Saturday, May 30, 2009

Saturday Morning Thoughts and Links… It was an Inside Job!

I’ll never forget flying into the Siberian town of Ulan Ude (Google earth). During the end years of the Cold War, I flew one of the first teams of nuclear treaty inspectors from Japan, across the Sea of Japan, 3,000 miles across Siberia north of Mongolia, down the length of the world’s largest fresh water lake, Lake Baikal, and to Ulan Ude, an industrial town set on a huge river whose waters flowed from Lake Baikal. The Russians were to have an aircraft ready to fly anywhere in the Soviet Union the treaty inspectors wanted to go and they had to be ready to leave in 45 minutes.

(The map below is ACTIVE, you may zoom out to see Lake Baikal and its position within Siberia)

View Larger Map
While the nuclear treaty inspectors where flying to various facilities, we were given the run of the town and dined with the Mayor! It was like going back in time to about 1930. Markets had shoes, black, baby carriage, black, overcoat, black… those were their choices, but of course it’s already way different than that now. I’ll never forget speaking to people in the town and those who could speak English would ask where we were from? We would reply that we were Americans and they would absolutely refuse to believe us! “No, no, you must be European… Americans in Siberia? Never!” And that’s pretty much the exact response I got from the person running the news stand where I picked up the latest edition of Pravda for a souvenir.

So, let’s kick our weekend off with a little reading from Provda online which certainly looks nothing like the all black newspaper of old. I share this article with you somewhat reluctantly as it’s not flattering to America at all – yet it is mostly the truth as painful as that may be. It is a two page article, so be sure to read the second page:

American capitalism gone with a whimper

The lesson from my perspective? Neither side “won” the Cold War. We both lost, it just is taking longer for us to realize it. And now we still carry the debts and use Marxist ideology in an attempt to cover them up. After seeing the healthcare in Russia, I swore that I would never support socialized medicine or socialized anything! Dental work, medical care? Terrible. Innovation? Forget about it. One of the things that struck me hard and fast was the lack of work ethic. Nothing getting done, everyone moving in slow motion, little service. Why should they innovate or hustle? Everything they needed was provided - one each black.

Any country that uses Marxist ideology will suffer hugely. That’s my point, and unfortunately we are using his ideology in spades now.

The result is that we pretend our markets are free while they are the exact opposite. We have our government doing everything in their power, and even things outside of their powers, to prop up our FAILING markets. They do not understand the importance of the rule of law, and THAT is exactly why they are failing. The central bankers went unchecked and designed ways to permeate the globe with their debts… debts that are not repayable. And without the rule of law we wind up with highly manipulated markets that do not operate the way free markets are supposed to.

Just look at yesterday’s close. Where did that last minute spike come from? Was it supported by fundamentals? Was there some positive news event? I’ll let others tell you about it from their perspective:

From Zerohedge is probably the most informative piece regarding Agency trading volumes and computerized trading – it would seem the only trading left:

Goldman Sachs Principal Transactions Update: Collapse In Agency Program Trading Volume

And here’s Karl Denninger’s take:

What Was That? (Friday Market Close)

What was that indeed!

This entire rally from March on has been entirely trumped up – start to finish. Our own Fed “buying” our own debt (???INSANE???), one bailout after another, changes to accounting rules that obscure reality and allow mark to fantasy, money laundering operations run by our own government, on and on. Our markets are not even close to being “free.”

Doing technical analysis is POINTLESS in this environment. The government and the banks are working together to create an illusion. You can call that statement “conspiracy theory” or whatever the hell you want to, but it’s simply the undeniable reality. If you simply understand the relationship of capital flows between stocks and bonds, then you will realize that having your own government buying debt changes ALL the market dynamics.

Heck, even the Baltimore Chronicle is running stories on the manipulation:

THE FIX IS IN - Manipulation: How Markets Really Work

You are certainly “free” to donate your money to the game players if you wish, but I’ve been scaling way back and after seeing Friday’s action have decided that “starving the beast” is the only right and PRO-AMERICAN action. That is exactly what the holders of debt are doing world-wide as evidenced by TLT (20 year bond fund) being down 23% from its pre-Christmas high, a classic parabolic collapse that I (and a few others) forecasted as it was peaking (Bond Market Hide & Seek – A Domed House & 3 Peaks...):

I knew the markets would become difficult to play the further down the markets went, but they have degenerated to the point already that free market forces are simply no longer in play. The rule of law has been lost – it exists only in one direction and that’s entirely at the central banker’s discretion.

Searching for the right music to play at the end of this is like searching for the right music to play at a loved one’s funeral… pretty damn difficult. I was searching for Don Henley’s “Little Tin God,” but couldn’t find it, however I did find a song from Don Henley I had never heard before:

Don Henley – Inside Job: