This is going to leave a mark: [pdf]
Click to enlarge
My Take:
This auction was flat out ugly. 40% of the allotment was sold at the highest yield, and the bid to cover was only 2.6, which is weak considering the fact that this was 5 year paper.. Bill Gross called this auction a "stinker". I can think of some other words to use but I will contain myself.
As you can see above, the bond market didn't like it either and pummeled bonds all afternoon following the results.
Stocks rose, of course, despite the negative news Tuesday which included more bad numbers in housing and consumer sentiment. Would you expect anything else from the trading robots? They think all of the news is bullish! In fact, stocks have now risen 27 times in the last 30 trading sessions. This recent rally has gotten beyond absurd at this point.
One of my more wild 2011 predictions is that the stock market will decouple from the bond and currency markets. This decoupling will then expose the equity market as nothing more than a manipulated robot controlled fraud. As this crisis unfolds it will eventually trigger a violent flash crash/sell off type event as investors start losing confidence in the stock market's ability to be used as safe investment mechanism. I might be a year early on this one but I think it's going to happen.
The Bottom Line
I will be hit and miss here this week. I am in the process of taking a well needed break. Needless to say I think the news will get increasingly worse as we head into the new year as consumers see gas close in on $4 a gallon. Oil was up once again Tuesday after the US dollar weakened following China's interest rate hike.
Gold and silver also rose on the dollar news. One other thing to note: Volume was extremely low so I am not paying much attention to what stocks do the rest of the week. In fact, I am starting to not even care how stocks do because the market refuses to reflect what's going on in the economy.
I cannot be long or short something that becomes more and more blatantly manipulated after each trading session. How stocks could rise given the news Tuesday is beyond me. I guess one could blame low trading volumes. Nonetheless, I refuse to participate in something that continues to bury its head in the sand hoping that this debt nightmare will just go away at some point.
It's not folks, and the longer they deny this reality the more painful it's going to be on the way down.
