The Numbers Racket

We are entering a glorious new age of prosperity and health, where no person will want for any thing, be it large or small. The government and the brilliant men and women running our largest corporate enterprises shall ensure that the necessities of our lives will be provided to all.

OK, now that kind of statement is right out of the Orwell handbook, but it is apparently the kind of Kool-Aid that Wall Street and the financial media seem to want to project. At least that's the impression left by 13 months of non-stop gains in the markets and another small, but still significant, rise today which pushed the Dow past 11,000 for the first time since September, 2008, some 20 months ago. It's a meaningless number, just like 2500 on the NASDAQ and 2000 on the S&P, both figures within hailing distance. They're just round and big, and that's why they get noticed. Look, even I'm mentioning them.

If you're paid to watch these things and/or report on them, then you might want to make the case that certain benchmarks are actually meaningful whether they are or not.

Dow 11,005.97, +8.62 (0.08%)
NASDAQ 2,457.87, +3.82 (0.16%)
S&P 500 1,196.48, +2.11 (0.18%)
NYSE Composite 7,641.75, +12.70 (0.17%)

Gainers knocked losers for the umpteenth time in the past two months, 3704-2780. On the 8th of February, the Dow closed at 9908.39. Since then - two months time - the index has gained 1100 points (11%). It is running at an annual rate of 66%. Those kinds of gains are not normal, and anyone who tells you they are is a liar. Simply put, the market is running on fumes and cheap dollars. The rally is as unrealistic as it is unsustainable.

New highs were prolific at 900. There were but 90 new lows. Volume was still limp and lacking.

NYSE Volume 5,071,607,000
NASDAQ Volume 2,066,159,250

Some interesting merger news today involved Haliburton (HAL) which will purchase Boots & Coots (WEL), Cerberus will take private Dyncorp International (DCP), and Reliant Energy (RRI 4.53) and Mirant (MIR 12.68) will engage in an all stock merger. Though all separate deals, they are actually part of the same umbrella, all engaged in Mid-eastern politics, war, oil and security. The Cerberus deal is likely the most nefarious, since Dyncorp is heavily involved in procurement, security and god--knows-what-else in both Iraq and Afghanistan.

Of course, Cerberus is the company that brilliantly took Chrysler private in 2007 and had to be bailed out by the government in 2008. According to published reports, Cerberus was supposed to have "eliminated" its 80% equity stake in Chrysler, but maintain a controlling stake in Chrysler Financial. About a year ago, Cerberus was supposed to have utilized the first $2 billion in proceeds from its Chrysler Financial holding to backstop a loan allocated to Chrysler automotive in December by the Treasury Department.

Whether or not that exact deal took place or not is unknown, though the murkiness of all of the bailout flotsam has become de rigeur. A private company like Cerberus, with seemingly unlimited amounts of capital to invest, can do pretty much what it wants, especially when it gets stamped "approved" by the friendly federales.

As for commodities, oil fell 58 cents, to $84.34. This should come as no surprise to anyone, as $86 oil is about as welcome as $3/gallon gasoline, and we're already approaching that threshold. Gold gained 50 cents, to $1,161.60. Silver gained 6 cents, to $18.40. That's not surprising. What will be interesting is to see which cartel breaks apart first: the oil price riggers, the metals and gold bugs, or the stock jocks.

It's a racket. A numbers racket.