'Hope 09' Continues to Live On

You have got to hand it to the masses who collectively make up the vast conventional financial apparatus. After becoming way too hysterical in their negative sentiment into March, they have got a really good story going now. 'Hope 09' in fact, lives on - perhaps to target (SPX 1010) or maybe even beyond target.

"Smaller job losses, rising stock prices and stabilization in homebuilding and manufacturing are evidence that government efforts to stem the financial crisis and lower borrowing costs may pay off," says Bloomberg (full article).

Still, it cannot be argued that some tepid improvement has been registered. Now, I was not originally sure if the recovery in sentiment would coincide with actual improvement in economic fundamentals when I coined 'Hope 09', but now we know that to some degree, the vast inflation panicked into the system, force fed by crooked (or maybe just stupid) policy makers to bail out corporate criminals, is having some short term effect, at least.

About 76 percent of companies in the S&P 500 Index that have reported earnings since July 8 beat analysts’ estimates. Tata Consultancy Services Ltd., India’s largest software exporter, climbed 16 percent after its earnings topped estimates. Stocks also gained on optimism lender CIT Group Inc. will get emergency loans from creditors to avert bankruptcy.

"'Corporate profits are beating expectations by their widest margins in a year, pushing most equity markets within a whisker of new year-to-date highs and the dollar toward its 2009 lows,”' John Normand, head of global currency strategy at JPMorgan Chase & Co. in London, wrote in a research note.

--Bloomberg (full article).

But let me ask you, what is going to happen if/when this two-pronged welfare program (golden parachutes for corporate criminals not named Bernie Madoff and vast infrastructure 'make work' aimed at the unions) falls flat of its own bloated, non-productive weight? Hmmm? What, more printing? More inflation? Is it that simple?

You know, many people have been managing the price of gold lately, but if these creeps are able to engineer a real end to the recession, gold is likely to under perform things like oil and the materials of infrastructure, not to mention other bubble areas in waiting like alternative energy. Oh, but let them fail and watch gold's assault on resistance and watch the gold mining sector's bottom lines gain in leaps and bounds.

The activity in interest rates recently tells us that policy makers no longer have full freedom and mandate to inflate against the dreaded deflationary beast (aka the lever of inflationary policy). If this mess starts rolling over into a new round of agony, they will be inflating and devaluing in the light of day the next time and the dollar will be front and center.

Oh but wait, maybe Mr. Bernanke can cook up a plan to manage that dynamic:

Bernanke needs to explain that the Fed has the tools to do the job and that it intends to use them forcefully when it has to,” said Lyle Gramley, senior economic adviser with New York-based Soleil Securities Corp. and a former central bank governor. “That would help hold down inflation expectations and give the Fed the opportunity to stay easier for longer.

--Bloomberg (full article).

Maybe this is how they will do it... click the heels of their pretty ruby slippers and maybe they can have it both ways. This had better be a real recovery. But it is overwhelmingly likely that it is not. It is a false dawn. Beware of strangers (financial services industry that got it wrong last time) bearing gifts (little bon mots about the end of the 'recession').

Here is the 'tell' on this racket: With the improvement in corporate 'earnings' and the 'hope' for an economic recovery that is based in anything real, should not the dollar be benefiting as pressure is put on treasury yields to the upside? No, the story remains the same here in Biiwii land; we are attempting to pump life into the corpse of what was, a bloated, greedy system that will no longer function effectively or sensibly and the US dollar remains the barometer in this effort. 78 has long term significance. Let's watch the drama unfold.

Comments

[DONE_SONZ:]

-You know, many people have been managing the price of gold lately, but if these creeps are able to engineer a real end to the recession, gold is likely to under perform-A real end to the recession will be a reflation recovery.Gold ^.

Jul 20 10:09 AM

[GMiki1:]

I wish no harm to anyone. Really. But it's a house of cards based on lies and corruption. There's still a quadrillion in derivitives out there. What's a quadrillion?

Mortgage resets and a jobless "recovery"? But Goldman and J. P. Morgan are making money. This is the society I used to read about as a kid--in science fiction, starting with George Orwell's *1984*, a society in which the news is managed and people have to think a certain way. But now it turns out it's much easier to manage "expectations* than previously thought since ideas are catching. We're tribal animals and need to think as others think.

Please delve a little further into our situation. Take nothing at face value. Unmask the man behind the curtain. Protect yourself.

Jul 20 10:52 AM

[Gary Tanashian:]

My portfolio is up 140% since October and is well into new all time highs. My newsletter was aboard the rally while the media were still declaring the end of the world, and I have been in capital preservation mode since spring. You can skim one article and call me a bear or you can do a little work and see what really is. I have had targets on the SPX of 1010 and 1200 up until last week. Unfortunately, the bullish scenario you hope for was dealt a blow last week.


On Jul 20 10:54 AM Freya wrote:

> Hope 09?
>
> As long as there are Bears like you around, I look forward to my
> Target of 1100 on the S&P This year.
>
> Current Hype has Analysts Normalizing Earnings for 2010 and Beyond.
> This means that PE Ratio expectations will rise. It doesn't matter
> that those Earnings Never materialize, nor that the PE Ratios are
> ever realized. What will matter will be Analyst Upgrades going forward.
>
>
> The Cyclical Bull is underway, you have missed most of it.
> But, go ahead, keep looking for improvements in the Economy. Those
> might take years.

Jul 20 03:37 PM

[Gary Tanashian:]

I am sorry but you are cherry picking. I do not tout stock picks. I was buying gold miners last year with HUI 150-175 and selling them as risk rose between HUI 360-400. Then buying back after the predictable decline recently. I understand you fancy yourself a market player and I am not going to micromanage the twists and turns with you. My portfolios are updated weekly in the newsletter.

How bullish were you in March?


On Jul 21 02:58 AM Freya wrote:

> Mr. Tanashian: I reviewed all of the Articles you published in Oct.
> 2008, there were no positions disclosed.
>
> And if the rest of your portfolio matches up to your Jan. 5th position
> statements of MSFT, CSCO, and TBT, Then the rest must be up over
> 200% too. Congratulations.

Jul 21 10:25 AM

[one eye:]

I own some of the above stocks. And BTW her husband made me a couple of hundred percent with his Bear triple X picks while you were buying CSCO, MSFT and TBT. July 5th.

Which is why I'm doing a Freebee here in the first place.

Jul 23 12:30 AM