Why There Probably Won't Be a Stock Market Crash

With US stocks suffering back-to-back losses of more than 100 points Friday and Monday on the Dow, conventional thinking might be assuming that the market has hit a short term top and they may well be correct.

Others continue to ponder the overall fate of the entire fiat-money global financial system and wondering when it's going to implode, if ever. Many have been waiting since 2008 for a full reset, but policy changes, bailouts, stimulus and interest rate manipulation have managed to keep the carnage contained, at least in the US.

Today in Europe, it was something of a different story, as many national equity exchanges were victims of among the worst losses of the year. Most indices were down more than two percent, with the Greek Athex Composite Share Price Index falling more than seven percent on pronouncement by the IMF in Der Spiegel magazine that the world's fail-safe lender of last resort may not help Greece in any further restructuring or servicing of debt.

Naturally, after the Dow was down 239 points in early trading, IMF officials reversed their opinion, saying that they would indeed be there for the Greeks, just as they have all along. This is now the accepted method of moving markets - by word of mouth, rumor and denial - and part of the reason why the economic collapse has more resembled a train wreck in slow motion.

Along those lines, a couple of columns by the estimablePaul Craig Roberts and Nomi Prins have received a great deal of attention as they examine the libor-rigging scandal and how that effectively kept banks and governments in collusion from complete collapse.

In the first article, from July 14,
The Real Libor Scandal, Roberts and Prins assert that the banks which "fixed" the libor rate were the main beneficiaries in something of a quid pro quo for the assistance they received from various governments and central banks:

Indicative of greater deceit and a larger scandal than simply borrowing from one another at lower rates, banks gained far more from the rise in the prices, or higher evaluations of floating rate financial instruments (such as CDOs), that resulted from lower Libor rates. As prices of debt instruments all tend to move in the same direction, and in the opposite direction from interest rates (low interest rates mean high bond prices, and vice versa), the effect of lower Libor rates is to prop up the prices of bonds, asset-backed financial instruments, and other “securities.” The end result is that the banks’ balance sheets look healthier than they really are.

Governments were also beneficiaries of a lower libor, as they could sell their bonds at rates below inflation while still maintaining enormous budget deficits:

In other words, we would argue that the bailed-out banks in the US and UK are returning the favor that they received from the bailouts and from the Fed and Bank of England’s low rate policy by rigging government bond prices, thus propping up a government bond market that would otherwise, one would think, be driven down by the abundance of new debt and monetization of this debt, or some part of it.

In a follow up to the first article, The Libor Scandal In Full Perspective Roberts expands upon the concept of ever-lower interest rates on government bonds into a full-blown indictment of government in collusion with the libor-fixing insolvent banks on charges of fraud:

As the Federal Reserve and the Bank of England are themselves fixing interest rates at historic lows in order to mask the insolvency of their respective banking systems, they naturally do not object that the banks themselves contribute to the success of this policy by fixing the LIbor rate and by selling massive amounts of interest rate swaps, a way of shorting interest rates and driving them down or preventing them from rising.

Roberts goes even further, demonizing Robert Rubin, whose actions to dismantle regulations in the US such as the Glass-Steagle Act put into motion over-leverage by the banks which resulted in the 2008 crisis and continue to this day:

As villainous as they might be, Barclays bank chief executive Bob Diamond, Jamie Dimon of JP Morgan, and Lloyd Blankfein of Goldman Sachs are not the main villains. The main villains are former Treasury Secretary and Goldman Sachs chairman Robert Rubin, who pushed Congress for the repeal of the Glass-Steagall Act, and the sponsors of the Gramm-Leach-Bliley bill, which repealed the Glass-Steagall Act. Glass-Steagall was put in place in 1933 in order to prevent the kind of financial excesses that produced the current ongoing financial crisis.

The articles are both "must read" material which outline the persistent fraud necessary to keep the fiat money crisis from imploding completely, with scenarios for its eventual collapse, not from within, but from outside.

As the stock markets are kept afloat at higher-than-usual levels by manipulators within the around the system, so too, the bond markets are manipulated, often by the very same people.

With powerful institutions plotting and defrauding the public on both sides of all trades, there's little wonder that every time there's an event which causes even a hint of panic, the authorities rush in to save the day, and with it, the global economic system from the carnage which eventually will engulf it all.

Dow 12,721.46, -101.11 (0.79%)
NASDAQ 2,890.15, -35.15 (1.20%)
S&P 500 1,350.52, -12.14 (0.89%)
NYSE Composite 7,670.54, -89.05 (1.15%)
NASDAQ Volume 1,586,828,750
NYSE Volume 3,576,762,250
Combined NYSE & NASDAQ Advance - Decline: 1242-4363
Combined NYSE & NASDAQ New highs - New lows: 113-202 (reversal)
WTI crude oil: 88.14, -3.69
Gold: 1,577.40, -5.40
Silver: 27.04, -0.26

Turn-Around Thursday: Greece, US $$ Bury Stock Gains?

Well, it's simply not all sunshine and roses out there after all. On a day in which market pumpers from the major brokerages were attempting to take the Dow over the magical 11,000 mark, turmoil in the Eurozone and strength of the US dollar killed all hopes of a smooth recovery.

The headlines from the various media would have you believe that investors are snapping up stocks like jelly beans on Easter morning and that the bad, old world of Europe, which just can't get its own house in order caused so much worry that everybody sold at once around 3:00 in the afternoon.

Folks, don't be silly. The selling began as soon as the dow crossed the threshold of 10,500, around 1:30 pm. There was no news at that point, except some rumors that Jean Claude Trichet, president of the Europen Central Bank, warned that the bailout of Greece should not involve the International Monetary Fund (IMF), a US export which has consistently stolen wealth from less-fortunate or less-well-armed nations. As it turns out, the EU will be in partnership with the IMF, with the latter handling 1/3 of the Greece debt solution. Good for us, though only if you agree with bullying smaller countries.

It's a working plan, without firm details, though Greece's senior notes are now graded as junk, BBB-. What happened at 3:00? Nothing, except that an ordinary time of day for heavy traders to make moves. And they did all move almost at once, selling, so as to lock in their profits from earlier in the session. This is nothing new. It is a normal trading day move, and nothing more. Reading anything more into a mid-session reversal is usually a bad idea, though this kind of thing could become more commonplace. If stocks continue to gallop higher, look for astute traders to take day-trade profits over and over again.

Dollar strength is good for the US economy, folks. Don't let anybody try to tell you otherwise. A stronger dollar means imports cost less. Sure, exports are more expensive and thus, less marketable around the world, but that shouldn't matter - either to you or most multi-national corporations - you don't export and the big companies nowadays have their manufacturing offshore, in other countries, where labor is cheaper. Besides, they're selling things like industrial tractors, nuclear plants and other extremely high-ticket items where price pretty much takes a back seat to other functions like delivery time and overall quality.

So, sure, the US dollar was marked up today, not because the US is in such outstanding shape, but because Europe is a basket case. US dollars just looked better by comparison, at least for the short term. The trend is positive for US consumers, maybe not for US companies as a rule, but, by no means is a stronger dollar anything but good.

Thus, trader sentiment, and the lust for a quick profit, had more to do with turning a 90-point move higher on the dow into a 5-point gain at the close, and a 25-point NASDAQ gain into a small loss. Tough cookies. Live with it.

Dow 10,841.21, +5.06 (0.05%)
NASDAQ 2,397.41, -1.35 (0.06%)
S&P 500 1,165.73, -1.99 (0.17%)
NYSE Composite 7,385.60, -22.56 (0.30%)

Surprisingly, volume was excellent, though most of the moves were made in the latter part of the day, when selling was the correct option. Losers outslugged winners, 3936-2583. There were 751 new highs to just 85 new lows.

NYSE Volume 6,429,545,000
NASDAQ Volume 2,589,351,750

The rise in the dollar shot dead a rally in oil and the metals. Crude for May delivery fell 8 cents, to $80.53. Gold, which was up sharply, closed with a gain of just $4.10, at $1,092.70. Silver picked up 10 cents, to close at $16.73 per ounce.

In two stories which have importance only in the context of a post-government era of semi-autonomous anarchy, California will vote in November to legalize marijuana and former Assistant Secretary of the Treasury and popular truth-telling writer Paul Craig Roberts said he is retiring from the writing business, ending his last column with the words, "As the pen is censored and its might extinguished, I am signing off."