Saturday, March 21, 2009

DoctorMad - Bond Market Dislocation…

I get the impression that Doc is not very impressed with Bernanke’s actions, and I can’t say that I blame him.

Doug Noland over at Prudent Bear had some more good insights on the government finance bubble in his weekly update. I'm going to be doing some thinking and research on how a bond market dislocation might unfold and what impact it would have on different markets. To be honest Ben Bernanke (BB) buying T's caught me off guard. In hindsight I was an idiot for not seeing it coming seeing as how we have followed the UK’s lead in much of our approach to the crisis and their QE (Quantitative Easing) was initially well received by the market place [as in not for long]. That's all water under the bridge now, though. The trick now is to figure out how QE is going to impact markets.

At the same time I want to get ahead of the curve and start thinking about what a bond market dislocation would look like. I've already got my line in the sand off the 50 year TNX (10 year Treasuries). Break the top of the descending channel we've been in for the last 20 plus years and the bond bull is officially dead. Note, though, the scale of the chart… we could still be years away from breaking that line. My guess is when it does finally break it will be on a day remembered by history. 30 year bull runs in the world's largest asset class don't end in a whimper. I find the symmetry of this chart quite interesting, too.

I also have a new motto. Buying TBT [selling treasuries] is the most patriotic thing you can do if you want to see America survive and have a chance at a prosperous future. The only thing that is going to stop the government from digging us in deeper is if the bond market finally reigns the government in. The sooner it dislocates and exposes the myth that "deficits don't matter" the better. Right now we are just layering misallocation of resources on top of previous misallocations making the painful adjustment, which is going to happen anyway, exponentially more damaging.

Past a certain damage threshold our economic system and society won't make it in its current form. We might have even already crossed the line [Nate says we are already there], but let's be optimistic and say we haven't. Your job as an American is to go out and make that dislocation happen now. Force our government to face reality and own up to all the lies it has told us based on voodoo Ponzi economics. How can you do this? Sell your treasury holdings, tell your friends to sell their treasury holdings. Don't lend money to a dead beat creditor. The sooner you cut the dead beat off, the better it is for BOTH of you. You can also help make the bond market implosion happen. Buy TBT and use your money to sell short other peoples treasuries for them. Do it for your country.

Okay, the sales pitch for TBT may be extreme, but the point remains that it's in our best long-term interest for the markets to call BB’s bluff right now. It's Helicopter Ben versus The Bond Vigilantes. And Benny fired the first shot on Wednesday before the vigilantes did so much as push rates ALL the way up to 3% TNX, a multi-decade low up until a few weeks ago. The Vigilantes (all T holders) need to stand right back up and kick Ben in the nuts repeatedly by relentlessly selling all of their Ts until interest rates compensate them for the risk of dilution of the underlying (dollar) based on the whims of one guy or institution. Anybody who doesn't sell their Ts is a sucker.

I've also now completed my Presidential platform. Bankruptcy for all, dislocate the bond market, and to make the pain not seem so bad, legalize pot.

- DoctorMad

Wow, Doc, that’s quite the platform, I’m sure election for you is right around the corner – lol!

Of course everyone may not fully understand this sell America’s debt mantra like we do. I get it, you want the bond market to force discipline on our politicians. That, unfortunately, is very likely to happen now.

For those not familiar, TBT is the ETF that works double opposite of bond market price – 2x short bonds. Of course, being an ETF, it does not directly influence the bond market, and thus buying TBT does not affect the ability of our government to issue debt. They are destroying that ability all by themselves, but selling treasuries definitely does have an effect. And it’s going to happen, and it’s very likely to get way out of control as Doug Nolan apparently agrees…

Mistakes Beget Greater Mistakes

March 18 – Bloomberg (Kathleen Hays and Dakin Campbell): “Bill Gross, co-chief investment officer of Pacific Investment Management Co., said the Federal Reserve’s purchases of Treasuries and mortgage securities won’t be enough to awaken the economy. ‘We need more than that,’ Gross said… The Fed’s balance sheet ‘will probably have to grow to about $5 trillion or $6 trillion,’ he said.”

“The problem with discretionary central banking is that it virtually ensures that policy mistakes will be followed by only greater mistakes.” Here, I’m paraphrasing insight garnered from my study of central banking history. Naturally, debating the proper role of central bank interventions - in both the financial sector and real economy – becomes a much more passionate exercise following boom and bust cycles. The “Rules vs. Discretion” debate became especially heated during the Great Depression. It was understood at the time that our fledgling central bank had played an activist role in fueling and prolonging the twenties boom - that presaged The Great Unwind. Along the way, this critical analysis was killed and buried without a headstone.

I believe the Bernanke Fed committed a historic mistake this week – compounding ongoing errors made by the Activist Greenspan/Bernanke Federal Reserve for more than 20 years now. I find it rather incredible that Discretionary Activist Central Banking is not held accountable – and that it is, instead, viewed as critical for a solution. Apparently, the inflation of Federal Reserve Credit to $2.0 TN was judged to have had too short of a half-life. So the Fed is now to balloon its liabilities to $3.0 TN, as it implements unprecedented market purchases of Treasuries, mortgage-backed securities, and agency and corporate debt securities. And what if $3.0 TN doesn’t go the trick? Well, why not the $5 or $6 TN Bill Gross is advocating?

What’s the holdup?

Washington fiscal and monetary policies are completely out of control. Apparently, the overarching objective has evolved to one of rejuvenating the securities and asset markets and inciting quick economic recovery. I believe the principal objective should be to avoid bankrupting the country. It is also my view that our policymakers and pundits are operating from flawed analytical frameworks and are, thus, completely oblivious to the risks associated with the current course of policymaking.

Today’s consensus view holds that inflation is the primary risk emanating from aggressive fiscal and monetary stimulation. It is believed that this risk is minimal in our newfound deflationary backdrop. Moreover, if inflation does at some point rear its ugly head the Fed will simply extract “money” from the system and guide the economy back to “the promised land of price stability.” Wording this flawed view somewhat differently, inflation is not an issue - and our astute central bankers are well-placed to deal with inflation if it ever unexpectedly does become a problem.

Our federal government has set a course to issue Trillions of Treasury securities and guarantee multi-Trillions more of private-sector debt. The Federal Reserve has set its own course to balloon its liabilities as it acquires Trillions of securities. After witnessing the disastrous financial and economic distortions wrought from Trillions of Wall Street Credit inflation (securities issuance), it is difficult for me to accept the shallowness of today’s analysis. In reality, the paramount risk today has very little to do with prospective rates of consumer price inflation. Instead, the critical issue is whether the Treasury and Federal Reserve have set a mutual course that will destroy their creditworthiness - just as Wall Street finance destroyed theirs. Additionally, what are the economic ramifications for ongoing market price distortions?

The counterargument would be that Treasury and Fed stimulus are short-term in nature – necessary to revive the private-sector Credit system, asset markets and the real economy. That, once the economy is revived, fiscal deficits and Fed Credit will recede. I will try to briefly explain why I believe this is flawed and incredibly dangerous analysis.

First of all, for some time now global financial markets and economies have operated alongside an unrestrained and rudderless global monetary “system” (note: not much talk these days of “Bretton Woods II”). There is no gold standard - no dollar standard – no standards. I have in the past referred to “Global Wildcat Finance,” and such language remains just as appropriate today. Finance has been created in tremendous overabundance – where the capacity for this “system” to expand finance/Credit in unlimited supplies has completely distorted the pricing for borrowings. As an example, while Total US Mortgage Credit growth jumped from $314bn in 1997 to about $1.4 TN by 2005, the cost of mortgage borrowings actually dropped. It didn’t seem to matter to anyone that supply and demand dynamics no longer impacted the price of finance. Yet such a dysfunctional marketplace (spurred by unrestrained Credit expansion) was fundamental in accommodating Wall Street’s self-destruction.

Today, the markets will lend to the Treasury for three months at 21 bps, 2 years at 84 bps and 30 years at 371 bps. I would argue that this is a prime example of a dysfunctional market’s latest pricing distortion. As it did with the Mortgage Finance Bubble, the marketplace today readily accommodates the Government Finance Bubble. And while on the topic of mortgage finance, the Fed’s prodding has borrowing costs back below 5%. This cost of finance also grossly under-prices Credit and other risks.

I would argue that market pricing for government and mortgage finance remains highly distorted – a pricing system maligned by government intervention on top of layers of previous government interventions. These contortions become only more egregious, and I warn that our system will not actually commence its adjustment and repair phase until some semblance of true market pricing returns to the marketplace. Yet policymaking has placed peddle to the metal in the exact opposite direction.

The real economy must shift away from a finance and “services” structure – the system of “trading financial claims for things” – to a more balanced system where predominantly “things are traded for other things.” Such a transition is fundamental, as our system commences the unavoidable shift to an economy that operates on much less Credit of much greater quality. But for now, today’s Washington-induced distorted marketplace fosters government and mortgage Credit expansion – an ongoing massive inflation of non-productive Credit. I would argue this is tantamount to a continuation of Bubble Dynamics that have for years misallocated financial and real resources. In short, today’s flagrant market distortions will not spur the type of true economic wealth creation necessary to service and extinguish previous debts – not to mention the Trillions and Trillions more in the pipeline.

Market confidence in the vast majority of private-sector Credit has been lost. This Bubble has burst, and the mania in “Wall Street finance” has run its course. The private sector’s capacity to issue trusted (“money-like”) liabilities has been greatly diminished. The hope is that Treasury stimulus and Federal Reserve monetization will resuscitate private Credit creation; that confidence in these types of instruments will return. I would counter that once government interventions come to severely distort a marketplace it is a very arduous process to get the government out and private Credit back in (just look at the markets for mortgage and student loan finance!). This is a major, major issue.

The marketplace today wants to buy what the government has issued or guaranteed (explicitly and implicitly). Market operators also want to buy what our government is going to buy. In particular, the market absolutely adores Treasuries, agency MBS, and GSE debt. There is no chance that such a system will effectively allocate resources. There is today no prospect that such a financial structure will spur the necessary economic overhaul. None.

There is indeed great hope policymakers will succeed in preserving the current economic structure. On the back of massive stimulus and monetization, the expectation is that the financial system and asset prices will stabilize. The economy will be, it is anticipated, not far behind. And the seductive part of this view is that unprecedented policy measures may actually be able to somewhat rekindle an artificial boom – perhaps enough even to appear to stabilize the system. But seeming “stabilization” will be in response to massive Washington stimulus and market intervention – and will be dependent upon ongoing massive government stimulus and intervention. It’s called a debt trap. The Great Hyman Minsky would view it as the ultimate “Ponzi Finance.”

As I’ve argued on these pages, our highly inflated and distorted system requires $2.0 TN or so of Credit creation to hold implosion at bay. It is my belief that this will ONLY be possible with Trillion-plus annual growth in both Treasury debt and Federal Reserves liabilities. Private sector Credit creation simply will not bounce back sufficiently to play much of a role. Mortgage, consumer, and business Credit – in this post-Bubble environment - will not re-emerge as much of a force for getting total system Credit near this $2 TN bogey. In this post-Bubble backdrop, only government finance has a sufficient inflationary bias to get Trillion-plus issuance. But the day that policymakers try to extract themselves from massive stimulus and monetization will be the day they risk an immediate erosion of confidence and a run on both government and private Credit instruments. Also as I’ve written, once the government "printing press" gets revved up it’s very difficult to slow it down. This week currency markets finally took this threat seriously.

Let's face it... it's time America gazed in it's looking glass, we're not a child anymore...

Styx – Suite Madame Blue (America Patriotic):

Red white and blue, gaze in your looking glass

You're not a child anymore

Red, white, and blue, the future is all but past

So lift up your heart, make a new start

And lead us away from here...

Moral and Ethic Morass…

New comers to my site may see me and the others here as a “gloom & doomers.” Primarily the news and information found on this site is mostly negative, no doubt.

For years, however, the roses, rainbows, and sunshine painted by the mainstream media on the boob tube by our media and also by our government has created a FALSE sense of wellbeing. A FALSE sense of REALITY.

What is real?

Math is real. The numbers associated with the debt that underlies our economy is real. It can be twisted to sound as if it’s all under control even if it’s not, but it is real. To untwist it, simply compare all debts to all income and you will see reality. It does not work.

As a collective society we have been living a mass psychosis – we’ve been fooling ourselves. We say and think ridiculous things when it comes to the economy. Things like 2% inflation every year, year after year is good. Things like we are protecting our freedom by spending more on our “defense” than the rest of the world combined. Things like its okay to spend trillions and trillions now because we can grow our way out in the future.

That’s all FANTASY.

We’ve been fooling ourselves, or someone’s been fooling us.

I think it’s both.

I’m a naturally happy and optimistic person by nature. Don’t laugh, it’s true! How do you think I can wade into this market cesspool and maintain a good attitude, and still be happy? During the bubble years, I played the bubble games. I owned many rental homes and played in the stock market - LONG. Leverage was the thing to do. And if that was still the thing to do, that’s what I’d recommend. But that was then.

My life experiences have taught me how the world really works. At least the way I see reality…

The first real eye opener to me was when I was flying in the Air Force and saw how much of what we were doing was just wasteful. The budgets are “use it, or lose it.” Thus, even if you didn’t need it, you still loaded up the plane and bored holes through the sky, pouring JP-4 out the back and taxpayer dollars with it. The rule was to ask for a bigger budget each year, and they were almost never denied.

That’s how government works. It grows bigger over time, each little fiefdom growing into a little empire. The little empires expand and turn into big empires. Eventually the entire thing implodes under its own weight – that’s what has happened to all empires throughout history, and it’s happening to us now.

You would think that if I could see this happening that our “mature” leaders would be bright enough to see it coming and to create a sustainable system for the long term. Not so.

I learned right away that you cannot buck that system. If you do, you and your career go nowhere – that was obvious from watching others, so you just go along. And it was comedy central watching the people transition from the lower officer ranks to the upper. They would always say, “When I get to be a General, I’ll be able to make a difference!” Ha, ha… what a joke, the Peter Principle in action. For the most part those who rose where the ones who couldn’t see how the world really works. Not to say there were not exceptions, there were, and there are some very fine commanders. But most do not see reality for what it is.

Reality struck me when the military initiated its AVIP program. That’s the one that mandates the Anthrax Vaccine for ALL military personnel. Long story short, this program was all about money, not force protection as they claimed.

At the time things were heating up with Iraq and that was used as an excuse. No member of any military of any country throughout the history of mankind had ever been exposed to anthrax, yet it was suddenly a priority to spend millions upon millions to vaccinate every member of the military, even the 110 pound pregnant clerk sitting behind the desk at McChord A.F.B., WA.

Former Chairman of the Joint Chiefs of Staff, Admiral Crowe (now deceased), was given a sizable equity stake in Bioport, Inc., a Lansing Michigan company to lobby the Pentagon to make the vaccine mandatory. Bioport was owned by a European man of Middle Eastern descent with a last name you may recognize – Bin Laden. Yes, a relative of Osama.

The money flowed and the Pentagon agreed.

“If only you knew what we know, then you will willingly take this series of vaccines,” They said.

The lies and manipulation flowed like an open fire hydrant. Many people who took the shots were injured and their injuries were not acknowledged as coming from the vaccine. People’s voices were suppressed – I saw that first hand. Over a quarter of my reserve unit (officer pilots) refused the vaccine and resigned – myself included. They were told not to state the AVIP program as the reason why on their resignation paperwork. They were “gagged” yet I did not comply, that is not in my nature.

This is a long and complex story, I could write a novel about it, but the bottom line is that it was all about the money.

Why am I telling the short version of this story? Because it speaks to the root cause of our economy and what is going to happen to it moving forward. But let me connect some more of the dots…

When I worked for an airline I found many of the same types of inefficiencies. Being the well intentioned employee, of course did my best to help my organization/ corporation just like most do. But then some ugly events unfold… an airplane crashes into the ocean because a part was not replaced on a decision to save money. Flight rules are “bent” and manipulated and “interpreted” in ways that save money. And those who dare to question are “gagged.” This can be very subtle, and most people cave easily under pressure, especially where their paycheck is concerned, but if you are identified as a leader for change, even if it may benefit the organization, you will be especially prone to being silenced.

I think we all just witnessed an example of that with Rick Santelli at CNBC. I guarantee you that he was “gagged” after his tea party comments and he has since been biting his lip while tip toeing around the issue of bond market manipulation, insider information, and quantitative easing.

I know how that works. While he may not have been DIRECTLY told not to do it, he was probably subtly “counseled.” But the hint was there that if Rick continues to make waves then his job, his paycheck, and his ability to service his DEBTS might be in jeopardy. He is frustrated because he sees the truth and others around him choose to ignore it or do not see it for what it is. This puts Mr. Santelli in a moral and ethical bind.

My prediction? Look for Rick to no longer be working at CNBC within a year – it will be of his own accord. Then look for a book from him within a year following that. They are cleansing to principled people, I know.

Here’s another little story that I ran across that demonstrates how the real world works:

FOX Reporters FIRED for truth:

Bet you’re going to be drinking organic milk after viewing that. I do.

And how does all this relate to the mess our economy finds itself?

You, and all of us, have been conditioned with little white lies. The government “adjusts” the way it calculates its data. Inflation, employment, GDP, etc. Our banks move items into the “level 3” asset category and mark them in value according their own made up model. There are thousands of these little white lies now permeating our economy, and they all add up, one on top of the other until the distortions are so huge that REALITY is not recognized.

Our marketing industry is a part of the white lie problem. Perceptions are molded and shaped. And who has the money to mold and shape those perceptions, to get their little white lies across the screen? We can all site many examples, programming begins at an early age.

The teenaged boy who sees a fancy Mercedes drive by sees a rich man inside. When he sees a man drive by in a 10 year old pickup, he sees a poor man. Where did that perception come from?

A wiser, older man seeing those same two cars roll by knows that may be true, but the odds are that one of those men is in debt, a slave; and the other is free. Money can create freedom only when it is earned. When it is borrowed, money, credit, debt, does not represent freedom, it represents the opposite. Our system is now shackled with debt that controls while your politicians wish to ignite a flurry of “credit” to help.

Money’s influence has concentrated into fewer and fewer hands. Much of the media is owned and controlled by the same people who run the large banks, as is much of the military industrial complex. They derive their power through money and control others by using their money to influence the political system getting laws passed in their favor, and also directly through the permeation of debt. Debt is a spiraling ride that once you’re on, is very difficult to get off. That’s true on the individual level, but also on the Nation level.

It was not our founding father’s intent to put the Central bankers and OUR money system in charge of our nation, yet it seems to me that they are, and there are no checks and balances, they have all been bought and paid for.

PEOPLE create corporations. Corporations were not intended to rule the world either. They were allowed to be created to insulate holders of capital so that they could invest in risky exploration without having to risk their entire wealth. This is how Spain and England were able to finance ships that explored the high seas. Today corporations lobby politicians and donate to their campaigns. They write laws and hand them to their politicians to be implemented on their behalf. Thus the PEOPLE have been removed from the process. Sure, you get to vote for your politician, you have a choice between two candidates who both made it on the ballot with corporate sponsorship.

It’s time to separate corporations from State.

It’s time America.

We are about to get run over by a tsunami, it is right around the corner. Tax revenues are cliff diving, spending is ramping and now we are out in the open printing money by the trillions.

Anyone, and especially foreigners, would be NUTS to buy treasuries to finance our debts while we manipulate, control, and artificially lowers rates while at the same time intentionally devalue our currency.

In the two days following the latest FOMC announcement the dollar lost more than 5% of its value. That means that Bernanke forced a 5% pay cut on everyone in America. In just two days.

It’s time to revisit the fundamental ideas of freedom and of the REPUBLIC. It’s time to revisit our morals and our ethics. To stare reality in the face and to stop telling ourselves little white lies.

In short, it’s time to stop fooling ourselves.

Styx – Fooling Yourself:

Bank Failure Friday – A Trifecta, plus a Daily Double with a REIT Twist…

The pace is picking up. We had three bank failures, plus two credit unions, plus GGP properties had another shopping mall seized.

General Growth Properties (GGP) is a REIT that owns over 200 shopping malls in 44 states, making it one of the largest in the nation. They are missing debt payments like crazy and just had another shopping mall foreclosed – this one by Citi Bank on a mall in New Orleans after GGP missed a $95 million payment (a general bankruptcy filing may not be far off).

This is going to be a massive trend going forward. The problem is that these developers took out huge loans and are not performing. The same is true with home builders and contractors. The banks have been reticent to foreclose as they do not want to take possession. Now, though, the banks themselves are so sick that they have no choice but to begin calling in their chips. This is going to happen with the big banks all the way down to the little ones who lent local builders more than they should have. The water level in the swamp is beginning to get low enough that we are seeing who is swimming naked.

And the bank and credit union failures were not insignificant. We have now shut down 20 banks for the year. As Seth says, it was just 13 on the 13th of the month, now it’s 20 on the 20th of the month. Has the pace picked up to one a day? We may very well be closing in on it:
Credit Unions With $57 Billion in Assets Seized; 3 Banks Fail

By Margaret Chadbourn and Ari Levy

March 21 (Bloomberg) -- Two corporate credit unions, with combined assets of $57 billion, were seized by the National Credit Union Administration yesterday to stabilize a system used by 90 million customers amid a worldwide financial crisis. Three U.S. banks failed, bringing this year’s total to 20.

U.S. Central Corporate Federal Credit Union, in Lenexa, Kansas, and Western Corporate Federal Credit Union in San Dimas, California, were put into conservatorship, the regulator said in a statement. The credit unions failed so-called stress tests that found an “unacceptably high concentration of risk” from mortgage-backed securities, the agency said.

“Most of the bad assets that we’ve seen in the corporate world reside at these two institutions,” NCUA spokesman John McKechnie said in a telephone interview. “We will be able to resolve them in a more efficient way.”

The U.S. has 28 corporate credit unions, which make loans and provide other services for the retail credit unions that cater to the public. This is the first time a corporate credit union was seized since 1995, when NCUA took control of Capital Corporate, based in Landover, Maryland.

U.S. Central has about $34 billion in assets and serves 26 retail credit unions. Earlier this year, it was granted a $1 billion federal injection in an effort to shore up public confidence.

Western Corporate has $23 billion in assets and about 1,100 retail credit union members, the NCUA said. Yesterday’s two seizures may cost the agency’s insurance fund about $1.2 billion, McKechnie said.

Emergency Borrowing
The regulator is seeking $30 billion in emergency borrowing authority from the Treasury Department to combat mounting losses. The U.S. House of Representatives has already approved expanding credit to $6 billion from $100 million.

“Service continues uninterrupted at both U.S. Central Corporate Federal Credit Union and WesCorp,” the NCUA said in its statement. “Members are free to make deposits and access funds.”

Also yesterday, banks in Kansas, Colorado and Georgia were seized as foreclosures surged amid a recession and the highest unemployment in a quarter century. The banks with $1.1 billion in total assets and $853 million in deposits were shut by regulators, and the Federal Deposit Insurance Corp. was named receiver, according to e-mailed statements from the FDIC.

The deposits of TeamBank in Paola, Kansas, will be passed to Great Southern Bank in Springfield, Missouri. Herring Bank in Amarillo, Texas, is assuming the deposits of Colorado National Bank in Colorado Springs. Regulators were unable to find a bidder for FirstCity Bank of Stockbridge, Georgia, and the FDIC will send payments to insured depositors beginning on May 23.

FDIC-insured banks lost $32.1 billion from October through December, the first quarterly loss since 1990. The agency’s deposit insurance fund, used to reimburse customers of closed banks, tumbled 45 percent to $18.9 billion in the quarter from $34.6 billion in the preceding period, reflecting the closing of 25 lenders last year.

“There is no question that this is one of the most difficult periods we’ve had to deal with since the FDIC was created 75 years ago,” Chairman Sheila Bair said yesterday at the Independent Community Bankers of America conference in Phoenix.
Banks Acquire Assets

Herring Bank will take Colorado National’s four branches and buy $117.3 million of Colorado National’s assets at a discount of $4.2 million, the FDIC said. TeamBank’s 17 offices will open tomorrow as branches of Great Southern. The acquiring bank will purchase $656.5 million in assets at a discount of $100 million. The FDIC said the three failures will cost its deposit insurance fund, supported by fees on insured banks, about $207 million.

The FDIC classified 252 banks as “problem” in the fourth quarter, a 47 percent jump from the previous period and the highest total since June 1995. The Washington-based agency doesn’t name the “problem” banks. The FDIC projects bank failures will cost its insurance fund $65 billion through 2013.

Note that the NCUA is asking for $30 billion. The money for these operations does not exist, yet it must come from somewhere. The FDIC has been collecting insurance fees, but the Federal Government has been spending it while returning I.O.U.'s to the FDIC's balance sheet and I presume the NCUA as well, thus they must go to Congress to get "real" money. Where's that going to come from?

Where is that somewhere? The taxpayer? TAX REVENUES ARE CRASHING. They are crashing on all levels, local, State, and Federal. Look for desperate acts from desperate government officials as this crises progresses. What a mess. Are you beginning to see how years of abuse are catching up to us?

Somehow the morose mood that Morison creates is just more appropriate for this Bank Failure Friday. Sure, I could play “Another one Bites the Dust,” but the lyrics just don’t say, “Another FIVE Bite the Dust!”

Doors – When the Music’s Over:

Friday, March 20, 2009

Rep. Brad Sherman - Not just bonus caps but salary caps…

And there’s CNBC defending the actions of Wall Street. They have bought into the CDS end of the world mantra. Not that I'm in favor of salary caps, what I'm in favor of is not allowing uncontolled debt and derivative expansion.

How’s this? Freeze all CDS until an exchange can be made to handle the FEW proper uses of them. If freezing the CDS knocks your institution to the ground, GREAT, then we’ll know who is swimming naked in the toxic ocean. Those who aren’t can pick up the pieces. GS and JPM fail? TOOO BAD, there’s our opening to a better system moving forward. Will it happen? Of course not in a deliberate manner, but it will most likely happen sooner or later regardless.

Santelli a Day Later...

Just this morning...

Evidently somebody's been reading my smokescreen article: Outrage Over AIG Bonuses a Smokescreen...

Morning Update/ Market Thread 3/20

Good Morning,

The magical “miracle” that is our corrupt and gamed markets was down all evening until this morning when the broad market took another hit of the crack pipe and rocketed 120 DOW points in the past hour:

This market is the exact opposite of “free.” The action in gold and bond options prior to the FOMC announcement are just sickening and disgusting – only the latest example of such manipulation.

There is no economic data today, Bernanke delivers a speech at noon Eastern time.

IYR is still down on SPG's stock dilution, be careful in that space if you have open positions. Financials are, or where, down as well, bonds are up, the dollar's up, Gold and oil down, SPG like a stone.

Of course today’s options expiration, the fun and games will continue at Goldman’s and Morgan’s discretion. Oh, and the bond market will behave at Bernanke’s discretion (who of course works for Goldman and Morgan).

Have a great free market day!


Styx – The Grand Illusion:

Thursday, March 19, 2009

Obama on The Tonight Show...

Full clip is now up of our Comedian-in-Chief...

Denninger on Bernanke’s Suicidal Tendencies…

Here is Karl Denninger’s take on the possible outcomes of Bernanke’s stunt yesterday. It is sobering, and I believe in the realm of possible outcomes. It is the result of the negative spiral I mentioned where people sell their bonds and treasuries to the only bidder left – the U.S. government.

He is correct that wages cannot keep pace with the onslaught, as I’ve mentioned because we are in an “open” system where our capital and international capital is free to leave. Thus, the result may be the opposite of the hyper-inflation most people expect. He explains this well, make sure you read this ticker.

Bernanke Inserts Gun In Mouth…

Yes, his scenario is possible. Yes, if you have the means to prepare, consider it a hedge.

Santelli "Hints" at Inside Information/ Option Buying PRIOR to FOMC Announcement...

Rick Santelli obviously is not happy with the Fed destroying our currency and taking away the free market from setting interest rates. He gets it.

What he also gets is that there was evidently massive option buying on the 10 year 1 hour PRIOR to the FOMC announcement (in the correct direction). How did they know? Who was it?

Welcome to the place and time where free markets do not exist. Every aspect of the "market" is at the behalf of the pigmen running the "show." The market is dead, Santelli knows it.

Obama “takes responsibility” as Geithner Allows AIG Bonuses…

Oh, he’s making messes all right. He appointed Geithner and his Fed Chairman just cranked out $1.15 TRILLION bucks! But man, does he sound good dishing out the crap while he does the opposite.

And here’s his pick, Turbo Timmy, admitting that he was responsible for the AIG bonuses sticking around, just like Christopher Dodd said:

Not to worry, “criticism comes with the job… and we have no choice but to act.”

End of Day 3/19

I know that it wasn’t that long ago that I played this Morrison tune (a different version), but I think yesterday’s actions mark a turning point in the life of what we knew as the Dollar. Do you see the accident happening? It’s happening right now – this marks the beginning of the final phase of the current dollar experiment.

Doors – This is the End:

But the dollar has lived through various renditions and perhaps the term “dollar” will stick around, but it won’t be the same dollar you grew up with – it’s already not, exponential growth has ensured that – the dollar has lost 5% since Bernanke’s announcement yesterday:

That means that when you travel overseas or buy anything from another country, your puchasing power went down by 5% in just the past two days. Can you imagine if that continues?


Today the DOW finished down 85 points, the S&P lost 1.3%, the NDX only lost .2%, the broader Nasdaq lost .5%, and the RUT gave up 1%. The XLF gave back 8%, IYR lost 5.7%, GLD gained another 1.4%, and the transports managed to close up a fraction creating a gravestone doji on its 8th consecutive up day:

Internally, the NYSE was split evenly on advancing and declining issues, but 60% of the volume was on the downside. The number of new lows contracted to just 8 on the NYSE… that could be called a bullish divergence, but one that I don’t think has much meaning for where we are in the rally – it shows that a lot of the pressure has been removed on prices, for sure.

But the pressure hasn’t been removed from the fundamentals and after the close today we learned that Simon Property Group (SPG) announced a public stock offering for 15 million shares that sent their share price tumbling 10% after hours. That has pulled IYR down placing pressure on all the REITS and even the broader market to some extent.

Here’s a 10 day 10 minute SPX chart showing the relentless climb over the past two weeks. You can see that we closed today outside of the green channel – barely. The red lines are the wave 5 channel… this leaves the door open that we just created wave 4 and still could make wave 5 of 5 down. Regardless, there will likely be a ‘B’ wave retrace and further rally even if wave 5 down is coming. The minimum I would expect for a B wave would be down to the 38.2% fib line which is now at 751. Note here that the 10 and 30 minute stochastic are oversold which could point to some rally tomorrow, but the 60 minute will likely keep it under pressure and the daily as well:

The daily SPX chart shows that we made another attempt to get over 800 and failed. We also pinned the 50dma and failed to get above that. You can see that the daily stochastic is overbought and the RSI touched the overbought line and backed off slightly. We closed beneath the 789 pivot which makes 768 and then 734 the next pivot support areas. Note that the 734 pivot is now exactly a 50% retrace of the up move, while the 748 pivot is very close to the 38.2%. This candlestick pattern does not look like a topping pattern by itself, but being beneath the channel means that the trend could be changing:

The DOW’s close makes me a little nervous just because it failed to touch the upper Bollinger band which I would expect once it’s gone this far. Again, there are limitations elsewhere, like the transports which did make a topping candle with that gravestone. The close right on 7,400 is peculiar, it is support, so the open and action tomorrow will be important. In fact, tomorrow’s action will be critical to know whether we have begun wave ‘B’ or not:

This is a 20 day chart of the NDX. This rising wedge pattern is fascinating. You can see that it came to a point at the end of the day today with prices closing just under it after overthrowing the top yesterday. On the daily chart, the NDX is running into the upper Bollinger, and that has definitely slowed its progress down some, although today is its second day above the 50dma:

The XLF tried to climb higher this morning but the news of legislation to cap bonuses was enough of a catalyst to get prices headed out from above the upper Bollinger. That close above the Bollinger yesterday combined with the close beneath it today is a solid sell signal. Note that it closed beneath the 50dma and thus only remained above it for a day:

Here’s the Put/Call ratio, it turned the corner with a low reading and is now at .77:

Tomorrow’s an important day for determining the intermediate road. The short term stochastic look like a bounce is possible, but the pressure is on and tomorrow’s options expiration making anything possible. It’s possible we are beginning wave B down, but one thing’s for certain… Yesterday, Bernanke’s actions mean that we are burning down the house in regards to our currency. The underlying problem is too much debt and too little real income. And what underlies that is a government that is bloated beyond belief, they cater and are controlled by the central bankers who have convinced them that never ending growth is workable in terms of a currency.

Talking heads – Burning Down the House:

Martin Weiss on CNBC…

I would trust Weiss’s bank ratings before I would trust the “auditors” going in to run the “stress test.” That’s just me.

Martin Weiss on Financials – The other guy is out there and doesn’t know what he’s talking about – as 90% of CNBC “experts” don’t. (7:50):

Spend Some Time With Peter Schiff…

Peter has a style that is, shall we say, irritating to some people… mostly to people who have no idea what happened to their little perfect bubble world.

I can relate to him with his real estate experiences. The price to rent ratios and CAP rates became a total and complete joke. Now, of course, everyone saw it coming! But BS, hardly anyone did, and hardly anyone took action.

While Schiff’s views have been mostly correct domestically his overall view on inflation/deflation, on the dollar, and on effects overseas have not been perfect and are a point of contention, witness the recent articles by Mish.

Personally, I would concentrate on the similarities in opinions between Schiff and Mish. They are both correct, I would lean on Mish being most correct on the fundamentals, but Schiff may be proven correct in the long run on inflation. Ultimately the outcome depends on government actions and how much abuse the people are willing to take from the central bankers. Personally, I was done taking their shit a long time ago and am just waiting for everyone else to catch up (not most regulars here – lol).

At any rate, Peter’s perspective is great for a topic of conversation, pay attention to his take on domestic real estate, long term dollar, and bond market possibilities. You may want to watch the first video (short) and come back later for the long video in the evening or this weekend.

Peter Schiff on CNBC – The Fed's $1.2B Gamble (7 min)

Why the Meltdown Should Have Surprised No One (1 hr, 16 mins):

Morning Update/ Market Thread 3/19

Good Morning,

Like the Energizer Bunny on crack cocaine, the market got another “fix” just in time yesterday to keep the party going and futures are up this morning with S&P futures up about 4 points:

The 50 day average is at 804, the upper Bollinger at 808, the next higher pivot is at 848, and the one right under us now is 789. It looks to me like we’re destined to at least touch the upper Bollinger. And boy, are we ever overbought on many indicators.

Unemployment for the week fell to 646,000, but continuing claims rose to yet another record:

Unemployment: Continuing claims hit new high

Government report shows the number of people filing initial claims for unemployment benefits fell last week but the number filing for more than a week hit a record high.

By Ben Rooney, staff writer

NEW YORK ( -- The number of people filing initial claims for unemployment benefits fell last week but the number filing for more than a week hit a fresh record high, according to a government report released Thursday.

In the week ended March 14, 646,000 people filed initial jobless claims, down 12,000 from the previous week's revised figure of 658,000.

Economists had expected 655,000 new claims, according to a consensus survey by

However, in a sign that more jobless are having trouble finding work, 5.5 million people continued claiming unemployment in the week ended March 4 - the latest week for which data was available. That's an increase of 185,000 from the previous week.
The 4-week moving average for weekly filings was 654,750, up from the previous week's revised average.

FedEx says that profits fell 75% in the past quarter and are slashing wages, mainly of its overseas workers.

Leading economic indicator and the Philly Fed survey come out at 10 Eastern.

That’s about it… sooner or later there MUST be a correction of some degree. We’re about 20% off the bottom now, options expiration is tomorrow.

The dollar is down further, bonds are up a little, gold is up a little more…

Have a good one,


Wednesday, March 18, 2009

Obama the Anti-Paper, Anti-Bubble Economy President...

Hey Ben, print up another Trillion, will ya?

Here’s a classic… Not but a couple hours prior to the FOMC meeting, President Obama gives a rant about getting away from an all paper bubble driven economy, but then his Fed Chairman turns around and announces $1.15 TRILLION in new printing.

Love the irony.

Doesn’t he sound great as he bashes AIG, who we learn was a contributor to his campaign? His rant begins about 2:50 into the video and continues for a couple minutes.

How about a nice rant about how nice it would be to REMOVE COMPLETELY corporate influence from our government? Would they then be able to make long term decisions in the best interest of the people and not just the central bankers? Maybe – I think this strikes right at the heart of the problems. So many bad aspects of our economy and politics would be fixed by simply separating corporation from state.

End of Day, 3/18

So, when you are a Central Banker and you’ve run out of ammo by lowering interest rates to zero, what’s left? Throw money from helicopters. That’s what Bernanke said he would do, and that’s what he just did. It is a desperate move, a move of last resort.

While the $300 billion designated to buy the long end of the bond curve isn’t *that* sizable in comparison to the size of the bond market, it is a start, one that surely will lead to more buying in the future. They will have to. I highly doubt foreigners will continue to buy our debts under these conditions. Once that selling starts, or if they simply stop financing our debts, then Bernanke could wind up being one of the only buyers of debts at such a low level of interest rate. I see the potential for a nasty, nasty, spiral. While it may take a while to come, the odds are now high that it will.

The spiral begins when investors overseas stop to finance our debt or begin to withdraw – this may have already begun. Bernanke buys to drive rates down, but in the process devalues the currency, making low rates of return even more unattractive – more investors leave. So, to keep rates low, he buys even more and the spiral continues. UGLY if it gets rolling.

A lot to cover tonight and I’m running late because of the other articles and computer malfunctions, so let’s get looking at what happened today… The DOW gained 90 points (1.2%), the S&P gained 2.1%, the NDX rose 1.2%, and the RUT gained the most, rising 3.5%.

The XLF rose a gigantic 10%, IYR rose 5.2%, GLD jumped the equivalent of $60 from the low this morning, and the TNX (10 year treasuries) lost an astounding 15.7%!! Those are huge moves.

Internally it was another very bullish day with advancers leading decliners by a 4 to 1 margin on the NYSE, while volume was 89% on the up side. New lows expanded by just two, to 19. The McClelland Oscillator is above 300, a level which is very overbought and usually leads to sizable declines.

To the Charts…

The 10 minute SPX shows a rising channel that is unbroken under its current configuration. This still has a rising wedge look to it with a throwover on the FOMC announcement. The stochastics are mid-range here, but extreme overbought on all timeframes through the daily. The percent of stocks above their short term moving averages is also extreme:

Next is the NDX which shows that rising wedge quite well. Again, a throwover after following the top trendline. I don’t have it pictured here, but the NDX is now above its 50dma, and today it pinned the upper Bollinger and retreated – pretty bullish overall, but very extended short term:

If we zoom out at a 3 month chart of the SPX, we can see that today’s candle pinned the green 50 day moving average and then fell back inside the wave 5 channel, meaning that it’s still quite possible that we may still be in wave 4:

Here’s the SPX P&F… note that it clearly shows we are coming up on resistance.

Here’s the same view on a 1 year chart showing how close we are to volume resistance. I note that the weekly charts just issued new buy signals on the stochastic for all the major indices (they just crossed and a decline tomorrow could actually uncross them on my settings):

The DOW one month daily shows that it is still under the 50dma, overbought, and that today had rising volume. The volume was higher across the board which sometimes can mark the end of a move, but there’s no doubt that the rise over the past seven or eight days has been very powerful and could extend. The confluence of resistance, the 50dma and upper Bollinger should keep prices from running too much higher before a correction occurs. This run is one of the longest, uncorrected runs in the entire bear market to date:

The XLF had a huge move on higher volume, winding up OVER the upper Bollinger. That is usually worthy of at least enough pullback to get back underneath it, although overall it’s very bullish looking:

The P&F chart for the XLF has a new breakout target of 15.50… that’s a LONG way up in percentage terms from 9.40:

This is a one month chart of TLT (20 year bond). Monster candle with a huge range, however about half the move came back off. Perhaps people quickly assessed the implications? We’ll find out soon enough… it was obviously unable to break free of the upper range of the latest channel:

The range on the TNX candle today was so huge that I had to zoom out to a 3 month view just to see something to compare it against. MONSTER move. We will have to watch bonds closely, this became even more important today:

Here’s a 6 month chart of GLD. That’s another monster candle on monster volume. The game that was played here today was NASTY and I believe it was INTENTIONAL and done with malice by those who knew what was coming today. No, I can’t prove that any more than I can prove that the Fed has already been monetizing the long end of the curve (which I think they have). However, the breakdown below that 6 month trendline, on volume, was classic and had everyone heading to the exit in their gold positions, then wham. That’s the type of manipulation that makes our current markets look like something that is just not worth playing in or with. I can’t think of a better way to destroy investor confidence. The Pigmen running this type of deal are going to get no sympathy when they finally get called out for what they are:

I flipping through my charts and noticed how perfectly the Major Market Index, one of the biggest, touched the pin low from November. The S&P is already well above that pin:

Next is a dollar daily chart showing the huge breakdown in the dollar today. It closed well beneath the 50dma:

The CBOE Total Put/Call ratio reached an extreme today at just .65… this is one of the lowest readings in the past two years:

Here’s a 3 year chart of the P/C so that you can see how this low compares to others. It’s difficult to do analysis on this chart, but if you line up the spike lows you will find that in this bear market those have corresponded closely, but not perfectly, with at least intermediate tops:

The Doc just sent me his thoughts on today’s action and I thought I would share them with you as his thinking is clear and rational:

Okay, I did some thinking and reading about the Fed's actions today. Here's what we know. Nobody knows what the unintended consequences will be and nobody knows for certain what's next. Anyone who claims they understand what this means for the markets is guessing. I think the long term is set in stone that we are at best headed for Japan. The main difference with Japan being our debtor status which means we are in even deeper shit. At worst we are heading for Mad Max which I also think got a little more likely today.

The bottom line for trading is I think today IS a game changing event to the fundamental environment. We need to pay very careful attention to the trends established off of today's action. Whatever we get, gold up, stocks up, stocks down, bonds up, it doesn't matter the trend, find the channel and play it, don't fight it. I think you need to abandon all pre-conceived notions about what we might be heading for in the short and medium term in all asset classes.

I still think it is most likely this is all part of wave 4. If the market picks up and starts to anticipate the logical end game to all this wave 4 could even end right here. That said I'm going to have orders ready to bail on equity shorts on a break over 800. If 800 does break, oil and gold should do very well so I like the hedges there I may not get long right away, but I'll change my strategy from short the pops to buy the dips as long as the channels hold up. My guess is 800 won't break until after opex if it does.


Thanks, Doc. I catch your drift about looking for a shift in the trends. I don’t think this is game changing in regards to the fundamentals the way I view them, I think this is a part of the degenerative process. This is what it looks like when debt saturation occurs and the government/central bankers are taking last step desperate measures to save the old system (or intentionally crash it, depending on your conspiratorial point of view).

At any rate, the debts are still there and still have to be serviced while the underlying math is only getting worse. Yes, the actions will help the financials and the banks, AGAIN. We could very well start to see different leaders and reactions in different equity, bond, commodity, and currency segments. All will have to be watched with an open mind, I agree. We’ll keep channeling and the trends will present themselves.

The Fed increased their balance sheet from $2 trillion to over $3 trillion today, a 50% increase in one day – all on their own, with no oversight from anyone. Today reminded me very much of the day the TARP was announced, the day I wrote Death by Numbers.

I’ll have to revisit that soon, the math is only getting worse. For my family of 4, it got $15,000 worse today. The TARP didn’t change anything, although the politicians and bankers credit it with avoiding a complete meltdown of our financial system. I completely disagree. I credit it with ensuring a complete financial meltdown. Today’s steps are just another step along the way to the destruction of yet another fiat currency experiment. It barely drew attention in the mainstream media that I’ve seen so far. Printing money, however, is the last resort of fiat monies when all else has failed (good choice of songs, Point).

The Eagles – The Last Resort:

Relive the FOMC Excitement!

Bill Gross - OINK!

Potential Effects of FOMC Actions…

Unintended consequences…
“The accident that involves you is NOT the one you see coming.”
- Nate Martin

Today’s announcement calls for “printing” another $1.15 trillion and using it to buy up our own debt in the form of Treasuries and agency paper or derivatives of debt.

While that may sound nice if you are a bank that holds this debt, if you are a homebagholder who is making payments on your house to service that debt, you were just put on the hook for $15,000 in loss of purchasing power and/or future taxes to pay for that debt – that you continue to service.

The problem here is that in a closed system you would expect the resulting inflation to drive your wages up to compensate. Only our system is not closed, it is open. And there are many hungry people throughout the world willing to do your work for a much smaller paycheck than you. That’s why all our capital is flowing overseas to places like China where cheap crap can be made cheaply.

This brings about a negative trade balance. That imbalanced must be financed by the issuance of debt or eventually all the capital (money) would leave the United States (international flow of funds). We are thus a debtor nation owing countries like China and Japan who hold our nation’s debts.

Now, if we are announcing to the world that we are going to jump in and buy up our own debts and our own Treasuries, then we are saying that we are going to keep interest rates low and devalue our currency (nothing but a circle jerk to be sure).

If you are an international investor, you may be willing to suffer through low interest rates, but NOT if the underlying currency is going down, because that will net you a REAL LOSS.

Thus, if you are overseas and hold U.S. debt, you should be hitting the SELL BUTTON and HARD on this news. At the very least you would be foolish to add more of your money to this devaluing effort.
As foreigners do this, it will mean that to keep interest rates low (a must in this environment), Bernanke will have to buy and keep on buying treasuries which are already in a huge bubble. He cannot “print” enough money to do that or our currency will be worthless. That process, IN THE OPEN, began with today’s announcement.

The implications and unintended consequences are huge. Of course these consequences were considered, but evidently Bernanke is standing on the rooftop with feathers glued to his arms and believes that jumping will cause him to fly. Flap hard, Ben, real hard!

You see, if Bernanke is successful in pulling up perfectly at the exact right moment, he will be the first in the history of the planet to do so. What’s at stake is the CONFIDENCE in our entire money system. Once that confidence is gone, there’s no coming back unless you have an entire new system to replace it.

So, the immediate consequences are that the dollar sinks, Gold, oil, and other commodities increase in anticipation of inflation, and bonds collapse in yield or go up in price.

The equity people love it (stocks), because it’s inflationary. They won’t want their money out of the market, again because of the expectation of inflation, stocks should perform better than bonds which are being bought to lower their yield.

If stocks do rise, however, it will be FALSE, as the purchasing power of the currency will be sacrificed at an even greater rate. NOTHING REAL has happened to make stocks increase in value, it’s just that the money supply has increased.

Look at Zimbabwe… they had the stock market that went up increadibly, yet their country and currency is destroyed (check out this list of Q1 2007 International Stock Market Performances ). It will take quite some time to turn the world’s reserve currency into Zimbabwe inflation, but today was a good start. The math and numbers involved are untenable.

Total income cannot service the debt already and doing this will increase the cost of living but your wages are unlikely to improve at the same rate.

We are now attempting to reinflate the world. That is their goal but they believe, like all people who attempted the feat in past history, that they can control it. No, they can’t. Many unexpected events can happen.

One possible outcome would be that enough bond holders leave the market to force interest rates higher, overwhelming Bernanke’s attempts. That would prove to be disastrous and is an outcome that I do not rule out over time.

Investors and markets are not stupid in the long term. Yes, they can be extraordinarily dumb in the short term but eventually the equity markets will figure this out. Much will depend on the extent of the printing that winds up happening.

Do you see that BIG RED Current Account Deficit number at the bottom of the page that just turned $11 TRILLION? That figure is grossly UNDERSTATED. The hundreds of billions and Trillions thrown at agency debt (FNM & FRE) are not being included on our balance sheet figures (but don’t worry, Obama IS including the miniscule in comparison war spending in our current budget). Nor are any of our future obligations now totaling over $56 trillion (or way more) included in that figure. Simply put, there’s not enough income to make the interest payments on that debt, much less pay down the principle (Death by Numbers). Now we’re piling on debt and printing money in exponentially increasing sizes. That simply never ends well, Spend some Time with the Good Dr. Bartlett….

So, the stock market and the bond market have been in a tug-of-war over dollars. The problem has been that there wasn’t enough money for BOTH stocks and Bonds to rise together. If stocks went up, bonds had to go down. And for bonds to up (interest rates down), stocks had to be sacrificed.

But if Bernanke is buying bonds down, that frees money to chase higher returns… and thus his buying bonds could finally allow money to come buy stocks higher. I do not doubt that this is what’s been happening already. I have remarked several times that I’ve seen unusual buying in bonds right at critical levels, even on days when stocks were rising. This is NOT natural, even if it’s just people trying to “front run” Bernanke’s printing or “Quantitative Easing” (QE). Please view Quantitative Easing Explained for a QE refresher if needed.

Their theory is that this will force interest rates lower and allow people who are stuck to refinance. Will it make the value of their house go up? Not in REAL terms. And again, if it does, what are we producing that will make our WAGES go up?

So, what I can see happening is that we’ll get on the fast track to the trends that have already been playing out but have been so slow people haven’t YET rioted in the streets. Those trends are that things will go up in PRICE, while your wages simply do not keep up.

Does this mean that DEFLATION is dead? NO, not yet. Remember that wealth is being destroyed at numbers way larger than the trillions announced to date. But this is a watershed event that could change the mentality and we’ve already seen buying panics in stocks. The thing that would really hose Bernanke now would be panic selling in bonds by foreign debt holders. Again, to reiterate, it does not mean immediate inflation is here.

Anyone thinking this move is roses and sunshine for the future is DELUSIONAL and does not understand math. Confidence in the system is being destroyed, and that process is accelerating.

They are trying furiously to reignite credit (borrowing), and will apparently do anything to keep the bubbles rolling, despite what Obama said just today to the contrary. “No,” they say. “Securitizing debt is just fine!” CDS? “We know what’s best!”

The entire concept of a privately owned Federal Banking system run by “The Fed” is ridiculous and needs to end, the sooner, the better.

The problem with credit run amok is that it represents DEBT that must be repaid by someone. QE is simply printing the value of our money away – it’s a form of stealth tax. No economy and no money system in the history of mankind has withstood that type of treatment for long. Ours won’t be the first.

Do not play the following Youtube video with children in the room or if your ears are “sensitive.”

F--- the Fed:

The CEO's Guide to Jetting!

After learning that our own government is bent on destroying our currency, I figure everyone could use a laugh…

I usually would not give the marketing department of any company the satisfaction of unwittingly promoting their product for them, but in this case they did such a good job of targeting us “angry Americans” that I’m posting them here and now instead of in the Sunday Funnies (hat tip Arno!).

"An introduction to commercial air travel for CEOs only.
No minions, lackeys, or "regular" people allowed."

$1.1 Trillion in Fed Spending Just Announced at FOMC…

R.I.P. U.S. Dollar, nice knowing you.

Total new money "printed?" $1.15 TRILLION or $3,770 for every man, woman, and child in America. Family of four? That's a $15,000 future hit to taxes and spending power, without interest.

Bernanke has now made himself the only buyer of Fed bonds and Treasuries. Why would anyone from overseas do so?

Now that he’s buying out in the open, he will have to do it again and again, just like he's doing with mortgages.

This will certainly light a fire under gold and temporarily in bonds. This is SYSTEM ENDING type of decision making. It may take a while, but watch out. The only thing that saves the dollar is if all the other countries in the index are likewise hell bent on destroying their money. We know the U.K. is, but we’re going to find out who else… (that's a daily chart of /DX [dollar] on left and /ZB [long bonds] on right)

Gold looks very sensible on this headline, just look at this reaction in GLD, up the equivalent of $50 an ounce on the news so far. This puts those crazy sounding figures sqarely on the table:

To summarize, the Fed is going to buy up to $300 billion in long-term Treasuries over the next six months. They are also buying up to an additional $750 billion in agency mortgage backed securities, adding to an existing program to buy $500 billion of agency MBS. It will also double the size of its purchase program for FNM and FRE debt to $200 billion from $100 billion.

Here is the entire Fed Statement:
Release Date: March 18, 2009

For immediate release

Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.