ANTIESTABLISHMENTARIAN

Finance, Fuel Prices, Economics, Markets

Stock Markets & The Economy

Most astute people are well aware that there is a total disconnect between the stock markets and economic fundamentals, and are baffled by this.

I will reiterate my view of what I think is happening in and to the stock markets as I think it bears frequent repeating. Prior to the collapse of ’07 somewhere around 50% of all adults had money in the markets in one way or another. It stands to reason then, that most people look at the Dow as a barometer of the economy, regardless of its accuracy.

Now, if you were the secretary of the treasury, upon whom was the pressure to “fix” the economy, and yet knew that you really had no means of doing so, what would you do? We all know that political rats are far more interested in appearances than reality, what with their vision focused primarily on the next election. Naturally, you would look askance at the Dow and wonder, “how can I make it go up?” Such a question becomes even more critical to the rats when they know that bailing out the banks really won’t solve the problem, by virtue of the fact that there is not enough money in the world to cover their monumental losses estimated at a minimum of $3.6 trillion by economist Nouriel Roubini, and as much as $6 trillion by others.

The banks could not raise capital either by issuing new stock, nor by selling bonds because they were insolvent and everyone knew it. But what if you could engineer a rally in the stock markets with a three-pronged approach? First, you cook the bank’s books by favorably changing the accounting rules so that much of those massive losses magically go away. Next, because they are broke and have no money, you force them to take bail out money whether the want it or not, with the caveat that the banks massive trading departments use that money to rig the markets to go higher, which they could and did do. Then we witness the magic of the stocks of bankrupt banks rising from the grave of $2-7$ prices to twenty dollars and far higher. Presto! Now the banks can raise some serious capital by issuing new stock. Take Citigroup for example, now here’s a bank that should have gone under and whose stock sank all the way below $2, yet today its selling at over $20, a real Phoenix if ever there was one.

The third prong is initiated by means of thinning the herd. You let three big investment banks go under (Lehman, Bear, Merrill) while propping up the others,  and allow the survivors to pick up the assets for pennies. Rebuilds balance sheets with nothing more than a phone call.

Additionally, as Sec Treas, you know that dear ole Uncle Sam has to borrow at least another $4 trillion in the next two years. Such an amount of money would suck the stock markets dry of capital, so you have an additional incentive to try to build it up higher before you pull the rug from under its feet. So what you do is to trump up a bunch of “emergency loan” programs to lend billions to the major market manipulators like hedge funds and banks. This brings us to the point where we are today with the top 15 largest banks controlling a verified 48% of all market trades.

Effectively all investors (defined as those who buy and hold) have left the markets. Daily volumes are down 60% reflecting this. Liquidity has vanished from the markets, and what little is left comes only from the banks. It is, quite simply, their market.

And that is the reason why the Dow is pushing 9,000 instead of 6,000 where it really belongs. Of course they can only keep the markets levitating and defying gravity up to the point where the money runs out, which it soon will.

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July 21, 2009 Posted by | Investing | Leave a comment

Manipulation of Markets Now Legal in US

If you are one of Washington’s preferred paymasters, that is.

Now we know why the NYSE published data omitting Golden Sacks from the program trading data. The silly boys just made an error, that’s all. Somehow they managed to omit the single largest trader from mention, and yet have the trading data remain correct. Corrected data shown below.

Our good friends at Government Sacks last week traded a paltry 2.8 BILLION shares, or a mere 16% of the NYSE total trades. And this is the same outfit that required a bailout? Wonder where they got the dough. Its nice to know that we live in a nation of laws, not men, and the SEC and Justice Department are ever-so-dillegent.

Those fifteen financial mafia families now control 48.3% of the entire NYSE trading.

NYSE fixed

July 7, 2009 Posted by | Investing | Leave a comment

Dollar/T-Bond Death Dance

Things are not looking good for the USG and its citizens. This past weeks events seems to have established  the slo-mo collapse of the US Treasury bubble, and the initiation of the long-awaited descent of the dollar. Here are the key factors.

  • March 18 – the Fed announces intention to buy $300 billion of long bonds.
  • To date, it has purchased only $100 billion.
  • The amount of debt the USG has to finance for 2009 is between $2.5 & $3.0 trillion. So far, the treasury has sold only about $1 trillion.
  • April 27 – The Fed bought $7 billion of bonds. The bid to cover ratio was 3:3. May 20, the Fed bought $7.4 billion on $45.7 billion offered, a 6:1 cover ratio. Essentially, the number of bonds offered for sale doubled.
  • Gold and silver are reflecting increasing fear of USD denominated assets.
  • May 18 – China and Brasil have made a deal to dump the dollar as exchange currency between those two nations. If we ever had any doubts about China’s intentions, now we know.

As for all the hoopla about S&P threatening to cut the UK’s credit rating, and translating that to the US, I don’t buy it. No US rating agency is going to slap Uncle Sam down, not a chance in hell.

Next week is likely going to be a moment of truth for both the Fed and Treasury as the later intends to offer up $101 billion in what is probably the largest weekly auction ever. If the auction doesn’t go well – and many doubt that it will – it is highly probable that the Fed will step in as buyer as last resort. Either way, the bloom will be off the rose and the future of the dollar all but assured. It will only be a question of how fast the USD tanks. Note that despite the horrible state of the UK, the GBP has not crashed, nor gone into a nose dive, so I wouldn’t take any bets on the USD doing the same.

The greater risk is that of the USG being cut off on its credit spree. Now, that’s a bet worth taking.

May 23, 2009 Posted by | Investing | , , , | Leave a comment

Lest We Forget

It is all too easy to have one’s basic instincts, reason and common sense washed away when one’s primary source of information (or what passes for same) is television or newsless papers, forgetting that corporate media is in the business of promoting the status quo, which is lending and spending.

Let’s not lose sight of the fact that the economy nearly collapsed as a result of excessive and unsustainable debt. And the government’s solution to prevent this collapse is borrowing and spending more money. Like curing a drunk with more alcohol, this works like a charm for a very short time as the cause of the disease only grows larger.

General Growth Properties, the nation’s largest mall owner with over 200 malls went bust last week in what is the largest real estate bankruptcy in US history. And it hardly made a ripple in the news on page A31. As a result of flooding the economy with funny money, President Change has managed to prop up the stock markets while the rest of the economy deteriorates at a somewhat slower pace. Stocks are soaring (so are craps tables) while unemployment rises by ¾ million per month whilst the big money boyz all shout bottom and recovery.

Horsefeathers. Recovery for them maybe, because all that taxpayer money ploughed into banks is being lent out only to speculators, meanwhile the banksters raise interest rates and slash credit to the rest of us. Data from the NYSE shows that the biggest market players are the f*ing banks themselves with Goldman Sacks leading the way. So there’s your rally in a nutshell. Or should I say, nutcase?

Odds are fairly good that the economy will appear to pick up for a while, possibly even as long as a year, but do not be fooled. The disease that is destroying this nation is still rampant but swept under the rug and, for the most part, legalized by Prezident Change. Corruption, rigged markets, fraudulent bookkeeping, lying, cheating, looting the taxpayers, bribery, payoffs and wholesale refusal to uphold the laws by not prosecuting financial crimes will continue to sour markets and destroy confidence. The financial speculators who have and can do nothing else will continue to milk the markets for every dollar they can squeeze. But the squeeze bag is running dry. And when there is finally no more suckers left, including the banksters themselves, its game over time.

I can’t predict how much longer that will be. I can only advise to beware and begin preparing if you haven’t already. Times like these call for survival planning, preparing for the worst. Have you given any thought to what it means that the USG goes broke and the dollar collapses? If not, you should because that is definitely in the cards. It becomes closer to inevitable every week.

April 21, 2009 Posted by | Investing | Leave a comment

Whodathunkit Part II

“Thar she blows,” shouts Quequeg as the Great White Whale takes a dive in Herman Melville’s Moby Dick. A fitting analogy today.

Top Stories

Wall Street Slides as Investors Dump Financials– AP 4-20-09

Wall Street fell sharply Monday as investors sold financial stocks and looked to lock in profits after a six-week rally. Investors are having doubts about banks’ profit reports and are wondering whether their better-than-expected performance masks larger problems with bad debt.

Gee, you mean it took “investors” a month-and-a-half to figure out that insolvent casinos also known as banks don’t make profits. Or better still, that they’re using the bail out money to lure in unsuspecting dim wits to drive the stock prices higher so they could sell new issues (and thereby dilluting the existing) in a futile effort to escape from the reality that banks owe 10-30 times their net asset value?

With a little help from the political rats the banksters were given permission to cook their books in the form of FAS 157 that allows the banksters to once again assign value to that which has no value, resurrescting market to magic accounting rules. That is, assigning full value to worthless mortgage bonds. You know, the very same ones that brought the banksters down in the first place, as if that was going to fool anybody and Mommy would kiss it and make it all better. But Mommy has teeth — big ones.

Of course they knew. The “they” are the majority of traders who are program traders that have football field size trading floors and also call themselves bankers. A few dollars spread around the media for propaganda and they probably got a fairly good ride out of the effort. Now its time to get out whilst the gettin’ be good. Leaving the suckers holding the bag as usual.

You want to swim with the sharks, you’d darn well better be one of them.

April 20, 2009 Posted by | Investing | Leave a comment

Golden Sacks

Golden Sacks

In several earlier posts I accused Golden Sacks of being a criminal enterprise and detailed why this is so. Today, we get even more evidence on how GS cooked their books in order to post fraudulently high profits in order to kite their stock price so that they could raise more money by selling more stock. This is a very old corporate trick and it is very illegal. Not that anyone in the national police department cares since President Change is most happy to see these manipulations. The main reason being that it has led to endless chanting about a recovery.

For those not attuned to stock markets, this bear “rally” was led by financials, you know, all those bankrupt, insolvent banks that are posting record profits like Wells Fargo and its $3.1 billion profit. Part of that was done via bailout money (obviously), part by changing the valuation rules for valuing worthless mortgage bonds, which now allows them to assign whatever value they wish (so that Tiny Tim and his public-private partnership scam can overpay for those used toilet paper bonds, and the third part by the old tried and true method of simply rewriting the books as they wished.

The exact method of culinary book cooking was by means of simply omitting all the losses for the month of December. A few sharp analysts like Tyler Durden of Zerohedge Blog, among others, figured this one out. You see, Golden Sacks a few months back changed their fiscal year cycle from ending November 2008 to beginning the new cycle to January, 2009 thereby conveniently omitting December from the books altogether. Not only that, they could also elect in which month to declare their losses, which they could move into December in order to be omitted from the public record.

Now for the clincher, two graphics that tell the whole sordid story.

goldmanrecipients

goldman1

If those numbers don’t cause cause the veins on your forehead to pop out nothing will.

April 15, 2009 Posted by | Investing | , , , | Leave a comment

Follow-up on Goldman Sachs

Monday’s piece was about how Goldman manipulates the stock market with taxpayer bail out money. Since I failed to provide complete proof that this was true, other than presenting mere numbers, here’s the rest of the indictment.

Goldman has repeatedly claimed they don’t need any more capital or money. This is a lie just like all the other such claims by bank presidents who went bust and got bailouts. Then we have Goldman declaring what amounts to near record profits. Next up is Goldman announcing it will sell new stock issues to raise cash to pay off the bailout money.

Virtually no one in the media is capable of either seeing or reporting this lie. How can they claim not to need any money when they have to sell stock to raise cash to pay off the bailout, unless (1) they lost money gambling with stocks or, (2) they paid bonuses and stock dividends with borrowed money, or (3) they, like all other banksters lie about their derivative losses.

Note here that Goldman got $25 billion in TARP, over $100 bn in AIG payouts on CDS, and still they have to sell stock? Lies, lies, lies, all of it.

The final clincher is that Goldman stock has risen 74%. And guess who are some of the largest stock holders. Why Hank Paulson and the company’s executives, that’s who.

April 14, 2009 Posted by | Investing | Leave a comment

Bear Market Rallies

I find it amazing how many of my friends and acquaintances judge the economy by the short term performance of the stock markets. Markets only provide a fair indicator of economic performance in the medium to long term, and even then such judgements are shakey at best. Remember July, 2007? One month before the great crash began, and EVERYONE thought that all was just hunkey-dorey.

The same goes for bear market rallies, which I call “fools rallies” because they sucker so many fools in. And huge numbers of those who lost half their 401Ks and whatnot are now being lured back in. This rally is only 11 days old and it is strong and violent. Here is what the previous rallies looked like.

On an average bear market rallies last for 9 days with an average gain of 16% from trough-to-peak.This most recent bear rally run has been the most violent, and the largest single move in the history of the markets. That means that it is a possibility the bear market is over – NO WAY!!!

Bear market rallies Start date End date Number of days % Change
1 9-Mar-09 23-Mar-09 11.0 21.6%
2 20-Jan-09 28-Jan-09 7.0 8.6%
3 20-Nov-08 8-Dec-08 12.0 20.9%
4 27-Oct-08 4-Nov-08 7.0 18.5%
5 10-Oct-08 20-Oct-08 7.0 9.6%
Average 8.8 15.8%

That should tell you all you need to know about this one.

Source: Reggie Middleton

March 26, 2009 Posted by | Investing | Leave a comment

Point of No Return

Economic outcomes are fairly predictable, its the timing of outcomes that isn’t. I was only one of thousands who wrote that USG was putting itself into a position from which it could not recover. This was the absurdity of trying to finance the nation’s way out of a debt-based financial collapse. Sooner or later they would destroy the very Treasury market that made the financing possible, thereby forcing the Fed to pick up the slack. Of course, with the Fed creating new money to buy treasuries, that devalues the dollar which devalues the bonds. Catch 22, damned if they do and damned if they don’t, a lose-lose proposition if ever there was one.

All indications are that the Treasury market turned the corner last week with rates rising and prices falling. Also, news broke (via Tzarina Pelosi) of yet even more “stimulus” bills in the works, all this in the face of the USG needing to raise at least $2.8 trillion and up to $3.3 trillion this year. That is simply impossible without collapsing the market, so hi-ho, hi-ho, its off to the printers they go.

Consider: $3 trillion is now 1/4th of the whole economy, now down to about $12 trillion GDP. To pull that much money from private capital would by itself collapse the economy.

Next, China has issued its fourth warning, this time by Premier Wen. These warnings started at low levels and climbed the ladder to the top. That latest warning is no idle threat; they are telling the rodents in DC that they will dump their bonds if the rodents start monetizing. The threat is no longer idle since exports to the US are down by half, and so the Chinese have far less to loose by dumping than by keeping.

I believe that this is setting the stage for a future dollar devaluation. That is the only remaining option after a Treasury collapse. Despite the massive amounts of new government credit creation, I do not see this as inflationary since most of it is going into the black holes of derivative implosions and very, very little of it will reach the pockets of the people. Government spending cannot take the place of consumer spending and so has very little power to cause price increases except in limited sectors like shovels for filling potholes. FACT: Government can spend $3 trillion but consumers spend more than $10 trillion, so that barely offsets the decline in consumer spending, yet alone increases it.

The bond market will not collapse quickly, nor will Fed bond purchases ramp up fast. The time frame for this second leg down of the GREAT COLLAPSE will be 1-2 years.

The outlook for Precious Metals is that the fear factor can be expected to steadily grow as the current rally fades out. I see a case for a slow, but steady climb in prices (with the usual wild swings in sentiment). If the economic news is bad enough in May, prices will hold throughout summer, so we may have at best only a couple more months to buy at bargain prices. Silver should easily be flirting with $20 by September and $25-30 by November.

There is a huge consensus that silver will close the spread with gold; I agree, and fear plus limited quantity is the reason.

March 14, 2009 Posted by | Investing | 1 Comment

Capital Withdraws

As we have witnessed over and over again, as the tide goes out on our Ponzi scheme “finance economy”, the underlying muck on the bottom is exposed. That Bernard Madoff goes to jail today is but the tip of the iceberg. The greater criminal activity resides in the Wall Street banks.

WASHINGTON (Reuters) – The U.S. House Financial Services Committee will hold a hearing next week to ask key justice officials and regulators what they need to prosecute wrongdoers in the financial crisis, the chairman of the committee said on Thursday.

Barney Frank, a Massachusetts Democrat, said he had invited officials from the U.S. Justice Department, the FBI, the Securities and Exchange Commission, and all the bank regulators to the hearing.

This would appear to be good news but for the fact that so much of the noise coming out of Gomorrah, is little but window dressing.

The truth is that financial crime is so rampant, and the markets so rigged, that a large part of the current problem is simply capital flight. People with money look at our markets and say, “Screw that! My money is safer in a strong box than on Wall Street.” In the stock markets there’s no one left but but the professional gamblers.

New York Attorney General Andrew Cuomo says that traders looted Merrill Lynch. Cuomoclaimed that Merrill traders had mismarked their books as of early December in an effort to get higher bonuses.

“It appears that some of these losses may have been booked by Merrill employees who marked down their portfolios only after their 2008 bonuses were set,” the attorney general wrote in the filing. “Despite the gargantuan unexpected losses, Merrill did not reconsider its bonus awards” and Bank of America did not request or demand that Merrill reduce its bonus pool, he wrote.

Its not as if the financial police did not know what was going on, for they surely did. What were the congressional banking committees doing all those years? Sleeping or collecting bribes? Judge for yourself.

Investors, particularly foreign investors, are not going to return to our markets when they have much in common with Moscow.

Investors are not going to return so long as the likes of JP Morgan and Goldman Sucks exist as proxies for Washington, rigging the markets to suit political policy. For example, Morgan has over $70 trillion with a T in interest rate derivatives which exist at the behest of the Fed and its never ending quest to crush interest rates to zero.

People foolishly celebrate low interest rates only because they are not aware of how this destroys capital as well as savings. Who wants to save at 1% when inflation is 4%? If anyone should wonder why the US has no savings, one need look no further than this. NO SAVINGS = NO CAPITAL = THIRD WORLD ECONOMY. The steady drip, drip, drip continues.

General Electric Co. (GE) and its finance arm have lost their coveted AAA long-term credit rating from Standard Poor’s Ratings Service, which said its view of GE Capital on a stand-alone basis had fallen.

And that is where we are headed at a very rapid clip owing to the endless self-dealing in Washington. Capital is being destroyed at a rate that we may never be able to recover from its loss. In the name of replacing the lost capital, worthless paper money will pour off the printing presses. This flood of funny money will only benefit the broker-dealers of Wall Street, the first to get the money before the price increases begin. The very same Democrats who railed against trickle-down economics, now extol its virtues now that they control the printing press.

We could clean out the scumbag bankers but we’d still be left with scumbag Washington, who would just create a new crop of sycophant bankers to serve their socialist interests. There is no remedy for a nation of suckling pigs who desire to spend their lives sucking the government teat. The republic no longer exists; a democracy will and are voting themselves the treasury. They will keep debiting the national credit card until the bond buyers wake up and shut the spiggot off. That day is not very far off.

How do you have a recovery in the economy without a recovery in the capital markets?

The answer is that you don’t. An honest government would shut down bankrupt banks, not fund them with trillions of borrowed money. That is pure insanity. . . . . of the sort nations do not recover from.

March 12, 2009 Posted by | Investing | Leave a comment