Sellers Resume Bearish Ways

It didn't take long for investors to continue their selling once the Fed and their internal, clandestine agents were through pumping the markets on the buy side.

Naturally, with news of the federal government handing out money to citizens percolating all over mainstream media, the index pre-market futures were goosed and the morning shows all headlined the "stimulus package."

On Good Morning America this morning, Diane Sawyer asked a real estate expert, "are we nearing the end of this recession?" This and similar false hope nonsense was being spouted all over the airwaves. Obviously, Ms. Sawyer, like most of her viewing public hasn't a clue as to the depth and seriousness of the economic crisis underway.

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Fortunately, the expert was clear, explaining that home prices probably wouldn't settle out until late 2008.

Over the past three sessions, the Dow, after bottoming out at 11,508.74 on Tuesday morning, rose an incredible 1014 points (8%) to 12, 522 on Thursday afternoon before pulling back somewhat to close at 12, 378.61.

Dow 12,207.17 -171.44; NASDAQ 2,326.20 -34.72; S&P 500 1,330.61 -21.46; NYSE Composite 8,827.48 -114.77

On Friday, the Dow gapped higher by another 108 points, reaching the high of the day (12,486.89) just 5 minutes into the session. From there, however, it was all downhill.

At 10:30 am, the 12,400 mark was breached, and as it turned out, for the day. Between 1:00 and 1:30 pm, the index sputtered around the 12,300 level, broke through that and headed still lower. Approaching 2:00 pm, the Dow had hit 12,200, down 178 points.

That 12,200 level would prove to be the battleground between the bulls and bears. Absent active participation by the PPT, the market was allowed to drift lower without the overt influence demonstrated over the past three sessions. At least until 3:00 pm, that is.

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Considering that the Fed is almost certainly going to cut rates by another 50 basis points next Wednesday, they need some kind of negative influence to make their move plausible, thus negating the immediate need for Plunge Protection. Still,with the markets down considerably for the day, the manipulators felt a need to pare back some of the losses. In a 10-minute span from 3:10 to 3:20, the Dow cut its losses in half. The other indices experienced similar moves.

Finally, in the closing 15 minutes, the PPT apparently stood down and the selling continued in a fierce manner, lopping off 100 points in a matter of minutes. When it was all said and done, the bears won again, though, for the week, the Dow gained a negligible 108 points. The S&P and NASDAQ closed the week with minor losses.

Internals were more pronounced. Declining issues took the lead over advancers, 3565-2812, and new lows continued to dominate new highs, 194-62.

Oil gained another $1.30 to $90.71. Gold and silver continued to forge ahead, with gold up $4.90 ($910.70) and silver ahead 16 cents ($16.49).

The protracted interference from the PPT continues to make trading difficult, especially for those playing the market short. The direction is clearly to the downside, but the PPT insists on preventing the markets from busting, which they eventually will. The distortions are evident to anyone trading and until the funds of the Fed and Treasury are exhausted, we are forced to live with this blatantly unethical condition.

Of course, market forces are more powerful than the machinations of a few madmen masquerading as government officials. The fear is that the influence of underhanded trades (and associated derivatives in the options market) is making conditions worse rather than better.

NYSE Volume 4,528,555,500
NASDAQ Volume 2,598,300,250

Bottom's Up!

From the stunningly stupid to the overtly optimistic and moronic misguided pundits and plagiarists who make up the financial news media comes word today that the bottom is in.

These calls began with the close of trading on Wednesday and continued here and there through the day on Thursday. Stocks could continue on an unlikely rise for another three weeks and these calls will all be proven wrong in the long run.

Let me be among the first to tell you: the bottom is definitely not in.

Markets have been roiled by a combination of bad news, poor economic reports, weaker corporate earnings, writedowns, bad loans, fear, panic and finally, desperate moves by the Federal Reserve and more sweeping stupidity in the form of free money soon to come from the political class.

All of this points to a world economy splitting apart not only at the seams, but also uncoupling from the moorings of a badly damaged banking and credit system. Fear is rampant, mistrust overflowing, especially among the well-heeled like those gathering in Davos, Switzerland, where the doubtable US Secretary of State, Condoleezza Rice, one of the more serpentine figures in world politics, declared glowingly, "the US economy is resilient, its structure sound, and its long-term economic fundamentals are healthy." Link.

Ms. Rice must think that those in attendance at the World Economic Forum are idiots. Just about everybody outside the United States knows that the US, thanks largely to the policies of her president's (Bush) administration, is a financial house of cards being sold off in parts precipitously to various Arabs, Orientals and other, more stable, companies, countries and individuals. Somebody forgot to give her the memo, apparently.

One has to love comments like this, from an article on a business web site: "This just doesn't feel like a real, full-blown recession to me."

It makes one wonder just what a recession is supposed to feel like. Is there real, physical pain involved in having your assets depreciated right before your eyes?

Take a look at just two serious articles today:
Housing prices to free fall in 2008 - Merrill - This report suggests a 15 percent drop in housing prices in 2008 another 10 percent drop in 2009, with even more depreciation likely in 2010.

Why the Fed can't save us - Here, Senior Editor Allan Sloan correctly points out that the Fed, which has cut rates four times already since September 2007 - from 5.25% to 3.5% - and is expected to cut another 0.5% next week, is running low on rate cut ammo.

That's more like it.

The big news today was another bombshell from the imploding housing sector. In a report released by the National Association of Realtors, the median price of existing homes fell for the entire year of 2007. Since records prior to 1968 do not exist, it is assumed that it was the first time the median price had registered a full-year decline since the Great Depression of the 1930s.

It's notable that reference is being made to the Great Depression, as more and more stories these days are carrying a similar connotation. While some economists are still arguing over whether or not we are in a recession, more adroit minds are pondering the potential of a global depression.

Most of the pieces are in place. The global financial system is about one or two serious events removed from complete failure. As it stands, Citigroup and Merrill Lynch are only still standing due to major cash infusions from sovereign funds from Singapore, China and Kuwait. An actual bank failure could occur at any time, triggering the ultimate catastrophe - the seizing up of the entire world financial system.

On Wall Street, however, where fantasy thumbs its nose at reality, stocks gained for the second straight day, today without as much overt assistance from the PPT, the Fed or any other nefarious agents who might prime the equity pump. No doubt, they were there, keeping the indices above break-even. The job is to restore calm and civility and keep the dastardly sellers and short-players in check... for a time.

Dow 12,378.61 +108.44; NASDAQ 2,360.92 +44.51; S&P 500 1,352.07 +13.47; NYSE Composite 8,942.25 +136.57

That the market will retest the intraday lows of Tuesday and Wednesday is not in question. It's only a matter of time before a bit of news or earnings reports or a piece of economic data once again sets the seller's sails for distant shores.

Today's internals were benign, if not wholly fatuous. Advancing issues raced ahead of decliners, 3861-2541. New lows moderated over new highs, 208-59. Trading was range-bound and, relative to the past few sessions, lighter.

Oil traders got the "all clear" signal and priced higher by $2.42, to close at $89.41. Gold rocketed $23.00 to the upside, to 907.00. Silver improved by 36 cents, ending the day at $16.33 the ounce.

With two consecutive days of gains, a Fed meeting less than a week off and the Super Bowl looming, we are in a significantly soft "bounce" period. The Fed and the PPT will do what they do best, manage the market, and everything should go along swimmingly for a time. Congress and the president are even playing nice, agreeing on a sweeping cash give-away program to boost the economy.

In typical fashion, however, the politicians will not actually deliver checks - ranging from $300 to $1200 - to "the people" until sometime in June, according to most estimates. As Washington goes, that qualifies as "fast.", one supposes. This $100 billion and another $50 billion in business incentives ought to stimulate somebody. By then, surely, we'll need more.

Ah, I almost forgot. The bottom is in. NOT.

NYSE Volume 5,790,062,500
NASDAQ Volume 3,019,970,750

PPT Rallies Markets, Raises False Hopes

I've mentioned the Plunge Protection Team (PPT) on this blog more than just a few times. While some people think that the President's Working Group on Financial Markets is some kind of chimera that I and other tin-hat conspiracy nuts have created out of whole cloth, there's more than enough evidence - including today's mythic 631-point rally - to prove that the PPT does indeed exist and now operates almost in plain sight.

Here are just three articles concerning the PPT from fairly credible sources:

THE TRAGEDY OF THE US STOCKMARKET Part 2 - PPT failing, panic in Washington...

Gold will rise, US Dollar would burn

Plunge Protection Team Now Official

There are many more which can be found using any search engine, but try this Google News search for links to current articles on the PPT.

After the absurd move today, rallying the Dow from a low of 11,644.81 to a high of 12,276.67, there should be no doubt that the US economy is in the midst of a serious crisis. The problem is that 95% of Americans don't know this because they will see the stock market rebounded today. Half will not know that the Dow was down more than 300 points. The other half will see that but simply not care.

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Economic reporters never mention the PPT, and always assign turnaround movements in the middle of market collapses as either bargain hunting, program trading or tied to the price of oil. So, the average Joe or Jane with money in their 401k thinks everything is OK. All the while the US dollar continues to sink into a black hole on the PPT's profligate spending in US equity markets.

All of this PPT-induced buying began at 12:45, when the markets bottomed out for the second straight day and it continued without interruption right through to the close.

Dow 12,270.17 +298.98; NASDAQ 2,316.41 +24.14; S&P 500 1,338.60 +28.10; NYSE Composite 8,805.68 +144.51

I have seen many a strange event on the markets, but today's takes the cake, the ice cream, plate, fork and napkin. Yesterday, I called the market rally the biggest fraud ever perpetrated in financial markets. I was wrong. Today's action takes that prize, hands down.

Let me be clear. Small investors in America are neither sophisticated or very smart. They get the majority of their information from television (CNBC) or paid shills, invest mostly in mutual funds which they barely comprehend and probably spend less than two hours per week analyzing market trends, individual stocks or financial events.

On the other hand, Americans still trust their federal government which is a major mistake. Here's a short list of non-credible functions, offices and people in the highest positions of power in the United States:

• The president and his administration and cabinet


• Congress: both houses are equally inept and unworthy of trust


• The Federal Reserve, the Chairman (Ben Bernanke) and the Board of Governors


• Treasury Secretary Henry Paulson


• Mainstream Media, especially ABC, NBC, CBS, FOX (lapdogs of the government)


• The SEC


• CEOs of any major corporation and all of the Dow companies

Thus, the not-so-clandestine operatives of the PPT get to manipulate markets without impunity, resulting in erratic and unexplainable movements like today. This inspires hope in the little people, even though that hope is based on nothing more than a government printing press spitting out $100 bills as fast as it can and operatives in the stock markets buying everything in sight with both hands.

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Market internals show just exactly how ridiculous today's 300-point gain on the Dow really is. Volume was the highest in a long time, surpassing yesterday's highest of 2008. That makes sense, since the PPT had to buy a lot of stocks while people were busy selling them and then covering their short positions as the fraudulent rise overwhelmed everything.

Advancers finally got a leg up on decliners, 4234-2198, but new lows were again dramatically ahead of new highs, 864-60.

Oil slipped by $2.22 to $86.99. Gold closed at $883.10, -7.20, while silver fell by 14 cents to $15.97.

Unless there's any doubt, nobody should be trading stocks unless they have a solid understanding of economics and the workings of the PPT, as the former is fundamental and the latter is a market dynamic which cannot be understated.

Stocks will eventually fall again, retracing the lows of today and yesterday. Within months, if not weeks, the indices should be well below today's levels, though due to the activity of the PPT, the timing of the collapse is difficult to discern.

If you are long stocks or call options, you should not be playing in this market. It's a very dangerous playground and some of the kids carry knives. If you're short or in puts - the advisable position - keep your stops fairly tight and a sharp eye on radical movements like today's. 600-point gains can drastically alter your profits.

NYSE Volume 6,765,203,000
NASDAQ Volume 3,585,647,750

Bernanke Blinks; Big One Forestalled

With markets tanking worldwide on Monday, the calls came in from central banks and economists around the world to Ben Bernanke to rush his rate cuts to the market to avoid a catastrophe.

By Monday night, the Federal Reserve Chairman had made up his mind and folded like a cheap suit, but the markets wouldn't know until around 8:30 am ET. Prior to that, here's what was flashing on trading screens:

06:47 am : S&P futures vs fair value: -57.3. NASDAQ futures vs fair value: -70.8.

06:47 am : FTSE...5586.70...+8.50...+0.2%. DAX...6729.26...-60.73...-0.9%.

06:47 am : Nikkei...12573.05...-752.89...-5.7%. Hang Seng...21757.63...-2061.23...-8.7%.

With the announcement of an emergency cut to the federal funds rate of 75 basis points (0.75%), the markets refused to go along. At the opening bell, the NASDAQ was down 114 points, the Dow fell 450 minutes after the open and at 9:33, the S&P was down 31 points.

From there, stocks took a u-turn, thanks to underhanded funding from the Plunge Protection Team (PPT) which immediately knocked 200 points off the Dow's losses. As the day progressed, the "invisible hand" of the PPT continued to pump money into stocks, nearly erasing the losses entirely.

Trading was highly suspect throughout the session. Volume was explosive in the first hour, then dawdled and dwindled, even though the totals were on the high end. In general terms, the Fed and Treasury pulled off one of the more dramatic and obvious frauds in stock market history.

Dow 11,971.19 -128.11; NASDAQ 2,292.27 -47.75; S&P 500 1,310.50 -14.69; NYSE Composite 8,661.18 -133.68

Even the press was involved in the fraud. In this story from Reuters, headlined on Yahoo Finance at 10:56 am as Wall St. cuts losses in half on bargain hunting, though the Reuters headline actually read, Market falls on recession worries.

From the article:

But by midmorning, major indexes had halved their losses, as investors snapped up beaten-down retailers, home builders and financial services companies after the Federal Reserve cut interest rates by 75 basis points in a surprise intermeeting decision.

That statement is almost certainly untrue and Reuters would be unable to provide proof if required. The story was later pulled from the list of available headlines. Nobody was buying stocks except agents of the Federal Reserve and the Treasury through their proxies at Goldman Sachs, Bear Stearns, Lehman Brothers and Merrill Lynch. This was typical Plunge Protection Team work, stopping the markets from a total washout, which was almost certain to occur, despite the Fed's desperate emergency rate cut of 75 basis points prior to the opening bell.

Stock manipulation was evident throughout the session, with the Dow closing to within 7 points of break-even just after 3:30 before selling off with gusto, losing over 120 points in the final 30 minutes.

While the Fed pumped $10 billion into the markets through their typical open market repurchasing (repo) activity, there was probably another $30-50 billion in secret, "underground" funds through the PPT, which is kept off-the-books and will likely never be revealed except to the inside players who manipulate the market with magic liquidity, flooding the world with fake capital and doing irreversible damage to the US dollar.

The point is that the markets are being falsely pumped to the upside and have been for years. There's likely an overhang of more than a trillion dollars worth of bogus liquidity that's been priced into stocks over the past 8-10 years. The number might actually be larger, and I am using a trillion as a conservative estimate.

Real damage is done to markets when manipulated by secretive bodies such as the PPT. Since equity prices are primarily perceived value, investors are subjected to stock prices that are an illusion. US stocks on average are probably worth 20-30% less than present values due to these distortions.

While the newspapers and internet reports will praise the Fed's "quick thinking" the truth is that stocks will continue to decline. Truly wise investors know that this market - and most other world markets - is teetering on the brink of collapse, and only clandestine operations saved it from total destruction.

The internals were telling. Declining issues pummeled advancers by 4064-2385, but the reading of new lows was literally the highest number I have ever seen. There were 2070 new lows to only 69 new highs. Nearly one in three stocks hit 52-week lows on Tuesday. Clearly, the market averted meltdown... for now.

Oil traded 72 cents lower, closing at $89.85. Gold was up $7.90 to close at $889.80. Silver gained just 2 cents to $16.04.

The view from this outpost is that investors should expect more severe losses over the next 3-6 months. The Fed's magic won't work indefinitely on a global financial system that's essentially broken.

NYSE Volume 6,256,598,000
Nasdaq Volume 3,109,516,000

Stocks Tank Worldwide. Is This the Big One?

Are we setting up for The Big One?

While America was taking the day off in honor of Martin Luther King, Jr., one of our nation's greatest defenders of liberty, equality and justice, markets around the world were crashing from the after effects of the credit crisis and now the looming confidence crisis in the USA.

This article tells most of the story, but the reality won't hit the US shores for another 12 hours. By the time US equity markets open, the Asian markets will have gone through another day and Europe's will be well into their afternoon sessions.

Some of the drops on Monday were shocking:
Britain's FTSE-100 -5.5%
France's CAC-40 -6.8%
Germany's DAX 30 -7.2.
Hong Kong's Hang Seng -5.5%

The meaning in all of this for US stocks is disturbingly real, since all of the declines worldwide are keyed to the fear of a US recession. As the so-called buyer of last resort, the US bears the blame and also will likely suffer consequences equal or worse than those of our fellow capital-intensive countries. After all, the recession is going to happen here first.

Shades of the Great Depression

While the actual causes of the Great Depression are still the focus of argument among economists, what remains clear is that most of the world was plunged into an economic abyss after the market crash in 1929.

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The actual extent of the damage to capital markets is still unclear at this point, and while not wanting to be alarmist, I've remained steadfast that the subprime mortgage blow-up was more of a trigger than an isolated event. So far, with the Dow already off more than 14% since the October peak, I've been right. And now it appears that we are in the second phase of a bear market, where losses are the steepest.

Where this is all headed is in the wrong direction. Using Fibonacci calculations of 33, 50 and 67% declines from the previous gain (roughly 6800 points), the declines would be of the order of 2244, 3200 and 4690 points on the Dow.

With the Dow already close to that 2244-point decline, I had expected a bounce and the gains on Friday morning might have been all there was. That makes the next stop around 11,000, and if that breaks down, somewhere around 9500 may be the bottom.

It could get worse, however, if, as anyone paying attention might recall, the stock market began its tremendous bull run at the start of the Iraq War in March of 2003. Considering the massive fiasco that campaign has devolved into, might there be some coupling of the market gains to the war "effort" and if so, what have we wrought but death, destruction and about a trillion dollars in wasted spending?

The last 4 1/2 years of "prosperity" might have been an illusion. If that's the case, we're in for some hard times indeed.

If the Dow drops below 9500 and begins to head for the 7500-8000 area, it could portend catastrophe, not only for the stock market but for the US and possibly all other economies.

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Retracing the missteps of the Great Depression, government was found either powerless or ineffective in stopping natural economic forces from occurring. We may be seeing a similar scenario today. Despite three rate cuts by the Federal Reserve amounting to a total of 1%, stocks still lost considerable value.

Now, world reaction to the US government's plan has been met with skepticism if not outright disapproval. Since investors and economists are generally better-equipped than government bureaucrats and politicians to read the "tea leaves" correctly, the instinctive selling by the cognoscente may have already begun. As usual, the really smart money has gotten out of the way earliest.

We may be in the earliest stages of a cataclysmic economic event. Remember, during the Great Depression we had the relative security of the gold standard. Such a limiting mechanism no longer exists in the leveraged world of floating currencies.

If we are indeed going to hell in a handbasket, the signs should be easy to discern and some have already appeared: inept politicians, secrecy and distrust within the banking community, a continuing decline in stocks with only brief respites, falling prices, falling currencies, disruptions in trade and commerce, business failures, bankruptcies, municipal budget pressures, massive real estate foreclosures from delinquencies on mortgages or taxes or both.

Inflation may turn out to be the least of our worries. The temporary advance in prices may turn out to be chimeric as the real devastation of slack demand takes hold in coming months. Inflation can be beaten back. A cyclical deflationary spiral is a demon for which nobody is prepared to confront, but we're fortunately not there yet.

A couple of months ago, I mentioned that some people might consider cashing out their IRA or retirement funds, even if it meant losing 20% of the portfolio's value as a penalty. Today, that almost looks like sound advice, especially if you're invested in an indexed fund. Since August or October, you may already be down close to that 20%. Wouldn't you rather have whatever's left in your control, rather than that of a fund manager who is likely to be chasing profits where none exist?

I am not a pessimist. I am a realist and I only present the views as a cautionary tale. If the worst is yet to come and the economic reality is more severe than most of us wish to imagine, it's far better to be forewarned than caught in the snare of an economy biting the dust.

Is sure hope my father reads this. Despite my constant warnings, he continues to play the market long and loses. I fear for his economic fate, but more for the welfare of those under 18 who don't already have a place at the table, but will be picking up the scraps.