Friday, October 15, 2010

Must Watch Video on Bank Fraud...

Wonder why the banks are plummeting? They were never healthy in the first place, they were built upon multiple levels of fraud (ht Mr. Guest):

Morning Update/ Market Thread 10/15

Good Morning,

Equity futures ramped higher this morning on more gum flapping from the Grand Puba High Priest Puppet Pumper Bernanke (no animals were sacrificed in the writing of this report).
Oct. 15 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said additional monetary stimulus may be warranted because inflation is too low and unemployment is too high.

“There would appear -- all else being equal -- to be a case for further action,” Bernanke said today in the text of remarks given at a Boston Fed conference. He said the central bank could expand asset purchases or change the language in its statement, while saying “nonconventional policies have costs and limitations that must be taken into account in judging whether and how aggressively they should be used.”

He didn’t offer new details on how the Fed would undertake those strategies or give assurances the central bank will act at its Nov. 2-3 meeting.

Of course that sent the dollar straight down then bouncing off support I’ve been showing just above 76, bonds are down, while oil, and gold both rose on his chanting. Today is options expiration, and it was certainly generous of Bernanke to give this money pumping speech 15 minutes in front of the time that’s used to calculate the price of many options. Gee, you would almost think it was planned to help out the largest options holders who just happen to be the Primary Dealers who just happen to be Bernanke’s true boss as they in fact OWN the “Fed.” And surely they must like the current administration for their willingness to go along, why else would they POMO Billions upon Billions in front of the election? Today is also a POMO day by the way. When will the people of America learn that WHO controls the money is FAR and AWAY more important than what backs it. If you want a money system that works for the people and retains its value over time, you cannot have private narcissists in control of creating it.

It was just yesterday that we learned the PPI has risen 4.0% year over year… that’s not enough? Even though we all know their inflation measures are far from accurate, four percent is enough to kill a currency in a very short number of years. This morning the CPI (consumer prices lag input prices) did come in less than consensus at .1% for the month of September when they were looking for .2%. Year over year the CPI is up 1.1%. Here’s Econoday:
Headline inflation at the consumer level eased and the core rate remains extremely soft. Although this morning's positive retail sales report should have the Fed happy, the CPI numbers will have the Fed still worried about inflation being too low. The overall CPI in September slowed to a 0.1 percent gain from 0.3 percent in August. Analysts had projected a 0.2 percent increase for September. Excluding food and energy, CPI inflation was unchanged for the second month in a row and came in below the median market forecast was for a 0.1 percent uptick.

The strongest component was for energy, up 0.7 percent in September, following a 2.3 percent jump the prior month. Food also was on the warm side, gaining 0.3 percent after a 0.2 percent rise in August.

By major expenditure components, upward pressure in September was seen in medical care, up 0.6 percent, and in transportation (up 0.5 percent and including a 1.6 percent hike in gasoline). Weakness was in a number of categories: housing, down 0.1 percent; apparel, down 0.6 percent; recreation, down 0.3 percent; education & communication, down 0.1 percent; and "other," down 0.1 percent.

The bottom line is that core inflation is anemic. The Fed will likely want to take out some sort of insurance policy at the next FOMC meeting to ensure that no inflation does not turn into deflation.

Less food and energy the CPI was flat which is perfect in my book. But that’s not enough for the money pumpers, they don’t profit unless everything’s price is going up. Note that price growth does NOT equal REAL growth. They do not care about real growth, they don’t care about employment, and they could care less how many people are on food stamps or are tossed out of their homes. All they care about is JPMorgan’s $4.4 Billion quarterly fraud profit and that the money supply keeps growing. That’s it. And they’ll hook and crook the supply of money higher as long as they are getting their way politically. When they don’t, or when they need something fixed real bad (fraudulent mortgage paper trail), then they will bring the markets down and threaten Armageddon until they get their way.

Is what I’m describing not completely accurate? You know it is, and yet we act as if we’re powerless to take back what belongs to us. We’re not, all we have to do is demand it, but collectively we must at least be aware enough to know what’s happening and to understand what it is that needs to be done. The people must take back the power to create money, it’s that simple. You will not have any form of true Democracy until that occurs.

Retail Sales for September came in better than expected at .6% when the consensus was looking for .4%. This is absolutely one of the poorest measurements in terms of reading the economy. This report should be called “Same Store Retail Sales” as it suffers from substitution bias because it fails to adjust for stores that have gone out of business. Let’s say there’s a strip mall with five stores in it. Four of the five completely fail and go bye-bye… that leaves one store whose business actually picks up because there’s no competition. Since that store’s sales picked up, it would be reported as an increase in sales even though the total amount of sales may have fallen of a cliff and 4 out of 5 workers lost their jobs. This is exactly what is happening and it is why this is such a misleading report. You won’t hear that from Econospin, but here they are:
The consumer is opening his wallet wider as the pace of retail sales has picked up. Although auto sales led a September gain, strength is broad based. Overall retail sales in September advanced 0.6 percent, following a 0.7 percent gain in August (revised up from 0.4 percent) and a 0.5 percent increase in July (previously 0.3 percent). The September figure came in above the market expectation for a 0.5 percent increase. Excluding autos, sales rose 0.4 percent, following a 1.0 percent boost in August (previously 0.4 percent) and matching analysts' median forecast. Sales excluding autos and gasoline rose 0.4 percent, following a 0.9 percent surge in August.

Today's report shows the consumer sector apparently in better shape than almost anyone believed-especially after taking into account upward revisions for July and August. The impact on the markets could be tricky today. Although the economy is in better shape than believed prior to this morning's release, there could be negative impact if the report is seen as significantly reducing the odds of further quantitative easing by the Fed.

See how they draw FALSE CONCLUSIONS because they don’t understand what this report is telling them.

The New York Fed’s Survey of Manufacturers did jump this month from 4.14 to 15.73. That is above consensus, here’s the spin:
Manufacturing activity is picking up steam in the New York region. The Empire State index jumped to 15.73 in October vs. 4.14 in September. The larger the reading over zero, the greater the rate of month-to-month growth.

And growth is strong in the two key areas of new orders and employment. New orders rose to 12.90 vs. 4.33 while employment rose to a very strong 21.67 vs. 14.93 and 14.29 in the two prior months which were already strong. Shipments jumped to 19.39 vs. September's minus 0.27. A negative is backlog which, at minus 1.67, continues to contract though at a slowing rate.

Strength is confirmed by the six-month outlook where the index jumped nearly nine points to 40.0. This report, which points to a new rise in the manufacturing recovery, has been much stronger than the sister report from the Philadelphia Fed. Yet the indications from this report suggest that wide negatives in the Philadelphia report will at least move to neutral. The Philadelphia manufacturing report will be posted next Thursday.

Last month the New York numbers were better than all the other regions, not just the Philadelphia region. Why do you suppose the NY region would be doing relatively better? Could it be related to that minor little detail of WHO controls the money? Hmmm… where does Jamie Dimon and the rest of the debt pushers live?

Consumer Sentiment and Business Inventory data is released at 10 Eastern.

Below is a chart of the dollar, you can see that with Bernanke’s jaw flapping it pushed the dollar right to the bottom of the channel and it perfectly then bounced of the rising pennant uptrend line I’ve been showing:

I think that the move down in the dollar and up in the Euro and Yen may be just about over for now. If the dollar does break the 76 area, then it will spell trouble for the world, and if it were to drop below 71 it would be a disaster for America. The sentiment is too negative on the dollar right now, so I think we at least get a short term bounce.

Bonds are troubling here. Yesterday there was an undersubscribed long term auction and the Primary Dealers were forced to step in and buy. It is a law that they MUST buy when there is not enough demand for our debt (they created the law). When they do this, they do not use depositor’s money or any such thing, no, they create the money for those purchases from thin air and you and I are thus indebted to pay it back, plus interest. Again, what’s important is WHO. Why would rational people pay private individuals interest for the use of a money system that is supposed to belong to them? Economic mass psychosis I guess.

Here’s a chart of the long bond futures, you can see that it has created a topping pattern and is breaking the uptrend line. Lower on this chart means higher interest rates:

Yesterday we saw what appeared to be capital flight. Stocks were down, the dollar was down, and bonds were down with an undersubscribed auction. Where is the money going when that occurs? Well, much of it can simply vaporize in the same manner in which it came into being, but those who actually sold were likely sending their money overseas. That’s not good as it means all the indebtedness that’s being created for Americans isn’t going to help America, it will be used to create jobs overseas. Hey, as the late George Carlin said, “They call it the American dream because you have to be asleep to believe it.” For those who are awake, WHO controls the production of our money is what is most important.

The VIX sell signal is now confirmed. POMOs aside, the signals in the market say that we are topping. The XLF and the banks were down hard. The overall market cannot rise for long without them, and they are truly zombie institutions, forclosuregate is exposing the rot. It's going to shock a lot of people when the market finally rolls...

Thursday, October 14, 2010

Damon Vrabel - Debunking Money (#2): The US Monetary System and Orwell's Animal Farm:

The contents of this video will surprise a lot of people. In fact, this will be news to the vast majority of Americans – sadly including those with Harvard, Yale, and Stanford economic degrees.

Once again Damon is good at clearly laying out the truth about money – a must see and a must share video… one step of understanding at a time.

Debunking Money (#2): The US Monetary System and Orwell's Animal Farm:

Morning Update/ Market Thread 10/14

Good Morning,

Equity futures are roughly flat this morning with the dollar sharply lower, bonds higher, oil higher, and gold reaching another all-time record at $1,388 an ounce.

Our International Trade deficit continued to widen in the month of August, up to $46.3 Billion from July’s $42.8 Billion. Trade gaps must be financed, they are not sustainable over time and we’ve run a historic gap for a historic time. Here’s Econoday:
The U.S. trade gap widened sharply in August, largely on nonoil imports but with oil imports also contributing. Exports continued to grow but only modestly. The overall U.S. trade deficit increased to $46.3 billion from $42.3 billion in July. The latest trade gap came in wider than the median market forecast for a $44.3 billion deficit. Exports edged up 0.2 percent, following a 2.0 percent gain in July. Imports rebounded 2.1 percent, following a 2.1 percent decline in July. Nonoil goods imports in August rebounded 2.2 percent, following a 3.0 percent decrease the month before.

The worsening in the trade gap was primarily in the nonpetroleum deficit which grew to $35.9 billion in August from $33.2 billion the previous month. The petroleum goods gap expanded to $21.9 billion from $20.8 billion in July.

You know, it’s funny because the latest Export and Import figures for September incorrectly pinned the movement on falling oil prices – yet they were up sharply in September. And here we have rising oil costs pinned for a deficit in a month in which oil prices actually fell. And this goes to show you that the people creating the data and assembling the reports are either incompetent or they are flat out making it up. I don’t know which, but what I do know is that I don’t trust the data coming from our own government. Yes, I believe the “Fed’s” influence is causing massive distortions in the reporting of our data.

Speaking of distortions, the PPI reportedly rose in the month of September by .4%, the same as in August but much greater than the consensus which was looking for .1%. Year over year PPI rose from 3.0% to 4.0%:
Producer price inflation was mixed for September as food prices kept upward pressure on the headline number with energy also contributing. The overall PPI growth rate remained elevated at 0.4 percent in September, matching the August rise and well topping the median forecast for a 0.1 percent increase. At the core level, the PPI remained sluggish with a 0.1 percent gain-the same as in August and equaling expectations.

For the latest month, food jumped 1.2 percent after dipping 0.3 percent in August. The energy component rose 0.5 percent, following a 2.2 percent jump in August.

Weekly Jobless Claims rose to 462,000 last week with the prior week revised higher yet again to 449,000. This number is yet another one in the same horrific range. Remember that we rallied last week on this report despite it being really no improvement at all and once again it’s proven to be no change in trend. Here’s Econoday justifying it for the masses:
After improving five of the last six weeks, initial jobless claims rose 13,000 in the October 9 week to a higher-than-expected 462,000 (prior week revised 4,000 higher to 449,000). The Labor Department had to use estimates for five states due to administrative delays tied to this week's Columbus Day. The four-week average, up 2,250 to 459,000, ended six straight weeks of improvement.

Continuing claims fell substantially in the October 2 week, down 112,000 to a recovery low 4.399 million. Yet improvement here reflects, to an uncertain but probably significant degree, the loss of benefits. Those on emergency and extended benefits both fell. The unemployment rate for insured workers is down one tenth to 3.5 percent.

Columbus Day clouds the initial claims results which will likely be expected to fall back in next week's report. The outlook for the jobs market remains uncertain.

The jobs market remains uncertain only for those who fail to recognize the structural debt saturation condition of our economy. I do note that the number of people drawing Emergency Unemployment claims fell below the 4 million mark, this is due to a large number of people running out of even those extended benefits. It is a tragedy, not a sign of improvement and it means less money coming into the economy.

This morning it was also reported that repossessions and foreclosures hit yet further record territory:
NEW YORK ( -- Bank repossessions and foreclosure auctions hit record levels in the third quarter, RealtyTrac said on Thursday.

372,445 foreclosure auctions were scheduled in July, August and September, while 288,345 properties were repossessed by lenders over the same time period.

Overall foreclosure filings edged up to 930,437 in the third quarter, a 4% increase from the previous quarter. One in every 139 homeowners received a foreclosure filing during those three months.

Bank repossessions, or REOs, also are on the rise. In September, a record 102,134 homes were taken back by banks. It's the first time repos have topped 100,000 in a single month.

Of course since foreclosures have now been widely halted, this figure will begin to come down but since they represent such a large segment of the market now sales will also have to come down. There was a ton of activity on the “foreclosuregate” front yesterday. The state of New York halted all foreclosures and subpoenas have been sent by the State of Florida. This is not just a foreclosure problem, the root ill lies in MERS and the way in which recording and title laws were subverted in order to expedite securitization. Fraud was a part of this process and it has HUGE ramifications for the real estate and banking industries going forward. If you are considering a real estate purchase, you have to ask yourself if the system has been fixed? Has it? The answer is NO.

Yesterday the word was fantasy as I discussed mark-to-model accounting and fraud perpetrated by the banks on the entire mortgage and investment industry. Corporate earnings are up solely due to fraud, none of the fundamentals have changed. Despite that fact, the psychology in favor of stocks is reaching unbelievably bullish extremes. People like me, who remain consistently bearish, are called out for not buying into the fraud. To me that’s simply another sign of the psychology extreme, it happens every time we rally and is yet another marker that we are very near a significant top as that sentiment has reached a crescendo.

It’s true that we are debasing the hell out of our currency. Yesterday the “Fed” released their current month’s POMO schedule and it is simply frightening. $32 Billion in just the next 3 weeks beginning tomorrow just in time for Options Expiration and the Friday afternoon front-running of the Monday morning HFT ramp job. You can see the schedule here: NY Fed POMO Schedule.

Simple question… if the economy is improving why do we need to POMO more than $10 Billion per week and why all the talk of QE2.0? The answer of course is that the economy is not improving, it’s getting worse. In fact the major banks are INSOLVENT, they are sitting on top of “assets” that are not worth anything near what they are being carried on the books, and they are guilty (in my opinion) of creating fraudulent mortgage paper and defrauding investors. Thus the “Fed,” who IS THOSE SAME BANKS, is creating money in an attempt to hide their fraud from you and the entire world. Fraud to cover fraud.

It’s not working and it will never work. The only thing they possibly can accomplish, if we’re stupid enough to leave them in power, is to further debase our money. The end result will be the same. Just look at what occurred in Zimbabwe. For a time – about a year – they had the world’s best performing stock market all the while the people literally were starving. So, how did the owners of Zimbabwe stock fare in the end? Uh, huh, that’s what I thought – their paper was worthless.

And what are the parallels between us and them? You say we are the world’s “reserve currency” and that it can’t happen here? Do you see gold priced in dollars zooming to $1,400 an ounce? Have you noticed the price of oats in dollars double in the past 5 months or the price of wheat or corn? Are you aware that there are over 40 million Americans on food stamps? Sure, the stock market is going higher, are you going to time your exit perfectly in a market built upon fraud and money printing?

Warren Buffet thinks stocks are a way better buy than bonds. Warren tells you that you must “know your business.” Of course he owns Wells Fargo and I’m wondering if he was aware that his bank was in the business of laundering drug money or falsifying foreclosure documents and very likely defrauding investors? And even bears like Marc Faber think that owning stocks might be better than owning other “assets.” That’s fair, but he bases that opinion on the fact he sees either continued monetary weakness or rising interest rates. And I would simply ask him how did that work out for stock holders in Zimbabwe, and if rates go up how will that affect a debt saturated economy and corporate earnings? So there is no easy answer and the “Fed” still unwisely is in control for now and thus gold continues to soar. Personally, I would rather own physical gold and silver than to own fraudulent based paper, but I do not believe higher stock prices are in the cards regardless. In fact I think stocks crumble, all the technical markers are there.

Those who believe the “Fed” can continue to hold it up will be mistaken, I believe, as the “Fed” is being pressured by forces not within their control. In fact there are signs that more capital flight is occurring – that is money is simply leaving the country. Printing more money will only make that problem worse. They can stop printing money, but then something somewhere has to give… and there in lies the rub. The currency markets are far more important than stock markets, and the bond market is also far more important than the stock market. So, if you’re a decision maker, which one are you going to sacrifice in the end? I know that everyone thinks it will be the dollar that is sacrificed, but I think we are already nearing the maximum amount that it can be without severe other side-effects. We’re already seeing oil in the economic danger zone, food is spiking, precious metals are zooming, and money is fleeing the country. No, the current trend is not sustainable.

Just last night the dollar continued its collapse and nearly reached the 76 level that represents the bottom of the up rising pennant trendline as well as the bottom of the current down channel. This is a highly likely place for the dollar to find support. Should it not hold, the target is 71/72ish:

Should that pennant line break, it will indicate that a storm is in progress:

The Yen continues to strengthen while it rolls out of a descending wedge. This is quite unfavorable to the Japanese and will be very unfavorable to the U.S. dollar if it continues:

Yesterday the market was touted all day long as being higher based upon the earnings of INTC, JPM, and CSX. Let’s look at the charts…

Intel opened higher and then collapsed producing a waterfall event and a very bearish engulfing candlestick – note the breakdown volume confirming the move lower (yet the supposed “breakout” in the indices was not on breakout volume):

JPMorgan also closed the day lower on very heavy volume, and is gapping lower this morning:

CSX was the only one to gain on the day, zooming higher on extreme volume that often marks turning points, while creating a potential shooting star way above the upper Bollinger band.

The price reaction to these earnings “beats” tell us a ton about what has been priced into the markets. We have more reports coming, it will be interesting to watch the price reaction as these reports come out. Remember, my opinion is that the financial earnings are nothing but fraud, and the non-financials are rife with game playing as well, to include reports based on operating earnings that exclude more and more “one time” write downs, and forward estimates designed to produce “beats” so that positive psychology is created even if earnings are lower.

Remember, there are three aspects to the markets that must be analyzed. They are the fundamentals (bad and based upon fraud), the technicals (over extended and divergent like mad), and then there is the psychological. Let’s talk about some of the extreme sentiment indicators…

For starters yesterday produced an extreme number of new 52 week highs that was above 400. Those numbers do not occur at bottoms or even in the middle of bull market runs – they occur at tops. Apple at $300 a share? Google at $550 a share? Come on… does that even pass the basic sanity test?

And at those levels insiders are selling like CRAZY – some of the highest insider selling in history is occurring at this time, as in right now.

Money continues to flow OUT of mutual funds, yet mutual fund managers are more bullish on stocks than ever!

Here’s a chart showing that sentiment in Europe, as measured by Sentix (a European composite), is at all-time bullish levels!

The Put/Call reached a very low level yesterday showing severe complacency:

The VIX:VXV ratio is coming off an all-time low, I showed you just yesterday how well low points in this indicator correlate to market peaks:

Yesterday the VIX did close back above the lower Bollinger band thus producing yet another market sell indication. This morning prices are back inside of the large pennant:

This VIX signal represents extreme complacency on the part of investors. The sell signal works because it reads the complacency and then sees a return to a more normal range. Two in one month is extremely rare, I personally do not ignore these signals, they are highly reliable indicators. Just because the last one did not produce instant results doesn’t mean that the second one isn’t going to work.

Sentiment extremes mark turning points because trades cannot mathematically continue once all the players are invested in the same direction. While I realize that I sound like a broken record and that prices have continued to rise, I can tell you that I have enough experience in the market place to know what’s real and what’s not. The markets are broken, our economy is broken, and yet sentiment is at an extreme. Don’t shoot the messenger, I would gladly fix it if given the chance. Beware the low spark of high heeled boys...

Wednesday, October 13, 2010

Morning Update/ Market Thread 10/13

Good Morning,

Equity prices are higher this morning with bonds lower, the dollar lower, oil higher, gold higher, and food commodities also higher.

The dollar is currently in the 77 vicinity, getting close to the 76 interim target rising trendline. Below is a chart of the dollar daily on the left and Euro on the right:

The falling dollar is a real problem for our economy. Most “economists” will tell you that it’s good for exports and it helps make debt easier to repay. While it may help a minority of corporations who do business overseas, it most certainly does not make debt easier to repay when wages are still arbitraged by overseas workers as that forces wages down here not up. In fact wages have been falling not rising. Now couple falling wages with higher energy costs and food costs and you have just killed off your consumer based economy.

Again, the actions that are transpiring for our economy are 180 degrees from what should be happening. There is a reason for this – here it is again for those who can handle the truth. The “Fed” is the private banks. They make their decisions based upon the best interest of the banks who have created a debt money system for themselves that benefits them and requires never ending growth. Supposed modern day “economists” are trained in schools funded by these criminals and they are taught things that have no basis in a debt money economy or that are just patently false. Throw in tons of obscuration and you have an economy based completely on financial engineering instead of real engineering.

Here’s proof of how much of an influence financial engineering is to our economy… Below is a chart of Nonfinancial Corporate Profits after tax thru quarter 2. Note that we are getting back close to all-time high corporate profits following a parabolic rise and subsequent collapse:

Below is total Corporate Profits after tax, this chart includes financial companies again through the second quarter. Note the new all-time high. I also annotated the accounting methods allowed by FASB rules... During the parabola financial engineering was exploding and mark-to-model was allowed. Along came mark-to-market accounting rules and corporate profits collapsed as did the entire stock market. Under threat from the banks and from Congress FASB was forced to reinstate mark-to-fantasy rules and you can clearly see the results.

Based on the above chart alone, it would seem foolish to bet against this criminal activity. However, here’s the story… Mark-to-model is simply an accounting trick that allows companies to assume that they will be repaid for all their worthless debts at this point in time regardless of what real future cash income may be. This mark-to-model is a PONZI scheme because those future cash flows will only be there if they are able to keep never ending growth never ending. This will not happen! Because consumers are already saturated with debt, their homes are underwater, they cannot repay all the debt. Plus we know that much of these financially engineered products are simply out and out fraud with no real cash flows behind them. Thus eventually this scheme is exposed for what it is – FRAUD.

But in the mean time companies like JPM, who remember IS THE “FED,” continue to make record profits and pay themselves record bonuses as they rob from the American people and mark their bogus “assets” to their own created fantasy prices. Keep in mind that these are the same companies that own the stock exchanges, they own the HFT machines, and thus they operate a network in which they are in full control. In fact they have created a real life “Matrix” in which their activities draw upon the blood of the people while in turn they feed the people’s minds with complete fantasy. The media is fantasy, the markets are fantasy, corporate “profits” are fantasy, and our political system is also a fantasy.

And nothing says fantasy more than this morning’s earnings report from JPMorgan:
NEW YORK ( -- JPMorgan Chase said it earned $4.4 billion during the third quarter on Wednesday, an increase of 23% from a year ago, as loan loss reserves continued to decline.

The first of the nation's big banks to report results, JPMorgan (JPM, Fortune 500) said it earned $1.01 per share. Analysts polled by Thomson Reuters were expecting the New York City-based bank to earn 90 cents a share during the three-month period ended September 30.

The provision for credit losses, the funds set aside for the allowance of bad loans, was reduced to was $3.2 billion, down 67% from a year ago.

"We are pleased to report a continued overall decline in credit costs, although our mortgage and credit card portfolios continued to bear very high net charge-offs," said chief executive Jamie Dimon in a statement.

$4.4 BILLION dollars in one quarter! “Loan loss reserves continued to decline!” You couldn’t make that up if you tried. Foreclosures are zooming, bankruptcies are zooming, defaults are zooming, and a huge crisis of confidence in the very structure of our loan system is underway and yet they have the nads to lower their loan loss reserves! And the fantasy continues as the criminals continue to rob America blind. Like all who get what is truly coming to them, there is absolutely no doubt in my mind that those committing this fraud will eventually have karma catch up to them. I wish Mr. Dimon many sleepless nights, if the American people ever figure out how they are being fleeced hopefully those sleepless nights will occur on the inside of a jail cell.

And least you think that the current “foreclosuregate” is simply a paperwork error, I invite you to listen to the following interview and pay particular attention to what is being said here:

"The banks would have to buy them back…" “We’re back to where we were two years ago…” Another TARP? “Not in this lifetime!” My, but that sounds like an attitude shift doesn’t it? Those who think another round of TARP to bail them out should pay attention to how and what he is saying.

Of course he’s 100% right! NOTHING has been solved NOTHING. The problems that created the crash of ’08 are still there, the only thing that changed was the FASB accounting rules! And that’s how it was sweped temporarily under the rug. Again, this fails when either the rules are changed to reality or it fails simply when it’s finally recognized that the cash to service these models simply isn’t coming like they say it is.

This morning the hypocritical MBA issued its weekly worthless and completely not believable Purchase Index for the prior week. The Purchase portion of the index supposedly fell 8.5%, but the Refinance index jumped… get this… no really… wait for it… 21.0% in the week! In just one week! LOL, do you believe that? Har, har, how gullible do they think we are? Oh, that’s right… this gullible:

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Import and Export Prices were reported this morning with export prices rising .6% and import prices falling .3% for the month of September. Hmmm… this was during a time that the dollar was falling and oil prices rose… and yet, here’s Econoday spinning reality into a relativistic economic time warp:
Import prices fell 0.3 percent in September skewed by a 3.1 percent temporary downswing in petroleum prices. Excluding fuels, import prices rose 0.3 percent for a second straight month. Prices for petroleum-based products, including natural gas, all show wide declines though a reversal is in store given this month's $10 jump to $80 oil. Prices of imported finished goods show very little change, up 0.1 percent for consumer goods for a second straight month, small increases that don't offset 0.2 percent declines in the prior two months. Prices for imported capital goods are unchanged. Year-on-year, total import prices are up 3.5 percent with ex-fuel up 2.6 percent.

Export prices rose 0.6 percent for a second straight sizable gain that once again reflects pricing power for agricultural products which rose 2.4 percent on top of August's 4.1 percent gain. The plus 12.1 percent year-on-year rate for agricultural export prices is the highest in two years. Finished goods prices on the export side are mixed with capital goods unchanged but consumer goods excluding autos showing a 1.0 percent jump.

Import prices were tame in September but rising oil prices together with this month's weakness in the dollar point to upward pressure for October. For tomorrow's producer price and Friday's consumer price reports for September, today's report points to mild readings.

Hmmm… “3.1 percent temporary downswing in petroleum prices.” My chart shows oil in the month of September going from $71.50 to $80 a barrel. No, that “reversal” in prices definitely occurred in September. This month oil has gone from $80 to $83, so once again it just throws all of this data into question as far as I’m concerned, I do not know how they get falling oil prices from the month of September.

Keep in mind that exports and imports are measured in DOLLARS, not in actual goods. This is a false measurement, as inflation makes it appear that trade is growing when in fact all that is growing is financial engineering.

Yesterday the McClelland Oscillator had another small change which means the large price move expected could occur today or tomorrow. The McClelland is still positive, this is definitely something to pay attention to as meaningful declines likely won’t happen until this swings negative (which won’t take too much at this point as it is weakening against rising prices – yet another divergence).

The VIX closed still under the lower Bollinger band yesterday. That means the sell signal simply waits for the time that it closes back above it:

What appears to be a meaningful indicator regarding the volatility indices hit an extreme yesterday, that is the VIX to VXV ratio (ht Scott again). The VXV is the NDX volatility index. As you can see on the chart below low points in this ratio tend to correlate very well with peaks in the equity markets. This ratio hit an all-time low yesterday. I would speculate that the reason this works is that the NDX tends to lead the rest of the market and when its volatility index hits an extreme versus the rest of the market it tends to mark turning points. This is an indicator I haven’t followed over time, so let’s watch it and see how it behaves:

Meanwhile the market presses higher on trumped up earnings from JPM. This is producing an overthrow of a rising wedge as can be seen in this 30 minute chart – note the divergent RSI versus rising price:

The fantasy continues for now. The higher the market goes the more the fantasy draws in the people who don’t see it for what it is. While the deception can and may continue for quite some time, buying into it is exactly the same as buying Enron stock early in the year 2000…

Tuesday, October 12, 2010

Morning Update/ Market Thread 10/12

Good Morning,

Equity futures are down this morning with the dollar rising, bonds rising, oil up slightly and gold down slightly.

There is no meaningful economic data this morning, however the FOMC minutes are released at 2 PM Eastern. Keep in mind that we have learned that the contents of these minutes are leaked to certain “privileged” individuals like Bill Gross prior to the public release - insider sanctioned trading, coming right from the top. This is yet another hypochritical message sent by this country's "leadership." They will throw you in jail if you trade on inside information but if they do it it's a-okay. And you want to trade against these criminals? LOL, good luck. Speaking of gross, the game of hanging on the phony “Fed’s” words is ridiculous. In fact they have created the problems, been completely ineffective at stopping the problems, and that’s because they ARE the problem. Who controls the production of our money is THE most important facet about our economy and yet it is completely ignored by design. Giving insider information to people like Gross is absolutely disgusting.

But everyone at this point seems convinced that the “Fed” is going to save them! In fact the Market Harmonics NDX sentiment index is higher now than it was at the 2007 peak – that is extreme (ht Scott):

The VIX closed below the lower Bollinger band yesterday. This sets up yet another VIX sell signal, the second one in a month. To trigger the signal, the VIX must simply close back inside the range of its 2 standard deviation bands – that could happen today. It is rare for a VIX sell signal to fail, I would look at this one as a cluster, the market simply exented following the first one. Again they can take time to work, so don’t expect an immediate response:

There was a small change in the McClelland Oscillator yesterday so we can expect a large directional move today or tomorrow. The Oscillator is still positive, I am waiting for it to turn negative as a sign that selling is likely to gain momentum.

There may be a rising wedge in play. I’ll post charts of this pattern inside of the daily thread as I want to see the market open to see how the lower trend line appears. The descent and bounce overnight may actually be defining the lower boundary a bit lower than I thought yesterday or we could be retesting it from underneath. At any rate I’ll be happy if we can get a descent going without creating massive gaps on the way down – the massive gaps on the way up will get filled, it’s just a matter of when. Don’t let the emotion created by rising prices fool you, make sure you see what the market in this analogy really looks like in the end!

Monday, October 11, 2010

60 Minutes Fluff Piece on High Frequency Trading

What follows is advertisement for erectile dysfunction followed by advertisements for stock market dysfunction. While vaguely describing what HFT is, Steve Kroft and 60 Minutes never get to the real issues. Mary Schapiro certainly doesn’t get to the real issues and never has.

They are not talking about the illegality of placing orders and pulling bids in an attempt to move the market in a certain direction. They fail to address the fact that the HFTs can see bids and stops before they are even executed. They fail to talk about the now programmed Monday morning ramp jobs, or the morphed Friday afternoon front running of the Monday morning ramp job. They fail to fully address the issue of arbitraging milliseconds and the advantage that gives to the HFT firms who are mostly the very same banks who comprise the “Federal” Reserve Bank system, and they fail to address that it is these very same banks who also own and operate the exchanges. These are the same banks that comprise "the Fed" who designed TARP, QE, and now POMO's. Thus the very same people create the HFT fuel from thin air, they write the laws, they own the exchanges, they are the largest contributors to political campaigns, they own the HFT machines, they used to own the mortgage on your home but now the government does - in short they own YOU.

Here’s one for you… what if an HFT owner programs algorithms to PRODUCE a flash crash and to take advantage of the price swings occurring within one? Who is there to stop them? Is Mary Schapiro there to protect your stop order from being overrun by these criminals? Hell no, and that’s exactly what they do – they see your stops, they run you out of your position and they take YOUR money without even so much as a blink.

This is nothing but a FLUFF/ SPIN piece that I am showing only to show you what type of crap is being fed to the public. People have no idea just how unsafe their retirement money is. Billions in outflows? Get used to it, there is NO MARKET, there is only a criminal enterprise designed to take your productive efforts from you.

Wall Street: The Speed Traders

PS - we just learned that Mary Schapiro (the head of the SEC whose pay was benchmarked to CEOs of investment banks and the NYSE) received a farewell payment from FINRA Of $8,985,334.0!! Sweet, no conflict of interest there! (ht ZH)

Morning Update/ Market Thread 10/11

Good Morning,

Equity futures are slightly higher this Monday – the forecast is calling for a 90% chance of a morning HFT ramp! The dollar fell over the weekend but has recovered back to slightly positive, the Yen touched a new high but has pulled back, both oil and gold were higher but have pulled back to lower.

The most significant move on the board is found in the soft commodities – FOOD. Friday saw several of the grains go lock-limit up, and this morning corn again went lock-limit up. That is not trivial, it is the worst possible move on the board. Of course it’s a tragedy for the human condition, but it’s also very dangerous for the investors in that space and will likely cause some margin calls to occur. The problem with these circuit breakers is that they don’t give market participants a good chance to escape as they go lock-limit into a freeze and when the market opens again it only takes ONE TRADE for it to go lock-limit into the next price level leaving no exit for those who are trapped. This is the fallacy of circuit breakers, they are very dangerous and most participants remain unaware of the dangers.

In the past two days, corn has rocketed 17.6%, soybeans are up 11.8%, wheat has gained 10.6% and is up 70.5% since June, rice is up 13.7% in the past week, and oats are up 15.2% in the past two days and 102% since May, doubling in price in just 5 months.

This is obviously a monetary phenomena, what you are witnessing is not a drought, it’s not that the government is going to turn corn into ethanol, it’s the debasement of your money plain and simple. This debasement is occurring when the “Fed” exchanges worthless debt for new digits to the banks who turn around and speculate in all the markets with their hot money. This is the exact opposite of helpful to the economy, it is an economic disaster.

Take another look at the oil to SPX chart I made this weekend, it’s extremely important in that it clearly demonstrates how rising oil prices tax the economy and markets. The late ‘07/ early ’08 ramp in oil prices occurred at the same time that a large wave 2 was occurring in the market – that ramp led to wave 3 down. Look at the chart during this time frame and you see the same thing, a likely wave 2 with oil exceeding $80 a barrel. In fact, while the price of oil is almost exactly in the same place it was 3 years ago, the stock market is still down 26%!

Is oil going to ramp to $150 a barrel again? I highly doubt it, and I doubt that food stuff can continue its ridiculous ramp for too long. The dollar is getting pretty close to support in the 76 range – no, it doesn’t have to hold, but sentiment against the dollar is very negative again and so it would not be at all surprising to see the dollar catch a bid and to see the Euro and Yen reverse against the dollar at some point fairly soon.

My take is that the much ballyhooed coming QE is going to be a major league sell the news event. The markets have risen wildly against terrible and worsening economic data. I’m certain that there’s concerted effort to keep things propped up until the elections, but adding trillions more against skyrocketing food and oil prices would be economic suicide. Thus don’t be surprised when all the hype turns out to be largely lip service.

There is very little economic data this week until the very end of the week. We’ll see PPI, CPI, Consumer Sentiment, Retail Sales, and International Trade. Most of the data will come this Friday which is yet another Options Expiration on the 15th. I also noticed that if you extend the descent in the dollar out on the same slope, that it will run into the 76ish uptrend line at about the same day this Friday.

If the dollar breaks the 76 region, it will be headed to 71/72ish… that would be a very bad thing. If it happens I think that the “currency wars” could quickly turn into trade wars. Is it really worth it? Will the new set of politicians allow further debasement to continue or will they bridle in the insane central bankers? What… hey, a guy can dream!

Sunday, October 10, 2010

Damon Vrabel - Debunking Money (#1): Money, Myth, and Machiavelli

The question that matters is WHO.

WHO controls the production of our money is WHO has the power. In this most excellent video Damon clearly explains this relationship. It’s simple, it’s the truth, and it doesn’t have to be like this – shouldn’t be like this!

I suggest that this video is the one that should be shared and should go viral. The hypocrisy of our money system is now glaringly open for you to see – witness the Daily Show video with the President of the Mortgage Banker’s Association (MBA) lecturing homeowners about their moral obligations while simultaneously walking away from their own mortgage. Disgusting.

More and more people are waking up, Damon’s video lands squarely on the target – a direct hit, I’m looking forward to more.