows, sea gulls and other flying creatures who pick through the trash in the parking lots of fast food restaurants, strip malls and shopping centers.

They have once again proven their collective brain-power to be insect-sized, and grateful are the hordes of locust, flies, fleas, mites, beetles, ladybugs, preying mantis, and ants whose job it will be to devour what is left of the continent once we are gone.

The fish are jumping and mammals of all ilk, coyotes and bears, antelope and moose, squirrel and gopher, praise the politicians for their largesse in allowing American humans to keep more of what they earn. Surely now, the great and magnanimous political class will pass some of our money over to the corporate class, for as we keep, so shall we blow. We will spend our extra moneys on iPods and flat-screens, CDs, DVDs, hors d' oeuvres, whirling dervishes and other diversions, all of which will cost more due to the inflationary policies pursued by the Federal Reserve and federal, state and local governments.

We shall spend. They shall spend. Together we shall ensure a present and a future in which nobody suffers any pain of any kind in any manner on any day forever and ever. Hallelujah, amen, they've saved the world again. God rest ye, merry gentleman and ladies, we can celebrate our christmas by shopping with our credit cards, online and off to the malls with you now! Enough reading. It's time to go out and spend, spend, spend.

My goodness! Look at that reaction from Wall Street. We are overwhelmed by its non-existence! With two weeks left to the year's trading, the clarion call apparently wasn't heard in lower Manhattan. Buy! Buy! Buy!

Dow 11,491.91. -7.34 (0.06%)
NASDAQ 2,642.97, +5.66 (0.21%)
S&P 500 1,243.91, +1.04 (0.08%)
NYSE Composite 7,835.31, -4.93 (0.06%)

Volume was strong today due to quadruple options expiration and nothing more. Advancing issued barely managed to beat the "Bah, Humbug" declining stocks, 3588-2905. On the NASDAQ, new highs outnumbered new lows, 211-31. On the NYSE, the tally was 175-22, new highs to lows. Hurrah!

NASDAQ Volume 2,576,992,250
NYSE Volume 5,729,695,500

Oil gained 32 cents, to $88.02. Three cheers. Gas will cost more this holiday season. Gold was allowed to rise a bit by the naked shorting banks, gaining $6.10, to $1375.60. Silver was also given special dispensation, gathering another 42 cents to its inexorable rise, now at $29.15 per troy ounce.

The lining, silver or otherwise, was that the republicans in congress, generally, would not pass a $1.2 Trillion omnibus spending bill proposed by outgoing Democritters, opting instead for a continuing resolution to tide the government over for a few more months. The next congress will get down to business come January, and they have promised to make cuts in spending.

Some of us also believe in flying unicorns that excrete hundred dollar bills.

Thursday, December 16, 2010

Stocks Higher on FedEx Miss. Yes, That Is Correct

In the current environment, market participants will rationalize anything bad into something good.

A case in point was the big miss of expectations by FedEx (FDX) on their fiscal second quarter results. Consensus estimates of 1.31 per share was greeted this morning - prior to the opening bell - with an announcement of 1.16 per share. The company also narrowly missed on revenue, but that was not the issue.

Normally, a miss like this (-12%) would send a stock price reeling, but in today's POMO-led, funny-money, can't-go-down-before-options-expire pirate market, FedEx actually opened lower, hitting what were to be the absolute lows of the day within minutes, but then exploded to the upside. Within fifteen of the opening bell, FedEx was trading up by more than 1.5 points and finished the day with a gain of 1.83.

Now, the rationalization is that the miss was caused by onerous things like employee compensation, and the company restated full-year projections much higher to offset the blow, but, the fact that everybody trading in the stock was pleased is without doubt part of a rigged system that cannot be trusted. Logic has been thrown out the window repeatedly, yet keeps finding its way back in, only to be tossed away again and again. This one is egregious to the extreme.

So, stocks shrugged off the bad news and went with their gut, incidentally tied to cashing out huge on options expiration tomorrow and then calling it quits for the year - all conveniently planned in advance.

Dow 11,499.25, +41.78 (0.36%)
NASDAQ 2,637.31, +20.09 (0.77%)
S&P 500 1,242.87, +7.64 (0.62%)
NYSE Composite 7,840.24, +41.46 (0.53%)

Advancing issues reversed the prior two days of embarrassment, drubbing decliners, 4406-2105. NASDAQ New Highs: 172; Lows: 24; NYSE New Highs: 118; Lows: 25. This puts two days of Hindenberg Omen calculus (appearance and confirmation) to rest for now, though the next 40 days remain in focus. Volume was sloppily low again, as usual, even more so, considering the closeness to options expiration (tomorrow).

NASDAQ Volume 1,750,373,125
NYSE Volume 4,863,573,500

Commodities oddly took it on the chin, with oil continuing a slow death march, down another 92 cents, to $87.70, though still well above average for 2010. However, since it is the holidays and people aren't driving all over the place to buy gifts they don't need for people they don't like, the oil barons have to make money somehow, don't they? So, they've done what every hard-knuckled oil baron would do in distressing times, bump the price up a notch or two. Watch how it comes down in January, like clockwork.

Precious metals were hammered down mercilessly for the better part of the day, but recovered as the stock market headed for the close (no coincidence there). Gold is currently down $9.90, at $1369.50, and silver was beaten until just after noon, now trading at $28.88, a gain of 8 cents.

Friday is a quadruple witching day, though the focus will be on stocks, buttressing the bonuses of wall Street's elite traders. After that, anybody's guess, but the market sure looks rich now, since it looked rich three months, six months and nine months ago as well.

One after-hours note: The Federal Reserve, as part of the Dodd-Frank legislation, proposed slashing interbank fees (fees charged to retailers on debit card transactions) from the current average of 44 cents (they charge 1.2 - 1/5% currently) to a structure which caps fees at 12 cents per transaction. The proposal is embraced by consumers and retailers, though Visa and Mastercard shares were smacked down on the news. What a shame!

Wednesday, December 15, 2010

Dead Money

Dow 11,457.47, -19.07 (0.17%)
NASDAQ 2,617.22, -10.50 (0.40%)
S&P 500 1,235.23, -6.36 (0.51%)
NYSE Composite 7,798.78, -56.44 (0.72%)
NASDAQ Volume 1,876,932,000
NYSE Volume 5,043,671,500

The numbers tell just about the whole story of today's uneventful trading. With just two weeks left in the year and Christmas now just ten days off, traders seem reluctant to take on new positions. Stocks are trading in a narrow range and for the third consecutive day, have sold off into the close, not a very encouraging sign.

Declining issues outpaced advancers, 4197-2299. On the NASDAQ, new highs bettered new lows, 167-32 and on the NYSE, 156-89, as convergence continues, especially on the NYSE. Volume was actually a little better than the low, low normal, and, with options expiring on Friday, the suspicion is that the smart money has already exited the trading area.

There simply is no catalyst for stocks besides the Fed's relentless pumping (another $6.8 billion today) and even that isn't enough to keep stocks positive. It raises the question of extending the Bush tax cuts and adding further stimulus by the congress. If conditions were so rosy, why the need for more easing on the fiscal side. Obviously, something is amiss.

One guess will be that the Christmas shopping season will be a minor disappointment, as will December jobs numbers, revealed the first week of January. Then there's the issue of corporate profits nearing the middle to end of the month. If they're not perfectly great, selling could become de rigeur.

Even commodities weren't moving today. Oil made a modest gain, up 34 cents, to $88.62. Gold fell sharply, losing $18.40, to $1,386.20. Silver slipped back another 54 cents, to $29.25.

It all looks very much like locking in year-end profits.

Tuesday, December 14, 2010

Fed, ZIRP, QE2 Pumps Dow to Highest Close in 27 Months

Since the economy is still looking like something out of a B-grade horror flick, the Fed can take credit for one thing, at least, pumping stocks to levels not since they were going down, two years ago. The Dow Jones Industrials closed at its highest point since September 8 of 2008, when it closed at 11,510.74, on it's way to its eventual bottom on March 8, 2009, of 6547.05.

Today's close of 11,476.54 represents an overall 21-month gain from the bottom, of 75%, one of the most tremendous performances by the stock market in history. However, as we learned in 2008, these gains are largely transitory, on paper, unreal, and can be wiped out in a matter or weeks or months. Further, they have been fostered by trillions of dollars in bailouts, stimulus, fraud and deception on top of an economy that can't seem to move off square one, never mind creating any jobs for real, working Americans.

If it all seems somehow out of whack, it's largely because it is. Between TARP, QE, QE2 and two stimulus plans, the government - and the Fed - has gone deeply into debt and the burden pushed onto the taxpayer in the form of an overgrown public debt and federal budget deficits of over a trillion dollars a year for as far as the eye can see.

Meanwhile, the housing and manufacturing sectors of the economy have been shattered. Home prices are down 25-30% since 2006 on a national basis, with some areas - particularly Nevada, California, Florida and Michigan - experiencing deeper declines. Manufacturing has shed nearly 500,000 businesses since the early 2000s, along with more than 10 million jobs.

Unemployment, even narrowly defined by the BLS, is approaching 10%, though true measures of employment in America put the number closer to 20%, with some estimates ranging as high as 27%. In effect, about one in four able-bodied American under the age of 65 is not gainfully employed full time. This is a condition which cannot continue. High unemployment renders us a welfare state, complete with all the nasty side-effects: high crime rates, rising death rates, lower educational standards and a permanent underclass which now is beginning to occupy the outskirts of major cities across the country and especially in the South and Southwest. Homeless people tend to gather where it's warm enough to sleep out-of-doors, and the numbers are beginning to become staggering statistics.

The FOMC voted today to keep interest rates at ZERO to .25% for the 27th month in a row, neatly matching up with the collapse of the stock market, so, while the Fed has failed on multiple fronts, they get a big round of applause from Wall Street, as the only group seemingly doing just fine are bailed-out bankers and the corporate crack in which they traffic.

The only other measurable group doing well would be coin and bullion dealers and collectors, as gold and silver coins and bullion have appreciated at rates dwarfing stock market gains since 2000. Essentially, both precious metals have quadrupled in price over the past decade and silver, in particular, seems to be just getting started on a lengthy bull run. So long as the Fed keeps monetizing the debt and the banks fail to record and write down their losses, the metals will outperform all other asset classes.

Today's gains were once again truncated by late-day selling, after the FOMC announcement. There's little faith left in equities, as they nervously approach levels which are unsustainable in the current environment. Traders are counting the hours down to the year's end, after which they can make adjustments in January, but we're not quite there yet.

Dow 11,476.54, +47.98 (0.42%)
NASDAQ 2,627.72, +2.81 (0.11%)
S&P 500 1,241.59, +1.13 (0.09%)
NYSE Composite 7,855.22, +5.20 (0.07%)
NASDAQ Volume 1,767,595,125
NYSE Volume 4,579,517,500

Advancing issues trailer decliners, 3067-3346. New highs/lows on the NASDAQ were 158-23 and 176-113 on the NYSE. The high-lows are converging in a hurry, signaling that a major dell-off could occur within days. Volume remained weak. No news there.

Oil pulled back a little on the day, shedding 33 cents, to $88.28, though still close to 2-year highs. Gold was up most of the day, but barely hung onto a $1.40 gain, at $1395.90. Silver was also higher, but is now printing down 4 cents, at $29.51. This, after JP Morgan, in a terse statement, said they had trimmed their exposure to the silver market, the one they are accused of rigging for years and now the subject of a criminal class action suit.

Anecdotal evidence that the holiday shopping season is not at all robust got a kick of reality as Best Buy missed estimates by a wide margin, causing other electronics retailers and related industries to tumble.

Monday, December 13, 2010

Twelve Days Until Retailers Call It a Day

If this weren't the most over-hyped Christmas season in the past six years, one would be wondering where all the ads are on TV. Retailers continue to proclaim that this year will be better than last year (which was pretty bad, in itself), that same-store sales are showing solid improvement and all the rest of the nonsense they banter about to shareholders and keepers of the materialist Christmas buying season creed.

But, with just twelve days to go before everybody stops shopping and actually opens the presents, there are some indications that this holiday season is going to be quite awful for many a retailer.

Here's a few reasons why:
  • "Same-store sales" are always measured against stores open a year or longer. Most of the larger retailers have already closed many non-or-under-performing stores, so the comparisons look better, even though there is less volume.
  • November non-farm payrolls actually showed a decrease in November retail hiring, at a time which retailers are normally hiring more staff for the "Christmas rush." This is a troubling sign that there is no rush this year.
  • Inflation has pushed up prices for many gift items, especially clothes, which are primarily made of cotton, which price went nearly exponential this year. Higher prices will result in high same-store sales, though buying the same sweater this year rather than last will cost 5-10% more, making it look like there were more sales when in fact there were not.
  • On Friday, December 10, TJX Cos., the parent company of TJ Maxx, Marshall's and HomeGoods, announced the closing of 71 A. J. Wright stores and the conversion of 91 others into TJ Maxx or Marchall's stores, and permanent job cuts of 4400 nationwide.
  • According to a BDO survey, 63% of retailers are spending what they did last year on advertising and marketing; 20% are spending less, and just 17% have increased their budgets over 2009.
  • Retail sales for October were up 1.2% (ex-auto, 0.4), but November, the start of the holiday shopping season, is expected to show a gain of only 0.5%. The figures are due out on Tuesday, and anything less than that may cause investors to reconsider retailers in their investment strategies.
All of this points to a ho-hum kind of Christmas season, when a whiz-bang one is what's needed. Unemployment is too high and consumer deleveraging continues at such a hot pace that one cannot reasonably expect high demand for consumer products. Some retailers may actually close more stores in January or February, or file bankruptcy, as Great Atlantic & Pacific Tea Company (A&P), parent of Waldbaum's and Pathmark stores, did last week.

Harder hit will be smaller, "mom-and-pop" type retailers, who generally have less room for error, tight - if any - lines of credit and no tolerance for losses. Retailing has been hit hard since the market collapse of 2008, and many small businesses fall into the retail category.

A little bit of good news is that some of these retailers may close their Main Street or mall shops, only to re-emerge online with business being run out of a home or less-expensive location. The trend from brick-and-mortar to online continues to grow and has actually been pushed by tight margins and high rents which plague many a retailer.

Still, when the country wakes up on December 26 and again in early January, only to find that the economy is still as sluggish as ever, there will be repercussions and more casualties.

Some of that sentiment may have been reflected in today's trading on the stock markets, which broke higher in the morning, peaked just before 3:00 pm and sold off hard into the close. It was an unexpected start to the week and may be offering a clue about tomorrow's 8:30 am retal sales release.

The Dow, NYSE and S&P registered marginal gains, closing at or near the lows of the session, while the NASDAQ broke an eight-day winning streak.

Dow 11,428.56, +18.24 (0.16%)
NASDAQ 2,624.91, -12.63 (0.48%)
S&P 500 1,240.46, +0.06 (0.00%)
NYSE Composite 7,850.02, +26.72 (0.34%)

Decliners beat advancers, 3459-3059. NASDAQ New Highs: 279; Lows: 19; NYSE New Highs: 271; Lows: 87. Volume was dull, as per usual.

NASDAQ Volume 1,853,841,375
NYSE Volume 4,861,153,000

The real action today was in the commodity space, which heated up once again with the Fed injecting $8.9 billion in fresh cash to the Primary Dealers through Treasury purchases. Oil advanced 82 cents, to $88.61. Prices for non-leaded regular gas are now over $3.00 per gallon in most of the United States. The most recent gold price was $1394.50, up $8.90. Silver had a huge rally, up 87 cents, to $29.55, and should break through the magic $30 mark this week if trends outlined by Turd Ferguson play out with resistance at 29.50 broken by today's close.

Friday, December 10, 2010

As the World Turns... or, As the Fed Turns the World Into Trash

You really have to hand it to our genius Chairman of the Federal Reserve, Ben Bernanke. He's so smart, he managed to lose a couple billion dollars on his recent bond purchases. Not a problem for him, really, he's just another hired hand, but he's now openly adding to the national debt load, which, in case this needs repeating, is completely unpayable and out of control.

How did Uncle Benji lose $2.4 billion in a month, you ask? Maybe announcing the timing of his "buying spree" otherwise known as QE2, in advance, gave the Primary Dealers (those from whom he was purchasing) the opportunity to ramp up interest rates to their benefit (and the public's detriment). Would they do that? would execs at Goldman Sachs, Morgan Stanley or Merrill Lynch steal your grandmother's purse in broad daylight if she accidentally left it unguarded?

It's exactly what happened. Otherwise, why did interest rates spike the moment the Fed announced their POMO schedule? It's open theft on the American public. May the Fed and all member banks rot in the very worst of hells for eternity.

Making matters even more absurd and detrimental to the health of the US economy, the Fed today announced its latest schedule of market "operations," by which they will monetize another $105 billion of Treasury debt and thus fund the bankrupt banks with more easy money.

Equity markets responded as they should to easy money flows, with gains across the board in the major indices.

Dow 11,410.32, +40.26 (0.35%)
NASDAQ 2,637.54, +20.87 (0.80%)
S&P 500 1,240.40, +7.40 (0.60%)
NYSE Composite 7,823.30, +41.16 (0.53%)

Advancing issues overwhelmed decliners, 4334-2199. NASDAQ New Highs: 243; Lows: 28; NYSE New Highs: 203; Lows: 47. Unfortunately, many of the NYSE New Lows were bond funds, many the repositories of municipal pensions. As these lose money, debt crises in the various states continues to grow. In New York, California and Illinois, state budget deficits have reached crisis stage. Volume, overall, was miserable, as normal.

NASDAQ Volume 1,754,129,500.00
NYSE Volume 4,996,264,500

In the commodities space, a bit of a breather. Oil, thankfully, has backed off a bit after flirting with the $90 level, losing another 58 cents today, closing the week at $87.79. Gold's last print was at $1385.80, down $1.20. Silver was also relatively quiet, spending the entire day in the red, though down only 8 cents, at $28.68.

Finishing off a ho-hum kind of week (though admittedly, the Fed has us on the edge of our seats), the following animated video helps explain why JP Morgan Chase is rich, though maybe not for long, and why you should own as much physical silver as you can afford.

Hilarious video of how JP Morgan is up to its neck in short silver contracts with no good way out.

Thursday, December 9, 2010

Do Not Watch at Your Own Risk

For those who think Nouriel Roubini (AKA Dr. Doom) is a little too pessimistic, the interview - linked at the end of this post - with John Williams ( might be a bit much to bear. But, it is highly recommended that anyone with a time horizon of more than six to twelve months view the interview in its entirety (almost nine minutes) and heed well what Mr. Williams says about the future of the United States, hyperinflation, Fed policies and being prepared.

Mr. Williams' site,, has general commentary on the state of the economy, though more detailed analysis is by subscription only. It's rare to see Williams live, this being one of the few interviews available, but he's a down-to-earth economist who examines the US economy with the bent of a CPA, using GAAP instead of the fuzzy numbers the government likes to throw around.

Just the kind of stuff one needs to hear before venturing out to the mall for Christmas shopping, but, essential viewing if one wishes to survive until, say, 2012.

First a quick recap of the markets:

Dow 11,370.06, -2.42 (0.02%)
NASDAQ 2,616.67, +7.51 (0.29%)
S&P 500 1,233.00, +4.72 (0.38%)
NYSE Composite 7,782.14, +31.82 (0.41%)
NASDAQ Volume 1,948,935,500
NYSE Volume 4,994,395,500

Obviously, not much to get excited about today, though House democrats did vote no in a caucus on accepting the President's "tax compromise" worked out with Republicans earlier in the week. It's a bit of a snag, especially since the Bush tax cuts expire at year's end and most of the cretins in congress would like to skip out of town in less than two weeks.

Advancing issues beat decliners, 3697-2758. NASDAQ New Highs: 182; Lows: 21; NYSE New Highs: 152; Lows: 28. Volume was poor, especially on the NYSE.

Oil put up a 9 cent gain, to $88.37. Gold recovered some lost ground, gaining $5.70, to $1387.00 on last print, as did silver, up 40 cents, to $28.76.

That's about it. Markets are dull as traders wind down positions at year's end, allowing more time to view the excellent video below.

Click here for John Williams interview.

Wednesday, December 8, 2010

Bullet Points (no, not real bullets, yet) on the Mid-Week Menage

The noise out in finance-land is becoming deafening. So much, that one can barely keep up with events as they occur. Whether that is the plan of the criminal oligarchs or not, things are sure getting interesting. we present bullet points for today's mass screwing:

  • Overnight, gold and silver are sucker-punched, supposedly by JP Morgan, which is trying to suppress prices of what are now competing currencies. The assault continues into the day (see below).
  • Certain members of the House of Representative express doubts about whether they will vote for the "tax deal" that President Obama and the Republican leadership worked out on Monday.
  • 10-year note yield hits 3.37 midday, backs off to close around 3.24, but is up a full 100 basis points (1%) from just a month ago.
  • Julian Assange, founder and head of WikiLeaks is still being held without bail in UK; lawyer seeks to fight extradition to Sweden where he faces trumped-up charges of "sex crimes."
  • In response to Visa and Mastercard shutting off Assange's access to his money, hackers shut down credit card web sites.
  • Planned bank run in Europe turns into a colossal failure, hardly worth mention.
  • More criticism of Fed's Bernanke interview surfaces, most claiming he lied about "not printing money" and laughable commentary about being 100% sure he can handle his job.
  • China ready to hike interest rates 50 basis points on Friday or Saturday, in direct opposition to Fed's QE2
  • Stocks flounder all day as Fed only monetizes $2.1 billion, smallest POMO in weeks.
  • Market spooked by alleged huge FBI raids on hedge funds, though no arrests occur.

Dow 11,372.48, +13.32 (0.12%)
NASDAQ 2,609.16, +10.67 (0.41%)
S&P 500 1,228.28, +4.53 (0.37%)
NYSE Composite 7,750.32, +10.68 (0.14%)

In opposition to the smallish headline numbers, declining issues outnumbered gainers on the day, 2829-3641. NASDAQ New Highs: 165, Lows: 25; NYSE New Highs: 125, Lows: 28. While the gap between the new highs and new lows is still quite large, the shrinkage today from the advantage the past few weeks is substantial. This indicator has been threatening to roll over for some weeks now, but has yet to do so. When it does - and it eventually will - it will delineate a new down-trend for stocks, one that is very long overdue. Even Bernanke's QE efforts cannot keep a market permanently on an upward bias.

Volume was back to sick, anemic levels once again as nobody wants to trade US stocks, or, at least the number of players in the market has diminished and will probably remain at low levels at least through the new year. Trades of size have only another seven or eight sessions remaining in the year to be made, as the Christmas and New Year's holidays blunt all trades and are normally among the slowest trading days of the year. A run on equities for year end is assumed, as prices are abnormally high and being held in space. Options expiration is still a week away, and could be the day (next Friday, Dec. 17) for capitulation, though today serves as a hint of what's coming.

NASDAQ Volume 1,783,785,000
NYSE Volume 5,241,274,000

Crude oil backed off a little more, losing 41 cents, to $88.28. The damage done in the precious metals markets, however, was more severe, likely the effort of highly-leveraged manipulators (JP Morgan), dropping gold $18.20, to $1382.20 and silver losing another 27 cents, to $28.38. Both gold and silver had made new multi-year highs on Tuesday and the powers that be could not stomach losing so badly on their short positions, thus, the coordinated attack.

For gold and silver bugs, who buy and hold the PMs as hedges against currency risk, the moves were meaningless, actually presenting a buying proposition as global currencies continue their race to the bottom. CNBC hosts asked if the moves were indicative of a bubble, especially in gold, the best contrarian indicator we've seen in some time.

Tuesday, December 7, 2010

Prepare For More Calamity

The President, Congress and the Federal Reserve finally got together on a unified theory of economics and apparently it is to borrow as much money from anywhere as possible, manipulate markets as much as possible, lie as fervently as possible and hope for the best.

With the "tax deal" done after-hours on Monday, the President bent to the will of the Republicans and sent the Bush tax cuts into permanent status (he says two years, but they'll never raise taxes again), extended unemployment insurance for another 13 months, meaning if you can manage to get laid off now, you're in for a three-year vacation, and to top it off, cut the social security withholding from 6.2% to 4.2%, a whopping 32% tax haircut.

All of this was done after the Tea Party Republicans were ushered into office on a "fiscal responsibility" platform just a month ago. It will be interesting to watch what happens when these newly-minted congress-critters actually are sworn in next month, because, if they're serious, they shouldn't stand for what amounts to a loss of about a trillion dollars in revenue to the feds.

Wall Street responded as it usually does to free money or lower tax regimes, it rallied right out of the gate. But late in he day, something odd happened. The markets suddenly rolled over and headed south, just like commodities - especially oil, gold and silver - did earlier in the session.

By the end of the day, the central planners in Washington and on Wall Street had a real mess on their hands: nobody trading stocks, bonds selling off, forcing yields higher (the Fed and the Govt. will go bust if this happens) and commodities being manipulated lower.

The insider crooks and their political lackeys have pushed the envelope over the proverbial cliff and now face what appears to be a disaster beyond even their control. Rising interest rates will destroy the Fed's balance sheet (QE was designed to do the opposite), absolutely plunge housing into another price collapse worse than what we've already witnessed and bankrupt just about every bank in the nation, to say nothing of the collateral damage done to the rest of the world.

As I've mentioned before on this blog, a deflationary depression may be one of those elements of financial nature that one cannot stop. It's going to happen no matter what. Lives will be lost, careers shattered, banks closed and general malaise will rule for an extended period. The morons running the Ponzi scheme in the financial markets and with tax policy will have to leave the country or face angry mobs who have nothing else to lose.

Pretty picture? Thank yourself for not taking action sooner, or not understanding what's happening or for trusting our government (yes, the one that hasn't done anything of any good for the average working-class person in the last ten years). These people and the coerced media represent the worst parasites in the world. They've ruined the global economy for their own enrichment. It's now every man and woman for his/herself.

I've hinted at this kind of statement in the past, but never actually put it in words: it's now time for Americans to take a stand. Stop paying taxes. Stop working. Stop buying. Just stop the government and the media in their tracks, force the politicians from office and arrest the heads of the largest financial institutions. They are all criminals and traitors and do not represent anything American, by any stretch of the imagination.

Dow 11,359.16, -3.03 (0.03%)
NASDAQ 2,598.49, +3.57 (0.14%)
S&P 500 1,223.75, +0.63 (0.05%)
NYSE Composite 7,739.64, -1.05 (0.01%)

Advancers narrowly edged decliners, 3397-3094. There were, due to the ramp up through most of the session, 783 new highs, and just 49 new lows. Volume, due to the bi-directionality (like that word?) of the market was strong.

NASDAQ Volume 1,925,702,500
NYSE Volume 6,967,751,000

The front end oil contract on the NYMEX was over $90/barrel early on, but reversed course and closed with a 69 cent loss, at $88.69. Gold and silver were both hammered mercilessly after the close in New York, by the Fed and their cohorts, JP Morgan, with gold losing $22.60, to $1401.10, while silver was absolutely blasted, losing $1.43, to $28.65 (buy, buy. buy!).

Here's one guy who gets it. The powers that be, both in Washington and Wall Street, cannot contain this much longer. Their schemes are too complex and will eventually implode back upon them either in a massive stock market crash (very high probability), a bond collapse (high probability), hyper-inflation (some probability) or the death-knell of the deflationary depression (high probability, but great for those on the mid-to-lower rungs of the ladder, as it implies debt forgiveness, lower carrying costs and a pretty basic reset).

The past two years have not been a picnic, but the coming three-to-four years seem to be flashing warning signals already. The worst - since there hasn't been any real pain yet - is still to come, and, by the looks of what occurred today, is about to get really serious.

Hold precious metals, keep as much cash on hand and out of banks as possible, hoard food and fuel and pray you and your kids don't get hit by stray bullets. When the shooting starts, it's not likely to end quickly. The guess is who fires the first shot, who gets it in the head and, not if, but now, when.

Monday, December 6, 2010

Silver Soars Over $30 as Europe Prepares for Bank Runs, Bernanke Lies

Our ongoing financial fantasy took a very real turn for the worse Sunday as Federal Reserve Chairman Ben Bernanke appeared in an "exclusive" interview by Scott Pelley on the "60 Minutes" broadcast. (The entire 15 minute report is embedded at the end of this post.

Bernanke has been widely criticized for many of his policies - mostly blunders which favor saving banks instead of liquidating them - but he's received far more criticism than ever before for his recent foray into another round of Quantitative Easing (or, QE2 as it's come to be known). Mr. Bernanke hinted at this move in September, providing upward grease for the equity markets, and than formally announced it in early November, implementing a series of daily permanent open market operations (POMOs) which commenced on November 12 and have continued daily - except for the days immediately before and after Thanksgiving - ever since, contributing 1.5 to 9 billion dollars daily in repurchases of Treasury debt from Primary Dealers (PDs).

What was most troubling about the interview was not what Bernanke said, so much, as how he appeared, trembling, quivering and crossing both his arms and legs at times, in the classic body language "double cross," indicative of those telling outright falsehoods. Bernanke lied that the Fed isn't printing money. He most certainly is, whenever the Fed repurchases Treasury debt. He also was largely lying when he mentioned that unemployment was an effect of education, saying that unemployment among collage graduates was only 5%, and higher for those without college educations.

Sure, he's right to some extent, but ask some of the recent college grads working at part-time jobs, or jobs for which they're overqualified or not working at all, what their job prospects look like. Many college-aged individuals have resorted to staying in school, pursuing post-graduate degrees, hoping that in two or three years the employment situation may be better. No, unemployment is not a function of education. It's a function of there being only one job for every five people looking, and the jobs offered being entry level or part time, at that.

Meanwhile, the Europeans have a new issue with which to deal: the widespread public outcry and rally for a bank run on Tuesday, December 7, promoted by soccer star Eric Cantona. While the banks are probably well-prepared and will likely close branches for a day or so if thing get out of hand, they're unlikely to fail, though the public will send a loud, unmistakable message.

Whether the officials at the control of the world's economy will listen is probably a moot point. They will not; they haven't yet, and probably never will.

Dow 11,362.19, -19.90 (0.17%)
NASDAQ 2,594.92, +3.46 (0.13%)
S&P 500 1,223.12, -1.59 (0.13%)
NYSE Composite 7,740.69, -10.89 (0.14%)

US stocks spent the day hugging the flat line, on low volume. Advancers beat decliners, 3032-2640. New highs bettered new lows, 241-32 on the NASDAQ, 259-8 on the NYSE. Nothing new there at all, with the same names being pumped or dumped for the better part of the past week.

NASDAQ Volume 1,633,755,875.00
NYSE Volume 3,694,626,75

The major news was in the silver market, which has experienced outsize gains over the past three months. Silver last printed at $30.13 spot, up 70 cents. Gold also made a new all-time high of $1422.90, up $8.40. Crude oil futures on the front end contract rose 19 cents, to a new 2010 high of $89.38.

How high can silver go? Most analysts see it doubling in three years, though prices of $100 per ounce and higher are being bandied about as the gold-silver ratio is expected to come back to its historical norm of 16-1.

Friday, December 3, 2010

Major Payroll Miss Slows Rally

Truly, the headline should have been worse, but the efforts of our beloved Federal Reserve, relentlessly supplying free cash flow to the entire banking and finance system through QE2, turned what, in ordinary times, should have been a major drop in the indices into a small gain. Obviously, these are not ordinary times, as the Fed's policies and government inabilities have completely distorted equity and bond markets, though, bonds, admittedly, are a little less affected.

The culprit in this case was a woeful reading from the BLS on November non-farm payrolls. Expected to come in at 150,000 new jobs, the miss was massive, registering at only a gain of 39,000 for the month. The unemployment rate was also hiked to 9.8%. A miss of this magnitude should have caused a major sell-off of something along the lines of 200 points on the Dow, but the smiley-face, feel-good "recovery" posture foisted upon an unsuspecting public by the charlatans who call themselves the "financial media" on CNBC and elsewhere, in perfect Orwellian doublespeak, turned this negative into a positive, suggesting that the lack of jobs in America is a good sign that the Bush tax cuts, QE2 and unemployment insurance will be extended.

Suddenly, like magic, the fact that there's only one job for every five applicants in America - during the height of the holiday season, no less - is a very good thing indeed! On the other side of the coin, since most everything emanating from our nation's capitol and Wall Street are complete fabrications and half-truths, at best, perhaps the doltish politicians running the circus thought a little depression might be good for what ails us.

Washington is so completely corrupt and bankrupt it's appalling, even to below-average fifth graders, who are likely to be able to see right through the politics of fraud. Nothing matters to these people except stock prices and elections. Half of the Southern states are starved for funds, as are most of the Northeastern ones along with California, but that's not anything that concerns them. They'll mindlessly dawdle over minutia like 3% tax cuts instead of actually handling matters of national importance. Thank goodness for Wikileaks and the internet, for displaying the true level of corruption and ineptitude that has brought the country to its knees.

Dow 11,382.09, +19.68 (0.17%)
NASDAQ 2,591.46, +12.11 (0.47%)
S&P 500 1,224.71, +3.18 (0.26%)
NYSE Composite 7,751.58, +39.33 (0.51%)

Amazingly, advancing issues outnumbered decliners by a substantial margin, 4029-2364. New highs again beat back new lows, 497-39, entirely similar to the past two days. Yes, siree! The same stocks, being endlessly pumped to infinity. The best news is that volume was down, meaning Goldman Sachs probably turned off one of its Cray XE6's for the weekend.

NASDAQ Volume 1,836,885,000
NYSE Volume 4,307,858,000

Oil futures reached a 2010 high, up $1.19, to $89.19. Precious metals and grains were also sharply higher. Gold ramped up $16.90, to $1,406.20; silver gained 70 cents, to $29.27. The silver and gold bugs would like to applaud Fed Chairman Bernanke for making them rich beyond their wildest dreams. The best part is that his failed policies will continue for many more months and be copied by our counterparts in the Eurozone, meaning the prices today will look like chickenfeed in a few years.

Of course, along with the precious metals go other commodities, like food and oil, so while the hoarders of gold and silver will be wealthy, they'll eventually have to hock that shiny stuff for gasoline, a loaf of bread and cans of tuna. At least they'll be able to get around and eat. The remainder of the immobilized masses will be starving to death.

We are deserving of all this, however, for electing spineless politicians and allowing the corruption and wantonness to go unchecked for so long. In another time, the wall of congress would be ringing with gunfire and bankers hung from the nearest lampposts, but the American public has been dumbed-down, satiated and nourished with the fruits of food stamps disguised as debit cards.

There will be no revolution, no wide public outcry. We will suffer quietly until the best of us all are gone and our children reduced to slaves. Bread and circuses is what we want and exactly what we will get.

Ponder these words, lest you fall into the trap of the status quo:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
-- Thomas Jefferson

Thursday, December 2, 2010

Trichet Promises More Money for More Banks in Europe

As the Fed's already-discredited quantitative easing (it was supposed to lower interest rates, not raise them, so we can assume Ben Bernanke was lying, again) funnels money from the Us Treasury to the Federal Reserve to the Primary Dealers (big banks), Europe has apparently taken notice and today, EU President Jean Claude Trichet announced a similar plan for the whole of the European Union, in which the ECB will purchase government (sovereign) debt outright and funnel it to the banks, which, like ours in America, are largely insolvent and lying about their financial conditions.

The race to the bottom, to devalue currency, has reached a new, more insidious stage that threatens the entire economic system of the world, in more pernicious and devious ways than the creators of sub-prime mortgages and credit default swaps could have ever imagined. With endless creation of money out of thin air, rampant inflation is inevitable, in everything except wages, that is, and possible home prices.

Choosing the path of least resistance, kicking the can down the road, so to speak, will lead to unimaginable horrors for millions of Americans and Europeans in terms of decreased buying power and slave wages, a fact that our so-called "leaders" know all too well.

With another $8 billion pumped into the coffers of the banks, Wall Street once again took off and ran with the money, pushing equity prices close to their peaks of early November.

Dow 11,362.41, +106.63 (0.95%)
NASDAQ 2,579.35, +29.92 (1.17%)
S&P 500 1,221.53, +15.46 (1.28%)
NYSE Composite 7,712.25, +108.52 (1.43%)

Advancing issues finished well ahead of decliners, 4442-2054. There were 501 new highs and 42 new lows, very similar to yesterday's figures, which implies that many of them were the very same stocks, pumped by the banks only to be dumped to the johnny-come-lately funds and individual investors. Volume was moderate, since most of the buying was by large firms with super-fast computers.

NASDAQ Volume 2,053,117,000
NYSE Volume 5,584,217,500

Commodities joined in the ramp-up. Oil gained $1.25, to $88.00. Gold was up a mere $1.00, to $1,389.30. Silver added 16 cents, to $28.57.

Tomorrow's non-farm payroll data for November should send stocks to higher highs and even more ridiculous valuations. Scheduled for 8:30 am, the fraud bankers will have plenty of time to adjust the algos on their computers for another glorious day of stock buying.

The following video contains some strong words from Vermont Senator Bernie Sanders over the increasing social inequality in America, citing how, as the middle class collapses, the top 1% earns 23.5% of all income, more than the bottom 50% of all earners. Further, the millionaires and billionaires on Wall Street are making more today, after we bailed them out, than before the bailout. It's poignant and very well worth watching.

Short Sales Helpful, But Read the Fine Print

While the economy seems to be improving, though modestly, one area of concern remains the shattered real estate market, where home prices have tumbled, homeowners owe more than their house is worth - a condition known as being "upside down" - and the recent foreclosure moratoriums by mortgage servicers like Bank of America, Ally Bank and JP Morgan Chase have slowed the pace of residential real estate sales.

With unemployment close to 10%, many homeowners are facing foreclosure and looking for ways to get out from under a financial burden they did not anticipate. One such method is a real estate short sale, which is a process by which the homeowner sells the property back to the bank at a reduced price. This often results in a win for both sides, as the bank does not have to engage in the time-consuming and costly process of foreclosure and the homeowner walks away from the home and mortgage debt, usually without any residual amount owed, known in the industry as a "deficiency," that being the difference between the original amount owed and the amount of the short sale.

Most states provide for deficiency claims, and banks routinely take judgments against short sale sellers, so this is an area which needs to be negotiated with the lender beforehand, and the services of a lawyer, representing the short seller, are strongly advised. Banks don't like to take losses and will normally try to slip in a deficiency clause into a short sale agreement.

For further information, you can can click here to check for all kinds of sales - including short sales - in your area, or for sales nationwide and more information on all kinds of real estate transactions, click here.

Wednesday, December 1, 2010

Ponzinomics, Feudalism and Fascism of the Highest Order

The following is my response to the video above, and to the wild upswing in the markets today. Just follow the bouncing ball, people, and the sequence of events. Wikileaks founder, Julian Assange, releases a boatload of data and internal memorandum from the State Department which is embarrassing to some of the highest-ranking officials in the world. Assange makes the mistake of telling, in an interview, that he is planning to release data concerning a very large US bank in January of 2011.

By nightfall on the East coast, Assange is wanted by Interpol in relation to rape and "sex crimes." As the day opens in the Far East, markets are pumped higher on positive economic data, and then to Europe, and finally, to the United States, where the Dow rallies for 255 points.

All of mainstream media is suddenly talking about recovery and how Spain won't need a bailout, and how jobs are being created in the US, and how the Christmas season is looking very robust for retailers.

At noon, the Fed, under order of law, courtesy the Dodd-Frank bill, releases the names and amounts of money lent to institutions during the height of the financial crisis in 2008. The list is vast, as are the numbers. It is a mind-boggling declaration of widespread, rampant, credit inflation.

The media continues to excite us with details of how Europe will not suffer any debt contagion, that the crisis is contained. Little time is spent reporting the Fed's release. we are all too busy watching stocks rise, secure in the knowledge that our economy is on the mend.

My contention is that the "rally" is a chimera. It will fade before making new highs, maybe a little bit after, perhaps. But the crony capitalism continues. And Julian Assange will not be a free man for long. He will not be allowed to release any information damaging to any bank, anywhere, at any time.

The banks own most of the world. The ECB and the Fed are only the most visible manifestations of the banking elite. The buy the debt of sovereign nations. They own them. Most are well hidden, or hiding in plain view.

Any questions?

Sure, but first, my reaction to the video. It was a bit over the top. All Americans don't act that way, only the slowest, dumbest, fattest and most ignorant. Unfortunately, their numbers are growing and their progeny will become more cheap, slave labor and credit card users for the rich to fondle and manipulate. That is the elitist game. It's what they do. So, yeah, there are a lot of fat, ignorant slobs out there who have lost nearly any dignity they might have had.

My question is this: What should those of us who believe ourselves to be above that level of wantonness and ignorance do about it? Should we counsel those who are too hypnotized by materialism, television and welfare statism to make better of themselves, to deny materialism and embrace a more wholesome existence?

I'll answer that one myself: Of course we should.

Now comes another antecedent question. After we've counseled our downtrodden brothers and sistahs and they go about their usual wanton ways as though they've heard nothing we've said, suppose one of them comes to us in their miserable way and tries to sell us a laptop that they bought for $198, for $20, for drugs, or food, or gas, or whatever moronic desire they might have at that time. What should we do then?

I'll answer that, too, for myself. I'm sure others might see this differently. My answer, I'd offer them $10, maybe $5. If they're too stupid to see, let them be blind. If you or I don't separate them from their possessions for less than market value, who will? Of course, the elitists, gladly, mind you.

I say it is the duty of all Americans to buy for less than market value and sell for as much as possible, even going so far as to sell to elitists at inflated prices. It is up to the entrepreneurial among us to seize the opportunity the elitists have created for those of us wise enough to make money to do so. I say it is easy if the system plans to endlessly create more money through debt. We should all be pawn-brokers, sharks and sharp deal-makers, for if we are not, surely it will be ourselves at the short end of the next deal and the one after that and so on, until we are slaves ourselves.

Stand up and take from the poor. They have been given our wealth by the rich. Take from the rich, too, if you can. If the economy is going to burgeon upon a sea of debt, then we must open our eyes and aour hands to take what is rightfully ours. we must fortify our own foundations, and to hell from whence it comes, as long as we make it OURS.

Now, if you have any questions, ask somebody else. I've already told you my plan. Acquire.

Dow 11,255.78, +249.76 (2.27%)
NASDAQ 2,549.43, +51.20 (2.05%)
S&P 500 1,206.07, +19.47 (1.64%)
NYSE Composite 7,603.73, +172.79 (2.33%)
NASDAQ Volume 2,136,493,000
NYSE Volume 5,358,660,500

Advances: 4944
Declines: 1632
New Highs: 500
New Lows: 51

Oil: $86.75, +2.64
Gold: $1,388.30, +2.20
Silver: $28.41, +0.20

Tuesday, November 30, 2010

Dow Down 400+ Points Since QE2

Since the inception of the Fed's QE2 program, throwing billions of dollars at Primary Dealers in exchange for Treasuries - essentially monetizing the government's debt - stocks have suffered mightily, posting losses in 11 of the past 16 sessions and dropping a whopping 445 points since November 7.

Currently, the scapegoat is the dastardly Irish, who chose a most inopportune time for their banks to become wholly insolvent and in needs of rescue by the European Union. With debt contagion spreading across to the continent in rapid fashion, the Euro has declined against the greenback, taking the fun of a weak currency trade along with it. As the dollar has strengthened, US stocks have nose-dived, and the rout is clearly underway, whether Ben Bernanke wishes to admit it or not.

Action on the markets today was entirely below the 50-day moving average on the Dow, and ended, after a midday respite, to the downside for the third session in a row. Blaming the Irish may be good sport for Fed bankers, but problems in the Eurozone certainly don't bode well for the ailing US economy. The slow-motion train wreck of Western economies which began in 2007 with the sub--prime mortgage unwind, is, after a $20 trillion reprieve from 2008 to the present, set to gather momentum and careen off the tracks again.

What will eventually prove to be the US economic undoing is still debatable. An expose of Bank of America's immoral and despicable practices in the mortgage arena has been put on the table by Wikileaks' founder Julien Assange. Shares of the Charlotte, NC-based bank fell to a 2-year low, closing at 10.95, on fears of such an event.

Perhaps Ireland's Parliament will just say no to the bank bailout being shoved down their throats by the equally-corrupt European Union, which itself may be a forgotten relic of a failed experiment in a few year's time.

Closer to home, it appears that the lame-duck congress has its hands full in the dwindling time before they decide to do what they do best - go home and do nothing - tackling issues such as the Bush tax cuts and jobless benefits have seen little movement. Congress must also pass a continuing resolution to keep the government operating by December 4, which just happens to be this Friday.

Tomorrow, ADP releases its normal private sector employment report, this one for the month of November, as a precursor to the BLS non-farm payroll data on Friday, which could also sway markets. Consensus seems to be calling for the nation to have created 130-150,000 new jobs in the month. Any number less robust than that could set off investor alarms again.

For today, another $6 billion pumped from the Fed to Primary dealers did little to stem the tide of selling. Stocks rebounded off their morning lows, but suffered a setback in the final hour, all major indices finishing deep in red ink.

Dow 11,006.02, -46.47 (0.42%)
NASDAQ 2,498.23, -26.99 (1.07%)
S&P 500 1,180.55, -7.21 (0.61%)
NYSE Composite 7,430.94, -52.40 (0.70%)

Losses were widespread as losers outnumbered gainers, 4290-2137. New highs numbered 156, while new lows closed to gap, at 103. In an obvious sign of weakness, volume ramped up to numbers not seen since election day.

NASDAQ Volume 2,429,697,750
NYSE Volume 5,643,896,500

Oil took a solid hit, losing $1.62, to $84.11, though it remains at elevated levels. Gold was a star, shooting up $19.20, to $1,386.70 per ounce. Silver also posted a strong gain of 89 cents, to finish at $28.09 on the COMEX.

FUD (Fear, uncertainty and doubt) are on the rise again and the Fed seems powerless to do anything but print more money.

Monday, November 29, 2010

Day-Traders Paradise

Forget fundamentals.

There is no reason to even bother examining a stock's recent performance, p/e ratio, cash flow, balance sheet or any other metric which might have some impact on earnings or performance because the stock market in the USA is now run by computers, and computers don't care about stocks, they only care about momentum, price and volume.

Add to that the fact that these computers are programmed by PhD's who don't know squat about markets, and even less about individual stocks. After that, add in near-infinite liquidity (free money) courtesy of the Federal Reserve's QE2 program and you have the makings for one very dysfunctional investment landscape.

Therefore, mere humans, especially those trading from the comforts of home, are at a distinct disadvantage. Only the major brokerages and banks are allowed to reap huge profits, not mere mortals who suffer from emotion and are terribly slow compared to the market-busting super-computers employed by the big firms and the HFTs.

Today was a perfect example of the dysfunction prevalent throughout the securities complex. In the morning, amid fears of growing problems in Europe on the back of the Ireland bank-bailout, stocks suffered enormous losses, with the Dow dipping by as many as 162 points shortly after 10:00 am. Of course, that was before the Fed floated some $9 billion to their pals on Wall Street to stage a comeback.

The day-trading slobs, like Lloyd Blanfien, CEO of Goldman Sachs, surely made a killing, as they do every day, manipulating the markets to their own delight and profit, all the while hammering the small investor and mutual fund managers at the margins.

Dow 11,052.49, -39.51 (0.36%)
NASDAQ 2,525.22, -9.34 (0.37%)
S&P 500 1,187.76, -1.64 (0.14%)
NYSE Composite 7,483.34, -17.20 (0.23%)

By the final bell, things were still in the red, though only slightly. Losers beat winners by a margin of 3645-2787; 155 issues made new highs, 85 recorded new lows. Volume was as usual: pathetic, but that's what you get when only computers are playing. Someday - and we can only hope it is soon - the computers will be forced to prey upon each other.

NASDAQ Volume 1,693,482,250
NYSE Volume 4,207,444,500

Oil priced itself another $1.87 higher, to $85.73 a barrel. Gold bounded all over the place, last showing a gain of $3.20, at $1367.40. Silver added 43 cents, to $27.13.

Just for those who think they've got it rough, here's a touching story about a family who blew $14 million in ten years. A great read, if you dislike people with money who are simply morons.

And, in the latest pandering PR move from the White House, President Obama called for a two-year wage freeze for civilian federal employees. The timing of this is particularly amusing, since federal wages reached an all-time high in 2010. The proposal needs congressional approval, so we'll see if the Tea Partiers recently elected to congress have any bite. It should be noted that some of them ran on platforms that called for cutting federal pay by 7-10%.

Good luck with that.

The final piece of sobering news is how governments will readily use public trust money to ensure than wealthy bondholders don't suffer any losses. The case in point is Ireland's 85 billion Euro aid package, which will be funded in part from government pension reserves, to the tune of 17.5 billion Euros.

That's how it's going to play out here in America, too, folks. All you people thinking you're going to get a nice pension check every month better start learning the new math. Cut that check in half by 2015, if you're lucky. As for Social Security, the Ponzi scheme of the past century, one would be well-advised to not count on that at all.

Friday, November 26, 2010

Main Street's Black Friday Turns Blood Red on Wall Street

Mmmm, that's going to leave a mark...

In the continuing control fraud series of gap up/down opens, stocks took the predictable nosedive version today - predictable in that Wednesday's close was greatly to the upside.

With the Dow opening at around 11,100, about 85 points below the previous close, we have the now-well-known condition of trapped longs, who bought and held during Wednesday's uptick rally. In general terms, if you bought on Wednesday and sold on Friday, unhedged, you lost and are now puking up the remnants of your Thanksgiving dinner.

A wiser course of action might have been avoiding the stock markets altogether and making some illegal wagers on football games via the internet. At least you might have won, with the added bonus of the winnings being tax-free. Even had you lost your bets, you could mentally write off the sour investment as entertainment value.

Stocks skidded pretty badly, and, devoid of volume, had no inclination of reversing course, especially since it was a half-day and trading was even more scarce than normal. The run rate was even worse than some of the slowest days - and there have been many since the 2008 collapse - making Black Friday look like a blood-drip from the arteries of the Wall Street Scam money machinery.

Dow 11,092.00, -95.28 (0.85%)
NASDAQ 2,534.56, -8.56 (0.34%)
S&P 500 1,189.40, -8.95 (0.75%)
NYSE Composite 7,500.54, -78.72 (1.04%)

Declining issues dominated winners, 4054-2064. New highs:185; New lows: 51. Volume: fagetaboutit.

NASDAQ Volume 623,831,125
NYSE Volume 1,778,664,375

Oil finished unchanged, at $83.86 per barrel, keeping the price just high enough to extend the prices at the gas pumps for the remainder of the holiday weekend. Gold last printed at $1364.20, down $10.90 on the day, while silver kicked 89 cents lower, to $26.70. Those awaiting a reversion in silver may be seeing the beginning of a 50% pullback of the recent rally, which would put the lustrous metal at $23 and change. A 67% retracement would send it to about $21, at which point one would be highly inclined to begin accumulation for the next leg up, to $35 in the first half of 2011. Of course, a global deflation may take all technical data off the table, rendering all asset classes subject to major price reversals.

Speculation in land may be a viable alternative in the first half of 2011, though another round of descending prices should occur with a massive number of defaults and possible widespread bank failures.

Bank of America continues to be the stock to watch as far as real estate is concerned, as they have - through their 2007 purchase of Countrywide - the largest exposure in residential real estate of any of the major players. The stock hit all cherries today, closing at 11.11, remaining in the bottom of its recent range, and lower than the October 25 close, at the tail end of the "foreclosure crisis." Bank of American (BAC) is signaling what's ahead for homeowners, with already more than 25% of homes with mortgages "underwater," more pain to come, resulting in slower sales at lower prices for the truly most distressed of a growing mountain of distressed sellers.

2011 may turn out to be the year everything finally goes over the edge. Congress and the president haven't yet address the mortgage/banking fraud in any meaningful way, except to hand the banks more money with which to shore up their aching balance sheets and kick the fraud further down the road. Without a workable solution that includes 30-40% principal forgiveness - anathema to any blue-blooded banker - expect real estate prices to decline another 20-25% overall and the US economy to continue floundering like a beached whale.

While many believe we've avoided the dreaded "double-dip" recession scenario for this year, the next one may prove to be even more severe than the first, though even a minor recession leaves the Fed, White House and congress without any useful policy tools. The likely outcome would be to print more money, unless Tea Partiers in congress force the Fed's hand by denying any raise of the debt ceiling in early 2011. An unlikely outcome, but still potentially the best - though painful to the extreme - medicine.

2010 continues to grind towards its conclusion, with optimism bolstered by millions of shoppers on the busiest day of the year. If Christmas saves the retailers and wider stock market, there may be a significant overhang heading into the new year which could collapse stocks as earnings peak out with nowhere to go but down.

Lovely, isn't it?