U.S. Markets Propped Up by Delirious Toxicity

With the Obama administration now showing a complete "do nothing" approach to the oversight crisis in US banking, it appears Goldman Sachs (GS) not only has succeeded in gaining a set of personal keys to the US Treasury Department, but has its tentacles in a complete squeeze of the entire government itself. This feat has been blessed by the Federal Reserve Bank; who together have created an even larger bubble in bank stocks, since before the crash! In any other country in the world today, this would be known as "a conspiracy".

I'd like to take this time to thank one Mr. Phil Grandy who has been one of the most diligent and brave Americans I know on this subject, who has refused to just sit on his hands like the rest of us; showing outstanding courage in his weekly broadcasts of the "Phil's Gang" radio broadcast to educate the public on these injustices now taking place. I join him in his plea to all investors to write every Senator, Congressperson and government representative you know to urge an investigation, make arrests and put a stop to the fraudulent activities between certain members of the US Treasury and Goldman Sachs and to the grossly inflated bank stock prices they are causing through criminal manipulation! I would further state that it is my sincere opinion that these activities are creating a bubble in the markets that will be worst than the one which has already popped and crashed!

This all comes against a backdrop of some pretty startling statistics which are causing the United States to slowly cease being as it ever was intended, while unintentionally decoupling itself to an even greater degree from any stable international economy. Industrial production in the US is still in free falling double digits, while for the first time in 50 years; its GDP rate has decreased for two back to back quarters. Defaults in corporate debt haven't slowed, with some 40 issuers in April alone having fallen prey. By March 2010 Moody's expects this rate to be a whopping 14.3% and no one seems to be paying attention to that ever growing "higher taxes cloud", looming still over potential consumers.

The seasoned professionals who have some of the highest percentages of accuracy in their forecasting outlook, are now leaning heavily toward the consensus that the US will likely experience a double-recession. If you go back to the years 1980 and 1982, the characteristics have very growing similarities with the current rhythms setting the stage for a rise in commodity prices over an environment of monetary easing and a falling dollar.

And while Rome is still burning today, investors chose to celebrate by paying upwards of $3.50 for $1 bank stocks in Citibank (C) and $140 for a $60 stock in Goldman Sachs. Goldman's PE at this time is over 30! And about all I can add to this is, "pop goes the weasel"!

Disclosure: Author has no positions in either Citibank or Goldman Sachs.

Comments

[Pin Code:]

So where does one put their money, at least what's left of it...in gold, a mattress, T-bills? While it is one thing to say the sky is falling (again) and crying "wolf", where's the proof? Do you really trust politicians to initiate an investigation? The best way to prove a theory is hard proof. Unless someone can present undeniable proof, I'm not biting.

May 20 09:50 AM

[Alan von Al...:]

WSJ: "BofA sold a block of 825 million shares for $10 apiece on Tuesday, according to people familiar with the situation."

Sold to who? - and why is it top secret?

May 20 09:55 AM

[AndrewBaker:]

It's a given that banking and financial stocks are way overbid, yet people are still buying. I've been hurt by not following and going short, and am pulling out for now: the markets can stay in denial longer than I can stay solvent! But, what to do whilst we wait for the bubble to burst? My own way - and because I can't bear just to sit on cash and do nothing - is go short and long day-trade financials, short and long short term trade various commodities, and buy longer term stock holdings on the dip and sell them into strength to buy back later. It keeps me busy whilst I wait for the drop to come.

May 20 10:02 AM

[wheelbarrel...:]

LOL the sky has already fallen - see you didn't even notice because you were on the couch watching Family Guy or Dancing with the Stars or American Idol or....


On May 20 09:50 AM Pin Code wrote:

> So where does one put their money, at least what's left of it...in
> gold, a mattress, T-bills? While it is one thing to say the sky is
> falling (again) and crying "wolf", where's the proof? Do you really
> trust politicians to initiate an investigation? The best way to prove
> a theory is hard proof. Unless someone can present undeniable proof,
> I'm not biting.

May 20 10:34 AM

[wheelbarrel...:]

I bought a bunch of Gold last dip - teh markets can be manipulated in the short term but the "elephant in the room" is the sound of the printing presses going day and night printing more USD. Everyone else in the world that can reduce their exposure to the USD is doing so and it will become painfully obvious at every 30 yr Treasury auction.


On May 20 10:02 AM AndrewBaker wrote:

> It's a given that banking and financial stocks are way overbid, yet
> people are still buying. I've been hurt by not following and going
> short, and am pulling out for now: the markets can stay in denial
> longer than I can stay solvent! But, what to do whilst we wait for
> the bubble to burst? My own way - and because I can't bear just to
> sit on cash and do nothing - is go short and long day-trade financials,
> short and long short term trade various commodities, and buy longer
> term stock holdings on the dip and sell them into strength to buy
> back later. It keeps me busy whilst I wait for the drop to come.

May 20 10:37 AM

[History Buf...:]

Another barometer of this market would be that people are still buying GM shares even though the bankruptcy is imminent. Who's the loons here?

May 20 10:38 AM

[Dave Wrixon:]

Sold to the Tax Payer at a highly inflate rate?


On May 20 09:55 AM Alan von Altendorf wrote:

> WSJ: "BofA sold a block of 825 million shares for $10 apiece on Tuesday,
> according to people familiar with the situation."
>
> Sold to who? - and why is it top secret?

May 20 10:49 AM

[wobatus:]

I dunno, I didn't buy any BAC. I own some faz, which is triple inverse the financials. Just as a hedge.

The price of a stock isn't where you and the author feel it should be, based on exactly what I don't know, perhaps some normalized earnings stream out into the future, but I seriously doubt it. It is all populist, perceived wisdom.

Regardless, because a stock isn't doing what is expected, we hear calls for criminal investigations, arrests, etc.

Hey, if there is some manipulation going on, be my guest. I have held some stocks that were naked shorted down and it royally pisses me off as well.

Frankly, though, the lack of specificity makes me think he doesn't have a case.

And I made that post knowing a bunch of folks would just give it the thumbs down. It is very easy to get thumbs up on this site. Tell folks what they want to hear.


On May 20 07:34 AM herbert hoover wrote:

> If the author is a loon what would you call the morons who own stock
> in BAC who actually drove up the stock price after their holdings
> were diluted another $40 billion last night? Freaking hilarious.
>

May 20 02:24 PM

[wobatus:]

Well then, why doesn't Ron quit the Republican party?


On May 20 08:17 AM doubleguns wrote:

> General loons.
>
> "In any other country in the world today, this would be known as
> "a conspiracy".
>
> Its still a conspiracy in this country. We just need a Ron Paul type
> administration to get an investigation going. The demicians and republicrates
> in office will NEVER investigate this since they know they would
> be outed for having their fingers in this cookie jar.

May 20 02:26 PM

[PROXIMO:]

Goldman/ Treasury arrangement reeks of behind-the-scenes deals. Ample precedent for it, if you've read Tim Metz book Black Monday, which provided an up close look at how the stock market was turned (manipulated) by the government and trading floor specialists in the 1987 meltdown. It bought them time in 1987 to recover. I don't think it works now. Far too much toxic sh#t everywhere, mainly banks, autos, and real estate. Someone has to pay. It will be the taxpayers.

May 20 02:40 PM

[wobatus:]

BTW, Goldman's forward p/e is about 11, admittedly justa collection of skin in the game guesses. Using p/e without context, and saying the stock "should" be this or that ignores many factors. GS, like many banks, took a lot of writeoffs, and we DID have a full on financial panic this past fall and winter, after all. Should it be $140? maybe not.

IF he sees coming inflation and commodity rises, invest that way. I happen to agree that we have a wave of taxes coming.

The funny thing is I see people saying look out, it will be just like japa,, so year crash, but they also call for inflation. Well, japan has had years of deflation. NOt against gold you say?

Fine, buy gold.

You say prices are manipulated? Theyc an't stay manipulated forever. Short term voting machine, long term weighing machine. You all know the phrase.

If GS can be propped up forever, why did it crash to $40s? How did LEH collapse if THEy control everything? Oh, because they were GS's rival? Then why not Morgan Stanley?

The guy complains that we will have a bad crash. Worse than the last bubble burst. So, is a burst bubble bad? If so, then why is he complaining as markets recover? Oh, because the method of recovery is improper? maybe so, but don't forget, anything that can't go on forever, won't go on forever.

Go ahead. Write your congressman. It better be more coherent than what you write here. They are pretty thick headed anyway. have fun cheerleading for brave Phil Grandy.

May 20 02:41 PM

[wobatus:]

Hey, Goldman is down, FAZ triple short financials way up, BAC back to flat, big time reversal off of huge blowoff top.

Ya happy?

Don't worry, disaster will come back, ok Cassandras? You will either be proven right, or what is rightfully yours, disastrous market crash, will be prevented by the trilateral commission, the gnomes of zurich, and the rothschild family. Oh and Chris Dodd. ooga booga.

May 20 03:18 PM

[Jasper M:]

Wobat,
You present one good question I can help you with.
Ron Paul doesn't quit the Republican party because he believes (along with many other libertarians), that it can be redeemed, and remains the 'First Best Hope' to save the country.

I happen to believe he is mistaken in this (too much rot there for me to stomach), but I have to acknowledge that the issue remains in doubt for a large number of participants. And I respect the man entirely too much to second-guess his strategy.


On May 20 02:26 PM wobatus wrote:

> Well then, why doesn't Ron quit the Republican party?

May 20 03:57 PM

[Carey Rowland:]

wheelbarrowsfullofcash writes: "
Everyone else in the world that can reduce their exposure to the USD is doing so."
I'm new at this game, and would like to ask: How does he know that?

May 20 05:46 PM

[Northstar10000:]

The dollar is falling. Compare week to week prices.

May 20 07:01 PM

[wheelbarrel...:]

China's desire to decouple from the dollar isn't just rhetoric - a prime example would be the recent agreeement between China and Brazil to trade using their currencies NOT the USD. As this becomes more commonplace it will add more downward pressure. Just keep watching the Treasury auctions.


On May 20 05:46 PM Carey Rowland wrote:

> wheelbarrowsfullofcash writes: "
> Everyone else in the world that can reduce their exposure to the
> USD is doing so."
> I'm new at this game, and would like to ask: How does he know that?

May 20 08:45 PM

[Jasper M:]

Carey,
re reducing exposure the the $US, buy pretty much anything else. Some dolla-hataz view stocks, even US stocks, as a safe place to hide from dollar depreciation.
One can buy ETF's that move with a foreign currency. One can buy ETF's that move with foreign stock exchanges (but then you are betting on general equity stability or improvement). One can bet on gold, any number of ways.

Carey, please note that I am Not endorsing Any of these option, for you or anyone else. I suspect the $US is going to play out quite differently than pretty much anyone here suspects, and for several years. But I hate to see people go wanting for an answer to a simple question, so I posted this.

On May 20 05:46 PM Carey Rowland wrote:

> I'm new at this game, and would like to ask: How does he know that?

May 21 12:01 AM

[Jasper M:]

Oops.
And . . . I am an idiot - I misread the word "know" for "do" in Carey Rowland's post. Clearly, I should go get some sleep . . .

May 21 12:03 AM

[Blackeyebart:]

You don't have to put your money anywhere. There is only urgency in protecting yourself. I humbly suggest that you do not trade unless the market meets your requirements. Doubt is the faint sound of your common-sense screaming.


On May 20 09:50 AM Pin Code wrote:

> So where does one put their money, at least what's left of it...in
> gold, a mattress, T-bills? While it is one thing to say the sky is
> falling (again) and crying "wolf", where's the proof? Do you really
> trust politicians to initiate an investigation? The best way to prove
> a theory is hard proof. Unless someone can present undeniable proof,
> I'm not biting.

May 21 06:53 AM

[wobatus:]

Ever read the Ron Paul Political/Survival Report?

I have some respect for Paul. I even have some modicum of respect for bernie Sanders. Hell, at least Ron ain't Robert Byrd. Somehow he doesn't bother the Daily Kossacks much.


On May 20 03:57 PM Jasper M wrote:

> Wobat,
> You present one good question I can help you with.
> Ron Paul doesn't quit the Republican party because he believes (along
> with many other libertarians), that it can be redeemed, and remains
> the 'First Best Hope' to save the country.
>
> I happen to believe he is mistaken in this (too much rot there for
> me to stomach), but I have to acknowledge that the issue remains
> in doubt for a large number of participants. And I respect the man
> entirely too much to second-guess his strategy.

May 21 09:50 AM