Monday, November 22, 2010

Morning Update/ Market Thread 11/22 – Contagion…

Good Morning,

Do we have a FAILURE to stem the contagion? That is the question this morning following Irelands’ “bailout.” Spreads on Irish bonds are UP this morning, not down. Spreads on Portuguese debt is blowing wide this morning, rising more than 40 basis points as the next victim of “rescue” is attacked. You know that Spain and Italy are right behind.

Below is this morning's reaction in the dollar (left), and euro (right). Not the results they want from a huge bailout:

At what point does the union simply collapse? How many billions in rescue funds can be generated before they finally admit that the entire region is broke and that the Euro has failed? IT HAS FAILED. The terms of the Union have already been broken, and I fail to see how it can survive in its present state as the crush of debt to come gets bigger and bigger very fast. Spain and Italy are many times larger than Greece and Ireland, the end of pretend is near.

And this so called Irish bailout is not even close to being a done deal itself – only broad strokes and agreement to leave their corporate tax rate alone, but no details regarding amounts or timing have been reached other than the government will have to inject an immediate $6 billion into their banks! Why immediate if their banks are all okay? Oh yeah, and Ireland “asked” for it… I must have read that a hundred times, what bull. Part of this deal is that supposedly the Irish banks will be restructured to be made smaller, with some parts sold off overseas… what they didn’t say is if the “bad bank” idea being floated over the weekend is a part of that restructuring. If so, that is nothing but the shell game whereby they dump bad investments into a shell corporation to be bankrupted later leaving that group of investors high and dry. They should be high and dry, but so too should the banks, their good assets should be sold to make good on their bad – that’s the rule of law, the shell game is ILLEGAL yet governments are doing it anyway (including ours).

And there is more and more resistance to this from factions within Ireland (appropriately so). And not just within Ireland, there are people inside of Germany threatening to sue over what has become the “Bailout Union (BU).” All of these bailouts are outside of the EU charter and are not supposed to be happening. In effect all of Europe is being placed on the hook to bailout European banks (boy, do we know what that feels like). But in Europe the countries are supposed to be sovereign, and being in perpetual and insurmountable debt is certainly not living free, it is living as a slave to the banks who are their masters.

But the people of the world continue to let the bankers control them. It starts out so subtly that we don’t even realize its happening. For example, just last week I received a statement in the mail from USAA who insures my property… in it was a notice that USAA is using personal credit information to set insurance rates! They show a full page table describing why certain negative credit events correlate to higher insurance risks, and thus higher premiums.

Now think about this for awhile… it may seem somewhat appropriate on the surface, especially to good actors like me who have low rates, but I have two big issues with this: One is that it works against the poor to keep them poor; and two, which is far more important, is that it conditions the population to CONFORM to the BANK’S RULES. This credit reporting system now affects every aspect of our lives, where we live, where we can work, and how much we pay for other things besides just DEBT. CONFORM OR ELSE. But in this case CONFORMING means you better not cross your corporate BOSS, and you better not disagree with anyone who can affect your credit rating or you will pay and pay and pay. Thus you have very LIMITED RECOURSE, but the corporations have nearly instant and unlimited recourse. RESISTANCE IS FUTILE.

Because resistance is futile, I would argue that resistance is MANDATORY.

Here’s Pat Rabbitte demonstrating the first steps of what I mean… where are the politicians in this country who have spines?

Sorry to break the news to you, but the people of the world are at WAR. The war is the people versus the central banks. Unfortunately we don’t yet collectively recognize the real enemy, but that recognition is developing. Also unfortunate is that the banks feed the corporations and in turn the politicians - as a result you get self-explanatory charts like this one that Jesse provided this weekend:

Markets? What a joke. With politicians on that side of the equation, is there any wonder that there are no adults to police the markets? Insider trading, dark pools, HFT machines, bailouts, POMOS, oh my. None of it is real, none of it serves the purpose for which they were created. FRAUD is rampant, it is no place for your money, not until the rule of law is enforced and is restored. That likely won’t happen until we change WHO controls the production of our money. Under the current system the private central banks produce and control all the money and they ARE THE “FED” – the same banks own and control the media and the military industrial complex. They own the exchanges, and thus they can see your bids and your stops before they are even executed. They have built high speed networks to arbitrage in milliseconds any move you make. They are the markets and they are profiting simply by stealing from you, and through the use of accounting and control FRAUD.

Here’s the ironic part… despite creating money (as debt) and owning all of the above, they are INSOLVENT. And that simply goes to show you how crooked the mobsters are – and that anyone in America should respect or bow to a puppet like the “Fed” is beyond me. Don’t fight the “Fed” - my ass. That very statement gives them power that does not belong to them.

As far as economic reports this holiday shortened week, the main event is tomorrow with the 2nd report of 3rd quarter GDP. The first whack claimed (falsely) that the economy is growing at a 2% pace, and now the consensus is looking for that to be revised higher to 2.4%! Existing Home Sales is also reported tomorrow.

Today the Chicago “Fed” released its National Activity Index. In negative territory for the 5th month in a row and the three month moving average getting more negative, here’s Econoday:
In October, the Chicago Fed national activity index improved to a reading of minus 0.28 from minus 0.52 in September. Three of the four broad categories of indicators that make up the index made small positive contributions, while the consumption and housing category continued to make a large negative contribution.

The index's three-month moving average, CFNAI-MA3, decreased to minus 0.46 in October from minus 0.33 in September, reaching its lowest level since November 2009. October's CFNAI-MA3 suggests that growth in national economic activity was below its historical trend for the fifth consecutive month. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. Production-related indicators made a contribution of plus 0.08 to the index in October, up from minus 0.12 in September. Manufacturing industrial production increased 0.5 percent in October, up from a 0.1 percent gain in the previous month; and manufacturing capacity utilization increased to 72.7 percent in October from 72.3 percent in September

Just remember that anything released from the “Fed” is suspect at best, so negatively reporting on themselves should be viewed that reality is much worse. NEVER give someone the power to report on their own performance – yet another doorway to fraud that was opened by the Federal Reserve Act.

So what does the stock market do from here? I don’t know for certain as we are in a transition point. If the contagion continues, then the markets are toast here and now. Many people this weekend were expecting a bounce, and many, many people are looking for a larger 5th wave higher. Will it develop? It doesn’t have to! But it could.

And thus we are still in the same area, still failing to break above the 61.8% retrace mark and still failing to break over 1200 on the S&P. We’ll track support and resistance levels and look for a trend to develop. The EW experts believe we’re in a wave 4, it certainly is acting like it, but again, it could be that hindsight will prove that count incorrect, that’s why we’re watching key levels like 1129 which is still a ways down there.

Eric Clapton - Stormy Monday: