Here’s another well written, thought provoking article by Chris Martenson. I agree with Chris – the only explanation for the recent stock run is that the market is being manipulated. How else can we explain huge stock gains around the world when unemployment (and other economic indicators) should be negatively impacting stocks?
Unemployment trends that we see today should not be driving 30-50% stock gains.
Take a look at our current unemployment situation compared to previous recessions. We’re looking at the worst unemployment situation since WWII – and we’re still heading in the wrong direction. We have lost over 5% of total U.S. jobs since peak employment at the beginning of the recession – and we continue to lose hundreds of thousands of jobs each month.
The next chart is simply staggering. In the current recession, almost 6 million people have been out of work for over 27 weeks. This number is more than double the number of people out of work (over 27 weeks) during the recessions in the early 80’s and early 90’s – and as you’ve seen in the chart above – this situation is not improving.
So – for those who study the markets and are trying to determine what is going on – there really is only one answer. Our government and the Fed are manipulating markets. My personal belief is that this is happening around the world.
There are many concerned people in the world today who cannot understand the Fed’s actions – and the actions of our government. The problem is that most people believe that governments and central banks around the world are trying to do the right thing – that there are no ulterior motives behind these actions. Many people believe that everyone is trying to fix the problem – albeit in the wrong ways. The focus is on what is being done – not why it is being done.
We assume that the reason for all of these actions is to fix what is broken. Why is the Fed pumping trillions of dollars into the system? Why is our government providing trillions of dollars of ‘stimulus’ money? We wrongly assume they are trying to fix our broken economy.
It’s a show to mask true intentions.
As you’ve seen me say many times – there are ulterior motives at play. We don’t want to believe it – but the truth is that the world has been setup for a catastrophic economic failure. If we don’t finally acknowledge this – we will never understand our enemy – we won’t even know who our enemy is.
Every one of us needs to acknowledge the truth – and stop listening to the lies. I don’t like what is happening either – but denying the truth and ignoring the truth – doesn’t stop it from being the truth.
For us to begin to fight our enemy, we must acknowledge the truth:
1. A very evil, very deceptive organization has infiltrated us from within.
2. They are succeeding where others have failed.
3. They are destroying the United States of America as we know it.
4. We don’t have to accept it. We can choose another way.
The Lord has warned humanity for 2,000 years about what is coming – and we have ignored His warnings. Nothing is truer than this.
You may have wondered – if the Bible tells us that the people behind the coming global government are successful at some point in the future – does it do us any good to stand against them? Is our fate inevitable? Very good question. The answer is – we are asked to stand against evil – in every situation. Our fate is not inevitable. If we humble ourselves and seek God – He will show us the way to stand against our enemy.
We choose our fate.
jg – November 8, 2009
Accepting the Obvious
Friday, November 6, 2009, 4:40 pm, by cmartenson
What if we were to just accept the fact that the government and the Federal Reserve are interfering in the stock market to engineer higher prices?
While I have long maintained that this is indeed the simplest explanation for the market behavior we've been seeing, it remains speculation because we have no audit of the Fed to either confirm or refute the idea.
But what if we could just accept that it was true. How would that change anything in our lives? Would we invest differently? Would we have a darker or brighter view of the future? Would we calculate that risk had been improved or worsened?
Here's one of the writers I respect the most out there: "Mr. Practical" from Minyanville, who has deep professional experience as an investor and trader, opining on this subject.
Many are marveled at the boom in stocks, given really rotten fundamentals. Of course, so far it's been a function of a lower dollar and there's a way to "reflate" with those printed dollars that normal conduits won't allow.
What if the government/Fed realized the most efficient way right now to "print" dollars and "reflate" the economy was to get stock prices up? What better way to do that than print dollars to buy stocks?
There's ancillary evidence that stocks are acting "artificial". Stocks aren't only climbing a wall of worry, they're scaling the Mt. Everest of bad fundamentals. Tick data is extreme, especially when the stock market is down. We constantly see 1000+ tick prints when stocks are down; this is very strange indeed. Volumes are down at least 20% from normal levels (and much more if you discount for high-frequency trading), making it easier to get stocks up.
Under TARP, the fine print allows dealers to REPO stocks to the Fed as collateral (holy cow is right).
What if there were an arrangement where large dealers buy stocks and stock futures through the day and REPO them to the Fed at the high closing prices? The dealer would book the profits derived from the difference at no risk.
If you look at the trading patterns of the largest dealers, one in particular lost money trading in only one day last quarter. Statistically that's like finding a needle at the bottom of the ocean.
Of course no one knows for sure because no one is allowed to see what's on the Fed's balance sheet. But more and more of us are suspecting it's not just the normal junk people talk about.
For those who don't know, Minyanville is quite well respected and is staffed by people with immense direct experience in markets. For this sort of 'chatter' about the bizarre behavior of the markets to begin to appear on such sites means we are only a hop and a skip away from it appearing in the mainstream press itself.
Note what he said: A llittle-talked-about provision in TARP allows dealers to hand stocks over to the Fed in exchange for cash. The question isn't whether or not they are doing this, but how much have they already done?
Today the stock market started to sell off hard, in response to the news that unemployment was worse than expected and had climbed to 10.2% and is flirting with breaking a 60-year record.
Worse, the under/unemployed measure now stands at a frightening 17.5%. How can stocks be consistently rallying on this news? The consumer is more than 70% of the economy, or at least was, and corporate revenues, debt defaults, and bankruptcies moving in the right directions all depend on consumers working.
This was an ugly report.
To make matters worse, consumer credit came out this afternoon and again surprised by a huge amount to the downside. Where -9.9 billion was expected, -14.8 billion was reported.
3:00 U.S. Sept. consumer credit falls $14.8 billion
3:00 U.S. consumer credit falls for record 8th month
3:00 U.S. Sept. consumer credit falls 7.2% annual rate
3:00 U.S. consumer credit down 4.7% in past year
3:00 U.S. 3Q credit-card debt falls record 10% annual
So it's clear that the consumer is pretty much out of the picture and receding.
Yet this is what today's stock market looked like:
We had an immediate and appropriate reaction to the unemployment report that was stopped dead in its tracks and immediately whipsawed the other direction to close the day in positive territory. Either millions of investors independently decided that the unmployment report was not all that bad in the same ten-minute period of time (those two big green candles), or something else happened.
I can whip up a lot more supporting evidence, but you get the idea.
So we are back to our starting questions.
But what if we could just accept that the Federal Reserve is printing money to buy stocks. How would that change anything in our lives?
Would we invest differently?
First of all, let's be clear - this is not investing. Buying stocks on the hopes that the Fed will continue with its policies long enough for you to sell them at a higher price is speculating. Worse, it's speculating without the insider information that better-placed firms like Goldman clearly enjoy.
But we might invest differently. I would entirely abandon the notion of shorting stocks while this policy is in effect. If I were to play the game, I would see which sectors they were preferentially propping and place my chips on those sectors.
However, I fundamentally reject that the game is fair or right, and I think that its long-term prospects were not good. Certainly, one could not simply place money into a diversified index fund and go to sleep for 5 years, expecting to wake up wealthy. "Investing" in such an environment requires daily vigilance. Heck, it's a poker game and the cards are marked. You'd better be alert.
Would we have a darker or brighter view of the future?
The idea that prices for all productive assets across an entire and large economy can be centrally managed is a bad one. I cannot find many ways to be positive about such efforts. They are certain to fail, because they will cause the further misallocation of resources into wasted enterprises. That's what false price signals do.
Instead, we should be using this time to aggressively shed our past mistakes and take a clear-eyed view of the future. We should be investing in ways to use our remaining energy more wisely and to work towards energy independence. I could think of a hundred ways to invest in our future. Goosing the stock price of Wal-Mart a little higher seems entirely counterproductive to me.
Would we calculate that risk had been improved or worsened? This is a no-brainer - risk is increased. A friend of mine who works on the bond side of Wall Street says that his measures of risk right now are redlined. Corporate bonds are priced for a fully healthy economy, not the one we have.
Why are corporate bonds being bid up so high?
That's simple. Because the Federal Reserve has pegged the short end of the bond curve at zero (0%) and printed money through its QE program to buy long-dated Treasuries, thereby depressing their yields, pension and MMF managers are forced to buy something, anything, that can offer them the yield they need.
If you plug the current Treasury yields into the actuarial table of the average pension, it will catch on fire and vanish in a puff of smoke. There is simply no way to meet the needs of pensions and savers using zero percent money.
Sure, zero percent helps out the big banks and the overly-indebted, but it is positively punishing for everybody else.
As a quite strongly worded article in Fortune recently put it:
(Fortune Magazine) -- This is a quiz. What do the record-high Wall Street bonuses have in common with the record-low yields for savers?
Answer: They show yet another way that prudent people, especially those living on fixed incomes, are being screwed by the government's bailout of the imprudent.
Here's the deal. The government is spending trillions to keep interest rates down in order to support the economy and prop up housing prices, and those low rates have inflicted collateral damage on savers' incomes.
"It's a direct wealth transfer from savers and retirees to overly indebted borrowers," says Greg McBride, senior financial analyst at Bankrate.com.
The risk that is being run here is that the manipulation of all facets of all markets is fine so long as it lasts. But when people figure out they’ve been living in a world of illusion? Then there will be a very high chance that everything will go out with the tide. The dollar, stocks, bonds…all paper assets in essence. All washed away.
I wish I could believe that the current people in charge appreciate this risk, but I think they cannot see past the next few months.
That is the risk as I see it today. I wish them all the best with their program of trying to run everything, but I truly think their chances of success are not nearly as large as they presume.
So I have accepted the obvious, concluded that the Fed is throwing freshly-printed money at anything that moves in a semi-desperate bid to create an appearance of health, and decided that the only way to win is not to play the game.