conceptwizard

Five Reasons the Market Could Crash This Fall

Over at Zero Hedge, Tyler Durden did the math and figured that the recent 45% surge in the S&P 500 had nothing to do with the fictional economic "recovery", but was just more of the Fed's hanky panky. Durden noticed that the money that's been sluicing into stocks hasn't (correspondingly) depleted the money markets. That's the clue that led him to the truth about Bernanke's 6 month stock rally.

Zero Hedge: "Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts!

Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount. Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer who net equity was almost negative on March 31, could have some semblance of confidence back and would go ahead and max out his credit card. Alas, as one can see in the money multiplier and velocity of money metrics, U.S. consumers couldn't care less about leveraging themselves any more."

So, the magical "Green Shoots" stock market rally was fueled by a mere $400 billion from the money markets. The rest ($2.3 trillion) was main-lined into the market via Bernanke's quantitative easing (QE) program, of which Krugman and others speak so highly.

Wouldn't you like to know if Bernanke sat down with G-Sax and JPM executives and mapped out the details of this swindle before the printing presses ever started rolling?

Money Supply: The Myth of Hyperinflation

Government cannot create recovery and wealth. The insistence of the fed of massive injections of money and credit only eventually destroys wealth and capital. Such devices demand more taxes at a time when unemployment is rising, and tax revenues are falling; yet, debt is rising exponentially. We have a cadre of elitist banks, Wall Street firms, insurance companies and transnational corporations that will never be allowed to fail. Each time they use leverage and gamble and lose you will get to pay for it, on a never-ending basis. This is the heart of corporatist fascism.

Celebrating the 'Recovery': I'm Disgusted

Two nobel prize winning economists Merton and Scholes' state that without a reversal of the "mark to market" accounting rules for the banks, there will be no recovery.
Many top economists believe that the economy will not recover unless and until the real state of the banks and their assets are acknowledged and insolvent banks broken up in an orderly fashion.

The Financial Accounting Standards Board (FASB) is, in fact, considering a reversal from its April change in policy which suspended mark-to-market accounting. Specifically, FASB is considering vastly tightening mark-to-market requirements to include virtually all securities on a bank's balance sheet.

The Obama administration believe that setting these rules aside and allowing the assets to increase in value after the recovery, that the assets will be worth more.

We are not dealing with reality, there is more pain to come.

Dollar Nearing a Critical Level

What is to be understood is that the weak dollar is the direct consequence of the Fed's extraordinary cheap money policy. To summarize, the average American household is being hit from all sides with this policy. First, if it is a net creditor (as most retirees are), its savings are earning paltry returns (most likely negative after inflation and taxes). Second, the U.S. dollar keeps falling in value, raising the cost of traveling abroad and of everything that is imported. Third, real incomes fall with rising prices as the purchasing power of stable or declining money incomes contracts. Fourth, the exploding public debt will translate sooner or later into higher taxes, thus reducing private disposable incomes. All in all, the standard of living of most people falls.

Don't get me wrong. I do not question the need to inject liquidity into the banking system after the onset of the financial crisis in August 2007. What I question is the way this was done and how the public interest was sacrificed in favor of narrow private interests. Indeed it was done in the worst possible social way, with private gains and social costs. They (the Bush and Obama administrations) recapitalized the banks to the benefit of a small class of bankers, while taxing the entire population in a multitude of ways to finance the public subsidy.

Jobless Recovery: Fasten Your Seatbelts

You are missing two ingredients to this scenario.

1. Manufacturing
We have shipped all our jobs and the companies that provide them to foreign soil, along with their profits (our tax revenue). This has changed significantly since the last recessions.

2. The Consumer

The consumer still had net worth after these last recessions, the boomers were much younger, now they are retiring, saving money. Debt load has increased toxically since.

There can be no recovery without these two criical ingredients. This recession is completly different than any other including the GD. The US had wealth and manufacturing to combat the GD now we print debt to buy debt. Totally different circumsatances and this requires a complete different strategy, which unfortunatly we are not getting.

Why the Recession Is Over

Nice Post, interesting angle.

So I guess we just have to close our eyes to:

1. Unemloyment numbers exploding.
2 Hourly weekly manufacturing hours lowest in decades.
3. Business investment down 35% in 2009.
4. Automotive sales down 7 million units.
5. Housing still has 10-15% to drop to the median.
6. US exports at alltime lows.
7. The Baltic Index collapsing again.
8. Forclosures accelerating again with Alt A, Prime, HELOC
9. Commericial Real Estate at 15% vacantcy rate.
10. California on the rocks which represents a big portion of GDP.
11. Delinquentcy rates on credit cards and loans accelerating.
12. 47 States cant balance their budget in 2009.
13. Mortgage rates are creeping higher.
14. BRIC are downsizing US treasuries exposures.
15. Banks decreased credit card lending by 38%.
16 Banks wont mortgage Jumbo loans. (Or anything else)
17. Retail sales are down.
18. Markets are being manipulated by liquidity injections.
19. Bankruptcies are up 50% YOY.
20. Consumer spending continues to decrease. (Critical)
21. Oil prices are soaring, putting pressure on the consumer.
22. Tax revenues are down 28% in April.
23. Benanke is having trouble rolling 1.2 trillion in debt in 2009.
24. Social Security and Medicare are underfunded by 50 Trillion.
25. 200 trillion in derivitives exposure in US, 500 trillion worlwide.

I have to live in the real world with the real people. How could have the recession have ended in June? When the numbers in the first week of July are still very negative. I guess I have to see/feel it to believe it. In a simple mans world I would like to see any 10 things on my list turn around.

Housing Bubble, The Sequel

Goldman makes money every time all the time because they control the direction of the market. This is becoming more common knowledge, just recently an employee of theirs that left stole software that GS accused him through the FBI of quote "being able to control the markets" through high speed trading. They of course did not want this technology to fall into the wrong hands, of course feel that theirs are the right hands. Nothing was said otherwise, and GS are not under investigation.
Their oil trading floor is another proof in the pudding with their ability just by sheer volume to sway the market price on oil. In my mind they cannot lose, and this is not BS it is criminal. Because in the markets someone has to win and someone has to lose. So if they win all the time then of course we lose.

On the housing issue, it is common place now to expect the Obama will do what is in the ultimate best interests of the banks. The banks in this scenario keep the upside of the investment, and now have switched the liability issues into revenues streams. That is why the Treasury department has called the top 25 mortgage firms to the meeting table. Obama's plan will make us beholden to the Financial Warlords in everyway, we will be debt ridden, renters with no jobs and low incomes, with weekly hours down to 33 per week and average wages dropping. America is about to change into a serfdom.

10 Reasons to Believe That We're in a Depression

In 2007, it was reported that, “The Bank for International Settlements, the world's most prestigious financial body, has warned that years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood.”

In 2008, the BIS again warned of the potential of another Great Depression, as “complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.”

In late June of 2009, the BIS reported that as a result of stimulus packages, it has only seen “limited progress” and that, “the prospects for growth are at risk,” and further “stimulus measures won't be able to gain traction, and may only lead to a temporary pickup in growth.” Ultimately, “A fleeting recovery could well make matters worse.”

The BIS has said, in softened language, that the stimulus packages are ultimately going to cause more damage than they prevented, simply delaying the inevitable and making the inevitable that much worse. Given the previous BIS warnings of a Great Depression, the stimulus packages around the world have simply delayed the coming depression, and by adding significant numbers to the massive debt bubbles of the world’s nations, will ultimately make the depression worse than had governments not injected massive amounts of money into the economy.

After the last Great Depression, Keynesian economists emerged victorious in proposing that a nation must spend its way out of crisis. This time around, they will be proven wrong. The world is a very different place now. Loose credit, easy spending and massive debt is what has led the world to the current economic crisis, spending is not the way out. The world has been functioning on a debt based global economy. This debt based monetary system, controlled and operated by the global central banking system, of which the apex is the Bank for International Settlements, is unsustainable. This is the real bubble, the debt bubble. When it bursts, and it will burst, the world will enter into the Greatest Depression in world history.

Oh, So Now There Are No Green Shoots?

I liked your article, Thank You. You said:

"In late December I said I thought there would be a huge rally for no reason at all--it would just happen"

I believe that a rally cant just happen, this last rally it was falsely fueled by liquidity injections by the Fed. Controlled by trading volumes by a certain few. This is evident if you watch where the trading volumes are coming from.

The trading volumes have been low and concentrated.

The leg downward once the banks are re-capitalized will be caused by the same bunch shorting. You see things dont just happen anymore, they all happen for a well thought out reason.
This must be part of our thought process as no other explanation is possible. Unless you truly believe that the market just does stuff for no reason, and I happen to believe that we all have a higher intelligence as do the people in control of the markets.

Why the Dow Is Headed to 6000

I think we are missing the big picture. Amaggedon was not avoided it was simply postphoned. There is still a 500 trillion derivative exposure out there, that can take us out in a moments notice. The dollar will be replaced, its only a matter of time, another doomsday effect for America. The BRIC is moving as rapidly as they can without crippling themselves.
Summers will rape the rest of the wealth as he has been positioned to do. America is bankrupt and the conversation is that the Dow might hit 6000, we have a lot bigger fish to fry that that. The whole disheartening part is that no one is doing anything about it. We are so wrapped up in bailing our own boats that we are allowing the ship to sink.

How Will Markets React to a Dollar Rise?

The dollar is being dumped wholesale, something that should have happened ten years ago. It didn’t happen because of massive US pressure on all nations not to jump and play along within the game. During the first six months of next year 71.18 will be broken. First to 65, then 60, then 55, then to 50 and perhaps to 40 giving new and greater impetus to higher and higher gold and silver prices as the dollar carry trade goes wild.

That means that probably the dollar will be officially devalued and debt will go to default in 2011. They won’t be alone. There will be another Smithsonian or Plaza type meeting and all currencies will be officially devalued or revalued against one another and all debt will be reduced by 2/3’s. A new international trading unit will be formed and three old dollars will be replaced by one new dollar. Do not ask how domestic debt will be settled because I do not know. Logically it should be on the same basis as international settlements, but who knows what these criminals will do. Not only is the US financial structure doomed but also so is that of the entire world.

Winter's Coming for the Boomers: Part 2

Very interesting points of views. So...by the sounds of this article and the current policies in finances and energy we are all but toast.

I always enjoy your articles, they really get the "mouse on the wheel".

I always struggle with the facts that the Powers that are dont already know this. It is impossible for them to line up all the strategies in a single line effort without taken into effect that they could be wrong. Without tooting the conspiracy horn, why are not all these options being looked at by the greatest minds on earth and contingency plans for a lot of different outcomes discussed.

The revelent fact is that they already know the perceived outcome.

I watch what the elite invest in and the projects the foundations that they are involved in invest in.

Why in the world would Bill Gates and David Rochefeller invest in a subterrainean lab in the artic to house 1000's of plants?

Why does Dick Cheny invest against the dollar and outside the US?

I learned a long time ago to watch what they are doing not what they are saying, its the language of truth.

The Debt Conundrum, Part 2

Nicely done James, I always enjoy your posts. I was reading these T2 Partners housing charts on Zero Hedge. they dont paint a pretty picture. It seems that there is a great deal of denial going on. It seems ludicris that the Fed and Treasuries dont know this. I believe Uncle Ben is starting to shed a warning in his indirect read between the lines way he has.
On the economic front there is no foreseeable way in which the United States can work off the $4 trillion it owes foreign governments, their central banks and the sovereign wealth funds set up to dispose of the global dollar glut. America has become a deadbeat – and indeed, a militarily aggressive one as it seeks to hold onto the unique power it once earned by economic means. The problem is how to constrain its behavior. Yu Yongding, a former Chinese central bank advisor now with China’s Academy of Sciences, suggested that US Treasury Secretary Tim Geithner be advised that the United States should “save” first and foremost by cutting back its military budget. “U.S. tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars.’

Challenging America will be the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO). The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the BRIC nations (Brazil, Russia, India and China).

Time is running out for the US dollar.

Why This Is No Time for Buy and Hold

I think it is pretty common knowledge at this point that there are forces at work here in the markets that are not normal. There is a complete range of documentation of Government programs, trading volumes and so on that subsist for the one reason to hold the markets up.

If this is truly the case then that in itself is enough to disallow trust in the markets. Even if this is meant in the well being of America, the fact that it exists is profound. In the markets someone must win and someone must lose, if the game is rigged the right people are not winning, and it is a criminal activity.

I find this appalling no matter what the intentions are. And leaves the Obama administration open for all kinds of conspiracy theories and innuendos of their real intentions.

The fact that they are playing into the hands of the FED and the Financials always has disturbed me to the point of disbelief.

Anyway, trust and transparency is what we elected, I have seen no such beast. Therefore I dont trust.

Will The U.S. Dollar Crash?

The Fed has been creating money out of thin air and monetizing a good part of it. This new money has gone to the Treasury and the financial sector. It is not being lent. It is being used to bolster balance sheets. It is not reaching consumers in the form of increasing employment, raising wages to restore fallen demand or to enhance economic recovery. Buying power is falling fast as underlying inflation persists reducing demand, which you are now seeing in falling retail sales. These funds from the Fed at the same time support an overpriced stock market. Lenders are opportuning the markets with public loans as they lay off workers to cut operational costs. That perhaps brings financial profit inflation and tends to cost price deflation. The result is financial profit inflation on a temporary bases, which misleads people into thinking there is a recovery underway when no such economic recovery is at hand. This leads to stock market corrections of the bubble variety in the context of a bear market rally. All this is the result of intervention by the Treasury and the privately owned Federal Reserve, the result of which is inflation, which destroys wealth, except for those who own gold and silver related assets. This production of current money and credit degrades wealth and money as a store of value. Most of the loss of purchasing power is borne by the poor and the lower middle class.