Wednesday, September 8, 2010

Delaying The Inevitable As We Creep Closer To the Edge

We saw a brief glimpse of the bears this afternoon. Glad to know they are still out there. In a little more than an hour they sucked up 7 S&P points. Nice! Only, of course, to have almost all of it POMOed back in the next hour.

A slightly damaging Beige Book from the Fed sent a tremor thru the markets.Oops: Beige Book Sees "Widespread Signs Of Deceleration" from Zero Hedge and Fed's Liar Book (Beige Book) from Denninger cover the announcement quite nicely. If you want the "Just the facts mam" version, there is always Calculated Risk Fed's Beige Book: Continued growth, but "widespread signs of a deceleration". From ZH, "This is not what the market wanted to hear: "Reports from the twelve Federal Reserve Districts suggested continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods."" - Nuff said.

Let's throw on top of that European Credit Stress Returns With Vengeance - Irish, Portuguese Bond Spread at All Time High - Yen Soars - Gold Hits All Time High from Mish."Another name for the risk aversion play is the deflation play. There is plenty of room for the dollar, treasuries, gold, and German government bonds to rally while the rest of the commodity complex drifts lower." Sounds sensible to me (except I think everything deflates except gold, food and ammo).

ZH has one post that sums up a lot of things in Albert Edwards: "Equity Investors Are In A Vulcan Death Grip And Are About To Fall Unconscious"  where the truth rears it's fugly head in, "It is now well known that the former Fed governor was manipulating the stock market on a day to day basis, as his statement that "if the stock market continues higher it will do more to stimulate the economy than any other measure we have discussed here" makes it all too clear that the Fed does not care about inflation or unemployment but merely Dow 10,000 hat sales, and will do everything in its power, even if that means collaborating with Chicago hedge funds in dark pools, to get stocks to go up. Yet how long until investors finally realize that stocks are not only a lagging indicator but a manic-depressive one at that." I have been screaming for well over a year now that the market is all "they" have left between "them" and total anarchy, nothing else matters and saving the markets is what it is all about. How bout that battle at 1040 and the subsequent rise on that solid GDP number? Debt? What debt? GSE? What GSE's they are not even included in the federal budget? Shall I move on to states, municipalities, pensions, Social Security, Blah, blah, blah.....

For those of you that like to refernce P/E and it's levels as some sort of reliable value indicator you may want to read P/E Expansion & Contraction from Ritholtz. "History teaches us that valuations typically become extremely attractive at the end of Bear markets. The P/E ratio — as well as the dividend yield, enterprise-value-to-free-cash-flow ratio," is well stated and in the purdy chart in the post you'll note P/E is about 2/3 of the way to where recessionary periods typically bottom (sub 10). I'll add that P/E is a joke in the stimulus driven, fraudulent accounting and market manipulated environment we are currently experiencing. Anything fundamental can be thrown out with the bathwater.

To put it all in a nutshell let's look at the must read 50 Mind Blowing Facts About America That Our Founding Fathers Never Would Have Believed. This one puts a lot of small (really large) facts on one place and will make you cringe.  A few of my favorites from the post: (comments in brackets are mine)

#6 Americans now owe more than $849 billion on student loans, which is more than the total amount that Americans owe on their credit cards.(and how many of those are working now?)

#11 Having one out of every eight Americans enrolled in the food stamp program is now considered "the new normal" and Americans continue to drop into poverty in astounding numbers. (and they are borrowing from this program to pay for another!)

#22 The Florida State Department of Juvenile Justice has announced that it will begin using cutting edge analysis software to predict crime by young delinquents and will place "potential offenders" in prevention and education programs. (this appears to be a trend now - pre-crime baby! Just come and get me now I guess.)

#27 Today, Americans are losing their homes in staggering numbers.  One out of every seven mortgages was delinquent or in foreclosure during the first quarter of 2010. (count the houses on your street and do the math)

#37 A recent Department of Justice guide for investigators of criminal and extremist groups lists "constitutionalists" and "survivalists" alongside organizations like Al-Qaeda and the Aryan Brotherhood.

#42 If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the annual U.S. government budget deficit would be somewhere in the neighborhood of four to five trillion dollars. (that's with a T and most likely excludes the GSE's)
That is enough for now. Kinda depressing if you ask me. That may be why I have been a little slack in posting some of the post market stuff. If is beginning to get to me the closer we get to the edge. Delaying the inevitable is all they are doing. Failure to accept reality and to correct crony capitalism is simply becoming a joke at this point. Bottom line (broken record here) is that it is all so out of control and so broken that all they can do is try and hang on cause either way it crashes miserably. There is no recovery. There is no double dip. It never ended and when it happens you'll know. We'll all feel it, see it, experience it and live it. Listening to CNBS spew their venom all morning is enough to make you sick. Money managers DON'T GET PAID unless you are invested, so they preach the promise of never ending appreciation and the fear that you will NEVER make your retirement goal if you leave the markets that are having this TEMPORARY blip that is an anomaly cause there will be no double dip on the never ending trip of 9.6% per year annual returns. That my friends is the epitome of the games they play with psych and perception. Lies, all lies, and don't get me started on Barry. that is a whole nother rant coming soon. Barring global default, massive devaluation and an overhaul of the government and the laws the Socialist state is not far away.What? You think they are gonna give up their wealth and power so you can have your freedom? Wake the hell up!

GL out there and thanks for the support!