Tuesday, June 4, 2013

Morning Charts and Fractal Lending 06/04/13 SPX /ES

This is a very important article for the uninformed that want to become informed and understand modern banking. Why the Fed Can't Stop Fueling The Shadow Bank Kiting Machine from Zero Hedge covers the topic from A-Z. From printing to inflating to investing, it is all in here and is a must read for all STB readers.

The problem today is the break with traditional money creation (yes, money creation) schemes and banks breaking the mold using new techniques to expand their hoard. "Where does the pyramiding come from if shadow banks aren’t making loans that get redeposited to fuel the cycle? Securities held as collateral by counterparties in a repo contract can be rehypothecated by the lender to obtain additional loans. (So can securities held in customer accounts, unless their brokerage agreements expressly prohibit it. This was an unwelcome discovery by MF Global’s hapless clients, who saw their assets whooshed off to London where different brokerage rules allow such hypothecation.) Loans made against securities held as collateral can then be used to either buy more securities, which can be fed back into the repo market, or trade a bewildering array of complex synthetic derivatives."

Yes, the Fed flat out prints money, there is no doubt to that, but the real money creation happens in the fractal lending, hypothecation and (hopefully) finally the rehypothecation of whatever securities are available. Banks have weaseled their way around regulation, dumped traditional lending avenues and created their own printing press of sorts. Sound practices? To them certainly, but when this system breaks, which it will, the devastation will dwarf the 2008 LEH crisis. For this reason the Fed can never stop printing, or their children, which have evolved to become parasites to their parent, will crash the system.

So why do the markets keep going up, cause the assets are necessary to feed the system. Just like the NINJA loans fed the RE bubble in 2007, now the assets in your investment and bank accounts (think O - MFG) feed the bank expansion. And some wonder why I warn that they will confiscate the retirement plans and capital controls on your bank and investment accounts actually exist. It is not your money, it is theirs, capisce? It started with them, they created it, it is theirs and they only let you borrow it (for a price of course). Isn't that nice. They get to make money out of thin air and then lend it to us with interest. Bottom line is without it, they die. Is it any wonder I often write that you need to exit the system and get out of dollar denominated assets?

From the above post, "As the debate drags on and global economic conditions worsen, the growing pyramid is being kept afloat by the easy money policies of central banks too frightened to withdraw their support lest a stock market correction trigger a cascade of margin calls that brings down the whole system—much like last time." We here at STB have discussed it for the past year now, they can not let the market even correct now or else. So, how comfortable are you looking at your account balance now? One question, is it real or is it Memorex?

On to the lies -

Tuesday, we all know what to expect today. Not sure whether to call it a joke or a gift when for almost the past half year you could bet green and hit 100% of the time. Is it just magical, or did you not read the above post close enough? Care to tell me how they reversed the Nikkei from doom and gloom all day yesterday to a +3% move overnight ? What, was it a headfake? Was the bad news not real?

SPX Daily - BB's narrowing and RSI support nearing, do we get a rinse/repeat? Bout every other month we get a 50 to 75 point "correction" and then they reignite the engines. Sad when the market "corrects" and the 20dma is all that is in play and they can't even scare the 50dma or the lower BB. I really don't think the want to bother with cracking that red support diagonal.

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It's Tuesday! Rock on Mr. Market! They can always print MOAR!

Have a good day.

GL and GB!

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