There's Something Very Wrong and the Tea Party Knows It

Stocks were down for the second straight session, as criticism of the Federal Reserve's recently-announced QE2 has ramped up and is nearing a fever pitch. While the Fed seeks to embark on another round of handing easy money to criminals on Wall Street, the rest of the world is not exactly enamored with Chairman Ben Bernanke.

Europe is beset with its own problems, stemming from unstable, out-of-control government spending in the PIIGS countries, but particularly Ireland and Portugal, which have gone from bad to mush worse over the past six months. That has kept the US dollar from appreciating against the Euro to any great degree, only because money seeks its safest refuge, and in currency markets, the US still appears to be a safer bet than most of Europe.

The Chinese expressed their displeasure by having their ratings agency, Dagong Global Credit Rating Co. Ltd cut the U.S. local and foreign currency long-term sovereign credit rating to A-plus from AA.

Throughout the day, stocks were sent lower as gold and silver, especially, caromed ever higher, with gold spiking to $1425.50 and silver hitting $29.38. By the end of the day, however, the fiat money-makers had had enough and the CME announced an increase in margin requirements to buy silver from $5000 per contract to $6500 (silver is traded in 5000 oz. increments).

That may have been cover for some serious naked shorting of both gold and silver, because while it may explain the late day selloff in silver, it would have had little effect on gold, which also crashed late in the day (see chart at right). At the moment, the bid on gold is $1393.00, and silver has been smashed down to $26.95. The obvious take-away is that the Bernanke put - his $600-900 billion in USSS created right out of thin air, is receiving some serious competition from real money, that being gold and silver, and the Fed, through their proxies on the trading floors had to do something.


They're likely to try to tamp down gold and silver prices in order to garner more bids on their beloved US stock markets, though it's unclear at this time whether anything they do can stem the tide rising against them. In the long run, though most people will never notice, gold and silver are going to become the basis for currency, not Federal Reserve Notes (FRNs) and debt. Sides are being drawn and this battle will end with few winners. Most of the losers will be stockholders and owners of paper currencies. Gold and silver - as they have over thousands of years - will prevail.

Dow 11,346.75, -60.09 (0.53%)
NASDAQ 2,562.98, -17.07 (0.66%)
S&P 500 1,213.40, -9.85 (0.81%)
NYSE Composite 7,702.31, -79.89 (1.03%)
NASDAQ Volume 2,204,733,500
NYSE Volume 5,605,771,500

Declining issues rocked advancers, 4709-1789. There were still 777 new highs to a paltry 82 new lows, but volume was much higher than yesterday's session and better than most days during the run-up of the past two months, a discouraging sign for stock investors, but probably the best news for the long-term, in which the stock market becomes a game of last-man standing.

Oil even came down for a change, dropping 34 cents, to $86.72, and if the stock market continues to slide, expect oil to diverge from gold and silver, following stocks down the deflationary path. Bernanke's big money bet notwithstanding, the next few weeks and into the end of the year may be very hazardous times for trading in anything.

With a pickup of sixty seats in the House, the Republican party has taken control, spurred onward by the success of anywhere from 30-40 Tea Party candidates. In the wide-ranging report from PBS below, some of the nuances are Rand Paul's hint that he may cut federal employee paychecks by 10%, Utah Senator Mike Lee pondering a constitutional amendment to balance the budget, cut the Department of Education and voting NO on raising the debt ceiling, a vote that is likely to come up early in the next term (March-May, 2011).

POMO + QE2 = Stocks to the Moon, Silver Soaring

One of the side effects of Ben Bernanke's $800 billion gambit - and there are many - is to send stocks directly upward, while also giving silver and gold somewhat of a boost.

A day after the announcement of $600 billion in QE2, plus another $150-200 billion more in re-allocated MBS, the Fed hit the trifecta with a 4$.5 billion POMO today and sent stocks to the their best levels since the crash of 2008.

Yes, siree! We're back on easy street thanks to Uncle Benji debasing the currency. Now all you people worried about your pension funds and 401Ks can rest easy, Uncle Ben's got ya covered.

Another side affect of QE is runaway inflation, but let's not talk about that now. Let's talk about that when gas is $4.25 a gallon, because that's where this is evidently headed. And word has it that if this round of stimulus via magic money creation isn't enough, don't worry, Ben can just conjure up some more. Isn't capitalism nice, easy, fun?

Oh, and you people who have saved diligently and are now in fixed income securities, bonds, and money markets, well, you're screwed. You'll still have money; it just won't be worth much, and, as an added bonus, it will buy even less in years ahead. Happy Retirement!

To the uninitiated, typical, dumb-ass American, they'll just see that the Dow was up AGAIN! and their stocks are doing well, so all is good in America. We've got a whole slew of newly-minted Republicans in the House of Representatives all set to slash taxes (for corporations), cut spending (on social programs) and usher in a new era of prosperity for the good old USA.

The problem with this scenario is that it's just all bunk. We're headed down the path of the Weimar Republic or, more recently, Zimbabwe, places where inflation was so out of control that restaurants asked patrons to pay in advance because by the time they'd finish their meal, it would cost more. The currency became essentially worthless in a matter of days and weeks.

Don't worry, though, we're just getting started. The fun part of hyper-inflation won't come until the dollar index hits something like 45. It's still above 75, or at least it was this afternoon. That could have changed.

Dow 11,434.84, +219.71 (1.96%)
NASDAQ 2,577.34, +37.07 (1.46%)
S&P 500 1,221.06, +23.10 (1.93%)
NYSE Composite 7,782.43, +174.02 (2.29%)

Gainers decimated losers on the day, 5265-1295. The new highs, new lows numbers were simply amazing: 1343 new highs; perhaps more amazing were the 112 new lows. From where did those come?

Volume was exceptional, for once, though considering that the Fed has only begun to pump nearly a trillion dollars into the stock market, we could see volume spikes which dwarf this in weeks and months to come. Today was a day to just pick some stocks you like and throw a bunch of money at them. They're almost guaranteed to go up. Even Bank of America (BAC) was up nearly 5%, despite the news that they may be on the hook for over $120 Billion in mortgage put-backs. In other words, the bank will be munching on those loans for years to come and, in fact, their exposure is probably more on the order of double or triple that.

NASDAQ Volume 2,533,570,750.00
NYSE Volume 6,609,444,500

The good news is that gold and silver went off like rockets today as well, because the really smart money (which gold and silver are) is into this space in expectation of enormous inflation and destruction of the dollar and other currencies. Gold was up $44.10, hitting a new all-time record high of $1392.90. Silver, in percentage terms, did even better, gaining $1.53, to $26.37, as JP Morgan and HSBC face criminal and class action lawsuits related to shorting and manipulating the silver market. Ouchie for them; great for anyone who loves silver.

It's a wild world out there; every man, woman and child for themselves.

Just a note in the wind. Keep an eye on House of Representative member Ron Paul, and his newly-elected Senator son, Rand. I'm promoting a Paul-Paul ticket for president and VP in 2012. A father-son team in the White House. Looks like a natural to me.

Oh, and never mind that unemployment claims were up 20,000 this week, to 457,000. That number will grow ever larger, likely to surpass 500,000 in December or by late January at the latest, while the stock market soars. Hey, who needs employees when you've got the Fed's printing presses on your side.

Tomorrow's non-farm payroll report for October should be a non-event, as will most fabricated economic data from now on. with money creation out the wazoo, there's no sense in measuring anything except the thickness of your bankroll.

Yippie! We're all going to be rich!