Friday, February 26, 2010

Weekend Post - Can We Figure Out Where Gold Is Headed?

I'd like to reference figuring out gold to figuring out a woman, but I might get crucified if I take that reference any farther (hey, us guys are just as bad I know). Bottom line is I don't think you can live without either of them these days. Up, down, sideways what the heck? Impending doom and gloom and where gold is going is about all anyone can talk about. Paper gold, physical gold and even the tungsten version, which one is right for me? Russia, China, they are all buying all they can get. The IMF is selling it? Whaaaat?

I'm gonna produce several charts that I feel are relevant, but in true blog form I can't do a full dissertation. I'll also avoid the conversation surrounding manipulation (although I fully believe in price manipulation) and conspiracy theories (tungsten). So lets get on with it. I have made the charts small for length purposes, but I have included direct links to the charts they are in for better viewing.

First I think you have to take the global economic forecast into the picture. It sucks and is going to get a lot worse. Plain and simple. We are being robbed by the banks and your government is allowing this to happen (no one can refute that). Massive deflation is coming and most likely some form of global default. Sounds great right?

So how does gold (red) correlate to the dollar (blue)? A 20 year chart should do the trick (I threw in SPX (Orange) for good measure). I believe the two larger wedges identify the long term trends that are still in tact and will be for many years to come.

Given those trends and the global economic disaster we are experiencing, most are forecasting that many  countries will try to deflate their currency as fast as humanly possible. What happens with the dollar may tell us where gold is eventually headed.This monthly chart says to me we are in a massive bear flag that is playing out before the big fall. It also says one of two things. 1) Either the dollar has completed an ABC here to resistance and a near 50% retracement of the last fall, or 2) it will continue to run to the upper blue TL or to the top of the pennant near 89 and then collapse. At this time I could go with either scenario.

So if the dollar continues to run, gold will....? Look at the first chart. The dollar has run recently and gold has not corrected. You could argue with gold having climbed from 258 to well over $1,000 it is slightly overbought. Yes, but this is gold and someone (????) who may have known a massive financial crisis was coming (????) just kept on buying the stuff up, up, up. So what is gold going to do? There are many scenarios from crashes to super booms above $5,000. My question becomes - Does the gold/USD correlation possibly end and a gold/SPX correlation begin? Again refer to thee first chart (and your imagination - sometimes that is necessary). Inverse to the dollar and direct to the SPX? Not that far fetched. That would be a worst case scenario for the gold bugs.

Looking at the $GOLD/$USD chart you can see the massive rising wedge that should be completed. Overbought is an understatement and room to fall is bountiful. Divergences exist. The need for a correction is overdue. Given the theme for massive global deflation to assist multiple nations from going bankrupt (here I apply my imagination again), I think the dollar is going to continue to rise as some sort of (tongue in cheek laughing) safe haven and then collapse with the rest of the world as most of the global economies default on the debt that they will never be able to afford.

Damn, Shanky? Well, that is what I think and common sense tells me this is how it will most likely play out. Big Sugar Daddy will come to the rescue initially and allow everyone to devalue to their dollars vs. the USD (you see, since we (and GS) really caused this mess we're gonna have to step up to the plate more than we already have). So USD initially go up to $89ish and then get crushed.

Here is a great link to a vid from Market Club that I liked - no, I really liked it - not kidding or it would not be here (If you liked that vid they have other market related vids - and another gold vid at this link here). Pretty subtle hugh? LOL. Hey, the charting stuff is pretty cool and easy to use - you should consider giving it a spin. And for the newbies that want to learn more about trading and market trends, try this link out. It is free. They don't think gold is going up from here either. They do some good time analysis that I do not normally cover that is well presented and worth a look. (OK - sales pitch is over, but let me know if you liked the vid in the comments)

So I am seeing a near term correction in gold, but not much. It is possible that the dollar and gold will lose their inverse relationship but not for long. With the IMF flooding the market, Russia and India have bought massive quantities near the $1015 level support should be bountiful. Gold possibly remains in a sideways to down corrective for a while. First as the market tanks for P3 the reaction will be to haul ass from everything, then the real panic buying begins. So how low does gold go before the meteoric rise? This Monthly chart of gold shows a nasty multi-year rising wedge (blue) with an even nastier wedge (red) causing a throw over of the top trendline (no - I do not think that is a breakout - it is a fakeout). The fibs and target for the red wedge are in the $961 to $909 are and the 20ma is at $953. That may sound like a lot, but the divergences (see pink boxes) in the indicators and the meteoric rise in price say it is due for a turn or at least a breather. The gold bugs need to be worried if a larger correction to the 38% fib of the whole move occurs or it corrects to the lower blue trendline near $820 (I don't think that is possible).

What do I think? It stays in the current ballpark with a $950 max floor at this time. The manipulators will not let it crash (unless they want to buy it cheaper).I think it struggles with the overall market (but not nearly as bad as the market) and when the dollar finally lets go and real panic sets in it will all be about GOLD BIATCH!

I hope you enjoyed this. Remember to check out the links to those vids and give me some feedback.

Have a great weekend.

Announcing The New Weekend Post

I am going to institute something new - a weekend post. This post is going to be different from the normal stuff to some degree. I will try to deliver the same high quality content, but with a bend towards one some of my new advertisers (some you see and some you don't). Yes, the goal will be to get you to click on something. Hey, I am telling you up front. They all have quality material at their sites for the beginner to the experienced investor. I feel comfortable introducing you to them, and I can do this via informative targeted posts that will not be a waste of your time or mine. If I could not keep the content at normal standards I would not do this.

If I did not like and trust them I would not be doing this. Believe me, we have been beating this around for about 6 months and I have resisted to this point. I am not "selling out" and this will not affect the site during the week. I am thankful for my many followers and do not intend on inconveniencing them in any way. I do this blog for free. I get nothing but the sporadic (and sometimes very generous) hits on the "donate here" button (yes it works, try it!).

So, I have decided to use the weekends (since I never post anything then anyway) as time to try and make some moola. You know, a little something for the effort. Thanks for your understanding. Again, this will not affect the normal weekly postings at all. I believe you will find the weekend posts worthwhile (or I would not do them in the first place).

Thanks again for your views, comments, emails and making this site a success.


Morning Post

For those of you wondering (or frustrated) about manipulation, Zero Hedge posted Rumor Versus Fact: An Insider's Report On A Manipulated Market last night. The post (you would have thought I had written it) has, "In the early afternoon it hit like a mad PPT trader masquerading as a legitimate agent of the NY Federal Reserve: MASSIVE BUYING!  Within minutes the S&P500 along with the other major markets took flight and quickly rallied 1%.  Had a rate cut followed the recent rate hike?  Was the recent horrific economic data revised by the BS artists at the BLS?  Nope – the market took off because it was rumored that AAPL would split its stock 4:1.  Yep.  A rumor.  A *^%$#!G rumor!  About 30-minutes after the short covering carnage started AAPL denied the story…and the market proceeded to ADD to its gains." You know it was not me because I freely use appropriate language where required.

Another finely written point (among many) was, "The Durable Goods report got major headlines from the Lame Stream Media about how bullish the number was.  This is only the case for the headline number.  Responsible for the good headline number was a 126% increase in civilian aircraft orders (these orders can be cancelled, by the way).  Outside of transportation, orders fell 0.6%. Core capital equipment and machinery orders dropped 2.9% and 9.7%, respectively, which are the important ones that determine the direction of the economy.  For all of 2009, durable goods fell a record 20%.  But don’t worry, it “could have” been worse."

You see folks I warn you constantly that the market is rigged, and that the MSM pumps up the volume endlessly for the boys on Wall St. to sell their wares to as many unsuspecting/ignorant/uneducated investors as possible. It is nice to see some backup to verify my constant rants on the subject. Want to know How Goldman Prevented Today's Market Rout And Made A Quick $3 Million In The Process? It is almost surreal. 

Given all the above it is any wonder I am struggling with the Morning Post today? I got all excited about the turn on the minis near 1084 yesterday after looking for 1083. (Now, why it turned there is another story.) I was pumped about the possibility of my 5.3.5 starting to possibly come home having the 3 complete and what looks like a 1 moving up. After reading the headlines and digesting some more reality (gotta take that in small doses these days), and with the market in a spot where 2 of 1 could be over or the final 5 up could be happening, I have to say that I am in pure wait and see mode on a Friday. My suggestion. Take the day off but keep one eye on the markets just in case. Cash is king right now. 

SPX 60m - Several options. 1)I had previously mentioned the possibility of the lower triangle support line being reset lower and a move to E may be it. 2) If the triangle is the wrong call and the 5.3.5 is right, care to do the math where C=A? You guessed it 1150. Double top would be pretty. 3) Finally is 2 completed and we're headed south for good like we should be and 3 of 1 is here? Thus the confusion. Yesterday was a great example of why short term gambling in this market is a fools game especially in an unpredictable 2 or 4 wave in a manipulated bullshit market. To add to the confusion, the indicators are all over the place, no clear trend is established and the VIX, while sitting on support, looks weak to me. Thus, sit it out. Take the day off.

Putting it all in one place. SPX and oil being stubborn ignoring the dollars rise. Has the dollar completed a measured corrective ABC and is not in the bull mode the EWT people think? Something has to give here as normal correlations are getting a little screwed up (as should be expected in a global financial crisis with rigged markets). This is adding to my lack of conviction on market direction.
I'm on the sidelines unless we get some large move south confirming the top of 2 is in. Enjoy your weekend!

Oh, and why am I not commenting on GDP? Well, you do the math compared to durable goods orders yesterday and to housing starts and tell me if it is remotely accurate or not? Just more BS from the BLS. 


Thursday, February 25, 2010

Every Day Is One Step Closer To The End

Long, slow, painful (yet titillating at the same time if you are into that kind of thing) march to the end. The set up is right in front of your face. Banks hoarding cash and not lending. They know the breadth and depth of the problems. They are now enacting rules and legislation to guard against runs on the banks. Do you really think if things were getting better they would be enacting such policies? did a nice piece on Citibank Controversy Puts Dubious FDIC Guarantee Back In The Spotlight that covers the issues facing the banks and FDIC limits. "Alarmingly, The Federal Deposit Insurance Corp. only has about $50 billion to “insure” about $1 trillion in assets across the nation’s financial institutions. This was even admitted in a article shortly after the collapse of Lehman Brothers in 2008. When Americans realize the fact that banks are “going to run out of money”, the article nonchalantly stated, a run on the banks will accelerate." Do not forget the FDIC is basically bankrupt (and the banks are refusing to come off of cash even to fund their obligations with them).

From the same post - ready for this? Want to be scared shitless? “The requirement is part of Regulation D of the Securities Act of 1933. It applies to all accounts classified as Negotiable Order of Withdrawal [NOW] accounts – basically interest-bearing checking and savings accounts held by individuals and non-profits. Banks are not required to hold reserves in place to cover NOW accounts, so the rule prevents a run on withdrawals for which there are no reserves,” states the report." (emphasis mine) Nice! I feel a lot better. Thanks Congress. Thanks a bunch! Uh, isn't that ass friggin backwards? Apparently not.

That is mostly right. A run on the banks from the citizens would be a big deal, but remember Dubai and that nasty thing called fractal lending that has caused this credit driven fuck up. They are not worried about you or me getting the funds. They are worried about Dubai demanding their $10 billion in deposits (fractal that). They are worried about sovereign runs on the banks. It will get ugly cause they don't have the money.

As always Mish does a nice job with the unemployment report. He has a unique way of bringing the worts ot of it almost every time. In Weekly Unemployment Claims Spike To 496,000; Will Reality Soon Set In? "At some point however, reality will eventually set in. Without jobs, all this happy talk about the impending recovery, and all of Bernanke's yapping about low rates, will not satisfy the market. It is going to take both jobs and an increase in consumer spending to lift the economy. From where I sit, neither is coming."

Your daily Greece update comes courtesy of Zero Hedge in Greece Deterioration Hits Nitrous: IMF, EU, ECB Find Greek Plan €4.8 Billion Short. You can only squeeze so much blood out of the turnip. This is it. This is what I see spreading globally. this is the main point of denial. Massive wage deflation and everyone is held captive to the banksters that we bailed out that caused this mess. What a friggin job that must be, huh?

Well the NYT has Banks Bet Greece Defaults on Debt They Helped Hide. Well? You don't think they KNEW this was coming did you? Nah, GS did not sell them (and numerous other countries) the systemic CDO's that caused their financial system to rot from the inside, all while knowing they would and having handsome bets on the other side. Friggin amazing stuff. Who needs regulations? ZH gave a nice graphic in Greek Treasuries Pancake As Bond Vigilantes Chant Death Chorus of their sexy looking bond spreads today.

Late yesterday Denninger put out Clap-Clap (Weil and The Mark-To-Market Scam) which covers the mark-to-myth scandal I do not cover enough (In plain terms the reason the banks are all actually insolvent). The Enron style accounting has led us to this, "We've done nothing other than making legal accounting lies. The impairment and thus the actual economic loss still exists, and while we may have pushed it off another year that actually makes it worse, because these non-accruing loans gather more and more hair on them the longer they sit around without being either foreclosed, put back, or otherwise disposed of. This part of The Bezzle is one of the worst examples in this entire sordid mess and if Congress won't grow a pair then FASB needs to - right now." I keep telling you we're really screwed. Like really deep shit. 

On the issue of lack of regulation Washington's blog has Economist With Financial Services Committee For Eleven Years, Assisting With Oversight of the Fed, Lends Support to Ron Paul's Questions "Today, Ron Paul accused the Federal Reserve of having a hand in nefarious plots such as Watergate and arming Saddam Hussein. House Financial Services Committee Chair Barney Frank said that the Committee should look into it." We really need to audit the Fed before it is to late. Heck, I'm not sure I want to even do it now. Scared of what we might find. Talk about Armageddon?

We're getting closer every day. Sure more QE may be coming but what good will it really do? Kick the can down the road another 6 month to a year and just dig an even deeper hole while stuffing the banksters balance sheets with more of your future tax dollars. Friggin GREAT! Sign me up! TWICE! I hope you all realize I am not blowing smoke here. Every night I bring you real world situations that should scare you to death. Massive deflation is coming to a street near you. Greece should be your model. I just hope like hell we come out of this a free nation.

This is AWESOME - Max at 7:00 - paints a really clear picture. the whole world will hate us when this is all over. 

GL and have a good evening!

Morning Post

Good morning class! I trust you all are ready for another fine day of HFT, algo driven, low volume ramp jobs. Today I bring you a study from contributor SellPuts at ZH called Guest Post: Is The SPY Getting A "Jump" At Key Levels From A Quant Algo? Please read this and understand it well. You will be tested on it at 3:30 every day the market is open. 

Minis down 7 as the durable goods number was not so hot. Jobs? I totally missed it on CNBS. Just another non-event you do not need to be concerned with. (They jumped of course)

Economic Calendar - Bernanke at 9:00 and NatGas at 10:30. 

Earnings Calendar - Nothing jumps out at me there. 

Emini 60m - Time for me to either eat my words or not. I said if the gray channel and green support gave way look out. Looks like a break and a backtest to me. I hate any call down in this market (as you shorties can well understand). Was that B of the ABC corrective I am looking for? Let's throw out a target of 1083 or the support line at 1080 and see what that brings. The fibs are 1085, 1076 and 1068 so my target is just between the 38 and 50% fib lines. If the minis can get one more lower low, I'd really like the call. If the Daily indicator set up is right and if RSI can crack the 50 line this fall may have some more meat. This could be the decision point of whether 2 of 1 of 3 has topped or not. I doubt it has cause the market is to rigged. You permabears need to remain patient. Sorry. (9:22 edit - minis got lower low)
SPX Weekly - (click on it for better view or go see it at my chartbook) I don't like the wiggles in the indicators. As you can see I have charted numerous possibilities. At this time I have temporarily let go of the 1214 top pipe dream that looked to be such a nice set up. The larger rising wedge could very well still be in play. Look, this market is all they have left between them and total anarchy, so I expect the GS HFT algos to front run and continue to suck as much money front running the system as possible and for the primary dealers and the treasury to continue to play the monetization shell game. As I have speculated all along - it will take something "external" and "out of their control" to rest the market away from the bots. I have wanted a reset of the lower TL to allow for more time and room to run north since early this summer. Is this the reset or is this the breakdown? Do the monthlys need to finish their march to being overbought? That was not a very convincing correction on the weeklys. Do they need to finish the move or was that it?
Near term I'm bearish. Is this C of the 3 of the 5.3.5 I am looking for here or something even better for the bears? I hope it friggin shits all over its self cause until that happens we have no recovery. All the excess must be wrenched from the system and the sooner the better. Again, we have to see how this plays out here. The dailys are trying to roll over but but the 5 and 14 RSIs are bouncing off the 50 lines. The 30 and 60m indicators are mixed. Tough call today. Let it sort its self out. We'll get a better picture soon. Let the trend come to you. Don't force anything.

I am working on the futures now.I'm gonna do separate posts on them later. Sorry, but you'll at least get more detail.

The dumbed down version for the newbies - My initial thoughts is that this is a corrective move down (profits being taken during a run up) and there is a little downside left before another (and possibly the final) move up in the market. What we have to watch for is if this is not just a corrective and something more, like a much larger move south. Thus, I am advising patience. The indicators (the things below the chart like RSI and MACD) are not painting a clear picture tight now. I am a believer in market manipulation (the government and GS control the action with a little help from their friends) and that every up move since April has all been fraudulently concocted. So, I am advising patience to see a clear directional trend. Then pounce.


Wednesday, February 24, 2010

Out On A Limb - A Very Thin Limb!

Up, up, up we go! Thank goodness for the reflation trade. Lord knows our bubble may have burst and that would have been horrendous! Thank goodness the removed FRE and FNM from the federal budget, wrapped them in protective bubble wrap, removed all sharp objects from the room and put them in the closet not to be addressed till 2011. Phew, I feel better now that they have addressed that problem!

Why the out on a limb title? Well, anytime I bring Prechter into the mix it gets dangerous. The timing is better for his prophecy this time. The link Bear Market Armageddon: Why Prechter Might Be Right This Time (the title kind of says it all - this time) takes you to a good article and a series of videos you may want to listen to. The whole series is pretty good. Even better, I don't think he mentions the word "top" once! Bottom line is the vids provide a nice all around primer for everyone. 

Further out on the limb I go when I bring you Jon Stewart. Last night he did a great piece on how we're getting screwed by the CC companies in Make it Rain - Bank of America - Wyatt Cenac examines Bank of America's hidden credit card fees with a former employee and a mafia loan shark that is worth a look. The loan shark at the end is really funny. 

Since the economy is out on a thin limb why not cover some of the action today. The news today was just as nasty and bountiful as any other, but you never would have known that given the markets actions. The MSM cheer leading propaganda machine tends to neglect major news events as well (or spins them if they should be forced to cover a tough issue).

Mish's site is full of wonderful posts every day (if you are into the doom and gloom thang). Just view the recent posts list on the left side and start reading. Today he has Is Consumer Confidence a Contrarian Indicator?. This is a good one in the case that the bulltards will spin and twist the numbers as big buying signal, but Mish (and I) think differently, "Rather than being a contrarian play, I think consumers have reached the recognition phase, with a panic phase yet to follow. This possibility is something that economists might want to take into consideration if they would ever take off their rose colored glasses and view the real world for how it is. It may be darkest before dawn, but the sun has barely set. The contrarian play is to bet against the masses who misunderstand history."

Pension Pulse has a great post on something I like to key on every now and then, underfunded pension obligations. In Pension Systems on the Brink? you get a nice report that breaks down the major flaws that exist in the $1 Trillion unfunded gap. This is a HUGE deal. States can not fund these obligations (they never have - how could they now). Big brother to borrow from to fund obligations (read - living on xtra credit just like everyone else to get thru) is no longer there. This will be a huge part of the total meltdown (especially after P3 hits and the unfunded portion skyrocket).

I suggest that you troll on over to Calculated Risk and sample the fare there. The news surrounding the RE/housing crisis was not pretty today. CR covers it from every angle.

For those of you that rarely go to Zero Hedge, just pop over there and read the headlines of the posts today. It will make your head spin. (Don't look at yesterday's unless you want your head to spin so fast you wind up getting sick)

LOL, what do we find at the tip of the limb? Denninger on Kaiser Report? Yup, only in Russia can you get something that good. Karl comes on about 14min into the program and then stumbles thru explaining the difficult to explain synthetic CDO's that have wiped out Greece and made the banksters rich biach while some hypnotic circle spins in the background (psychedelics not provided).  The whole 30m is worth watching IMO.

Not sure who put the water wings on the markets in the last fifteen minutes of trading or if TOS just has some errors (nothing happened on the minis).

Have a good one.

Morning Post

Several scenarios exist. My favorite is that was an A of and ABC corrective of a the final 5.3.5 move of 2 of 1 of P3,  that could have completed 2 and we're now in 3 of 1 of 1 or we're in a secular bull market, have fully recovered and you should be balls deep in equities with 100% margin. You should know that the last part was a joke from ne, but the BS you hear from CNBS you may not have known.

Tough call here as the minis tangle with the support line that runs back to August and the lower channel support as well. If that support goes I'd watch for form first. If you see a big 3 impulse, then 2 of 1 is toast and the bears have the ball. If it pussy foots around and lacks volatility then more upside may be coming the bulls are still on offense.

Everything I see says the markets should continue their move down. The 30 and 60m indicators have not bottomed nor have set any sort of divergence that usually signal a turn coming. This move south may just be getting started. If what Benny says today causes a reversal, it should be sort lived and will force the daily indicators to remain overbought. Again, let's see the form and be patient. Let Benny get his BS speech out of the way and then see how the market reacts.

Economic Calendar - Busy with "Make It Rain" Ben at 10:00 along with New Home Sales then at 10:30 the Petrol report. Jobs tomorrow could effect markets later.

Earnings Calendar - DLTR and RIG may interest you.

No futures this am, sorry.

SPX Daily chart -Does not look good.
SPX 60m - This is a possibility that I do not like much, but if this triangle should play out we may be on to some good targets. My last triangle worked great. Why not try another? Again, I don't really like it that much. Maybe the lower TL needs to be reset? The indicators say so. 

Tuesday, February 23, 2010

Shit + Fan = Huge Mess

It is always nice to be able to see the train coming and not have to suffer a blind side crash. In this case that light at the end of the tunnel (no, don't go towards it) is the global financial default coming on the express route to a country near you.

I suggest you watch Mob Madness - Greece on YouTube to get a glimpse of one reporter's views and opinions of the troubles they face and the building anarchy on the streets there. This country is being ripped apart from core. They are so far in debt that even if bailed out they could not pay that off. This is what the EU knows. This is why they have not spent a penny on solving the problem. Finally, the situation may be clear to the lords of finance. The monster of debt created by the beast of cheap credit, corruption and extremely loose global liquidity can not be fed anymore. We are out of food and have one hungry monster (the banks) that want to be fed.

Here is a glimpse of why our nation is enacting the unthinkable limits on demand deposits (see Citigroup can limit demand deposit withdrawals and money funds can too). You see. it is not such A Wonderful Life. We have taken the red pill and are stuck on a bad trip to Pottersville. The big bad bankers have looted all your money and now the sumbitches don't want to give it back in the form of credit or in the form of cash. In a rare glimpse of what will (not may) be coming our way in the near future is Greeks Scramble To Pull Out €8 Billion From Local Banks As Greece Responds With Money Control Measures. "This represents over a quarter of the money held by private banks in the country. This also represents about €400 billion in total money leaving the system courtesy of fractional reserve banking and the money multiplier. Yet the worst news for Greeks: money controls are coming".  If you need to read that two or three times to get it to sink in go ahead.

How can I so boldly say this is coming our way? Cause we are now in full debt monetization mode. In ZH's Charting The Indrect Bidder Hit Ratio After Today's 100% Result, And Anticipating A Surge In Brand New SFP Issuance you get, "This SFP news is relevant because today's Indirect Hit Ratio demonstrates that the "sales" of $195 billion in new SFP bills will merely go to Primary Dealers and whoever the increasingly less mysterious Direct Bidder is, as Indirects phase out all Bill interest altogether." Monetization of debt. We are printing money to support out debt payments. Whooo Whooo - hear that train whistle. It is calling. It is empty now. All the passengers got off. We are the only ones buying our debt now. How long till the big money grab starts and countries (well, China already is) start cashing out? Uh, folks, the system was not designed nor ever intended to experience a cashing out. That is where global default comes into play. Anyone care to take a peek at the National Debt Clock?

It wont be long till the PIIGS all start falling apart (really every debtor nation globally). They will all topple one by one from the overload of debt created by zero regulation and a corrupt and greedy banking system. It is surreal cause you are able to see it all happening in slow motion in real time. Denial is not a river in Egypt. Denial is the state that most of us are living in. This can't be happening. This is not real. It can not happen here. Sorry folks, it is real and that train is coming. It is big, heavy and at this point futile to try and stop. It will rip its way across the globe causing all sorts of devastation and destruction. Not until that train is derailed will we have any sort of recovery.

Maybe we are not in denial. If the Consumer Confidence Survey is accurate at all maybe we are waking up. Mish does a nice job with Consumer Confidence Plunges To 46, Lowest Since April; Current Conditions Lowest Since 1983 "Housing has stalled with another leg down coming, jobs are pathetic, taxes are headed higher, and debt levels are unsustainably high. Pray tell what is there for consumers to be optimistic about?" (What is really funny is at the beginning of all this mess in 2007 I used to read Mish and get depressed. Glad I don't have to read my own stuff LOL.) And from Rasmussen Reports 73% Agree That Washington Is “Broken” and Obama's approval rating is .... -19. That is really, really bad for the man from HOPE and CHANGE.

Wake up people. Get involved. Force the issues. We need massive amounts of regulation first and foremost. Then all you will be able to do is hang on till that train has done all the damage. We'll come out of the rubble and rebuild. What America will look like will be anyone's guess? We'll be OK in the long run as we always are, but some really tough times are ahead. Whooo Whooo. 

Take care. 

Morning Post

Kind of quiet out there this morning, so you get lots of charts!

Economic Calendar - Consumer and investor confidence at 10:00

Earnings Calendar - Nothing huge bust worth a glance.

Emini 60m - What some are calling wave 1 down (blue) and wave 2 up (gray) are clearly seen here. The green diagonal line is the market support line going back to August. Notice how narrow the up channel is compared to the down channel and the decrease in volume with the upside move. Watch that green TL and the channel. If they crack I believe the bears will have the momo again.
SPX daily - Sorry to keep bringing you this chart over and over again, but it has kept me on the right side of the trade for some time now. The RSI 5 has finally crested and RSI may be rolling over. S Sto and  MACD hist have not confirmed anything yet. CCI and ADX are rolling over as well. We should be close given the indicator TL breaks on the 30 and 60m indicators. Another thing I will harp on is the green dashed bear market top TL. I assume this may be a magnet to any downside move and it is going to take a strong move by the bears to recapture it. (it can be seen on the weekly chart below as well.)
SPX Weekly - To me this chart says the market is confused somewhat. This may be the chart to watch to determine who really has the momo and if my thoughts of this being a 5.3.5 move are remotely possible versus the ending of a 2 corrective. Both RSIs have gone flat. MACD hist is moving up and has not gone positive. S Sto is in a bull formation still. Thus some confusion as two are saying up and two are saying caution. F Sto may be the one to watch as it looks to be rolling over and may be the first one here to confirm the trend change if we get one.
Gold - Fairly narrow trading range has developed since the beginning of the year (if you call 10% narrow). Look at the indicators. Topping and trending down. I'd look for the lower TL to be tested before any further strength (if there is any further strength).

Oil - Trending up in a large channel (yellow) and may be getting a little toppy. Nearing the 50% line of the channel with indicators kind of toppy, but still have room to run. There should be a lot of resistance in this area.
Dollar - My thoughts of a E throwover after completing and ABC corrective of the fall sho look good on this chart. It also makes sense if the whole world is going to be in a battle to devalue their currencies. The monthly dollar chart has this as the E of a larger A-E flag that should top at 89ish, thus I am somewhat torn on the call. The dollar has almost completed a 50% retracement of the fall and is at gap resistance.
Not gonna cover the currency pairs till I get them figured out. The drive for global devaluation can't work cause someone has to strengthen for someone to get weak. I assume we strengthen to assist everyone globally (and cause we have a bigger printing press) then later everyone collapses somehow. This is what has been happening recently and the trend may continue. Some are seeing the dollar in a big move up here. I do not think that is possible given the global dynamics (thus I think the EWT counts are wrong).

SPX should be about to roll over here and give the bears the momo for a little while. It does not look like a big 3 down is coming as should be expected by EWT, but you never know. Let's be patient and let the set up come to us.I assume i will be short somewhat (maybe 1/2 position) before the day is over.

GL today!

Monday, February 22, 2010

News Time!

Gotta be a quickie tonight - I am coaching coach pitch baseball (this will be the last year I think) and have to get to practice.

Mish has Commercial Real Estate Apocalypse in 2011-2012, an incredibly detailed post that will have you feeling less better after you read it (or better if you are a perma bear like me).

As we watch the EU implode, Mish pulled this one Italy a Bigger Threat to EU than Greece; Italian Derivatives Draw Scrutiny; Mundell Wants Cap on Euro Gains; Academic Wonderland he notes the conundrum facing each nation these days, "It is impossible for everyone to get what they want: a weaker currency vs. everyone else hoping to stimulate exports."

Since I brought up Wonderland, just what has been happening behind the curtains over there? ZH has The Chairman Of Goldman Sachs Bank, And Former FRBNY President, Says Many European Countries Used Comparable Debt-Hiding Swap Transactions     

TPC has THE ONE CHART THAT SCARES RICHARD RUSSELL most of us are salivation over TBT and where it may go one day. They are scared, I'm looking forward to it. USB (30yr) is set to bust one sooner than later. 

Several blogs covered this one, but WB's conspiracy tint is the best I think -McCain: Paulson and Bernanke Promised that the $700 Billion Troubled Asset Relief Program Would Focus on the Housing Meltdown

Ritholtz has Policy Errors Dog Treasury Secretary "Ignore that misleading headline — the article itself is not so much about the anger over the bailouts, but instead details the policy decisions and political choices Geithner made as Treasury Secretary. The litany is not pretty." That it is not. I found this one quite humerus.

Enjoy! See you in the am.

Morning Post

Like sand thru the hourglass - as the market churns. There is no telling how long they can keep the charade up. As long as they have no regulation of any sort, a printing press and basically no accounting rules I think they will run it till they suck the last dollar out of the corpse that is the American taxpayer. Then it all goes bust. So, put the big moves of P3 in the back of you mind for a while. It will happen, you are just going to have to be patient.

Economic Calendar - Bernanke speaks at 11 this morning.

Earnings Calendar - There are a few good ones left. TGT after the bell.

Minis at 1112 resistance riding along the top channel resistance line. It all depends on what Helecopter Ben has to say today and where the GS HFT bots want to take us.

SPX daily - Getting overbought but not ready to turn just yet. Should be soon with the 30 and 60m setting massive divergences (thus I very rarely ever play a 60m indicator only daily for the turns). 50ma, upper BB resistance and the 61.8% retracement are flashing yellow warning turn soon. It really is that simple. You can't force the market to do anything. You have to be patient and let it come to you. When the S Sto gets it's bear cross on and the MACD hist turns that will be the time, but until then you are dreaming if you are short. If Uncle Benny decides he wants to squeeze the shorts some more, you know darn well he can do it. Tune in at 11:00. The Weeklys are moving up as well. Remember the dailys can embed up here. this is no normal market.
Gold - Still climbing and should continue. Lets see what happens at the 1142 level. I expect a little more than that.
Dollar - I think the climb is done for now. I'm torn between a possible run to 89 or the ABC corrective that I have been calling is completed and it is toast from here. Looking at the daily and weekly indicators I'd be leaning really short here. Again, tune in at 11:00.
Oil - Plenty of room to run and may double top or better.
EUR/USD - technically it is either bottoming at the 61.8% retracement and is due for a bounce or the indicators embed and the party goes on.
Natgas - Channeling down. &4.67 is the 38% retracement. Let's see if it stays in the channel when it gets to that number.

GL out there. I'm in cash till Ben speaks. I'm gonna try to get some more detailed posts out this week that may help.

Friday, February 19, 2010

Man Bulldozes His $350,000 Home

Is this funny, sad, poetic justice or plain crazy? It's ballsy for sure and a sign that people are tired of being ripped off by the banksters. LOL, he may do his business next! (The post title is a clickable link)

Have a good weekend.

Morning Post

Opex and Fed rate increase are the big issues facing the market today. It will be most interesting what happens later this afternoon. How you position yourself may be a tough decision. I'm still going to lean to this being the end of A or the first 5 of a 535 corrective move up. I'm still in the market manipulation/PPT camp, and they will force it to go wherever they want it to (like it or not). You should be used to this by now. If it is the top of 2 then we'll know soon enough and be able to position properly.

SPX daily - Upper BB, resistance, 50ma and the 61.8% retracement with the indicators topping out combined with the Fed announcement should generate a turn here.30 and 60m indicators are topping. Even though the futures are recovering right now I still think we correct soon.

Thursday, February 18, 2010

Whutz In The Newz?

Isn't the market amazing? TD at Zero Hedge put it best, "So let's get this straight: we are hearing Iran is working on a nuclear warhead, an alleged rogue Mossad force in Dubai killing Hamas operatives, Greece about to file, Britain getting punished by a term that was in vogue when people still listening to a Flock of Seagulls, tax refunds getting halted, and now a possible redux of the Falklands war, and what do we have? A market that is up nearly 1% on vapor as a major "technical level was breached." The backstop - assorted central banks will be forced to rotate the "print" dial to Turbo Max. All we can say is LOL." Just another day in paradise!

SURPRISE! after the bell - Fed Begins Tightening Process: Discount Rate Raised To 0.75% From 0.5%, Futures Plunge, Dollar Surges. Nice of them to have verbiage like "the unforeseeable future" in their outlooks. I guess that means a week or two.

Mish paints a not so pretty picture in Unsustainable Spending Trends in Graphical Form; Monthly Treasury Statement February 2010. Remember the other day when I was encouraging you to do the math and how none of this can work? Well if you are mathmatically deficient, this will help. 

We need to take a closer look into what may happen in Chinasooner than later and naked capitalism has a good read in Thinking the Unthinkable: What if China Devalues the Renminbi? The best quote, "It could get very ugly."

 I believe Matt Taibbi is doing the best job at historically documenting what I believe is the truth behind most of this financial nonsense. While the history books will no doubt claim Greenspan and Bernanke as the next version of founding fathers. We all know better. Must read - Taibbi: "Goldman Raped The Taxpayer, And Raped Their Clients"

You knew I would get to the plane crash sooner or later. Here is ZH's  posting of the suicide note, the uber conspiracy laced infowars post and Denninger gives you a more lively take in This Is How It Begins (Wanton Violence). My thoughts....Dude had enough and took action into his own hands. The comments around the web label him from crackpot to patriot. I'm leaning more to patriot. I do my part in writing congress, supporting End the Fed and various other items I slam down your throats every night. While not on this extreme, I would love to see us all do more to wakre up the nation to the financial raping we are all experiencing at the hands of the Fed, Congress and Wall Street. I am deeply sorry for those in the collateral damage field and wish them all  speedy recovery (I do not know if there were any fatalities). Sadly the solution may take more larger profile actions like this to wake up our leaders and let them know we have had enough. While I do not promote or condone violence or any actions that may hurt another, I can't help but think that another Kent State is coming down the road and their ability to control the masses this time will be feeble in comparison to the anger they are instilling in us. This financial massacre has to stop and they are doing nothing, I mean NOTHING, to stop it and we may just have to take actions into our own hands one day if it is not already to late. 

Can't wait to see the markets in the am after that rate increase. It is well known they are between a rock and a hard place. the have to raise rates but can't. I'm willing to speculate on more raise and then they revert to zero in the future as they attempt to keep the banks solvent and the economy humming (LOL) while attempting to reduce liquidity. 

GL out there. It should be about to get really ugly.  

Morning Post

Jobs disappoint but what's new? Walmart disappoints as well.

The minis are backtesting their market support line that runs back to June.It has completed a 50% retracement of the fall from 1148. There is a nice divergence in the 30 and 60m indicators and daily RSI is leaning down. Was that the top of a completed corrective yesterday? I do not know. At this time I want to call that an A or the end of the first leg up of the corrective.

SPX 30m - Topping at TL's and divergences all over the place here and on the 60m. That was quite a run over the past few days. I'm gonna look for a pll back tot the lower black TL and possibly to gap support, but that is it for now. The dailys still have room to run and that is keeping me somewhat more bullish than most in the pack.

Gold - The IMF sale will effect the price, but this is not a new announcement. Looks like they may be thwarting a breakout.
OIL - Dailys and channel say it is headed up for a while.Petrol report today. Look for it.
Natgas - Settling in at support but also near the top of a channel down. I think it has further weakness. NG report today. Look for it.
Dollar - Tough spot cause I want to call the top of an ABC retracement of the fall from the $89 top, but my gut (and another chart) says its going back to 89. I need to make up my mind here and do a more detailed post.

GL today!

Wednesday, February 17, 2010

IsThe Writing On The Wall?

The piece by Hoenig is either total manipulation BS being spewed but the powers that be to quell the Tea Party followers or there is one person at the Fed that has a brain. Actually they all have brains, it it morals they severely lack.

Mish has praised Knocking on the Central Bank’s Door by Thomas M. Hoenig, President, Federal Reserve Bank of Kansas City in his post "Three Paths Forward" - Kansas City Fed on Current U.S. Fiscal Imbalance, Hyperinflation, Printing. I guess having someone at least attempt to lay out some sort of exit strategy is nice. The only problem is he left the full frontal out of the equation.

Hoenig says, "I see just three ways forward in dealing with our current and prospective fiscal imbalances. While each involves considerable pain only the third will resolve the imbalances without eventually causing inflation to accelerate or precipitating a financial and economic crisis." 

Option 1 - Monetize. "One option for dealing with a fiscal imbalance is for the central bank to succumb to political pressure and monetize the debt. ... This process often appears benign at first, but if it goes on unchecked, the outcome is almost always higher levels of inflation and ultimately a loss of confidence in the value of the currency and the economy." News flash! We're there already. With the Primary Dealers now buying huge chunks of the auctions and promptly being refunded those funds by the Fed and the recent increase in the treasurt debt ceiling limit by $1.9 T, we're there. So seeeeerike one!

Option Two - Policy Stalemate. "The second path forward is a stalemate between the fiscal and monetary authorities. In such a stalemate, the fiscal imbalance grows while an independent central bank maintains its focus on long-run price stability. ... Eventually, this combination of large debt, and high cost of borrowing and capital weakens economic growth and undermines confidence in the economy’s long run potential. Slowly, but inevitably, if the fiscal debt goes unaddressed, the currency weakens, as does access to global financial markets. And the cycle worsens, leading ultimately to a financial and economic crisis." We're already there again. The key words are "undermines confidence" and weakens economy". What's that about China pulling out (China Pulls the Plug on U.S. Treasuries)? Who bought what last year? Large debt and high cost of borrowing will lead to that $1.9 T being spent in a few months and the drug addict will be back at the door looking for another fix. As DP used to say, "And the whiff." Steeeeerike two!. 

Option Three - Equitable Fiscal Discipline "Knowing inflation is not an acceptable alternative to strong fiscal management, a government faced with rising debt levels must provide a credible long-term plan to reestablish fiscal balance. The plan must be clear, have the force of law and its progress measurable so as to reassure markets and the public that the country has the will and ability to repay its debts in a stable currency." Steeeerike three! Flat footed watching a fastball down the middle! Plan? Anyone seen that plan laying around? You know the one with all those new job programs, ways to increase lending to small business and other measures to stimulate the economy while increasing regulations to ensure none of this ever happens again? Wait, not not that one, you mean the one to save the banks, funnel all of the TARP funds and increased taxes to the TBTFs? Oh, yeah, that one is right over here. They got a plan alright. One that puts us in the default line.

The Financial times picks up on Hoenig's speech in Lone voice warns of debt threat to Fed "The hawkish Kansas Fed president also warned against “dire” consequences of the central bank prolonging its holdings of mortgage-backed securities, which it purchased in an effort to prop up the US housing market. Mr Hoenig painted a picture of a slippery slope, where a less independent Federal Reserve was asked to find ways to support other ailing sectors, such as agriculture." LOL, don't forget about the Fed's balance sheet that is absolutely bloated with toxic debt and how their efforts to save the RE/CRE markets may have amounted to a big fat zero. 

For those of you looking for a good debate on whether to hyperinflate ot not, here you go. And I quote, "While Donovan is correct in principle, the opportunity cost, should debt levels become insurmountable, of a devaluation will likely be actively considered by all financial "experts" in the administration. Coupled with a prevalent expectation that this kind of action, especially in light of Donovan's analysis, and coupled with a short-maturity focused debt curve, means that the likelihood of just such a policy is becoming increasingly likely."

You can chew on this as well - The Minneapolis Fed President Kocherlakota Warns Massive Debt Load Can Only Be Paid By Tax Collections Or Debt Monetization - Our options are fading fast and none of then are very appetizing. Tough times are coming.

Have a good one.

Morning Post

The minis are entering their first round of resistance points in this area. The next block is around 1113. Minis also at the top of the corrective channel. 30 and 60m getting toppy but the dailys have plenty of room to run.

Earnings Calendar -  Cause you may want to see it.

Economic Calendar - Tomorrow is a busy day with employment and the EIA reports on Natgas and Petrol.

SPX daily - Pretty much just like the minis. 30 and 60m overbought. I'm viewing this move as more of the continuation of the breakout of the red dashed falling wedge. The BB 20ma is toast and the next stop will be the 50ma at 1108 which sits in the retracement zone (box) between 1097 and 1110. The upper BB is back on the chart finally and sits at 1136. The only caution point I see on this chart for the bulls is the RSI sitting at the 50 line. MACD hist has gone positive which means the market can now put in a top. I'll be watching the RSI 5 for preliminary topping signals.Friday I called for 1103 max upside. Let's see if that can hold.

I suggest you keep an eye on this as it falls for a possible reversal signal when it meets price. I was correct in last Fridays buy call and I'm still calling for some more upside. I will caution the longs to keep those stops in place and lift them with the market. This sucker can and will turn on a dime and when it does it can be severe.

More upside than most may be expected if the dollar has completed the ABC I have been calling and it is not in a 5 wave move up.

Gold - is on a tear (up 8.5% in the last week) and possibly has a valid breakout happening cutting thru the upper resistance line with authority. Will it backtest? 30 and 60m indicators have some strong divergences, but the dailys are just getting warmed up. Gold all depends on the dollar. 1135 to 1157 is the retracement zone for this correction (if it is one).
Dollar -The dollar is a tough call. Is it completing the ABC corrective leading to much further weakness now or does it have more steam left in the engine? I like the ABC as being completed, but I think it is going to double ZZ to the 89 area before the plummet. Either way it eventually gets crushed.
Oil - At near term resistance, but in the channel with room to climb.
Natgas - Channeling down and indicators look like more weakness is to be expected.
EUR/USD - Looks like a possible E throwunder near a 62% retracement. That would be a classic corrective completed and some strength should be expected.

GL out there. Nice to be back. I'm gonna be updating charts and posting the beat of what I find.

Tuesday, February 16, 2010

Yes, It Is That Bad

Nice to go away and know nothing has changed. The world is still rotting from he inside and the maggots are beginning to bore holes in the skin. The process of decay is a long slow one. The elements that the body are exposed to have a lot to do with the process and as long as the Fed keeps it warm and dry, the process will just be extended. Infinity is not an option. Once the process has started there is no reversing course.

I often compare our financial situation to a black hole and that we are on the event horizon. This is the point of no return like the edge of a whirlpool but worse. Beyond this you are sucked into the vortex where nothing, not even light, can escape.The gravitational pull from our staggering amount of debt is the collapsed star at the point of singularity. Eventually it will pull in and destroy everything that is in the outer ring until nothing is left. 

I'm of the opinion that at this time you have to have this mental outlook. You have to go to the edge. You have to understand that the financial world is collapsing around us. The unsustainable debt crated by fractional lending and the resulting collapse of credit markets can only be sustained for so long before implosion. You add up the numbers that I present here nightly? You tell me if the simple math adds up to any other conclusion? Every effort now to save something only adds to the mountain of debt that no country can support.

All we are managing to do is keep the bubble afloat. It will burst eventually and everything goes down with it. Once the first domino falls the chain reaction will be unstoppable. We have two paths to take. One, the rich get richer and the middle class gets eliminated (which is the current, wrong and bad projection). Two, we suffer such a deflated state that nothing escapes it's wrath, and we become a nation that can actually afford to manufacture things again (my preferred and I believe the eventual route). The option of some sort of global warfare will be out of the picture. No one will be able to afford it and it is possible that compassion may rule if we get the right leaders in place.

The bailouts can not continue. Do you care to explain to me where the funds will come from to pay off the current deficit? And we're gonna keep adding to it? Be realistic people. The math does not work no matter how many disaster default swaps or whatever friggin bogus instruments they decide to create to fund or insure against this mess. Billions eventually become trillions and trillions become quadrillions and so on. The fraud will have to stop at some point. Their lies and corrupt acts will catch up with them. What will the solution be? There is only one, massive global default. It is coming. I believe 1000% that it is the only exit door that exists, and I believe they know it and are measuring the move at this time.

Not if but when, times are gonna get really tough. They are setting up for it now. Why would they enact the money market limits or be discussing the socialist act of confiscating 401k assets? Regulation, LOL, have they fixed one darn thing yet? Do the lies outnumber the solutions? Does the corruption train just keep on keeping on?

You do the math. Yes, it is that bad. There will be a rosy future once the purging/exorcism is complete but not till the full frontal is experienced.

I'll just toss two relatively normal/daily occurrence articles at you from Mish this evening - again YOU DO THE SIMPLE MATH.

Cali and Illinois are friggin broke PERIOD! Illinois Pension Fund $61 Billion Underwater; State Borrows Money For 2010 Contribution; California $20 Billion in the Hole Again Get it? that is a pension fund that is $61 BILLION under funded. Care to tell me where the thousands of public servants are going to maintain their promised and entrusted living from in retirement? Bueller? Bueller? Greece ain't shit compared to this mess.

Corruption? What corruption? Did you see any corruption? I didn't see any corruption Geithner and JPMorgan CEO Jamie Dimon's Parade of Lies Exposed What were those assets worth? Oh, OK. Just put them in that pile over there.

I'll be back in the am and on a normal schedule. Sorry for the break in the action. Take care.

I'm Back

Sorry - snow day, power outages, valentines, pres day and office move had me all out of sorts over the past few days. I am back now and ready to rumble.

Friday, February 12, 2010

Morning Post

Snow day for Shanky here in South Georgis. Waiting on 4-6" of some pow-pow to show up on my doorstep. I'll believe it when I see it. What's the forecast for Vancouver today? I feel sorry for those people up there, but still looking forward to the winter Olympics and Daytona this weekend.

China has raised rates again. The big news that pissed me off this am is that Toyota hired  regulators to help hault investigations. The corruption is rampant. They care more about corporate health and profits than our own well being. You would think they are getting better and might be learning something from all this mess. Apparently they don't give a flip about our well being. Money talks.

Markets are at a precarious spot. The EWT folks are looking for another sharp move south very soon to save their most recent counts. They may get it as the markets try to hold upper resistance lines with the futures down. The mixed indicators have some (especially me) feeling a little leery about forecasting any specific direction at this time. The 60m overbought, the dailys have been bottoming for sometime and the weeklys are still headed south. I tend to lean to what the dailys have going on for true direction.

SPX daily - Which TL will be the upper resistance for the next turn? Trying to crack the dashed red TL now that has been proven resistance. On the other hand the blue TL below has been proven support. A break either way could be significant. Looking at the indicators the RSI 5 cracked it's downtrend line. Every other indicator is oversold and ready to turn. My old reliable S Sto has a bull cross. On the other hand the 60m is overbought and the weeklys are still headed south. Barring some reversal in the dailys forcing them to embed and even given the bearish action in the futures, I am going to lean to some more upside before any major turn south (which is coming). Maybe this move at the open today cures the 30/60m problem or they become embedded overbought. I'd call it somewhere in the 2 wave and not in 3 yet.1 is over. Possibly some more choppy consolidation. The BBs are still way to wide for any super volatile moves. 1103 max upside at this time. The bears party will just have to wait I guess. IF I AM WRONG (and since I decided to make a bold call against the grain) I'd say recent support at 1044 and the green bear market TL will be in play pretty quickly.
Have a great weekend. I'll be rooting for the old man in the #5 car as always at Daytona (I like the 38 as well). GL!

Thursday, February 11, 2010

Confusion Reigns

I'm not sure which way is up anymore. As global turmoil and confusion reigns down on all of us, you have to wonder how they will wiggle their way out of this mess and find some reason to pump the markets full of eternal optimism that the reflation trade will work, the recession is over and all is well. You knew we'd be the ones on the white horse to save the day with the Greece issue (American taxpayer via the IMF). I guess we'll be financing the other PIIGS in the months to come. All is well. You should be superoverallocated in equities. Have no fear the great backstop is here.

Looking behind the curtain you will notice that our 30 year auctions are not doing so hot. Even Santelli said it failed although you would not know this by looking at the numbers. It all sold right? Not so fast my friend. In Putting Today's Record 30 Year Direct Take Down In Perspective ZH points out that, "Today, we saw a record explosion in the Direct take down for the longest bond purchasable. Just who are the Direct bidders? Whose orders are they executing? Are these merely a proxy for China or the Fed? What happens when that "mysterious" demand disappears? Nobody knows. Which is why Rick Santelli called this a failed auction." Funding our own debt is like a drug dealer dipping into his own stash. This is not a good combination, especially when the rate of the take down is increasing. Monetization is bad. Denninger echoes the sentiment in 30 Year Auction: A Solid "F".

Mish brings the swift changes to corporate bond yields to the table in Corporate Bond Yields Offer Hint Party Is Over. "I do not think that treasury yields break to the upside. However, they could. And if they do alongside corporate bond yields, there is a distinct possibility, and one that I have pointed out before, that there may be no places to hide in 2010 other than perhaps the much despised US dollar." You see they held rates artificially low as long as they could to make the market the only game in town. When the mass exit from the bond market commences, look out below. (I will take this moment to warn you about the possibilities of what I see as the many dangers in the muni markets as well.)

Denninger continues harping on the MTM issues for a good reason in Whistling Past The Graveyard We Be....., no one is listening or seems to care that assets held on balance sheets are marked to the most bogus amounts they can imagine. You would know why this is legal (cause the O allows it) if you read Yes, America is Still in an Official State of Emergency from my post the other night. Karl has, "Even companies that are allegedly "Strong" and have "No material exposure" are doing tricky things - witness CISCO's recent disclosure that it is funding customer financing at below-market interest rates (zero!) with off-balance sheet vehicles." This is the first I heard of CISCO's fiasco and am quite pleased to hear the sham has spread beyond the financials. 

Ed Harrison with Credit Writedowns has penned Chandler: Uncertainty and contagion at work with Greece. Ed comes at the crisis from a good angle allowing you to see the full contagion that exists no matter how you try to fix the issue. "Now, if you were a Greek resident, you have to feel a bit panicky about the safety of your hard-earned savings given this scenario (see Guardian article).  So, we could easily see the sovereign debt crisis spill over into bank runs. And if Greek banks implode, there is going to be a knock-on effect for other weak banking sectors like the Austrian or Irish. This is how contagion works." The maggots will consume the body from inside out and you will not see the damage till it is to late.

Investor psychology has been rapidly gaining ground as a scientific way to predict market moves. We are predictable and like to herd. ZH has a lengthly read on this subject that is well worth the read. In Just How Ugly Is The Sovereign Default Truth? How Self Delusions Prevent Recognition Of Reality you get "At that point the financial oligarchy will very much wish the Methadone had been administered sooner (roughly about March 2009, when we first suggested it). It will however be far too late, and the decades of self delusion will finally end." It is truly only a matter of time.

Sorry for missing this mornings post. 

GL out there and have a great evening. 

Morning Post (Delayed Today)

Sorry I am running late today. I'll put something together. Give me till 10:30 EST.

I'm quite surprised and the lack of reaction to the news from China and the PIIGS. Market is in wait and see mode.

Thanks and GL

Wednesday, February 10, 2010

Fast And Furoius

I tell ya, the news hits so fast not that some of the stuff I pot on here will be obsolete by the time I finish writing the post. It is amazing stuff to watch the world unravel before your eyes as the bankster vultures pick apart the financial carcass that is the American taxpayer. Don't worry, the bones are starting to show good and they will have it picked clean, nice and shiny by the end of the year.

Where to start? PIIGS, China, IRAN or any number of states here in the US? How about the DTCC announcement?

I'll start with a HuffPo piece - Obama Still Doesn't Get It - You know there are real issues when they blast the man. Regarding the O's comments on the mega bonuses of Dimon and Blankfein, "Not only that, but the incentives for the people running these megabanks is now to take on reckless amounts of risk. They get the upside (for example, in these compensation packages) and - when the downside materializes - this belongs to taxpayers and everyone who loses a job." Simon is dead nuts on target with this one. The banks have been feeding at the risk free trough. They have done nothing but take advantage of the worst crisis possibly in history to gorge themselves on taxpayer funds. This act will come back to haunt them in the end (and maybe that is why they are all getting fat now).

Denninger picked up and digests Freddie Mac to Purchase Substantial Number of Seriously Delinquent Loans From PC Securities in his post Are You SITTING DOWN Folks? "This is going to be a problem folks, because those loans in which reps and warranties (that is, the promises made to Freddie by the banks when they were sold to them) were breached due to a material falsehood of some sort will be, as a matter of fiduciary responsibility, puked back onto the bank involved." This one will be interesting. how will they protect our financial overlords here. I'm guessing they play a hold 'em till eternity and hope we all forget they ever existed. 

Mish has done a nice job covering the most unthinkable - Citigroup Plans "Crisis Derivatives" Yeah, I said it too, "You have to be fucking kidding me?" This is the ultimate proof that the banksters living in a 0% IR world with us as their backstop and still levering to the hilt have not learned one friggin lesson from any of this disaster. "This is yet another example that shows fundamental conceit. Systemic risk is not lowered by the introduction of new derivatives, it is heightened. The risk doesn't go away after all, it is just shifted.Moreover, since derivatives need speculative participants to provide trading liquidity, they actually ADD to overall systemic risk. That Citi would introduce such a product is a huge sign that the bottom is not in, and another huge crisis is coming."

If you have not seen it floating around, Washington's Blog has Yes, America is Still in an Official State of Emergency. I find this worth posting so you will understand the oval office's powers under this event and how they apply to the credit crisis and the banksters (can you say lax regulations and accounting gimmickry allowed by the president?)  Give it a glance. It will help you put all the pieces together. 

Prag Cap has a nice vid with GARTMAN: THIS IS MORE THAN A 7-10% CORRECTION I could not agree more. 

If you are still reading, the meatiest post of the day came late from ZH - Enter Cede & Co II; The Fed Is Now Backstopping $25 Trillion In DTCC Cleared Credit Default Swaps  Ever since the fiasco I have not trusted the DTCC and do not have nice things to say about them. This IMO is the perfect spot for the Fed to "control" the global CDS market. I should have seen this one coming. More secrecy and black shrouds in the dark hole I call the DTCC. "And you thought the $23 trillion in backstops for the financial system was bad, you ain't seen nothing yet."

Marketwatch does have something worth reading for those of you that need a primer on Why European debt matters to the United States  "The point of recognition will eventually arrive that our debt issues are cumulative; when that happens, the contagion will no longer be contained. In the meantime, as we edge from here to there, be on the lookout for the unintended consequences of European austerity initiatives, including but not limited to social unrest and the abatement of risk appetites."

HA! I have not even gotten to China, Iran, Greece, or Cali, NV ..... so I wont. The news flow is absolutely NUTS and a bit overwhelming to me jut to try to follow it. Can you imagine those trying to manage the fires right now? Impossible. Pick the biggest one and hope some of them go out on their own. Sorry, not gonna happen. You see, the credit driven inflated money pit has become some sort of all cash consuming monster that is GROWING. It is only a matter of time before we can not feed it anymore. When it can't be fed ever increasing amounts of cash anymore it gets sick and then we all suffer the terrible consequences.
Sorry - a late grab from ZH - Faber's Bold Prediction: Both The US And Europe Will Default On Their Debt - This appears to me to be the only way out, and I have speculated on this many times in the past. Massive cross country debt cancellations at government levels. Just wipe it all away.

GL out there and have a good evening.