Monday, September 13, 2010

Will the Madness Ever End?

You are in one camp or the other, you either want to get it over with or you're hanging on praying please no. Well, to those of you on your knees, your prayers have been answered. Lord Bernanke and his First Lieutenant Angel Geitner herd you and have declared Primary Dealers Prepare To Invest $27 Billion In Fed Money, Levered 30x Over The Next Month, To Buy High Beta Names. What does this mean? Well as ZH interprets it, "the New York Fed has just disclosed it will buy $27 billion in Treasurys between mid-Sept and mid-October. Using the Basel III blessed 30x leverage, this money, once it makes its way to the Primary Dealers, should be sufficient for a $750 billion leveraged push higher in risk assets. And just to prove that point, there will be a POMO on both Wednesday and Thursday. You didn't think a politically "impartial" Fed would allow a  market crash before the mid-terms now, did you?" I've been on my soap box about the markets, elections, riots and the market being all "they" have between them and total anarchy and that they will do anything in their power to keep it up as long as possible. As a commenter on ZH put it, "Risk on bitchez!" I'll call it Pump-n-Dump Supreme. you buy it, they sell it and haul ass out the back door.

So, are we about to enter a full frontal "risk on" mode? With Big Bond Bubble Beckons Bears, Buries Treasuries, And Busts Fixed Income Investors Yelnick does a nice job (as always) dissecting the charts and putting the potential diaster into perspective. "What did happen was the Euro debt crisis drove money to safer havens in Treasuries, and the pronouncement of a continuation of QE led observers to expect a bigger QE2 ahead. Bonds soared as rates dropped. In the last few weeks, however, we have seen them reverse dramatically." I posted THIS CHART on The Dark Side yesterday afternoon. Stockcharts PnF of $TNX has the bearish price objective of $25 as met. Something has to give as the SPX is flat out running away from the TNX.

Denninger's concerns  over the Dollar/10yr/futures price action is explained nicely here in Now We Got Problems...... "There are two "nightmare" scenarios that I have been concerned about for more than two years.  The first is an equity sell-off that comes with a big selloff in Treasuries.  The second, which we may be seeing the start of, is a selloff that comes with a big dump in the dollar." He's right on both fronts.

Denninger also covers The Genesis For The Next Crash. Read the "Here's how it will happen." portion.

For those still poo pooing market manipulation - This can not be disputed, the actual prosecution (potential admittance?) of Trillium Brokerage in Well Well Well.... (FINRA / HFT / Manipulation) and Zero Hedge covers it in First HFT Casualty As Finra Fines Trillium $1 Million For Quote Stuffing And General Market Manipulation (Again)  

The debate over inflation is spiking the headlines again. Mish got into the act with  Debating the Flat Earth Society about Hyperinflation "Hyperinflation could theoretically come from massive sustained political will to bail out the little guy at the expense of the banks, the wealthy, and the political class. However, unlike Mugabe and Zimbabwe, neither the banks nor the Fed nor the political class wants to bail out the poor at the expense of the wealthy." It is a long and detailed post, but worth the read. Me, I'm a pure deflationist. It is the only way out. We have to deflate everything globally to a point where we can afford to manufacture again. How else are we going to put everyone back to work?

Well, there you have it. To put it in a nutshell, inflation is not going to be a problem as the "risk on" trade is running over 100mph, the markets are rigged and will not be allowed to correct until the elections (or all the insiders are out whichever comes first), the bond bubble is about to burst and Harrisburg, Pa is drowning, the EU banks are in just as bad of shape as ours and Greece (or another PIIGS) add to all that 112 Stocks Now Account For Half The Day's Trading Volume and the gargantuan RE and CRE issues that exist and POOF there goes America. It won't be long now.The only question is when.