Monday, May 18, 2009

Babble Babble Babble!

Yawn!

Someone please come in here and wake me up when the bubbleheads are done babbling.

Talk about "sell" indicators:

Cramer claimed today that the market will never retest its 666 lows. My God! If that's not a "sell" indicator I don't know what is! Cramer is the most profitable fade I have ever seen!

Banking analyst Richard Bove said the banks have never been better capitalized then they are today. HA! Your kidding me right? Let us all not forget who this clown is. This is the same asshat that said the banks were a "generational buy" right before the whole banking system almost collapsed last Fall.

Then we got this news at the end of the day which rallied the financials heading into the close:

*GOLDMAN, JPMORGAN, MORGAN STANLEY SAID TO APPLY FOR TARP EXIT*BANKS SAID TO APPLY TO REPAY COMBINED $45 BILLION TARP FUNDS

Ok, how many times are they going to recycle this story? Its old news banksters!! Find some new material!

Seriously, I am so sick and tired of the same bullshit. If Lehman was alive today it would also be "well capitalized" if they had been able access to the Fed's window and didn't have to mark to market any of their toxic assets. Folks, the government is basically propping up the financial system with a blank check. Of course they are all well capitalized when the Fed's got your back! Keep in mind all of these banks are insolvent and couldn't survive for even a day on their own.

You need to ask yourself this question going forward:

What happens when the Fed has to pull the "blank check" in order to keep inflation in check(more on this later). Answer: Its not gonna be pretty.

For now, the fraud and sham that we like to call the stock market rolls on folks. All of the financials are just shell companies that are being propped up by the government. The banks are basically nothing but a bunch of Enron's that could blow at any moment if Congress cuts them off.

There will most assuredly be a time where the government runs out of money as thousands of states, pension funds, munie's, and corporations all beg for bailouts. The 10-year was up sharply again today as our Ponzi spending continues:


My Take:

We are once again testing the recent highs on the 10 year in terms of yields post QE. What's interesting here is yields soared despite the fact that the Treasury bought bonds today as part of their QE policy. The Fed wants to keep the 10 year at around 3%. As you can see above this is starting to become a struggle despite their QE policy.

I am sure the following unemployment prediction from Standard and Poors didn't help things in the bond market today:

"*S&P SAYS U.S. UNEMPLOYMENT VIEW 11.7% FOR `PESSIMISTIC' VIEW*S&P SAYS U.S. UNEMPLOYMENT VIEW 9.7% FOR CURRENT BASELINE VIEW*S&P SAYS U.S. UNEMPLOYMENT NEXT 12-18 MOS MAY REACH 9.7%-11.7%

"Based on our current baseline and pessimistic economic forecasts, webelieve unemployment for the next 12-18 months could reach 9.7% and 11.7%,respectively. Our loss forecast for U.S. bank credit card receivables is10.5%-12.5% for the same period. We believe that credit card losses,delinquencies, and delinquency roll rates will likely continue to rise, and payment rates will likely decline, as unemployment rates and personal bankruptcies continue to increase," noted credit analyst Ildiko Szilank.

Ratings information can also befound on Standard & Poor's public Web site at www.standardandpoors.com; underRatings in the left navigation bar, select Find a Rating. Members of the mediamay request copies of these reports by contacting the media representative provided."

My Take:

11.7%!..Ouch! That's gonna leave a mark. I thought the banking stress test said the worst case scenario was 10.3% for unemployment. Ooops!

Maybe its time for a new stress test with 12% unemployment. I bet those banks will look even better capitalized then!(scarcasm off)

You can't help but ask yourself this question after seeing violent moves higher in treasury yields:

Is the bond market getting nervous? Stocks were up sharply so a rise in yields should be expected, so I am not going to read too much into this today. However, this will become a huge story if we clearly break the recent highs seen in the last few weeks following the Fed's QE purchases.

There will eventually be a "battle royal" between the bond market and the Fed over treasury yields. Its going to be quite a war. I can't wait to watch.

So How Ugly Can Lending Rates Get? Pretty Ugly When Inflation Becomes a Threat:

Lets go back in time and take a look at the Fed's interest rate policies:


Bottom Line:

As you can see, rates can get flat out ugly when inflation rears its ugly head. Yields peaked in the 1980's at over 16% as Volcker was forced to battle raging inflation.

As you can see today, rates are at historical lows not seen since the Great Depression because the imminent threat is deflation. There is no demand for money as the economy collapses at a record pace.

However, down the road, what in the hell do you think is going to happen to inflation as a result of the Fed's $10 trillion dollar spending binge? Let me answer that Alex: Crushing inflation that will decimate the consumer's buying power.

The Fed will then be forced to respond as they did in the 1980's by raising interest rates back up into double digits. If they don't, the people of this country will starve because the cost to simply survive would become unaffordable to most.

What are those McMansions going to be worth if rates get back up to 17%? I don't even want to answer this one. Put it this way, anyone with $100,000k in cash will be able to pay cash for just about any house that they want(within reason).

The stock market can keep drinking the koolaid for now. They better enjoy it now because there will be a large price to pay for this asinine "bailout nation" response to the worst financial crisis since The Great Depression.

16 comments:

CT-Hilltopper said...

Hi Jeff!

I didn't even put the TV on today when I got home from work. I knew what to expect, and I really didn't want to hear it.

Jim Cramer? Please shoot me. He also said on another show that the housing market would bottom on June 30th. I feel for people that are listening to him and taking his word as the gospel on these stock picks, because he's losing somebody some money. Don't even get me started on Steve "I must be an economist because I play one on TV" LIEsman, or that other waste of oxygen, Dennis Kneale. Please don't get me started on Larry Kudlow either...I think the only green shoots in this economy are coming out of where he sits.

The only thing I can't figure out is if we're going to see a period of deflation first, then rising interest rates combined with rising inflation that basically deliver the one/two combination that put us under, or if we're just going straight for inflation and rising interest rates.

I've just had the feeling that the response to this whole financial crisis has been a "throw something at the wall and see what sticks" approach, at best. It doesn't appear as if anyone has had a real plan, just one thing tagged on after another thing, which hasn't worked. I've never seen anything like it.

Jeff said...

CT

Well said!

I agree with you. This is one giant science experiment. Ben doesn't have a clue as to what he is doing.

All I know is you can't prevent bubbles from bursting. You don't fix a drunk by giving him another glass of wine.

I think we will see continued asset deflation and price inflation.

A few years down the road it will be an inflationary nightmare. So the 1-2 punch theory is how I see it.

There was a 1-2 punch during the Great Depression. First ovvuring in 1932 and then again in 1938.

I think you will see one more wave of selling followed by a serious inflation problem.

That being said because this stimulus is so unprecedented, I don't think anyone knows as to how this all plays out.

BTW I avoided CNBC for the most part all day today as well.

I did a little Howard Stern on Sirius.

Its going to be interesting to watch this all play out!

J

CT-Hilltopper said...

I copied this for you. Its an excerpt from one of only a few posts I ever made on a blog I tried to start up. I thought you might get a chuckle out of it...

...As far as the government being permitted to practice a policy of deception for the greater good of society...lets call that what it is...no political doublespeak. It's called lying. Just like what multiple people were doing during the chain of events in the mortgage crisis were called fraud. Lets not pretty it up, or put a better face on it. It's called lying. Just call it that.

I'm not naive'. I know that people lie, governments lie. I also know that when people and governments lie it usually comes back to bite them in the backside at the worst possible moment. That being said, there's a lot to be said for just telling the truth, because you pay a mighty high price if you don't.

There's not a lot of "hope" and "change" in lying in government.

I think we should start another government acronymed (is acronymed a word, btw?) agency right now called C.R.A.P. It should be implemented immediately, and it should have jurisdiction over TALF, TARP, and all of the other acronymed programs that the government has come up with to deal with this Depression.

What does CRAP stand for?

The Committee to Rescind Asinine Programs.

Jeff said...

Ct

So true.

Change we can't believe in! All of this is one big lie.

You should continue writing your blog. The more people that spread the word the better.

We need the truth versus more lies to be spread. The corruption must stop before our country is destroyed.

Best
J

Anonymous said...

Actually C.R.A.P has been around for a while now. Most Americans are just not aware of it.

CRAP = Continuous Raping of the American Public

Jeff said...

Anon

Here here.

Its going to be a generation before anyone ever trusts the markets or the government again.

This whole charade is deplorable.

The system has never been more gamed. I personally will never have many assets in the stock market ever again.

I may dabble in certian sectors like hard assets like commodities, metals and oil as inflation hits.

However, I will NEVER buy and hold in this market ever again.

I will remain in fixed income for the most part going forward. If that looks shaky then its going in a safe.

Wall St has destroyed the public trust in capitalism and stocks.

They may game the system for now, but as earnings collapse and stocks tumble for the third time in a decade, I think most Americans will never consider stocks to be safe ever again.



However

Anonymous said...

Hey Jeff,
any luck finding reputable places for gold/silver purchases?
thanks,
RG, NYC

jeff said...

RG

Working on it.

I want to confirm my sources.

I am thinking gold might pullback a tad here so I am hesitant to focus on it right now. It will be on the blog as soon as I finish my research.

Buy the ETF GLD in the short term. I am in this to a small degree.


Best

J

Anonymous said...

Jeff,

I agree with your assessment about the stock buy and hold strategy. It is a losing proposition because the market is highly manipulated by the Wall Street crooks and dirty DC politicians

Short term play or quick hit & run is the only way to avoid being a bag holder.

Jeff said...

Anon

Yup

Get in and out.

The problem is its hard to even do this nowadays when the government is constantly manipulating the market.

I love to trade because its a passion of mone.

However, its hard to try and trade when the rules always change. Short term plays at this poi nt are risky as hell.

I am very concerned that the obsessive bullishness by GS and others on Wall St right now is about to destroy the retail investor.

The investment banks love to pump pump pump and then sell and short the market at the expense of the little guy.

The system sucks right now. I totally agree that the market is criminally manipulated.

GL with your trades!

Greg said...

Jeff,

Did the Fed announce further Treasury purchases yesterday?

Anonymous said...

Jeff - Thanks for taking time to write and update this blog. It is one of the better ones that I read.

To Anon and others: With due respect, you may be cheating yourself of a wealth building opportunity by swearing off the market forever. I agree completely it is a den of theives. I'm not claiming to be an expert by any means, however, I do think there are long term trends that you can take advantage of. Not buy and hold.

With regard to gold and metals, I highly suggest you check out this blog http://garyscommonsense.blogspot.com/

I've been following his blog for almost a year and for full disclosure, subscribed to his service. It is the only investment service I've ever paid for and I consider the price and value more than reasonable. But, I don't want to come off like some pimp, especially on Jeff's site. (Again Jeff, you're great.) Getting back to gold . . you may find that the gold mining stocks are a better value. At a minimum, look at GDX (an ETF basket of miners). I am not a gold bug or doomsayer, nor am I an all in or all out kind of person. Continue to read, research and follow your own direction. Good luck to all.
Respectfully, BK

Jeff said...

Greg

Yes the fed bought close to 4 billion yesterday.

Anon

Good points

I am not swearing off stocks forever. I just refuse to come back until the fraud is cleaned up. Investing in a market that's unregulated like the market today .

I own some gold too . I will check out gays blog.

On the road right now.

Thanks for your support and your thoughts!

J

Jeff said...

Oops bad typo!

Gary!

Also I wanted to add that I meant its crazy to invest in an unregulated market

maximus said...

Love this post....

And now some people are trying to do something about the Federal Reserve....

Please visit and take action....

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Best to all....

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

Jeff said...

MAx

Thanks

Lets keeep turning up the heat!