Friday, November 26, 2010

Morning Update/ Market Thread 11/26 – More Contagion…

Good Morning,

I hope everyone had a terrific Thanksgiving. Equity futures are down again this morning for our post holiday shortened trading session. The dollar is significantly higher, the euro lower, bonds are higher, while oil and gold are lower.

The Chinese hiked margin requirements on almost all commodity trading, this is pressuring the commodities as China attempts to cool the hot money inflation. Notice how our governments first work hard to stimulate, and then when that blows up in their face, as it always does, then they resort to having to micromanage every aspect of the markets… and then that will fail as it always does. Governments cannot manage markets – doing so eventually wrecks both the government and the markets.

There is no economic data today. Next week will be a busy data week that culminates in the November Employment Report on Friday.

The real news continues to revolve around debt saturation. European spreads are continuing to blow wide in one country after another. The “rescue” of Ireland has failed to lower rates on Irish debt and the average rate across the PIIGS is now at new all-time Euro zone highs:
Irish Relief Fleeting as ‘Day of Reckoning’ Nears: Euro Credit

Nov. 26 (Bloomberg) -- Borrowing costs for Europe’s most indebted nations are at record highs as Ireland’s capitulation in accepting a bailout of its banking industry stokes concern that other countries also will have to seek aid.

The average yield investors demand to hold 10-year debt from Greece, Ireland, Portugal, Spain and Italy reached 7.56 percent today, a euro-era record. The average premium investors demand to hold those securities instead of German bunds widened to 488 basis points, the highest level of 2010. The average cost of insuring against default by the five nations using credit- default swaps reached a record 517 basis points on Nov. 23.

“It’s no longer taboo to speak about a restructuring,” said Johannes Jooste, a portfolio strategist at Bank of America Corp.’s Merrill Lynch Global Wealth Management in London, which oversees about $1.4 trillion for clients. “The fact that bond yields continue to rise and put pressure on countries that have to fund from the market makes investors less and less confident, and it’s bringing forward the day of reckoning.”

The Nov. 22 relief rally after Irish Prime Minister Brian Cowen conceded that the nation needed financial support proved transient. Irish 10-year bond yields fell 4 basis points, before jumping 100 basis points as of 11 a.m. today, exceeding 9 percent for the first time since 1995. The euro’s respite was more fleeting; the bailout inspired a 0.8 percent gain for the currency before it slumped to a two-month low. It fell 0.9 percent to $1.3238 today.

Volatile Market
“When Ireland accepted help, the general feeling in the market was that this could restore some calm; that hasn’t been the case,” said Michiel de Bruin, who oversees about $35 billion as head of European government debt at F&C Netherlands in Amsterdam. “Authorities should be doing their utmost to calm the situation.”

Analysts at Morgan Stanley said in a Nov. 11 report that any move by Ireland to use the European Financial Stability Facility would boost the euro and be a “circuit breaker” for the European sovereign debt crisis. While Ireland has enough money to pay its debts until the middle of next year, it has requested a bailout from the European Union and International Monetary Fund amid concern the cost of rescuing its banks would overwhelm government finances.

Portuguese Finance Minister Fernando Teixeira dos Santos said in an interview published today that EU governments can’t impose a bailout on his country.

A majority of euro region officials and the European Central Bank are putting pressure on Portugal to accept aid that helps stop contagion spreading to Spain, the Financial Times Deutschland reported today. German government spokesman Steffen Seibert said the nation isn’t pushing Portugal to seek aid. An official at the office of Portuguese Prime Minister Jose Socrates also denied the report.

The “bailouts” haven’t restored calm because they make the situation worse. Only a fool believes that you can cure a debt problem with more debt. But trust me, the central bankers are no fools, they are rolling in the lap of luxury while they PURPOSELY create stress across the region in order to force these “bailouts” that are really all about establishing power and control. They do so by creating money from absolutely NOTHING and then indebting entire nations. It’s preposterous and I’m amazed that the people aren’t waking up to take action.

Oh wait, in Ireland they are:


I hope you took the time to watch that video, it is extremely important. Jim Corr is a man who understands what’s happening, the first citizen I’ve seen who eloquently, directly, and correctly identifies the ROOT of the problem and is organizing to defend themselves against attack. You are going to see more of this type of pushback, it is critical that the people of the world step up and do this. It will be coming to America, I only hope we will be as brave and as well spoken as Mr. Corr.

Attack is the correct word, the central banks are the ones pushing up the debt and the cost of that debt in order to push these bailouts. Politicians who don’t realize this are being duped. This is going to ripple from one country to the next, and sorry Mr. Zapatero, Spain is squarely in the crosshairs:
Spain Bets on Budget, Home Investors to Stem Contagion

Nov. 26 (Bloomberg) -- Spain is counting on budget cuts and domestic appetite for its bonds to build a firewall against contagion as Prime Minister Jose Luis Rodriguez Zapatero warned investors would lose money betting against the nation’s debt.

Spain, which has the euro region’s third-highest budget deficit, says it won’t adopt new measures to protect itself from Europe’s worsening debt crisis after cutting the central government’s budget gap by almost 50 percent and taming regional spending. Providing support is about half of Spanish debt is held at home, more than in Ireland or Portugal, offering a line of defense against changes in foreign investors’ moods.

“I should warn those investors who are short-selling Spain that they are going to be wrong and will go against their own interests,” Zapatero said in an interview with Barcelona-based broadcaster RAC1 today. He “absolutely” ruled out Spain would need a rescue.

You are being duped, Mr. Zapatero, your talk will only embolden the shorts (who are the same central banks who lent you the money in the first place, creating a completely unmanageable credit bubble in your country).

Those same banks in Spain are getting ready to dump massive amounts of foreclosure real estate into the market, this will spur the next major leg down in real estate prices, and that in turn will cause government revenue to plunge, making current debt all the more unserviceable.

And thus the ripple continues across Europe. There is simply no way that the math works in Europe and thus the Euro experiment is destined to fail, it already has.

And as smart as the central bankers are, their efforts to control the globe will ultimately fail. This is because there are NATURAL laws that prevent such an effort from being successful. You cannot repress intelligent people forever, they absolutely will rebel.

And thus we are going to witness HISTORIC events unfold at an ever quickening pace as the math of their debt is exponential and that exponential growth compresses those events in time. North Korea is threatening war again due to our military exercises planned for this weekend. These types of tensions and releases of anger are part-and-parcel the expression of underlying stress created by DEBT. It simply doesn’t have to be that way, and the people are going to change it – get ready as more historic events are coming.

Before I close today’s message, I want to talk about people’s misperceptions of this site. What it is not is a day trading site. It is my belief that those who day trade in this market will eventually get eaten alive by the central banker’s HFT machines, quote stuffing, and various inside games they play in order to ROB you of your money. My advice has been and remains DON’T DO IT.

I consider the writing on this site to be public service. Goal number one is to educate others so that we are aware of what’s happening and can thus work to fix the REAL PROBLEMS without being duped by the Central Bankers. I talk about the markets and do TA work, to highlight those problems and so that people can decide for themselves just how real the markets are or are not. Right now it is my considered opinion that the markets are NOT REAL, and thus I do not consider placing money for any time frame into those “markets” as an investment.

As I have repeatedly pointed out, there are three market aspects to consider before “investing:” 1. Fundamentals 2. Technicals 3. Psychological.

It is my ongoing opinion that fundamentally our economy is saturated with unserviceable debt. I therefore do not believe that investments are safe until RESTRUCTURING occurs that significantly lowers the amount of debt in the system. Therefore, betting long the markets is betting long that the bankers can push still more debt onto the backs of the people. Maybe they can for a while, but it will be short lived, and counter trend, again in my opinion. I personally do not bet counter the fundamentals or counter trend as I consider it foolish. I know there are people who think they are clever and can win by playing in these markets, and I think they are gambling and will be taught a lesson in the end. So, if you are here to pick up tips and tap my market knowledge, that is great, there will come a time again when that knowledge can be put to use in REAL markets again… but that time, unfortunately, is not now.

Again, that’s my opinion, and note that I charge NOTHING to share that advice. If you wish to give your money away, then by all means sign up for people’s trading services – there you will find that there is NO ONE who will consistently return you money by trading over and over again in short time frames. Buyers beware.

And thus, if you want to be a successful INVESTOR, then you need to have realistic goals and a realistic understanding of the markets and of the people who provide services about the markets. NO ONE consistently gets every turn in the markets right – NO ONE. There are those who have made good calls in advance, and for the rest of their careers they will shout about those good calls while ignoring the bad ones. That’s the name of the game in investor services – buyer beware.

Don't forget that Monday's (ramp job) is coming 'round again...