Wednesday, December 8, 2010

Reversals Reversals Reversals

Was yesterdays market action a sign of a Top in the equity markets?
After all the markets should have been flying the whole day after Obama gave us another huge stimulus bill via his extension of the Bush Tax Cuts.

Yesterday, I posted on Copper which is an excellent predictor of economic growth.

Copper is at a major resistance point. Copper has been on a tear of late greatly helped by global liquidity flows. Can it get thru this level and make multi year highs even in the face of China which is desperately trying to slow their economy?

Today lets take a look at the SP Futures.
IS this a little too perfect? Is this even the Kiss Of Death?

As you can see the SP Continuous Futures kissed exactly off its 61.8% Fibonacci retracement of the sell off from 2007. This point was at 1235 on the Futures yesterday. This is what we call a bearish hammer candle at the highs of the day. This is considered a huge divergence. Nasdaq futures posted similar technicals as well yesterday.

Gold, Silver, and Copper futures all had huge run ups mid day but were all faded towards the close. Gold and Silver are both referendums on Fiat currencies but also on global liquidity as well. These are momentum commodities. Are the turn arounds saying something about crowded trades?

Did I happen to state that long term interest rates have surged the last 3 months? Wasn't QE2 supposed to lower rates further?

Yesterday was a huge day for the risk trade. It was risk reversal day. We need to figure out of this continues today and the rest of the week. POMO is ramping up with a smaller monetization today followed up by bigger POMO's the rest of the week.

What also should be watched is the German Bunds Market. There was a failed bond auction in Germany today and the DAX couldn't close above 7000.

The thing that the market has going for it of course is free money from the Fed, but seasonality. Its year end and mark ups seem to happen this time of year.

BTW.....Netflix CFO resigned right after he sold $52MM worth of stock.

Tuesday, December 7, 2010

Bet Against Bernanke? Surely!

If you want a good tax loss then just buy shares in Ben Bernanke.
Want to lose everything you have? Bet on Ben Bernanke.

The markets were propped up again by a kick save by who else last week? The Federal Reserve AKA PPT. The markets were about to roll over last Tuesday afternoon when all of a sudden unbelievable manufacturing numbers out of China saved global equities. I don't know how this could be considering that the Chinese have basically telegraphed much higher interest rates in China over the last few months. Much better manufacturing data out of China is not necessarily good news as it portends the Jack Nicholson saying - "Its as good as its going to get." There are rumors of a very imminent rate increase in China as early as this weekend. If we see a 50BP rise in short rates global equities will fall.

In his 60 minutes interview:

Ben Bernanke preposterously believes that Inflation is low. That is like saying my kid is doing great in school. He gets A's in Gym and Lunch, totally forgetting about the F's in Math, English, and Chemistry. This is because Bernanke and his band of thieves selectively forget the most important part of inflation which is food and energy. Just like the most important subjects in school or math and science, why worry about failing them when you are being graded on doing push ups and eating?

When Bernanke stated that he was 100% sure that he can prevent higher levels of inflation this was a sign that he had completely lost it. Only psychopaths can make this type of prediction. Let me state for the record that I am not in the hyperinflation camp, I am in the much higher inflation camp. The fact is we are beyond any type of real fix to heal or rebuild our economy. QE2 basically put this country over the cliff. Yesterdays announcement of extending the Bush era tax cuts only adds to the immense debt levels the country currently has. Adding new debt to the country is going to prolong unemployment not reduce it. Let me also say that the country is not bankrupt. We are not revenue constrained. We can always print more money but are we going to enjoy these low long term rates forever? Bonds have sold off ever since QE2 was announced. If rates spiral upwards then the jig may already be up for Bernanke. Taxes regulate our economy and balance out the reserves in the banking sector. There is simply not enough to balance and regulate. This is why the Treasury has to balance out the reserves to make up for the lost revenues via taxation.  

Bernanke just doesn't get it. He either is an economic imbecile or a complete elitist psychopath. Take your pick?

His desperate attempt to have stock prices at these elevated levels is simply beyond belief. Quite simply his 60 Minutes attempt to explain himself to soft ball questions really gives us a quick look into this mans head. Guess what? There is nothing there! I am still stunned by his assertion that he can control inflation 100%. Paul Volcker must be rolling over in his grave and the mans not dead yet! The only 100% assertion in regards to Bernanke is his track record. He has been wrong 100% of the time!  Why break a good losing streak? It is beyond stunning to me why people still take this guy seriously?

Lets review:

Bernanke didn't see the 2008 credit crisis coming.
Bernanke has no clue what systemic risk is.
So when he says that he is 100% sure he can control inflation, we all should sell Treasuries hand over fist and buy Gold/Silver with the proceeds. If Bernanke thinks he can control inflation then inflation is right around the corner.

In fact from the above graphic is that inflation in terms of food and energy is already here.




Bernanke seems to think that there is no problem putting/keeping Barbara Eden back in the bottle but Barbara is already out of the bottle and not going back in.

So this guy has made these statements over the last five years.

1-Subprime is contained.
2-We are not going into a recession.
3-No housing bubble that is evident.
4-After housing blew up - Housing is bottoming.
5-The economy is recovering.
6-Labor market is getting better.
7-The banking sector is fundamentally sound.
8-I am 100% sure I can control inflation.

How in the world does this guy still have a job?
This guy is the ultimate MUSH!

A bet against Ben Bernanke is money in the bank.

Watch Copper

Watching High Grade Copper over the last few years have given great clues to what direction the broader markets are headed.

The metal is considered the standard bearer for the general health of the world economy. Copper has an excellent correlation to economic growth. This is because copper is used by many industries like the electronics and telecom industries. Copper usually rallies when there is greater visibility into global growth because its a bell weather for capital spending.

A 94% correlation is something that cant be ignored.

Copper coming up to another major point.

Can it get through this important level? A multi year double top?

This Time Is Different?

I am currently reading the Reinhart and Rogoff book "This Time Is Different."
An excellent read.

Please go out and buy this at AMAZON.COM

If you happen to buy it from this link I get a few shekels, not enough to live on let me tell you.

Well! The Futures are screaming higher this morning. Up some 12 points from last nights close. If they hold these levels it will be a new high for 2010. Yippee!

Looks like risk assets are getting a big bid as extend and pretend and TTID (This Time Is Different) is winning over Fraudclosure, European Sov Debt, Housing, and that small thing called jobs. The markets are also strong in the face of an impending Chinese Interest Rate Hike as soon as this weekend. But I digress, who cares when lower taxes, tax cuts and free money for not working trumps trivial stuff like reality, jobs, and commodity inflation?

Did I just say lower taxes? Tax Cuts? Oh Yes! I did! The markets are also stumbling over themselves like a drunken sailor on shore leave. In case you missed it our President- Barack Obama bent over to the GOP on taxes. This is not a surprise coming from #44. Should we call him Mr. December?

This is the deal on taxes:

Obama is extending ALL of the Bush tax cuts for two years. Which means after he loses the election the tax cuts will be made permanent. These are the same Bush Tax cuts that he swore would be reversed if he got elected.This is why Independents voted for him. This is why the ccultural/pprofessional Left voted for him.

Reduce the worker payroll tax for one year. From 6.2% to 4.2%.

Temporary reinstatement of the estate tax at 35%, which means again after he loses the election, the estate tax will be eliminated permanently across the board.

Extension of UI for the long term unemployed.

All of this of course is completely unfunded. I have stated before that Barack Obama is more like George W. Bush then George W. Bush himself.

This is no longer a discussion.

Double down in Afghanistan? Check!
Keep GITMO open? Check
Keep Extraordinary Rendition? Check!
Do not prosecute banksters? Check!
Keep State Secrets? Check!
Keep Defense Budget near $700B? Check!
ObamaCare like Bush Medicare Part B? Check!
Have Lobbyists and PACS dominate? Check!
Extend & Pretend into oblivion? Check
Reappoint Bernanke after Bush mistake? Check!
Keep Bush Tax Cuts? Check!

There are hundreds of examples of the Obama policy that is lock step with the Bush policies, this is just a taste of the massive betrayal of #44.

I have never seen a President in my life or in modern times betray the country that elected him as much as Barack Obama. Bush may have been a dolt but he at least catered to his base. Where is Obama? Massive loss of respect and trust will lead Independents and the Left to abandon Obama. The Democrats would be stupid to renominate him in 2012.

What this means to the market short term is more Alice In Wonderland. What it means mid/long term is Alice In Chains.

I keep hearing This Time Is Different. Don't Fight The Fed. Don't Fight Big Money. Don't Fight The Tape. How did this work for everyone in 2000? 2007? 2008?

In the short term, investors have a long memory. Its like putting your hand on a hot oven. But in the mid and long term the memories are very short and the same idiots that were buying Ariba and Commerce One at $500 are buying Chipolte, Bidu, Priceline, and Netflix at the same valuations. Remember! This Time Is Different.

I would like to leave you with two links that tell me that nothing really ever changes.

We now need to hear the missives of total idiots when getting quotes on Yahoo?
Is this anything different than the Silicon Investor and Clearstation? What about

I can say one thing regarding human nature. Its never different anytime. Doing the same thing over and over is insanity. You cant fix a debt and leverage crisis with more debt and leverage.

This little end of year market melt up will end badly in tears.