Flash Crash Proves Individuals are OUT of the Market and Computers Run the Show

As mentioned briefly yesterday, US and European markets are a joke. They are manipulated beyond one's wildest imagination and almost exclusively, the trading is done by computer algorithms, as was made entirely too clear by the action in yesterday's hacked AP Twitter account-flash crash.

In case you missed it - after all, it was only a four minute event - stocks lost all of their gains when somebody hacked into the Twitter account of the Associated Press (AP) and posted that there were two explosions at the white House and that President Barack Obama had been injured.

The tweet was a hoax, but the computers - which cannot deduce and make value judgements - responded by selling off all stocks. Volume, as displayed in animations from nanex.net completely dried up, leaving a few computers trading with a few other computers.

In other words, there were very few, if any, human responses to the fake tweet. Welcome to the bidless US stock markets, where only the computers can get the best prices and humans are relegated to a back seat. Any wonder why individual investors are wary of the stock markets? The same conditions likely exist - though not in such a pronounced manner - in forex and commodity markets.

It's time the American people disengage from this lunacy where only the bankers, exchanges and traders profit.

Take, for instance, today's trading, in which, when all was said and done at the close, the S&P gained a penny, the NASDAQ, 32 cents, while the Dow was down 43 points and the NYSE Composite gained almost 34 points. Surely that makes sense to some master algo inside a supercomputer somewhere beneath the trading floors, but to us dumb humans, it's somewhat confounding and confusing.

CNBC's Rick Santelli astutely pointed out that the other trade impacted by the phony tweet was none other than the Japanese Yen - US Dollar cross and the Yen/Euro cross, making the point that the Yen is now also tied into US stocks by HFT algos. Lovely.

Sooner or later, there's going to be a mistake somewhere, or some purposeful key-logging or hacking that completely disrupts trading in markets nearly around the world, and by then it will be too late. Obviously, having algos that trade on the basis of tweeted information is rife with flaws and ripe for harvest by nefarious forces.

As far as today's trading is concerned, nothing really mattered, even though the US was hit with another poor economic report, this one on durable goods orders for March, which came in at -5.1% on expectations of -3.1, so it was a bad miss on an equally bad forecast.

The spate of bad economic data has been partially offset of late by fairly good earnings reports from a smorgasbord of companies, close to half the S&P 500 having already reported. Of course, the algos are all over those, programmed to buy heavily on any earnings beats and disregard most misses.

Reality seems to have evaded Wall Street on a semi-permanent basis, but, Wall Street has never purported to have been a place for well-grounded types of people in the first place.

With sociopaths running the computers which trade the world, humans are bound to get bruised, and badly.

Gold and silver got a little bit of a bid, but a good chuck of it after the COMEX trading session ended. Oil was the top-performer with a gain of more than two percent. Oil never seems to be able to stay down for long. Funny how that always seems to be the case.

Dow 14,676.30, -43.16 (0.29%)
NASDAQ 3,269.65, +0.32 (0.01%)
S&P 500 1,578.79, +0.01 (0.00%)
NYSE Composite 9,147.77, +32.65 (0.37%)
NASDAQ Volume... 1,643,812,625.00
NYSE Volume 3,647,139,250
Combined NYSE & NASDAQ Advance - Decline: 4021-2343
Combined NYSE & NASDAQ New highs - New lows: 381-36
WTI crude oil: 91.43, +2.25
Gold: 1,423.70, +14.90
Silver: 22.83, +0.016

Tuesday Tune-up: Stocks Rally on Bad Economic News

Really? US and European markets are complete frauds.

Here's the latest Keiser Report with Max Keiser and Stacy Herbert on the gold smash-down psyop, Ireland as an open-air prison, institutionalized corruption and much more:



Dow 14,719.46, +152.29 (1.05%)
NASDAQ 3,269.33, +35.78 (1.11%)
S&P 500 1,578.78, +16.28 (1.04%)
NYSE Composite 9,113.80, +93.88 (1.04%)
NASDAQ Volume 1,642,050,375
NYSE Volume 3,962,323,500
Combined NYSE & NASDAQ Advance - Decline: 4963-1510
Combined NYSE & NASDAQ New highs - New lows: 396-41
WTI crude oil: 89.18, -0.01
Gold: 1,408.80, -12.40
Silver: 22.82, -0.507

Relative Price Inflation; Getting Off the Investment Grid; Permanent Backwardation in Gold

Since today's trading was nothing but another typical "buy the dip" on low volume type of affair, after Caterpillar (CAT) posted truly ugly first quarter results and existing home sales were likewise horrible, today's post contains some random thought and ideas about the state of the economy and a link to an article by Professor Antal Fekete, one of the few honest economists in the world.

I'll take IBM for 200, Alex... er, make that 175.

I've always been skeptical of yields on dividend stocks, because, in a market-clearing event like 2001 or 2008, these stocks all lose on a per share basis. Yes, your yield rises, but at the expense of share price. At best, you break even; at worst, you lose and the dividend gets cut, a la 2008.

I don't believe the RE market is actually improving. Where I live (upstate NY), RE prices were not greatly affected by the bubble bursting, but now they're headed south, with lots of Fannie Mae foreclosures showing up after the courts were clogged with them for years (still are).

Cash, silver, land still appear as safe havens, though the recent decline in paper silver has had the opposite effect on physical. Current premiums are now ranging from 25-35%, making the actual price for physical silver closer to $30 per ounce then the post $22 and change.

Land is still a little pricey, especially if it's good farm land, but I'll still take wooded acres because you can cut and use the wood for all kinds of useful things, like buildings, fences, and heat (burns good), and once cleared, viola, farm land. I'm thinking more in terms of small organic garden plots rather than macro-farming, enough to feed a few families. Doesn't take much. The average back yard will feed three-to four families of four.

Cash is your best defense despite the scourge of inflation. If deflation occurs, cash is king, and with a huge crown. That's when you can buy assets on the cheap, which is investing 101 - buy low, sell high - ya know.

I'm still a deflationista, because I look around a lot. You can buy tomatoes at $2.49 a pound at the popular Wegmans' grocery stores, or hit the same thing for $1.59 at Price Rite or even Wally World. Don't get me started on limes, a must for my favorite Bloody Mary, at 3 for $2 at Wegmans, but 4 for a buck at Price Rite.

The Price Rite's and Aldi's are in poor 'hoods, so the sucker middle class gets raped at the "safe" stores. The dimwits in the inner cities, though, are buying mostly Cheetos and crap rather than good food with the SNAP cards, so, they'd just die off, albeit at lower prices.

My point is, get off the investment grid. Buy local (farmers markets are awesome), horde cash, and, when and if the silver mania subsides, more shiney.

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A True Small Business Success Story

Start a business. Anything. Get paid in cash, if possible. Don't become another debt slave with a shitty job.

Here's my 100% true story: I think it was about 1992. I was broke, living with my brother and he wanted rent. I had $12 in pennies, my car, a little gas and a computer and printer. I took those pennies, rolled them up, took them to the bank, got $12, bought $12 worth of stuff at the dollar store - mostly cleaning supplies - printed up some cards that said "Happy House" and took my goods door-to-door in my neighborhood (in the city, a little distance from the dollar store). I sold what I had in about an hour, went back to the dollar store twice that day to re-supply and again hit the streets.

In one day - ONE DAY! - I had $45, more merchandise and people calling me with orders and questions. My biggest seller were sponges. I was able to get a big bag of them for $1, broke them up and sold them for $50 each. People would buy six or eight at a time. Also, Old Dutch Cleanser (like Comet), which I got 2 for a buck and turned around at $1 each.

In a week, I netted over $400, and then got a huge order from a guy who ran a cleaning business for about $250. I did all this in three residential blocks, barely tapping the market.

I did this for about a month, paid all my bills and took a job with a friend as a painter, which paid extremely well, and still kept getting orders over the phone. I didn't pursue the business further, but, looking back, figure I could have made serious money had I kept at it.

So, my advice, find a service which you can handle, print up some cards or use the internet. There are opportunities everywhere for self-starters. Avoid self-pity and self-defeating attitudes and people who are negative. You have worth and if you allow yourself to overcome your fear of failure, you will succeed.

(Just a side note: When I started my "Happy House" business, I was worried that people would see that I was just buying stuff at the dollar store and turning it over. Never happened. Years later, I realized that I was providing a service: bringing those cheap goods to their doors, and that was the "value added" aspect. Add value to an existing product or service and you can't miss. I know a guy who goes to the farmer's market every morning, brings home vegetables and sells them from his front yard. His day is done by 1:00 in the afternoon, and he plays a lot of golf in good weather. There are success stories everywhere - many on ebay - of people pulling themselves out of bad situations. You are no different.)

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Professor Fekete on permanent gold backwardation:

http://www.professorfekete.com/articles/AEFWhoSaidDragon.pdf

Dow 14,567.17, +19.66 (0.14%)
NASDAQ 3,233.55, +27.49 (0.86%)
S&P 500 1,562.50, +7.25 (0.47%)
NYSE Composite 9,019.90, +25.78 (0.29%)
NASDAQ Volume 1,626,128,625
NYSE Volume 3,288,661,500
Combined NYSE & NASDAQ Advance - Decline: 3644-2759
Combined NYSE & NASDAQ New highs - New lows: 225-85
WTI crude oil: 88.76, +0.75
Gold: 1,421.20, +25.60
Silver: 23.32, +0.364

Avoiding the Obvious Global Slowdown, Stocks Ramp Higher to End Week

With the nation focused on the manhunt in the Boston bombings, Wall Street types took the opportunity to bid up prices on risk assets, which is really all they know how to do.

Despite the best efforts of the insiders trading against each other and hoping with all their hearts to lure retail suckers into the market, the major indices still ended the week with losses.

For the week, the Dow lost 318 points, and was held in check today by IBM, as Big Blue missed earning and revenue estimates and was down 8% in heavy trading.

The NASDAQ lost 88 points through the week; the S&P 500 dropped 33.

The G20 meeting in Washington was nothing more than the usual gap-fest, with nothing of importance coming out of the fete.

Boston continues to be locked down as infantile efforts by our nation's security forces try to catch a lone 19-year-old kid accused of committing - with his now-dead-brother - the Boston bomb attacks.

The wall-to-wall coverage of this non-event has allowed CNBC and Bloomberg talking heads to sidestep the issue of the rapid deterioration of the US economy.

Stay tuned for further non-developments.

Dow 14,547.51, +10.37 (0.07%)
NASDAQ 3,206.06, +39.70 (1.25%)
S&P 500 1,555.25, +13.64 (0.88%)
NYSE Composite 8,994.12, +72.94 (0.82%)
NASDAQ Volume 1,710,872,500
NYSE Volume 3,876,484,750
Combined NYSE & NASDAQ Advance - Decline: 4538-1852
Combined NYSE & NASDAQ New highs - New lows: 213-68
WTI crude oil: 88.01, +0.28
Gold: 1,395.60, +3.10
Silver: 22.96, -0.285

'A Little Off the Top, Please': Stocks Get Trimmed Again; Gold, Silver Shortages Occurring Worldwide

The weirdness engendered by the recent gold and silver smash-down will not relent. While the paper price represented by the gold and silver ETFs (GLD and SLV) is unrelenting. As soon as the central banks sent the paper prices of precious metals reeling, regular people (and reportedly some not-so-regular people) worldwide have headed to their coin shops and online outlets to purchase as much physical in coins and bars as possible, at prices 20-40% over the paper price.

For those not familiar with this kind of activity, it's known as decoupling, disintermediation or dislocation. The paper price, represented by the traded funds, has decoupled from the reality of the physical price, and, that's a very important, if not disruptive, development.

What it means is that buyers are now not satisfied with the published prices and the market will determine for what one buys or sells gold and silver. That's the premium, and stories are running rampant on the internet of buyers lined up in droves outside coin shops. On ebay, the current price for an ounce of silver is now closer to $30, rather than the smacked-down price of around $23. Gold, though dearer, is seeing similar premiums for physical delivery and shortages are developing worldwide.

What's at the bottom of all this - and the reason for the price smash-down in the first place - is liquidity, or, if you will, supply, and, money velocity.

Simply put, the COMEX and JP Morgan, were facing imminent supply issues, i.e., they could not stand for delivery on contracts which wished to be paid in physical metal. Rumor has it that the long-standing practice of these two titans of trade was to settle in cash, with a premium. Beyond their shortages, this is a central banking issue of liquidity and trust. In particular, the US central bank - the Federal Reserve - cannot allow the price of gold, in particular, and its cousin, silver to erode confidence in the dollar, thus the smack-down, using naked shorts, to the tune of 400 million tonnes.

A few things the Fed, the COMEX and JP Morgan did not anticipate - the unintended consequences - were a run on physical demand rather than panic selling, which actually was the first thing that happened in the paper markets, where the heavily-hedged big players were forced to cover margin calls, thus selling their shares (not their physical metals, of which they owned exactly zero) and forcing the price down further.

The rush to physical was completely unforeseen, obviously, since now, the price for paper assets are far less than that of the physical (the premium effect). So, anybody looking to settle contracts on the COMEX in physical assets will get far less, but the COMEX will have to pay more to purchase the physical asset to settle up, which, if the math is correct (and it always is), means that the COMEX will eventually default on obligations to settle in physical assets and instead pay in cash. Buyers will be quite unhappy to receive cash rather than metal, and, ka-boom, down goes the COMEX, maybe JP Morgan, and maybe even the Fed. We are witnessing the beginning of the end of the craven, evil, debt-is-money fiat system backed by nothing and the rise of real money, gold and silver.

Expect the paper price - the price quoted by the ETFs or the COMEX to become increasingly irrelevant and also expect the CFTC to do what they always do: nothing. Prices of the precious metals have been manipulated by the large players with the help of central banks for decades, and the jig is finally up. This drama will play out over the next three to nine months, but the fallout will be devastating to the global financial system, whose proponents only know how to print, print and print more to solve liquidity and solvency problems.

It can't work, won't work and has never worked, especially now that people have awakened to the rapacious ways of the money-lenders and bankers and are demanding honest currency with no counter-party risk: gold and silver and other hard assets. The global financial system is close to implosion.

This impending implosion is being reflected in stocks, which have taken it on the chin three of four days this week, and the direction of trade is beginning to seriously head in the other direction. Illiquid and insolvent banks backing companies with fudged balance sheets and earnings reports via cost-cutting, wage-shorting and stock repurchasing are beginning to appear unattractive in terms of risk. The reality is that equity investors hold nothing but paper and promises to be paid, nothing more, and those "assets" are looking shakier and shakier as the global economy grinds inexorably to a halt.

Dow 14,537.14, -81.45 (0.56%)
NASDAQ 3,166.36, -38.31 (1.20%)
S&P 500 1,541.61, -10.40 (0.67%)
NYSE Composite 8,921.18, -27.18 (0.30%)
NASDAQ Volume 1,771,593,625.00
NYSE Volume 4,382,134,000
Combined NYSE & NASDAQ Advance - Decline: 2662-3651
Combined NYSE & NASDAQ New highs - New lows: 103-128
WTI crude oil: 87.73, +1.05
Gold: 1,392.50, +9.80
Silver: 23.24, -0.062