Wednesday, April 29, 2009

Ben Blinks/Investing will Never be the Same

Good Evening Folks!

Whoa!! Watch out Ben!:


My Take:

Oooops! I hope everyone that planned on refinancing into a 4+% mortgage did so last week. Ahhhh...I had to chuckle watching this all play out today:

First we get an awful GDP# of -6.1% versus the consensus estimate of -4.7%. Futures then jumped after the traders dug into the report and saw that consumer spending had increased by over 2%.

Hmmm.....How can consumer spending be up after digging into the report?:

"Current-dollar personal income decreased $59.9 billion (2.0 percent) in the first quarter, compared with a decrease of $42.9 billion (1.4 percent) in the fourth.

Personal current taxes decreased $193.5 billion in the first quarter, in contrast to an increase of$19.7 billion in the fourth.

Disposable personal income increased $133.6 billion (5.1 percent) in the first quarter, in contrastto a decrease of $62.6 billion (2.3 percent) in the fourth. Real disposable personal income increased 6.2percent, compared with an increase of 2.7 percent."

Alrighty folks:

A little question here: How does disposable income soar while at the same time personal incomes dropped versus the 4th quarter? Anyone smell something fishy? Yeah me too. I call bullshit on this report.

Could it be that disposable income increased as millions started to stop paying their mortgage? That's what some of the bears are thinking. You can put me in this camp as well.

Ben Blinks:

Well, today certainly didn't disappoint when it came to the bond market. I warned yesterday that Ben better announce a treasury buying spree if he wants to continue to keep yields and mortgage rates low.

For a change Ben showed some discipline and just announced that the Fed will continue with their treasury purchases as needed. The bond traders then predictably shoved it right up Ben's ass by taking yields higher.

You better be ready to back up your words in the bond market. These are the best traders in the world and they will most certainly call your bluff if you fail to back up what you say. As you can see in the graph above, yields soared as traders ramped up the pressure on Ben and the Fed once they learned that no new treasury purchases were announced in the Fed's statement.

As I said yesterday, the Fed is increasingly running out of options. Bill Gross said today that he doesn't believe the world has the finances to buy the $2.1 trillion in treasuries that will be brought to market this year. IMO, we have a better chance of seeing god before we sell all of this crap sold to the rest of the world!

The only way I can see it happening is if the DOW crashes to 4000 or so. This would force trillions of spooked investor dollars into treasuries. Consider this to be a warning. This type of collapse can be easily orchestrated by the Fed: All they need to do is pull their liquidity and this market is toast.

Let me explain it another way: The financial system and most its players today are all a bunch of bailout addicts. The only drug dealer with the bailouts is the government. If the government pulls their bailouts from the addict, the economic system will be exposed for what it is: A BLOATED BANKRUPT INSOLVENT DISASTER.

Investing Will Never be the Same

I'll end with this point today. The stock market moving forward may never be the investment tool it has been in the past. Its been gamed, defrauded, and stripped naked and put in a closet.

I have often discussed a lot of trading ideas on here in the past. You will see less and less of this moving forward because I can no longer make sense of such a system that has become so corrupted and filled with fraud.

The desperation and panic that's filled the market in the past year has killed the Bulls(Sept-Nov.) and the Bears(March-today).

The only advice I can give at this point is to hoard cash and other assets of value. Going long this market is total suicide. There have been times that I have seen nice long plays out there.

However, I can't advise anyone to go long anything while the market is still filled with the criminals that almost and eventually will destroy our financial system. The bottom on this could fall out at any moment folks and going long at this point is extremely dangerous because there are no fundementals to support the market. Please keep your trades small on both the long and short side. Keep your hard earned 401k money in cash.

Could the market move up to 10,000 on this insanity? Yes, but I could just as easily see it plummeting to 4000 if reality is allowed to kick in.

The larger this move gets, the more fearful I become that average investors will all pile in here thinking everything is safe once again. Folks, this market is about as safe as walking into a Mexican hospital without a face mask thats filled with swine flu patients.

The only thing that's propping up this market at this point is hope, fraudulent spin, and the governments balance sheet.

Don't allow yourself to get sucked in by all the hype around this bounce.

Before you do anything around stocks: Turn off bubblevision, look around where you live, and ask yourself: Do things look any better?

15 comments:

teddy bear said...

http://tiny.pl/zj17

but, is it trustworthy news? there is so much manipulation all around, especially in media ;)

johndaniels said...

" How does disposable income soar while at the same time personal incomes dropped versus the 4th quarter?"

our beloved credit card economy. people maxing ut their cards and hoarding real goods; its a bt fatalist trend actually, as you described.

johndaniels said...

"I have often discussed a lot of trading ideas on here in the past. You will see less and less of this moving forward because I can no longer make sense of such a system that has become so corrupted and filled with fraud."

BRAVO Jeff, i couldnt agree more. I stopped all trading immediately sfter the bailout; most of the issues i had owned are down over 50%; and I had a long mentality at that time.

its all just not real. how can we trust this system?

Jeff said...

Haha

Nice catch Teddy.

Yup

The criminals at Goldman Sachs are sitting there with a boatload of stocks that they need to sell to the suckers after this rally.

Lets see after the next leg down if there are any retail investors that are willing to come back and get slughtered a third time.

It may be a generation until investors trust stocks again.

Jeff said...

JD

Thanks

I totally agree!

Did you catch Visa's earnings tonight? They beat expectations mainly based on new card issuances.

There is no alternative when the wallet is empty.

Anonymous said...

thanks for your comments

Macroanalyst said...

"Current-dollar personal income decreased $59.9 billion (2.0 percent) in the first quarter...

Personal current taxes decreased $193.5 billion in the first quarter...

Disposable personal income increased $133.6 billion (5.1 percent) in the first quarter..."

The numbers do add up. Change in disposable personal income = change in current-dollar personal income - change in personal current taxes

Jeff said...

Macro

Good point. Agreed

But why did personal taxes decrease so much?

Home wealth loss? Unemployment?

The numbers add up but don't make sense.

maximus said...

Wait a minute....

If taxes decreased, it's because income decreased which would certainly not provide additional dollars for spending for a consumer.

If I made $10,000 and paid $1000 in taxes last year and made $5000 and paid $500 in taxes this year, I do NOT have an additional $500 to spend, correct????

It's also interesting the "current" taxes decreased by nearly 4 times what current personal income decreased. This must mean they are including estimated taxes in the current year no longer due or some bizarre manipulation like that, but in any case, reduced taxes due does not translate into higher disposable income unless there was some sort of tax rate reduction and I don't recall any of those....

Someone tell me what I'm missing here....


Great blog, watch for it to be featured on my site at some point in the near future....


Maximus
http://4best4worst.wordpress.com/

sam said...

ok

Anonymous said...

Quickest decline in GDP in 50 years, we are on the cusp of a global flu pandemic, and we have had nothing but economic news for months and monts - and the DOW goes up almost 200 points yesterday. There is no way that the stock market isn't being gamed. If any of this news broke anytime in the past the market would have crashed. How are they doing this? Do the big trading firms have this much influence on the market? I don't know anyone who is doing anything but getting their money out and keeping it out.

Minton Mckarkquey said...

I gave up trading and just spend the occasional $100 at Vegas - it's more reliable! Wife's company just cut salaries for everyone by 20% - I hear this is happening in many places now. Painful.

Interesting piece here: http://jameshowardkunstler.typepad.com/...

Jeff said...

Max

Thanks.

Yup I have the same question. The system is being gamed for sure.

Nice website by the way. I just took a peek.

Jeff said...

Anon

Its the big trading desks that are moving the market higher. Goldman's trading volume is through the roof.

When everyone bails on the market it becomes more easy to manipulate.

The quants that hedge are forced to go long as the market moves higher in order to hedge their short bets.

This is all unsustainable and its gonna end badly.

Jeff said...

Minton

Sorry to hear about the wife. At least she is still employed! I have many friends getting laid off.

This recession is really hitting home for me as well when it comes to my friends and family.

Lets hope the criminals get put away soon and we can begin to trust the stock markets once again.