Tuesday, May 31, 2011

Something Is Not Right

Nothing like a three-day weekend to rekindle those old "animal spirits" in the stock market.

Today's outsize gains come courtesy of the banking criminal cartel, whose sole mission in life is to separate regular people from their money. There was no good reason for stocks to go up, much the less by this inordinate amount. In the real world, economic indicators all pointed to a much weaker US economy than the mainstream media has been hyping, but the Wall Street floozies pumped their paper garbage all the same, and, apparently, there were plenty of pigeons to be plucked.

Before the market even opened, the S&P/Case Shiller 20-city index showed that the value of residential real estate has now fallen more than during the Great Depression. That's not some figure picked out of the blue. The link comes from none other than CNBC's Diana Olick, one very savvy real estate reporter who - unlike others from her network - can be trusted to share pertinent facts.

Olick points out that the big banks will definitely face more write-downs due to the massive unwind in real estate. Those big banks - PM Morgan Chase (JPM), Bank of America (BAC), Wells Fargo (WCF) and Citigroup (C) all finished 0.5 to 1.0% higher today. Either investors are whistling past their own graves or there is something definitely wrong with this picture. The banks are among the most unhealthy institutions in our unhealthy economy. The sooner they are wound down and bankrupted - because they really are insolvent, despite massive inflows of cash from the US taxpayer - the US can begin healing. Until then, we will head down the path of dollar destruction and desperation.

Just 15 minutes into the trading session, Chicago PMI posted a horrible read, with the index falling from 67.6 in April to 56.6 in May. Though the perma-bulls will contend that the index is still positive (anything over 50 is considered expansionary), an 11-point drop in one month is simply jaw-dropping. This actually took a little wind out of the Wall Street sails, as stocks drifted off their gap-up opening highs, hitting a bottom around midday. From there, however, the 30-minute attention span that seems to cover most of the trading public, kicked back in and stocks surged into the close, even though there was no catalyst - such as a sinking dollar - to prompt the gains.

Again, absent a falling dollar, stocks should have been flat or lower, considering how generally bad was the news today, but also every economic report from the past three weeks. Something is crooked, rotten, bad, awful, wrong, but since the stock market is now the special province of four or five major players, we may never know what the game really is until it comes.

At some point, Wall Street will be reconnected to Main Street, though the impression is clear that there will be many tears and disjointed days such as this. Until then, we can only marvel at the absurdity of centrally-planned economies and their formerly-free stock markets.

Dow 12,569.79, +128.21 (1.03%)
NASDAQ 2,835.30, +38.44 (1.37%)
S&P 500 1,345.20, +14.10 (1.06%)
NYSE Compos 8,477.28, +90.94 (1.08%)

Advancing issues buried decliners, 4904-1755. On the NASDAQ, 135 new highs dwarfed 46 new lows. The NYSE, not to be outdone, posted 224 new highs and just 11 new lows. Volume was terrific, something we have not witnessed since the collapse in 2008.

NASDAQ Volume 2,561,412,750
NYSE Volume 4,560,891,500

Oil was jacked another 2.11, to $102.70 per barrel for WTI crude. Gold lost $4.00, to $1535.10, but silver finished higher, up 40 cents, to $38.47.

The dollar index only fell 0.303, to 74.61. This was not a DXY move that could have produced the kind of gains seen today.

Something is definitely not right, and until we find out just what it is making stocks look like the values of the century, all due caution should be employed.

Friday, May 27, 2011

Come Back on Tuesday

For those who have to stay focused on the stock my for a living, condolences, for today was the culmination of three of the most boring, low-volume events in the history of the NYSE.

Stocks managed to eek out marginal gains.

There was an almost total news blackout as traders made their way to the Hamptons for the weekend.

Dow 12,441.58, +38.82 (0.31%)
NASDAQ 2,796.86, +13.94 (0.50%)
S&P 500 1,331.10, +5.41 (0.41%)
NYSE Composite 8,386.34, +44.68 (0.54%)

Advancers topped decliners, 4566-1953. On the NASDAQ, 87 new highs exceeded 33 new lows. The NYSE recorded 112 new highs and just 8 new lows. Combined, 199 new highs, 41 new lows. Crisis averted, for now. Volume: lowest of the year.

NASDAQ Volume 1,642,331,625
NYSE Volume 3,111,512,000

Crude oil gained 36 cents to finish the week at $100.59. Gold was the big winner for the day, gaining $17.00, to $1536.40. Silver tacked on 76 cents, to end at $37.95.

Nothing much of substance to report, except that the beer is cold and the grill, hot.

Have a great weekend. See you Tuesday, May 31.

Thursday, May 26, 2011

Bye, Bye, American Pie

There are only a few facts that need to be known to understand what happened today on Wall Street, and, believe me, it wasn't nearly worth the effort.

New unemployment claims came in at 425,000, up 10,000 from an upwardly-revised (always) 414,000.

The government's second (rhymes with fecund) estimate of 1st quarter GDP was 1.8%, the same as the first estimate, but measured differently. For instance, the price index for US domestic purchases increased by 3.8% and motor vehicle output added 1.28% to real GDP for the quarter. Translation: inflation was the main driver behind the poor 1.8% gain and a lot of cars were produced, but only a fraction of that number were unsold. Were it not for government sleight of hand, we'd be going backwards, which we are, but nobody wants to use the "R" word just yet. Forget about growth in this environment. It's a mirage. Survival will be the operative term for the next five years, as it has been for the last three.

It was one of the five slowest trading day of the year thus far. The Dow was down as much as 76 points early on, up as much as 47 later and finished nearly flat.

In other words, if all the traders, bankers, money managers and other financial gurus had stayed home and done nothing, the same result could have been mailed in from a remote location without all the fuss. Tomorrow will likely be ever more boringly stupid as we approach a three-day weekend.

Judging by GDP, our elected officials reluctance to do anything constructive and the general lack of regard by the public, it's a safe bet that we've ceased to be a nation of people and are now just an amorphous aggregation of individuals foraging for life support. America is a dead duck and all that's left are whatever crumbs one can pick from others.

Today may not have been the day the Republic died - that was probably years ago - but anyone who believes that there's a future here is really on some powerful meds and should share with the rest of us.

The federal government is busily raiding the retirement funds of federal employees and will be coming after similar state funds in due time, then private accounts. Eventually, the banker class will have stripped the country of all assets, in plain sight of the populace. Bye, bye, American Pie. The levy truly is dry.

Dow 12,402.76, +8.10 (0.07%)
NASDAQ 2,782.92, +21.54 (0.78%)
S&P 500 1,325.69, +5.22 (0.40%)
NYSE Composite 8,341.66, +46.29 (0.56%)

Advancing issues outpaced decliners, 4663-1852. New highs on the NASDAQ were 64, compared to 51 new lows. On the NYSE, there were 77 new highs and 29 new lows. Total: 141 highs, 80 new lows. Volume? No.

NASDAQ Volume 1,859,346,250
NYSE Volume 3,656,113,250

Commodities were mostly down, with WTI crude oil off $1.09, to $100.23. Gold's latest reading was down $4.60, to $1521.20, with silver stepping in line, losing 50 cents, to $37.40.

Advice for Friday: Take the day off; make it a four-day weekend, maybe five.

Wednesday, May 25, 2011

Lack of Catalyst Encourages Buyers; Rally Fizzles at Close

Mark Haines
This post is dedicated to Mark Haines, CNBC Anchor, who died unexpectedly last night at his home. Mark, 65, was one of the pioneers of televised financial news reporting, a stalwart with CNC from the beginning. Godspeed, Mark, may your surviving assets be spent in splendor by your rightful heirs.

As far as bounce-back rallies are concerned, this one rates at best a D-minus, for any number of reasons. First, there could not have been a more friendly environment to buy into; second, volume was so light a junior trader could have engineered a better bounce; third, the rally fizzled into the close, just like yesterday's 3:30 and beyond slip-slide.

Today's action was more a re-positioning of assets rather than a rally. For perspective, consider that the Dow dropped 250 points in the prior three sessions. Today's gain of less than 40 points was not even a quarter of that. The NASDAQ was down 77 points over the prior three sessions. The gains today were not meaningful.

Besides the untimely death of CNBC's Mark Haines, there was little to trade off of today, and most of it was bad news. Greece continues to twist in the wind of proposed EU austerity packages, all unacceptable and leading eventually to Greek default on their debt. Durable goods orders for April nose-dived, down 3.6% for the month, after a 4.4% gain in March. Estimates were for a 2% decline, so that was a pretty substantial miss. Investors seemed not to notice that all economic data has been either bad or horrifying the past two weeks.

Dow 12,394.66, +38.45 (0.31%)
NASDAQ 2,761.38, +15.22 (0.55%)
S&P 500 1,320.47, +4.19 (0.32%)
NYSE Composite 8,295.34, +42.88 (0.52%)

Winners took the measure of losing issues, 4336-2215. On the NASDAQ, 46 new highs, but 73 new lows. The NYSE showed 61 new highs and 35 new lows, making the combined total (the one that matters most) 106 new highs and 108 new lows, the second in the past three sessions that there have been more cumulative new lows than new highs. We are plumb out of adjectives to describe the ridiculously low volume on the markets. Sorry.

NASDAQ Volume 1,845,890,875
NYSE Volume 4,024,320,500

A weaker US dollar boosted commodities. Crude oil was up $1.55, to $101.32. AAA reports the average price of a gallon of unleaded regular gas in the US at $3.81, about 14 cents lower than two weeks ago, offering a little bit of relief for over-burdened drivers.

Gold found some life, but was eventually blunted late in the day, losing 90 cents, to $1525.20. Silver had another good day, gaining $1.20, to $37.83 the ounce.

Thursday brings the usual scariness of initial and continuing unemployment claims, plus the added bonus of the second estimate on 1st quarter GDP. The initial estimate had the US economy growing at 1.8% and the consensus is for little change to that number.

And so we bump along, grinding lower in due time.

Tuesday, May 24, 2011

The time has come, at last.

Almost anybody who is anybody on Wall Street is in agreement that the Fed's POMO-and-ZIRP-induced party has come to an end, and like all good party-goers, the hangovers are beginning to be felt.

Laughably, Goldman Sachs, the evil giant squid which everyone loves to hate, expects the party to go on without end, today boosting its outlook for oil to something ridiculous at about $130/barrel. Somebody needs to ease the Goldman boys away from the punch bowl, because they've obviously had too much. It takes less than a genius rationalization to understand that if everything begins going in reverse, oil cannot be priced higher. This simple, fundamental fact has apparently escaped the great minds in Goldman's glassy, lower-Manhattan towers.

Elsewhere, Greece steps closer and closer to defaulting on its debt. Not that Greece might one day default; it is an eventuality, and the sooner it gets over with it, the better. Yields on 10-year greek bonds have been running at about 25%, which would be a real find if they were actually going to pay them back. Of course, they're not, so whomever is loaning them money (there are a lot of silly people in this world) is exacting a pretty hefty price for the privilege.

Stocks went up, then down, then back up and finally, down into the close, a nifty continuation trade that began a few weeks ago and has been gathering momentum. The close today was rather dramtic, with loads of selling on pretty solid volume. Sooner or later, there will be a final flushing out of all the weak hands - and there are many - and a cataclysmic collapse in all the US - and global - stock indices.

We are heading into a frightening period of economic history, as nothing less than the actual value of money will be center stage. Today, $10 US could buy a couple of raw 8 oz. steaks of less-than premium quality. Tomorrow, who knows, maybe the same money could buy only a pound of bologna, or perhaps one could purchase premium sirloins. It all depends on the politics, the players and the public's acceptance of the value of a dollar, or two, or ten.

For the present, the US dollar still holds some value and still buys oil globally. That is the good news. The bad news is that there are a multitude of competing currencies, pricing strategies and unknowns that could change the course of economic history in a very short time. As the Fed unwinds its massive funding and balance sheet, all manner of nastiness could occur, though the current betting is on a mild dose of deflation, probably through the end of this year and into the first and second quarters of next. In other words, another year of fear, uncertainty and doubt (FUD). After that, nobody knows, so plan accordingly. HA, ha, ha.

Dow 12,356.21, -25.05 (0.20%)
NASDAQ 2,746.16, -12.74 (0.46%)
S&P 500 1,316.28, -1.09 (0.08%)
NYSE Composite 8,252.46, -15.91 (0.19%)

Not unexpectedly, declining issues bettered advancers, 3587-2941. NASDAQ new highs: 48; new lows: 79. NYSE new highs: 74; new lows: 32. Combined new highs: 122; new lows: 111. A tenuous win for the bulls, but on slight, sell-weighted volume.

NASDAQ Volume 1,880,249,750
NYSE Volume 3,867,757,500

Crude oil popped back over $100 per barrel on the back of Goldman's call, but it didn't hold, finishing with a gain of $1.89, to $99.59. Gold tracked higher by $8.10, currently at $1525.30. Silver blasted higher by $1.50, to $36.57. Apparently, faith in physical silver holdings has regained some degree of confidence, though there will certainly be more raids led by JP Morgan, hoping to keep a lid on the price. That's another eventuality; Morgan will fail.

Cash continues to hold a place of prominence in a multitude of portfolios, and for good reason. Bargains pop up nearly every day, and savvy buyers are keen to take appropriate advantage, though they should beware, as price discovery is more than ever more art than science.

Monday, May 23, 2011

Euro Debt Crisis Exacting Heavy Toll on Global Markets

Make no mistake about it, today was the start of the great reckoning. The beginning of the end of easy money policies, of kicking the can down the road, of failing to come face-to-face with the reality of the global credit crisis that began in 2008 and never really ended.

Oddly enough, it comes on a day in which the US President, Mr. Obama, is headed to Europe for a meeting of the G-8, in which the globalist governors will mete out whatever they see fit for the peasantry of their populous nations. It's a little like playing Russian roulette with all the chambers loaded. You're going to get it no matter how lucky you are.

The interesting aspect of the day's trading happened not specifically today, but actually last Friday, when futures went limit down shortly after the US close. It was a weekend warning shot that the powers in control would be taking their various pounds of flash come Monday. And they did, sending markets around the planet down by one, two and three per cent.

Here in the USA, one-month lows were the order of the day, though that's hardly exciting news. The pertinent take-away is that the great unwind of asset values has begun - or resumed - as the major indices finished the session today less than 4% off their recent multi-year highs.

What was notable was the changing of the guard on the new highs - new lows indicator. For more than two years - with only slight variations - new highs have exceeded new lows on both the NYSE and the NASDAQ. Today, new lows outnumbered new highs on the NASDAQ and the gap narrowed on the NYSE. Even though this is not the first time this has happened recently, its frequency and narrow range makes it a particularly potent indicator at this point in time. Once this turns, it tends to remain in place for quite a while, periods between changes in leadership are measured in years.

Market movements are often subtle and difficult to pinpoint, though this one has been telegraphed for quite some time. The debt condition of Greece, Portugal, Belgium, Italy, Spain and Ireland are unsustainable situations as is the salve of QE2 and ZIRP here in the US. Japan, literally and figuratively, has been swept off the face of leading economic nations and uprisings across the Middle East and North Africa (called the MENA region, for short) threaten the global economy.

Even the leaders of the most powerful nations know that this little game of chicken, complete with artificial stimuli, bailouts, buybacks, swaps, jawboning and other gimmicks cannot proceed forever. Europe must get serious about its long-term structural deficiencies and the US must confront the debt limit and its own burgeoning solvency problem, and both must do so quickly. Thus, preparedness for financial armageddon is underway, and, if one listens closely to the pundits and analysts populating the airwaves and internet, most are calling upon investors to take a pause, pare back on stocks and raise cash, which is, in the parlance of Wall Street, like saying, "run for your life!"

There's an opportunity for the globalist agenda to sail through this period of austerity, consolidation and downgrading of the private sector fairly unscathed, but be assured that the plan is afoot and the stock indices will bear the brunt of what will amount to a massive global deflation. In a year or two, they will once again announce victory over the forces of debt and monetary destruction and proceed to blow the bubbles once more.

In this environment, no asset class is safe, though cash and equivalents, gold and silver, are good starting points. Growth will be minimal, as measured by GDP, if positive at all, and the opportunity for fresh recessions are abundant. Today was just another in a series of well-timed warning shots. Prepare or die.

Dow 12,381.26, -130.78 (1.05%)
NASDAQ 2,758.90, -44.42 (1.58%)
S&P 500 1,317.37, -15.90 (1.19%)
NYSE Composite 8,236.55, -120.98 (1.45%)

Losers soared over winners on the session, 5257-1342, a 4:1 ratio, though hardly a complete rout. It could have been much worse. On the NASDAQ, 37 new highs, but 86 new lows. The NYSE recorded 51 new highs and 44 new lows, the smallest gap in nearly two months. Taken together, the 88 new highs do not reach up to the 130 new lows, and that is the important set of figures to watch, the combined number. Continued weakness has been forecasting a more serious tumble for the past two months. Volume, despite the massive decline, remained at severely low levels. Once again, the major players have been unable to draw in the usually-gullible public, which is tapped out and wants no part of the Wall Street circus. Thus, they play amongst themselves, like a pack of starving wolves who will eventually turn upon each other.

NASDAQ Volume 1,806,104,625
NYSE Volume 3,761,192,500

Crude took another turn down, the front-end NYMEX contract for WTI losing $2.40, to $97.70. Gold managed a gain of $3.70, to $1517.20, while silver advanced by only a penny, to $35.07.

The major indices completed three straight weeks of negative results on Friday. Monday's opening gambit to the downside portends worse to come. March Durable Goods Orders data on Wednesday and the second 2nd quarter GDP estimate on Thursday will most likely add to the sense of pervasive desperation.

Friday, May 20, 2011

Random Notes as Stocks Slump Near Lows of Month

In the absence of earnings or economic data, let us suffice to say that stocks did today what they should have done yesterday, given the housing and Philly Fed data. That said, it seems we now are actually getting somewhere in the coming great unwind, which must happen if QE2 ends.

With the close of the Dow today, we can see that the decline is going to be gradual - about 100 points per week on average - which should get the Dow down to around 11,000 by Labor Day.

Along those lines, allow me to close the week with some random thoughts on the current working environment and the accelerating deflation:

Current economic conditions are fostering an environment where work has changed and what you call the "existential needs" might more reasonably be filled by the technology-marginalized workers, such as home gardening, DYI home repair and generally more resourcefulness and less dependence on the "system", the grid.

I am one of these technology-marginal types, in my own home business, with very limited overhead, having to actually do work about five to six hours a day, and that only four days a week. The rest of my time is spent raising my own vegetables, making my home more energy efficient and sourcing other income streams. It's actually a pretty sweet spot.

The promise of technology was always presented - back in the 60s and 70s - as more leisure time, but the banksters and politicians stole that luxury lifestyle from the common man. However, through their own rampant greed, this is backfiring, because more people are now on welfare (read: government-supplied leisure), not paying mortgages (bankster inspired leisure), and working less (congress, thanks for doing nothing).

With all this free time on their hands, common folks - the smart ones - are devising ways to capitalize and take back their leisure, which has some new definitions, such as, leisure as not spending, leisure as self-education, leisure as efficiency.

Deflation is going to hurt the most at the top of the food chain. Those already at or near the bottom will be scarcely affected, while the smartest of that group will actually prosper, just as during the Great Depression. Fortunes will be lost, but many others will be made.

It's all coming at very slow speed, thanks to the Fed's unending fight against deflation, but it's coming, no matter what. There is no other good alternative.

Always remember - and I don't know where I got this, maybe Malcolm Gladwell - but economies are always created at the margins. It't not LinkedIn with a $10 billion capitalization that will make change - that is simply a misallocation of capital on a grand scale - but the guy building solar heaters in his garage, or the people in Cleveland harvesting fish and vegetables in the same facility.

There may be the Googles and eBays of the world which created great shareholder value, but, both of those companies profited on the margin of hundreds of thousands, maybe millions, of small entrepreneurs, buying and selling ads, goods, services.

I tend to think the raw data on the level of entrepreneurship in this country is vastly understated because so many people are not reporting what they are doing nor what they are making because of the absurdly high level of government invasion and regulation. There's more wealth hidden in the underground economy than ever.

Sound familiar? Same thing happened during prohibition. Read the book, "Last Call" for a clue.

Dow 12,512.04, -93.28 (0.74%)
NASDAQ 2,803.32, -19.99 (0.71%)
S&P 500 1,333.27, -10.33 (0.77%)
NYSE Composite 8,357.53, -70.42 (0.84%)

Declining issues finished well ahead of advancers on the day, 4314-2224. On the NASDAQ, 58 new highs and 53 new lows. The NYSE was ever the outlier, with 97 new highs and 22 new lows. However, all week we've witnessed the gap between the new highs and new lows narrow and considering the dipsy-do taken in July and August of last year, may not revisit equilibrium until the end of summer. The stimulus is still being worked through the system, but cracks have become visible in the facade of recovery.

Volume was once again light, though considering that it was an options expiration day, it was actually horribly so. Fewer players means lower velocity, leading eventually to atrophy.

NASDAQ Volume 1,786,991,750
NYSE Volume 4,011,100,500

WTI crude oil was lower by as much as $2.00 during the morning, but finished the day with a gain of $1.05, closing at $99.49. Gold rocketed $20.50, to $1514.30, though silver barely budged, up 11 cents, to $35.05 per ounce.

This choppiness in commodities and stocks should persist until traders are more certain of the future, which could be a long, long time, considering the state of negotiations on the debt limit and the 2012 budget in Washington. They are at standstills on both issues. Our president and congress should be absolutely ashamed of themselves as they dawdle over pressing issues.

This is the worst government, on the federal level, maybe of all time.

Thursday, May 19, 2011

Despite Poor Housing Data, Philly Fed Big Miss, Stocks Rock On

Following yesterday's exercise in exposing how Wall Street makes money at the expense of almost everyone else, confirmation today as stocks gained despite continued horrible data from the housing sector and a huge miss in the Philadelphia Fed's latest report on economic conditions in the region.

According to the NAR, existing home sales for the month of April dipped 0.8% nationally to a seasonally adjusted annual rate of 5.05 million.

Chief economist, Lawrence Yun said:
“Given the great affordability conditions, job creation and pent-up demand, home sales should be stronger...”
Naturally, Mr. Yun, an economist, hasn't set foot outside his office for some time and hasn't taken into account the facts that banks aren't lending, jobs are scarce and those who do have regular jobs haven't received a raise in a while, all along dealing with higher energy and food prices.

Median price for a single-family home fell 5.4% year-over-year, to $163,200. Total housing inventory at the end of April increased 9.9 percent to 3.87 million existing homes available for sale, and the NAR feels this is amount is a 9-month supply. Their figures are probably not inclusive of the two to four million homes in the so-called "shadow inventory" which includes houses in foreclosure, off the market and in the hands of the banks (REO) and other distressed properties.

That, my friends, was the good news.

The report from the Philadelphia Fed was a little more alarming, where its business activity index slumped to 3.9 from 18.5 in April. Ah, yes, that recovering economy just continues to click along in places like the Northeast business section of the country.

Stocks actually lost ground for a few moments after these two sets of data reached Wall Street at 10:00 am EDT, but then the computers running the trading floor were reminded that tomorrow is stock option expiration and their human masters would be in need of more money for hookers and cocaine, so back up they went, on volume so thin Charlie Sheen was brought in to cut it.

That was, except for the darling IPO of the day, LinkedIn (LNKD), the business/social website that was priced at $45/share, but opened at $85 and traded as high as 122 before setting for the day at 94.25. That price places the company's market cap at around $10 billion, which is more than 65% of the companies listed on the S&P 500. The trading frenzy over what amounts to a web-based rolodex brought back memories of the 1999 tech bobble. Some traders actually shed tears of nostalgia.

Dow 12,605.32, +45.14 (0.36%)
NASDAQ 2,823.31, +8.31 (0.30%)
S&P 500 1,343.60, +2.92 (0.22%)
NYSE Composite 8,427.95, +20.47 (0.24%)

Advancing issues held sway over decliners, 3603-2911. On the NASDAQ, 81 new highs and 38 new lows, while the NYSE showed 179 new highs and a mere 17 new lows. Volume was slight, though the A/D line hints that there was a smattering of caution, likely concerning the forward-looking trends set by the Philly Fed and housing data, to say nothing of the impending end of QE2, which accepted 1.9 billion in outright coupon purchases today. Ted Fed has released the schedule through June 9. Some time after that, the operation is supposed to end, though few doubt that the easy money will come to a complete halt.

NASDAQ Volume 1,739,600,875
NYSE Volume 3,625,738,000

The price of oil eased, down $1.66, to $98.44 per barrel of WTI. Gold traded down $2.30, to $1494.60. Silver was off seven cents, at $34.95 per troy ounce.

With options expiring tomorrow and the Fed dealing another $5-6 billion in POMO, unless nuclear war breaks out somewhere - and even if it does - stocks should show more gains, at least in the morning.

Wednesday, May 18, 2011

Making Money at the Margins and Why the Rigged Game Doesn't Matter

OK, all you wise guys who think they know how the markets work and how to make money in them. If you've been paying attention the past few weeks and months, you may have noticed some kinds of patterns that have developed, both in individual stocks and in the general indices.

One such pattern is playing out right now, and, of course, as all things on Wall Street are now played out in factors of milliseconds, this one and its tangential cousin, is pretty obvious.

First, let's look at the overall picture and then we'll jump into the tangent by-product of what is essentially a swing trade that takes place over the span of a few weeks, but can be played by the day, hour, or, if you have ultra-fast connections, the millisecond.

It's all about movement and that herky-jerky, up-down action that's become so common over the past ten years or so. Taking a look at the movement of the Dow Jones Industrials over the past two weeks (actually, 13 trading sessions, or the month of May, to date), we find the following:


So, we see stocks go up, stocks go down, but, by the end of the day, the RANGE, from the highs to the lows, are amplified double, triple or many more times the amount of gain.

Why is this significant? Because, if you know which way the market is going, minute-to-minute, day-to-day, obviously, you can make a fortune. And you know those sharpies at Goldman Sachs, Merrill Lynch (owned by Bank of America), Morgan Stanley and JP Morgan have all been boasting some awesome profits on their trades. Most of them will go entire quarters without having more than one or two losing days.

How do they do it, and why can't you and I? Because, they pretty much are the market. Their volume of trades is probably 75% or more of the total volume trading. They can move individual stocks any way they like, whole indices if they work in collusion. Funny word, that collusion. In its barest form, it is defined as: Secret or illegal cooperation or conspiracy, esp. in order to cheat or deceive others. Oh, yeah, and it's very, very illegal.

Now, I'm not saying that these big Wall Street firms are engaging in anything illegal. After all, the government just bailed them out with billions of dollars of taxpayer dollars a few years ago and the Fed keeps shuffling them money nearly every day via their POMOs. So, why would they need to cheat?

Well, nobody has to cheat, but it sure makes the game a heck of a lot easier if you do. And, judging by what these very same firms did when they were hurling mortgage-backed securities and credit default swaps around, they've shown a propensity for, uh, cutting corners and shading the truth, all to their advantage.

By determining the direction of the market due to the size of their cumulative trades, they almost have to make money every day, every minute, every, yes, millisecond. They are the best at their craft, no doubt about that, and they can shave every last dollar off an individual investor's hide. No doubt, they are not very concerned with the success or failure of anybody but themselves and their largest clients, who are likely clued into the game and whose money they use to goose or deflate stocks and whole markets.

Face it, with four or five big firms handling most of the daily volume, does anybody else really stand a chance? And just how reliable are these stocks which are jumping around in inconceivable patterns on a fundamental basis?

It makes one question the validity and freedom of our markets, something which I've called into question many times here. To be perfectly honest, I've often considered giving up this daily blog, because, when one gets right down to the nitty-gritty details, there's no technical analysis needed, no market savvy needed. All one really has to do is go with the flow, day-by-day, every day, to make money, but that assumes you know which way the flow is going. It would be a full time job, though there's no guarantee that even the smartest, most skilled day-traders, armed with the best data and fastest computers, would come out ahead, only because the big boys on the inside would be skimming at the margins all along.

There's little doubt that the traders on the street, employed by the major firms, have a massive advantage, and it's probably much the same way in commodity markets, forex markets and any other market in which they have established a presence. While the markets may be kind to those at the top, the risk level is quite high for everyone else, and that's why I just write about it. I haven't made a single trade in almost two years, and even then I was playing very lightly.

So, what to do?

Honestly, I don't know. I've advocated silver and gold for the past few years, but we've seen recently what can happen there, especially in the case of silver, which took a 30% haircut in just about two weeks time, proving no market is safe from the ravages of the Wall Street gang.

That covers the general trend here. No about that tangential trade. Referring to the chart above again, notice today's action: an 80 point gain and a mere 128 point range. Today's trading was almost all one-way, and I'll wager that tomorrow will be more of the same, and maybe even Friday, too. Why? Take a look at the calendar. Options expiration is Friday and there's plenty of money out there looking to cash in on the upside.

For all the ups and downs over the past 13 sessions, the Dow is only down 250 points, about 2%. By Friday, there's a very good chance it will be less than that, and a whole bunch of traders will be high-fiving each other over their exploits in the options markets.

Hey, it's a lifestyle.

Dow 12,560.18, +80.60 (0.65%)
NASDAQ 2,815.00, +31.79 (1.14%)
S&P 500 1,340.68, +11.70 (0.88%)
NYSE Composite 8,407.48, +74.41 (0.89%)

Things turned dramatically today for now apparent reason. Advancers trounced decliners, 4999-1573. On the NASDAQ, a dead heat. There were an equal number of stocks making new highs and new lows, 52 of each. Over on the NYSE, new highs led new lows, 121-22. Volume was right back in the old toilet, simply because, as stated above, there aren't that many players.

NASDAQ Volume 1,893,562,500
NYSE Volume 3,871,767,500

Crude oil was up sharply, gaining $3.19, to $100.10 on reports of a drawdown in supply and raging fires in Alberta, Canada, home to major oil operations. While Canada is our largest supplier of oil (no, honey, not those nasty A-Rabs), the amount of crude affected is a small fraction of the daily import total, but that doesn't matter to the market manipulators, apparently. Anything to goose the price at the pump a little higher, they'll use it, whether it makes sense or not.

Gold managed a gain of $9.90, hitting the $1496.90 mark, while silver rocketed higher by $1.11, to $35.02. Word has been circulating that the major shorters of silver have cut back their activity to a level not seen since last fall. That should be a signal to most silver players that it's safe to wade back into the market, as the price manipulators have covered their out-of-line bets and gone to play elsewhere.

What else can one conclude from the wild swings and unusual weather but that ours is a very strange and still quite untamed world.

Tuesday, May 17, 2011

Poor Data Undermines Fed Pumping Effort

Well, there's nothing the Federal Reserve can do about a collapsing economy, after all.

Data from the housing sector today suggests that despite pumping literally trillions into the US financial system, the original canary in the coal mine, residential real estate, is still lying prone on the operating table, unable to move, dead as a doornail. And yet, the Fed and the federal government still insists that spending more money (creating more debt) is the ultimate fix-all.

One has to wonder just when the American public will have had enough of this disaster in centrally-planned economics. The banks have been spared, though they remain among the worst investments listed. The government has exceeded the debt limit (yesterday), and is now raiding the retirement funds of public employees. The federal employees are the first to be robbed. Next will be state pension funds, so you teachers out there, adjust your lifestyle pans accordingly as you're about to receive a very unwanted haircut.

The numbers coming from the real estate sector can be characterized as nothing less than a national disaster. Housing starts and building permits fell to unprecedented lows at 523,000 and 521,000 (annualized), respectively. The numbers for housing starts (new homes) represents a 23% decline from a year ago, while the permit figures for new home construction fell 4% from March.

All in all, it's simply horrible environment in which to be building new homes. The level of new home construction has been at the lowest level since the government began keeping track and continued to decline. There's simply too much shadow inventory being held onto by the banks, who don't want to realize losses on the many homes that are either already REO, in the foreclosure process or where the homeowner is already more than three months behind.

The market for new homes is absolutely the thinnest it's ever been and it doesn't appear to be getting any better.

Adding to the ongoing economic catastrophe were figures on industrial production - flat for April - and capacity utilization, which may have peaked in March, at 77%. April's figure came in at 76.9%, and will likely be revised lower.

Thus, we have a stalled industrial sector, a dead residential housing market, slow to no job creation and the recession was supposed to have ended more than two years ago.

Face it, folks, your government is not in favor of prosperity for the average American. If congress and the administration were serious about jobs and growth and not preoccupied with fighting wars on drugs and terror and meddling into the affairs of other countries, none of this would be happening. We've been sold out, lied to and yet there are fewer and fewer voices of protest. One supposes that Americans have had enough, yet are so worn down by joblessness, violence, foreclosures, regulations and intrusions that they haven't got the energy to complain.

Wall Street is feeling the stress as well. The Dow Jones Industrials were down a nifty 170 points in the early going, but, as usual, when the Fed money comes into play, reversed course and finished with a smaller loss. The other indices were down as well, except the NASDAQ, which posted a fractional gain, probably from being so viciously sold off the prior two sessions.

The "go away in May" crowd seems to have it about right. During the month - today being the 12th trading day in May of 21 total, so we're past the mid-point - the NASDQ is down 90 points, the Dow is off 330 and the S&P has shed some 34 points. It's not a great amount, yet, though it is already a 2-3% decline. Slow death. The S&P has been down eight of the 12 sessions in May. The correction is underway.

Dow 12,479.42, -68.95 (0.55%)
NASDAQ 2,783.21, +0.90 (0.03%)
S&P 500 1,328.98, -0.49 (0.04%)
NYSE Compos 8,333.07, -3.52 (0.04%)

Declining issues danced past advancers, 3815-2713. NASDAQ recorded just 28 new highs and 83 new lows, the second day in succession that the lows have been on the high side. The NYSE continues to resist flipping negative, as new highs outnumbered new lows, 80-47. Volume was moderate, another ominous signal on a down day.

NASDAQ Volume 2,190,797,000
NYSE Volume 4,459,555,500

WTI crude dropped 46 cents, to $96.91, though it traded significantly lower for much of the session. High gas prices, in spite of slack demand and 15% lower crude, persists, however, with the US average at $3.94, down only a few cents from its peak. Just a few hours ago, a group of Democratic Senators called for an FTC probe of oil refiners, suggesting that price-fixing has occurred. Rest assured that it is nothing more than a dog-and-pony show as the senators are merely grandstanding, knowing full well that their campaigns are largely financed by these very companies.

The hit squad was out in full riot gear in the metals markets, sending gold down $4.80, to $1485.00 and sending silver below $33/ounce, before it rebounded to post a gain of 35 cents, currently at $33.95. It should be apparent to all that the forced de-leveraging in precious metals is not about to abate, and prices could tumble quite a bit further, especially where gold is concerned.

A discussion is underway in Washington as to whether it would be prudent to sell some of the gold held at Fort Knox to keep the government running. Presidential candidate Ron Paul feels it's a good idea, though he faces opposition, notably from President Obama. The US gold reserves are valued presently at roughly $370 billion.

All along, the government sits back and watches in a silent stupor, as the United States of America, and its constitution, is slowly ground to dust. And not a word of protest was heard.

Monday, May 16, 2011

Over the Debt Limit and Over the Edge

Just in case you are like about 98% of American's who will think that nothing of importance happened today, we duteously inform you that today, May 16, 2011, is a seminal date in American history, as it happens to be the day the US government purposely and willfully exceeded the statutory debt limit and began raiding the federal employees' pension fund, specifically, the Civil Service Retirement and Disability Fund (“CSRDF”), in order to keep the federal government operating.

It's all laid out in detail in this letter [PDF] from Treasury Secretary Timothy Geithner to Senate majority leader Harry Reid.

In a nutshell, since Treasury cannot issue any more debt by which to operate the hopelessly bankrupt government, they will take the funds from whatever government agencies have money, with a promise to repay once congress acts to increase the debt limit. In case they don't - and there's ample reason to believe that this current bunch of uneducated, deceptive and uncontrollable legislators may not - then too bad for all those federal employees who thought they had it made in the shade. The government will shaft you first. The rest of the public citizenry will be shafted in other ways, at a later date.

This is pretty serious stuff, and the end-run by Geithner around the debt limit gives the congress until August 2nd to sort things out. But, it's by no means a done deal or even close to it. The Republicans are calling for steep deficit reductions in the upcoming 2012 budget, while the Democrats are pushing for tax increases. In all seriousness, neither idea has any chance of passing, so the obvious alternative is to declare war and issue emergency powers.

What's that? We're already at war? In three different countries? Well, then, no problem-o! Spend at will.

Last week - and in measured ways over the last three years - this blog prepared its readers for calamity of varying degrees to be foisted upon the public, saying that chaos would prevail and with today's action by the Treasury, so it has.

Now we have rigged markets, a rogue government, spending completely out of control and borrowing beyond constitutional limits. The government has commenced paying back debt and paying bills with money collected from federal employees; money that was supposed to fund retirements and payments to disabled workers. And while no current retiree will be affected, future ones may well be. It's all in the hands of probably the worst congress (and that's saying something) ever to be seated. Well, good luck with that.

The stock markets took it in stride, first dipping into the red, then going positive, then the NASDAQ taking a nose-dive, and a final-hour smash-crash which took down the other indices. It was spooky, surreal and and absolutely frightening day.

On top of that, over the weekend, the head of the IMF, one Dominique Strauss-Kahn, was arrested in New York on a range on charges related to his alleged rape and sodomizing of a hotel maid. Since then, Mr. Strauss-Kahn has been denied bail and formally charged.

So, we now have a rogue congress, administration and the head of the world's most powerful and influential financial organization behind bars. Can it get any more ridiculous, any worse? Oh, yes, and it definitely will, shortly.

QE2 ends in a few more weeks, and with the free Fed money spigot about to be closed, expect the ruinous crowd on Wall Street to head for the hills, selling as many stock certificates as they can unload before peeling out the door. One problem may be that there will be no takers for their inordinately over-hyped investments, and they will have to sell them for much less than the levels at which they currently trade. If that occurs, we like to call such events a market crash, and there will be no bailing out this time, no savior from above, like the Fed, because they too are over-leveraged and tapped out. This time it will be for real, and it will not recover.

So, hang in there, buy more silver and gold and hope that your garden vegetables head for harvesting before the wheels fall completely off the federal fiasco and the world ends.

And, if you're scared, worried and/or confused by all this, take heart that you should be and that you are by no means alone. We all stand to lose everything if this doesn't go well.

Dow 12,548.37 47.38 (0.38%)
NASDAQ 2,782.31 46.16 (1.63%)
S&P 500 1,329.47 8.30 (0.62%)
NYSE Compos 8,336.59 35.08 (0.42%)

Declining issues took the measure of advancers, 4744-1843. Just in case more proof of the severity of this unannounced crisis was needed, the NASDAQ provided it in the form of flipping the new highs-new lows metric. Today, there were only 40 new highs and 67 new lows. The NYSE compressed, but did not flip (it will), with 104 new highs and 35 new lows. Volume was fairly pathetic, especially on the NYSE. In coming days and weeks, expect more and more stocks to begin selling off, first, in a somewhat orderly fashion, but as the end of QE2 approaches, in a real rush for the exits. Incidentally, banking stocks fell anywhere from 1/2 to 1% on the day. It's only fitting that the companies that led us into depression will be - again - the worst affected.

NASDAQ Volume 2,071,148,875
NYSE Volume 3,888,652,000

Commodities were a mixed bag. Crude oil slipped $2.28, to $97.37. What's of particular concern, however, is that while oil has slumped 14% over the past two weeks, the price of gasoline in the USA has fallen only ONE CENT PER GALLON. The rule of thumb used to be that the price of gas would rise or fall two to two-and-a-half cents for every dollar per barrel move in oil.

Apparently, now that the kleptocracy has gone full retard, that rule no longer applies. Gas will, from now on, cost whatever the oil cartel believes it can charge whether that price be fair, rational or based upon any measure of supply and demand.

Gold was higher earlier in the day, but now trades $5.40 lower, at $1489.80. Silver continues to be the bankers' favorite whipping boy, losing another $1.70, to trade at $33.60 [ON SALE, BUY MORE]. Under siege from HSBC and JP Morgan Chase, the world's biggest shorters of the commodity, silver should continue to experience weakness and erode down to the upper 20s in price. This is a unique buying opportunity in one of history's most manipulated and currently-undervalued pure forms of money.

It will get even more strange and perverse in global markets. Today was only the beginning.

Friday, May 13, 2011

Correlation Trade: Dollar Up, Stocks Down

After a roller coaster type of week, the major indices and commodities ended fairly flat, but that's how the skimmers of Wall Street make their dough: bidding prices up and selling out underneath momentum buyers. This is a fun game for them, not so nice for individual investors, but eventually all the trades will go in one direction and it won't be good for anyone except committed short sellers.

Stocks really got off to a piddling start, but accelerated mid-day, with the Dow down as much as 150 points. While the Dow rallied into the close a bit, the NASDAQ stayed down at finished at its low point of the session.

April CPI was a non-event, coming in at expectations of 0.4% gain for April. Michigan Consumer Sentiment showed a small rise, to 72.4, from 69.8 in March. Despite the steep drops on the averages, it was, all tolled, a pretty dull session. The major trade consisted of shedding stocks (risk) as the dollar advanced, closing at 75.793, up 0.60 as measured by the Dollar Index. It's become the most reliable correlation trade: dollar up, stocks down.

Dow 12,595.75, -100.17 (0.79%)
NASDAQ 2,828.47, -34.57 (1.21%)
S&P 500 1,337.77, -10.88 (0.81%)
NYSE Composite 8,371.67, -84.51 (1.00%)

Declining issues roared past advancers, 4790-1789. On the NASDAQ, the gap tightened with 97 new highs and 51 new lows. A similar situation prevailed on the NYSE with 182 new highs topping 22 new lows. Volume was back in the doldrums, signaling the beginning of the summer season, with traders taking off early and heading for the hills, the Hamptons, or Hades.

NASDAQ Volume 1,885,009,375
NYSE Volume 3,921,132,750

Commodities put in an equally lackluster performance, though most were trending lower through much of the day. WTI crude oil on the NYMEX, down most of the session, caught a bid late in the day, finishing up 68 cents, at $99.65. Gold was swamped today, losing $13.10, to $1493.80, while silver managed to eek out a small, 64 cent gain, at $35.26.

There was a lot of posturing and positioning, but no real commitment on the buy side. Sellers won the day and the week as we inch ever closer to the end of QE2.

Finally, financial stocks took the brunt of the selling, with Bank of America (BAC) down 27 cents, to 11.93, Citigroup (C) shedding 89 cents, to $41.53 despite declaring a .01 annual dividend. Apparently, investors were not impressed. JP Morgan Chase (JPM) lost 94 cents, to $43.15 and Goldman Sachs (GS) dipping 1.29 to 141.46.

Continued pressure on the banking sector is symptomatic of the sluggish economy and may portend another round of trouble for the mega-banks. Couldn't happen to a nicer bunch.

Massive Disconnect in Markets

Apologies for the tardiness of this posting. At press time, Blogger - the system we love and use for posting this blog - was down for unexpected maintenance, at 3:30 pm EDT, on Thursday, May 12. We also note that Blogger lost our post from May 11, 2011, and, since it was created completely upon their system, cannot say with any level of assuredness whether or not it will be restored. At this point, it is permanently gone. Our regular post for Friday, May 13, will (God and Blogger willing) be posted shortly after close of trading, about 4:45 pm EDT.

More of the same from the people who brought you "Financial Suicide 101" (2008) and "How to Jack Economies Worldwide" (2009-11), the genii of Wall Street and their willing government henchmen today took a look at unmistakenly miserable data from fresh unemployment claims filings (434,000) and turned a market that was selling off into another miracle rally.

On top of that April PPI came in at 0.8%, highly inflationary and retail sales disappointed, registering a gain of 0.5% when the estimate was for 0.6%, revised lower from 0.7%. Truthfully, most of the 1/2 per cent of retail gains were due to nothing more than higher prices. There is no growth in the US economy and hasn't been for a while.

The games and maneuvers of these criminal elite which operate on Wall Street are truly breath-taking and never ending. When the Dow was down 90 points and the NASDAQ off 27, shortly after the opening bell, these guileless bastards just began pumping fresh POMO money into the dead carcass that is the US stock market, as though the economy were performing just dandily and those new jobless claims were merely a tick to be brushed aside with a swat of the hand.

What we have here is a massive disconnect which has prevailed since well before the financial catastrophe of 2008 between Wall Street and the rest of the world. In reality, the world would have been a far better place had Osoma bin Laden done a better job and eradicated more of the sniveling, greedy, sociopathic slime that has infested our markets and destroyed not only the US economy, but that of Europe and a handful of other nations.

The egregious crimes committed before during and after the sub-prime meltdown that exploded into a full blown $700 billion heist known as TARP still have not been addressed, no one has answered for this disaster, and to this day, banks such as Bank of America, Citigroup, JP Morgan Chase and Wells-Fargo have continued to conceal their losses behind corrupt, dubious accounting rules, off-balance sheet transactions and trillions of Fed-pumped dollars to boost their bottom lines and hike up momentum stocks to unbelievable, unsustainable valuations.

The biggest banks still cannot lend, cannot process foreclosures without falsifying documents and are routinely charging credit-worthy customers usury rates on credit cards. Even still, they whine and complain after having been bailed out by the government (read: taxpayers) about every little detail that might make their miserable existence even the tiniest bit more fair toward consumers.

Make no doubt about it. These cretins who sit in the executive suites atop the largest financial institutions in the world are still in the process of raping and pillaging one "investor", one "consumer" at a time. If they had it their way, they'd just have their flunkies in congress pass new laws that mandate that all Americans submit all of their money to them, while in many ways, they already have, through control of investment trusts, pension and retirement funds, municipal bonds and a variety of other means - like JP Morgan Chase's easy money scam for administering the SNAP (food stamp) program nationwide.

Today's market action and many other days before it - and surely more to come - is just another example of how ludicrous is their game of "chicken" with markets that are essentially dead and have been for nearly three years. If there was a way to remove the parasitical banks, insurance companies, and other so-called "facilitators" from the scene, our markets would once again return to health and there is a small chance that we might even survive the long-term, generational damage they have bestowed on us and citizens across the globe.

Continual goosing of the stock markets with funny money from the Fed will no doubt leave a legacy of destruction in its aftermath. Because the American economy is so tightly wound around the major financial institutions, extrication from the iron fist of Wall Street and Washington is going to be a painful and unsteady process, but it begins with Americans who have stopped believing and are getting out of stocks, 401k plans, college funds, retirement funds, and all manner of paper investments. Sadly, there is fresh money from new sheep to be sheared, so the game continues and we sink, as a society and as a nation, further and further down the past to insolvency, destitution and eventual destruction of all the principles, laws and common decency that made us a great nation.

America is either already dead or dying a slow, agonizing death. Indictments and criminal prosecutions should have happened two or three years ago, but they can still happen, if people demand that they do.

Write to your congressman or woman. Take your money out of the big, national banks. Liquidate your IRAs, 401ks and other investment vehicles. Leave them for dead, because, in reality, they already are.

Dow 12,695.92, +65.89 (0.52%)
NASDAQ 2,863.04, +17.98 (0.63%)
S&P 500 1,348.65, +6.57 (0.49%)
NYSE Composite 8,456.18, +28.09 (0.33%)

Advancing issues swamped decliners, 4199-2408. NASDAQ new highs: 113; new lows: 55. NYSE new highs: 172; new lows: 36. Make note that new lows have been rising or steady in recent weeks. There are fewer than 30 trading days remaining before the planned end of QE2 and the rats are jumping off the stock market ship. Volume was higher today as it takes more stock trades to save a market from imminent collapse.

NASDAQ Volume 2,233,589,000
NYSE Volume 4,241,912,500

Commodities were whipsawed once again. Crude oil futures finished up 78 cents, at $98.97, but not before some uncertainty in the morning which had futures down 10 cents.

Gold finished up $6.00, at $1506.90 and silver lost 45 cents, to $34.62, but was down briefly below $33 per ounce.

Thankfully, tomorrow ends another week, and the University of Michigan presents its monthly consumer sentiment survey, plus April CPI. It is Friday the 13th, however, so expect more than the usual wild swings, lies and obfuscation.

Wednesday, May 11, 2011

Dollar Wins; Stocks, Commodities Whacked Again as Chaos Commences

Whatever one thinks about the policies of the Federal Reserve, one has to respect their inside job ability to influence and move markets, thus, it should surprise nobody that everything went down today as the dollar rallied past 75 on the Dollar Index.

The dollar gained nearly one per cent today, closing at 75.29, its best level since April 18. That surge brought down stocks and with them, most commodities. No doubt the Fed has responded to inflationary pressure and the stock junkies have expressed themselves by selling off riskier assets, such as stocks, though their commitment has been anything but binding.

A more cynical view might be expressing serious doubt about the trustworthiness of all markets, as rule changes, manipulation and front-running make price discovery more an abstract art than a defined science. The movement in stocks seems to be suggesting that "buying the dips" may have become out of favor in recent days, and a prolonged correction is at hand. With the Fed ending QE2 this would be an opportune time to begin shedding positions in many overpriced stocks.

That's the flavor of the day, and maybe of the month. Stocks finished well off their lows, but still took a significant drubbing, a scenario that seems to be repeating itself with increasng frequency.

Dow 12,630.03, -130.33 (1.02%)
NASDAQ 2,845.06, -26.83 (0.93%)
S&P 500 1,342.08, -15.08 (1.11%)
NYSE Composite 8,428.09, -122.40 (1.43%)

Declining issues hammered advancers, 4955-1719. New highs totaled 89 on the NASDAQ, offset by 46 new lows. On the NYSE, there were 133 new highs to just 22 new lows. Volume was up to decent levels, indicating that the selling, which began in earnest just over a week ago, has resumed.

NASDAQ Volume 2,229,573,750
NYSE Volume 4,265,927,000

Crude oil took another steep loss, dropping $5.67, to $98.21 at the close on oversupply issues and a dampening of China's economy. The Energy Information Administration reported that demand for gas has fallen for seven consecutive weeks and today reported a 2.4% decline in demand. This prompted the CME to halt trading in gas futures for five minutes as the price plummeted 25 cents, triggering the automatic trading suspension.

Additionally, OPEC reported that member nations were only 65% in compliance with production quotas, and 17 senators, led by Oregon's Ron Wyden, sent a letter to the CFTC, urging them to impose position limits on oil futures trading.

If anything is for certain, it's that the world's driving population has been taken over a barrel recently by the oil cartel and Wall Street traders. While it's encouraging to see a bi-partisan group of senators calling for change in how oil and gas are priced, one should not get too excited until we see oil back to some reasonable level - under $75/barrel - and gas back to $3.00 a gallon or lower. As usual, the price hikes at the pump had little to nothing to do with basic supply/demand fundamentals, but certainly, the demand destruction caused by gas rising to over $4/gallon in much of the United States should serve as ample evidence that high oil and gas prices are a major contributor to economic stagnation or even recession.

Elsewhere, gold dipped $15.90, to $1500.90 and silver took another beating, losing $3.34, to $35.11, after rising for three straight sessions. It certainly appears that the banking oligarchs are not yet through punishing those who would speculate in potentially competing forms of money, such as precious metals. Silver traders have been particularly whipsawed in recent days, though true believers, who buy, hold and do not sell, are looking at any drops with gleeful anticipation of more accumulation.

Strength in the dollar is almost certain to be - to use one of Chairman Bernanke's favorite terms - transitory, which means the collapse in silver and any declines in the price of gold will only lead to more enthusiastic buying.

The true measure of the strength of the decade-long precious metal bull market lies in the ability of gold and silver bugs to hold until the government gives up supression measures completely. That may turn out to be a long time frame, as the printing presses at the Fed will be turned on full throttle and efforts to manage or mangle gold and silver price advances will be well-funded.

Unusual movements and increased volatility in prices of all goods and services are signatures of an economy on its knees, with price discovery completely blown away and manipulation rampant. And while there are major camps of support on Wall Street and in Washington to keep money flows into bonds and equities, the battle may already have been lost. There is simply too much debt and more being piled on every day, to expect an orderly unwinding.

Chaos will become common.

Tuesday, May 10, 2011

More POMO Equals More Momo; Less for Your Dollar

For the uninitiated, POMO stands for Permanent Open Market Operations, which, well, really doesn't explain anything, but let's just say this is how the Federal Reserve has been handing money over to primary dealers for the past 6 1/2 months, through various coupon pass-throughs and bond-repurchases.

So why POMO causes MOMO (slang for "momentum") is that these primary dealers have to do something with their newly-minted free Fed paper money, so they thrust it into the stock market and goose up shares of Apple (AAPL), Netflix (NFLX), Chipolte Mexican Grill (CMG) and other darlings of the "Fast Money" crowd.

The Fed is furiously throwing money around these days, attempting to keep the Ponzi market afloat before John Boehner decides to cram it all back to the Fed by insisting on budget cuts. Mr. Boehner best watch what he says or soon enough there will be calls for him to step down as Majority Leader in the House. Treasury Timmy and Bingo Bernanke don't like cuts in spending as it really diminishes the impact of their unilateral pumping of all things financial.

Of course, Mr. Boehner's calls for $2 trillion in budget cuts is laughable and will never happen. Even he knows that, but he must maintain the posture of a "conservative" even though he and his Republican members (except a brave few - very few - Tea Partiers) are as quick to spend a buck as their Democratic counterparts. There will be a few trifling spending cuts announced as part of some kind of compromise, but it won't matter. The government is about as desperate and broken as the stock markets, and that takes some doing.

So, today, on the back of a ramp job yesterday, we have more momentum playing, goosing stocks back towards the highs they scored a few weeks back. There are about 30 more POMO days before the Fed cuts the cord in late June, so expect the equity indices to be heading for higher highs before then. As long as the mainstream media can keep the public convinced inflation is marginal, transitory or immaterial, and that $4 or $5 gas is now acceptable, there will be no turning back the tidal wave of Federal Reserve Notes banging prices higher around the world.

Quoting Diane Keaton in her role as Annie Hall, from the Woody Allen movie by the same name, "la dee da." Welcome to the centrally planned economy.

Dow 12,760.36, +75.68 (0.60%)
NASDAQ 2,871.89, +28.64 (1.01%)
S&P 500 1,357.16, +10.87 (0.81%)
NYSE Composite 8,550.49, +72.30 (0.85%)

Advancing issues far outpaced decliners, 5077-1471, so one could call today's ramp-up, POMO-induced rally, broad-based, if one so chooses. Most of it are just calling it "nowhere to hide the devalued dollars." On the NASDAQ, there were 142 new highs and 34 new lows. Over on the NYSE big board, new highs were well ahead of new lows, 240-16. This is, in fact, easy to accomplish with free money, no restraint and near-record low volume - again.

NASDAQ Volume 1,996,086,625.00
NYSE Volume 3,778,728,750

Crude oil, despite an announced 25% margin hike which takes effect tomorrow, gained $1.33, to close at $103.88. And now, since oil has been sufficiently beaten down, we hear that numerous refineries are partially shut down, just in time for the nicer weather. Welcome to $4.00 and $4.50 gas coming to a fueling station near you.

Gold continued to strike back against the empire of debt, gaining $3.20, to $1516.30 up to the minute. Silver added 76 cents, at $38.47. The precious metals now have added momentum to meet and exceed previous all-time and multi-year highs before the end of June.

The government reported today that import prices (almost everything that US consumers purchase) rose 2.2% in April, on the heels of a 2.6% rise in March. Year-over-year, the increase was 11.1%
The 12-month advance in April was the largest year-over-year increase since an 11.2 percent gain between April 2009 and April 2010.
So, no, there's no inflation, just record import prices two years running.

Keep printing, Mr. Bernanke. We will continue to buy silver and gold, POMO and MOMO notwithstanding.

Monday, May 9, 2011

Citi Reverse Split Causes Volume Dump; PPT Still Engaged

Covering the daily machinations of a stock market that is now nearly a vast wasteland of swap trades, churning and "gotcha" moves seldom offers much of anything substantive of which to report, but today's reverse split of Citigroup (C) may turn out to be a watershed moment for our contrived and trivial stock markets.

With Citi now a $44 stock instead of a $4.40 stock - and it being the nearly indisputable daily volume leader for many months - America's 3rd largest bank has cost the NYSE about 450,000 trades on a daily basis, today, tomorrow, forever. This dramatic upside-down-sizing caused today's NYSE volume to dip to its second-lowest level of the year.

It is more than dismal on Wall Street; it is so scary that the PPT was brought in today just before noon for a quick fixer-up, sending all the indices close to their highs of the day in a 20-minute ramp job that is certain to destroy what little remains of confidence in the veracity of US markets.

From about 11:50 am to 12:10 pm, the Dow gathered itself up for an 80 point gain, the NASDAQ gained about 27 points and the S&P added nine. The indices had been hugging the flat line until the PPT (yes, we're absolutely certain they're still working) showed up. Afterwards, stocks drifted along the new highs and closed near those newly-elevated levels.

Yet another fantastic display of why nobody trusts these markets and nobody should be trading here: the stocks are all traded between the biggest brokerages and selected hedge funds, and the whole game is rigged for their benefit. Someday, we can only hope, the whole miasma gets thrown a loop by the HFT computers and never recovers. Maybe then, the greed, corruption and utter uselessness of US stock markets can be exposed.

Dow 12,684.68, +45.94 (0.36%)
NASDAQ 2,843.25, +15.69 (0.55%)
S&P 500 1,346.29, +6.09 (0.45%)
NYSE Composite 8,478.19, +52.29 (0.62%)

For the record, advancing issues beat decliners, 4534-2055. NASDAQ new highs: 81; new lows: 39. On the NYSE, there were 120 new highs and 17 new lows. Combined volume for the NYSE and NASDAQ was at or below the lowest level of the year. While the trading volume on the NYSE was expected, the absurdly low number of trades on the NASDAQ is telling market timers that now is the time to get out of Dodge.

NASDAQ Volume 1,654,697,000.00
NYSE Volume 3,366,898,000

Commodities must be the new playground, because they had a banner day. Forget the massive drop in crude oil from last week. Today's ramp job of $5.37 on NYMEX WTI crude futures brought the price back to $102.55 at the close. One wonders whether it's actual volatility driving the wild price swings or just plain revenge by the traders who were nearly wiped out in last week's plummeting decline. In any case, the price of oil has absolutely nothing to do with fundamental. It's almost as though price discovery has become a function of speculation. There is no real price for a barrel of oil, only that which appears or appeases for the day. These markets are broken beyond repair. Time to dust off and oil up that old bike. You'll need the energy boost in order to stay ahead of the coming rolling panics in cities across America.

Gold buyers were back in earnest, raising the price $18.20, to $1513.60. Silver recovered as well, gaining $2.28, to $37.90.

If anybody can make sense of any of this, please call 1-800-CONFUSED and leave a long, descriptive message.

Friday, May 6, 2011

Skimming Off the Fear Factor

Another week in the books for the crippled economy saw stocks rise on a better-than-expected jobs report and commodities take a bit of a breather as the dollar and bonds both gained.

for the week, the major averages were down anywhere from 1.3% to 1.7%, with the Dow faring best and the S&P the worst.

For analysis of the control factor in all trading, see this morning's post.

When the BLS' non-farm payroll report came out prior to the opening bell, futured roared back to life and equity markets opened sharply higher. The Dow was up as many as 175 points, but the rally fizzled as renewed weakness in Europe prompted a flight to safety to the US dollar.

News that Greece was pondering a move to leave the EU, or at least abandon the Euro as its main currency, kept the Euro sliding right into the weekend.

As the dollar gained strength, trades came off in risk assets, mainly equities, as investors were once again cheered then spooked by forces other than fundamentals.

Dow 12,638.74, +54.57 (0.43%)
NASDAQ 2,827.56, +12.84 (0.46%)
S&P 500 1,340.20, +5.10 (0.38%)
NYSE Composite 8,425.90, +28.50 (0.34%)

Advancing issues finished well ahead of decliners on the day, 4144-2356. New highs beat new lows on the NASDAQ, 68-36. The story was more exaggerated on the NYSE, where 133 new highs towered over 15 new lows. Volume was back in the doldrums, following heavy flight volume the previous two sessions.

NASDAQ Volume 2,007,823,250
NYSE Volume 4,907,953,500

After being whipsawed into submission, a few brave souls ventured back into the commodity trade, but it was definitely not for the faint of heart. NYMEX WTI crude oil continued to sell off, losing another $2.62, to finish out the week in NY at $97.18.

Gold bugs were welcomed back with open arms, as the shiny yellow metal yielded a gain of $19.30, to stand at $1492.40 as of this writing. Silver was less warmly received, but still managed to bounce of the lows and add 65 cents, to $35.31, though there is still concern another round of trimming is yet on the way.

The calendar for next week is rather light until Thursday, which kicks off with unemployment claims, PPI and retail sales, followed on Friday with the monthly CPI figures and the University of Michigan consumer sentiment index. With first quarter earnings now winding down, the markets will be looking for clues for direction, as this week's action has left many dazed and confused.

Snow Job in May

It is difficult to express just how warped US markets have become, though, from the movements of the past two trading days, a case can be made that the markets are being guided by forces that are distinctively not based on free market ideology nor statistics that can be trusted within any degree of accuracy.

Taking a look first on the massive downdraft in commodities - mostly silver and crude oil - from Thursday's trading, one should look no further than the CME (Chicago Mercantile Exchange), the overarching body that controls trade in futures, options and various other derivatives.

The CME raised margin requirements - the cost to buy a futures contract - on silver four times in the past two weeks. That resulted in many speculators - generally honest traders working with leverage via margin - to reduce their exposure, thereby taking the price of silver from close to $50/ounce on Friday, April 29, to under $35/ounce by Thursday, May 5.

This really doesn't require much thought. If it costs more to buy something - in this case a silver futures contract - you either buy less of it or don't buy at all, waiting until the price is more reasonable. In the case of silver futures contract, a highly inelastic entity (You can't buy a fraction on one; you must buy a full contract.), one is either in or out. When margin requirements (cost) rise rapidly, many legitimate buyers head for the hills. This is exactly what happened all week, culminating in the final thrust downward on Thursday, May 5, as there were also fewer short contract holders which would have provided some support, having to cover as prices fell. Alas, the shorts were also out of the market due to exorbitant margin costs.

This makes a great deal of sense from a banker's perspective. Money flowing into either physical silver or gold is money out of circulation, and, more dangerously, into a competing currency. Precious metals compete with all fiat (paper) currencies, insofar as they are considered stores of wealth and mediums of exchange. Thus, when one buys Silver Eagles, silver bars, etc., bankers get worried because the buyer exchanged paper dollars (or Euros or Yen or Reals) for physical metal. And if the price of physical metal and the amount in circulation gets too high, the need for paper dollars is diminished.

Silver, being the "coin of gentlemen," as opposed to gold, "the coin of the realm (or, kings), is a very dangerous commodity to the banker line of thought. If more and more ordinary people - the "little guys" upon whom the banker depends - conduct transactions in silver - the utility of paper money declines, velocity decreases and all of a sudden there's a liquidity crisis.

This is exactly what the global (mostly in the USA) banking cartel feared as silver approached all-time highs, thus the need for margin hikes to kill the competing currency before it became a real threat.

The same is true for gold, to a lesser degree, as central banks hold gold as a final backstop to their paper currencies, though it is leased out, levered 100-1, and therefore, being a useful conduit for the bankers, not as volatile as silver.

As for oil, what caused Thursday's sell-off is a little less clear, but again, the CME, which owns the NYMEX, where West Texas Intermediate oil futures (the most popular and widely held) are traded, extended trading range limits from $10 to $20, exacerbating an already decisive decline.

In simple terms, the CME allowed oil to fall though the floor simply by changing the rules in the middle of the day. There's less concern in the price of oil declining, because lower oil prices are generally good for everybody outside of oil companies and Middle East sovereigns, so less attention was paid to the CMEs quick decision, but it still underscores the levels at which rules will be either broken or amended to accommodate the needs of the powers behind the money (read: the too big to fail banks, the Fed and Treasury Department).

Now to Friday's fiasco in the Bureau of labor Standards (BLS) non-farm payroll data for April (the establishment survey). While the consensus opinion had been trending toward lowered expectations, the BLS surprised everybody with the announcement of 244,000 new jobs created during the month, 268,000 in the private sector, offset by a loss of 24,000 public sector jobs - mostly municipal and state employees being furloughed.

What's intriguing about the non-farm payroll data is how the numbers are created, and the use of the word "created" is no accident, because the BLS employs such such extreme and convoluted data manipulation that pure statistics become rather murky. It's easy to say that our monthly "jobs data" is more a political process than an actual statistical survey with a margin of error in the low single digits. It's guided by a smallish sample and then amplified by what's known as the "birth/death model," a number created to reflect the number of businesses opening (birth) and closing down (death).

Does the BLS actually sample bankruptcy and new corporation filings in selected communities and states? No. Does the BLS ever adjust the number for seasonality. No. For accuracy, yes, but not in the month-to-month survey numbers.

So, from where did the 244,000 net new jobs in April come? 175,000 came from the birth/death model. And while some are contending that roughly 62,000 came from the widely-published McDonald's hiring, the Wall Street Journal begs to differ, stating that McDonald's hire date was April 19, a week after the BLS survey period.

Taking just the raw data, subtracting out the birth/death figures, the US economy consisting of existing businesses created 69,000 net new jobs - not so hot. If we can believe that a couple hundred thousand newly-minted entrepreneurs joined the business fray and 30 to 40,000 businesses went belly up in the same time frame, we could believe this figure. However, like the missing photo of a dead Osama bin Laden, there's no proof of these "births" and "deaths," only trust in the BLS, which, by the way, stretched credulity again by proclaiming the official unemployment rate to have risen, up to nine per cent (9%).

That rise correlated to the other side of the BLS coin, the household survey, which showed the number of employed persons to have fallen by 190,000 from the March reporting period to April.

Is it a gain of 244,000 jobs or a loss of 190,000? Who knows? The point is that many decisions are made based upon the BLS data, which, as shown, is more guesswork and massaging of data than trustworthy data, but one wonders if these decisions are based on reality, a perception of reality, or if the reality is being superimposed upon the American public to suit the current narrative of "recovery."

Whatever the case, it seems a shoddy way to run a country's economy, with dodgy data and questionable maneuvers by those running the exchanges.

It doesn't snow much in the USA in May, but that surely doesn't preclude a massive snow job by Wall Street and the federal government and their extensions.

Thursday, May 5, 2011

Armageddon Arrives in Commodities; Stocks Next

As has been the ongoing motif of this blog for many months, the grand Bernanke experiment is now experiencing some of the nasty side effects. Today's action in commodities, particularly silver and crude oil, came as a stark reminder that leveraged positions can go very, very badly in very, very short spans of time.

It was just last Friday that silver stood at the precipice of $50/ounce, approaching the all-time high. As of this writing it is now trading on the spot market at $34.76, a drop of 30% over just four days. WTI crude oil futures were at $116 on Monday, and today it closed on the NYMEX at $99.80. All those sheiks and oil robber-barons drooling over $4/gall gas across the USA can now wipe their chins with their sell tickets.

Stocks were also not immune from the liquidity trap. The Dow was down as many as 200 points around midday, but recovered a bit into the close. Still, leveraged bets (margin) on selected stocks have finally begun to display inherent risk and the carnage has only begun.

What set off today's massive selling spree were a number of unrelated events which combined to turn the trading day into an economic tornado, tearing through asset classes like a Midwestern twister. First, a series of margin tightenings on silver speculation that has been ongoing from Sunday night began the unwinding process. Silver had been hammered for three straight days without buyers on the downside. Then, with the 8:30 am release of some truly horrible weekly unemployment claims, the spring was coiled tighter.

Initial claims for the most recent week (last week in April) came in at 474,000, the highest since August of 2010, off expectations for a number around 400,000. So much for Hope and Change, Bernanke's Zero Interest Rate Policy (ZIRP) and QE2. The smart money has made its way out of Dodge and the rest of the pilgrims are scrambling to leave town with whatever they can salvage.

While commodities were being ravaged one after another, stocks were salvaged from the brunt of the storm, though they eventually faced capitulation and will likely be under pressure from the opening bell on Friday, after the April non-farm payroll report goes public at 8:30 am EDT. Following the unemployment number, expectations have been ratcheted lower. The expected number of new jobs created during the month was supposed to be around 200,000, though that's been trimmed to 185,000 and even lower by some analysts. Anything under 185,000 will produce a bloodbath. Even anything over that will likely induce more selling, on a faster pace than today's, because this is a liquidity trap, and economic numbers - good, bad or indifferent - may not matter at all.

The winners on the day were the US dollar, which majestically made its move all the way from a low of 72.81 (about the point at which Mssrs. Bernanke and Geithner were having accidents in their pantaloons) to a close at 74.08, a move of roughly 1.5%, which, in the world of currencies, is enormous. This created a vicious, self-reinforcing virtuous loop, with the dollar's rise causing commodity margin calls, and a risk-off scramble in stocks.

The other winner was bonds, which explains much. Bonds are the lifeblood of the Ponzi scheme between the Treasury, Primary Dealers and the Federal Reserve which gave us the illusion of prosperity against the backdrop of an eroding dollar. Bumping right up to the debt ceiling, the Fed intervened in a very big way today - behind the scenes, of course - to dampen risk appetite and make fixed income investments the choice for the foreseeable future. They had to, being backed into an untenable position.

It was truly a momentous day, one which we've been preparing you for with our reminders all week that the narrative was changing with the (fictitious) slaying of Osama bin Laden. And now, change has come to us all.

Dow 12,584.17, -139.41 (1.10%)
NASDAQ 2,814.72, -13.51 (0.48%)
S&P 500 1,335.10, -12.22 (0.91%)
NYSE Composite 8,397.40, -109.21 (1.28%)

Advancing issued were submerged by decliners overall, 4183-2412. The NASDAQ recorded 48 new highs and 52 new lows, the second straight day of high-low reversal. On the NYSE, there were 100 new highs and 36 new lows, mostly due to the elevated levels reached recently. It's hard to imagine the daily lows not overtaking the highs within the next week. Volume was magnificently higher as sellers sold with both hands.

NASDAQ Volume 2,241,177,750
NYSE Volume 5,510,796,500

Crude oil took an earth-shattering drop of over 8%, losing $9.44, to finish at $99.80. The selling is certainly far from over as the tempering of emotions in the Middle East after the slaying of OBL will surely push prices back to some level of sanity and take out the majority of the risk premium and speculative fever.

Gold, which had been holding up relatively well with respect to other precious metals, finally took a beating, losing $43.40 (nearly 3%), to its current trading level of $1473.10. Silver took the worst of it again, falling another $4.73, to $34.66, but there is a silver lining for the faithful in precious metals. Most of the true believers - who only hold physical metal and use the futures and ETFs only as a hedge - have a cost basis below $20/ounce.

Technically, they've lost nothing, and could still sell right here for a hefty profit. But they won't, and are actually looking at this momentous correction as a buying opportunity, hoping to snatch up more metal at what they perceive as bargain-basement prices. The general strategy is to buy once everything has more or less settled out. Nobody is really worried about catching the absolute volume, and a few days of upwards trending will not entice the hardiest of the breed. They will wait until a bottom is confirmed. Like love, they'll know it when they see it. The same strategy holds more or less true for gold bugs worldwide.

The holders of gold and silver will eventually rule the world as we approach - at breakneck speed - the eventual destruction of the global fiat money regime and the likely collapse of more than a few governments. What has happened in Greece, Iceland, Ireland and Portugal will eventually visit the shores of Japan, the USA, Great Britain, France and even China.

We are still reeling from the catastrophe of the housing bubble and collapse and the general liquidity and solvency crisis of 2008. The measures taken by the Federal Reserve and other central banks has been to throw more money at the credit monster they created, but it has resulted in extreme imbalances everywhere. The thinking at the top of government is focused already on the elections of 2012. The betting is that the US government and the financial community will have a time making it there unscathed.

If this looks anything like 2008 to those wizened enough to learn from history, those people would be on the right track, except, this time, it's likely to be worse and without any magic bullets, because the Fed is all out of them.

Wednesday, May 4, 2011

American Sheeple Love to Be Fleeced and Played

The lies, half-truths and material obfuscation by the government has reached new heights with the latest flip-flop on the "Osama bin Laden is dead" story.

Now the president won't release a picture of a dead bin Laden because it might inflame the Jihadists of the world. Rubbish! Pure, unadulterated nonsense from the man who is supposed to be the leader of the greatest nation on the planet, but is now exposed as nothing more than a simple liar.

Lies, lies and more lies are all the American people can expect from the most corrupt government the world has ever seen. The details of this entire, "we got him" affair have changed so often as to strain credulity until it doubles over in laughter or vomiting, or both.

First, the story originally released by AP on Sunday night, May 1, was that bin Laden was killed a week prior and that the White House had been waiting for DNA tests to confirm that the victim was indeed the world's bogeyman. Anyone watching the news scroll on FoxNews or CNN saw it, undeniably. That story vanished as soon as the president stepped up to the podium that Sunday night.

Then there were reports of a firefight, now, no firefight. Osama was armed, then he wasn't; he used his wife as a human shield, then he didn't and it wasn't even his wife, then it was his wife and she was shot because she rushed one of the Seals. There were two helicopters, no, three, no, there were four. Then Osama bin Laden is taken out of the compound to Afghanistan and rushed to an aircraft carrier for a proper burial at sea. Sure, that's completely understandable, especially if you believe Osama bin Laden was a seaman or a pirate.

Of course, there's the implausibility factor of a huge compound with 18-foot high walls, topped by barbed wire in a town populated by retired Pakistani military people, which never raised any suspicion for five or six years. That's certainly believable.

The entire episode is one huge farce and sadly, the iPad buying American sheeple public-at-large will gooble up every last sound bite of it, all the while chanting, USA, USA, USA! because the American sheeple actually love being conned, swindled, cheated, fleeced and sheared by their government. After all, this is the culmination of the 9/11 attacks, the major farce that has to this day never been adequately explained.

But, so what? Osama the Terrible is dead, right, and whether he's been dead for five, six or seven years is really immaterial because the powers that be are changing the narrative. They had to, because the most recent narrative of borrow and spend and gas at $4.00 a gallon and rising food prices and war on three fronts wasn't really going all that well, was it?

So, now, we have crashing commodity prices, falling stocks and oil down seven bucks in three days. Get ready for the new AUSTERITY coming to America. The sheeple will be fleeced from an entirely different direction and instead of calling it a recession or a depression, it will be known as a period of "slow growth" or "stagnation." Anything but calling a spade a spade, a recession a recession, a depression a depression.

The American sheeple will receive less in government service and be taxed more for it all in a "shared sacrifice" decade of austerity that is evolving even as we sit back and watch the latest American Idol or Star Dancing. America has been permanently dumbed-down and defeated, and the government loves it because an ignorant public is a well-behaved public. Give them their bread and circuses, today known as food stamps and football, and they'll just blindly follow along.

That's just the way it is, sheeple, one and all. You love being played.

Dow 12,723.58, -83.93 (0.66%)
NASDAQ 2,828.23, -13.39 (0.47%)
S&P 500 1,347.32, -9.30 (0.69%)
NYSE Composite 8,506.61, -78.07 (0.91%)

For a change, everything (except bonds) went down. Declining issues overwhelmed advancers - for the third day in a row - by a score of 4700-1904. On the NASDAQ, the flip required to shake the markets from rally mode to selling spree occurred today with 52 new highs, but 53 new lows. On the NYSE, stubbornness prevailed with 89 new highs and 28 new lows, but it's getting closer. Volume, unsurprisingly, was up again today, on a down day, an ominous warning that more selling is on the way.

NASDAQ Volume 2,250,185,000
NYSE Volume 5,078,037,500

Commodities continued to be whipped into submission. WTI crude oil futures fell another $1.81, to $109.24, the lowest price in two weeks. Gold tumbled another $20.60, to $1516.50 and silver took another massive beating, down $2.27, to $39.39. And, this just in after the close, margin requirements on silver are being raised again by the CME. Apparently sending the price of silver down $11 in three days isn't enough to square all of HSBC's and JP Morgan's short positions.

The often-discredited ADP Payroll report for April was released prior to the open today, showing private payrolls increasing by 179,000, short of consensus. But the real news was that the ISM Services index fell from 57.3 in March to 52.8 in April, a pretty big loss and well below consensus estimates of 57.5.

Tomorrow comes another week of initial unemployment and continuing claims, which precedes the BLS non-farm payroll report on Friday.

Prepare for disaster because we've been living one for the past three years.

Tuesday, May 3, 2011

Ponzi Schemes, Bubbles and Manipulation Rampant in US Markets

What follows bizarre?

On the absurdity scale, probably irrational, or maybe unbelievable.

That's exactly where US markets are now and for the foreseeable future - or until about the middle of June. Nothing makes sense on the surface, but there are correlations. Below the surface are machinations of big money players, central banks, the Too Big To Fail banks here in the US and Europe and whatever whacky game they're playing in the two biggest Eastern economies - China and Japan.

Consider that the dollar index spent the overnight gaining, fell sharply during the morning in the US, spent the next two hours rising, and ended the day with two hours of flatness, resulting in a final prinat at 4:00 pm EDT of 73.095, a paltry gain of 0.051, hardly a blip on anyone's radar.

Now, the Dow did follow along at the end, though it made all of its gains, back to a small print higher for the day, in the final hour of trading, bouncing back from a 50-point loss.

Meanwhile, silver had its worst one-day decline since the Hunt Brothers got wiped out in 1980. Sure, silver was overvalued on a very short-term basis, but the meaning of the massive, manipulated crash was to get the price back down to where JP Morgan and the rest of the shorts wouldn't be losing theirs. The attacks since Sunday night on the paper silver market, in conjunction with margin hikes by the COMEX, have had the desired effect. Silver is down, the US dollar will live for another day, week, a few months, maybe even until the presidential election in 2012.

Oil finally had its comeuppance, for a day, but if anything is a bubble, it is not silver, which has been suppressed for decades, or gold, which has broken out of the stranglehold of the big banks, but oil and stocks. Crude oil has doubled in the past year along with stocks over the past two years. Some stocks are up as much as 300, 400, 500% or more from the March, 2009 bottom to today. Normal markets do not double in one or two years. One only need to look at the massive amount of stimulus thrown at the markets via the Federal Reserve to see where the bubbles lie.

Where will everything go from here. A guess is a good as anyone can make right now, but if Ben Bernanke is serious about ending QE2 on schedule in June, one can probably side with deflation over the short term, a long-overdue market correction, and crashing interest rates.

Of course, the Fed can't allow interest rates to rise, since that would bankrupt the US government, so their only option is to reign things in, allow the stock market to correct and hope it doesn't crash as money will flow into medium term bonds. The speculative plays in commodities will cease to exist and the dollar will bounce.

That's a best guess scenario, until the next financial crisis, caused by either the Fed, the banks or the government, occurs. And one will occur, because one always does. Heck, it's been almost three years since the last one, so we're probably overdue.

In the long, long run, it's a depression, plain and simple. The Fed cannot continue printing money at a breakneck pace, nor can the government borrow at ridiculous speed, especially when the two biggest buyers of our debt (after the Federal Reserve, via the PDs and POMO), Japan and China, have their own issues and are not all that sound, economically-speaking.

In a world so tangled and cross-reliant, there are no safe havens, only places that will do better than others. Sure, the good, old USA will likely outperform Greece and Ireland, but Germany appears to be the only sane economy in the world, followed maybe by Brazil or India.

Dow 12,807.51, +0.15 (0.00%)
NASDAQ 2,841.62, -20.22 (0.71%)
S&P 500 1,356.62, -4.60 (0.34%)
NYSE Composite 8,584.68, -64.93 (0.75%)

Declining issues took the measure of advancers for the second straight day, 4471-2090, and if this kind of lopsided A/D line continues another day, we'll have no problem calling it a trend. On the NASDAQ, there were 60 new highs and 39 new lows, closing in on equilibrium. At the NYSE, 141 new highs and 22 new lows were recorded. And, surprise, surprise, volume was actually solid today; not a very positive sign for markets.

NASDAQ Volume 2,225,012,000
NYSE Volume 4,968,288,500

The commodity trade seems to e blowing up all over the place. WTI crude futures fell $2.47, to $111.05, when traders were shocked to find that there was actually a glut of oil sloshing around waiting to be turned into useful products, like gas, plastics, etc. The world has been led to believe that there's no more oil out there, that the political disruptions in the Middle East will cause production declines, when nothing is further from the truth. The oil wells and fields will keep on producing through revolution or peacetime, money is money, everywhere in the world, after all. There is simply a greedy cartel of nations and companies that like the price in the stratosphere and people need to drive their cars, run their engines, so it goes.

Gold was squelched a bit again, down $8.50, to $1537.10 at the moment, but that was nothing compared to the raid on silver, which is currently down $2.27, to $41.66. Remember, silver was almost $50 per ounce last week. A line has been drawn in the sand by the central banks and, more importantly, the silver shorts at JP Morgan and HSBC, who have won this battle, though the war carries on apace. Silver is eventually going to $150 on the open market and there's nothing they can do about it, long term. All they have is their paper market in the SLV and PSLV EFTs and they will eventually break down, when all participants require physical metal and they won't have enough.

That's where we stand today, on the precipice of failure of fiat money, for what it's worth.