Today's price action was absolutely baffling to me.
We almost saw a failed bond auction in Chicago as the world begins to run away from our treasury debt:
As you can see above, the bid to cover was a measly 1.92! This was not officially considered to be a failed auction even though many economists will tell you that anything under a 2 BTC is considered to be a failure.
The primary dealers "Goldman, Morgan Stanley, etc.)" were forced to eat more then half of the auction as world demand plummeted. They had to put up $24 billion of their own cash in order to close this nightmare out. Indirect bidders(China and the other FCB'c) gobbled up only $14 billion.
Folks, the fact that the indirect bidders are disappearing this early in the year is frightening. We still need to sell over a trillion dollars worth of debt.
It's pretty simple as to why we are screwed:
THERE IS NOT ENOUGH MONEY IN THE WORLD TO FINANCE OUR $2 TRILLION DOLLARS IN ANNUAL TREASURY SALES.
The only way they can pull it off is if they push the DOW down to 4000 by yanking liquidity which would then scare everyone into treasuries.
The Ponzi spending party is just about over folks. Batten down the hatches when our funding is cut off. The market pretended to take this all in stride. What's bizarre is treasuries actually rose today despite the news of the horrible bond auction. The market actually rallied from the lows of the session AFTER the bond sale. The dollar also spiked on the news.
You gotta ask yourself folks:
HOW IN THE HELL DOES ANY OF THIS MAKE ANY SENSE? WHERE IS ALL THE MONEY GOING TO CONTINUE TO COME FROM TO PROP UP BOTH THE EQUITY AND THE BOND MARKETS INDEFINATELY WITHOUT AN ECONOMIC RECOVERY???
ARE WE ALL LIVING IN THE TWILIGHT ZONE?
I am sorry, but anyone thinking that there isn't market manipulation going on only needs to look at how the bond and equity markets traded today. NONE of it makes one ounce of sense.
The high frequency trading scandal continues to gain traction. How can you not believe that the market is being front run to some extent after watching the market action today?
As an investor, I wouldn't touch anything at this point because I believe that THERE IS NO WAY THIS IS ALL SUSTAINABLE.! The market rally combined with its resilience in the face of bad news has really emboldened the bulls.
This is very sad because they are totally being led to slaughter. I don't see it any other way.
Rome Continues to Burn
Meanwhile, as the bankers continue to count up their TARP dollars and prepare to pay themselves billions in bonuses, the sheeple continue to suffer:
The USA Today reported that there are now 39 million Americans on food stamps as of April 2009. This is a whopping 20% increase from the same period a year ago:
"More retailers are accepting food stamps, as a record number of consumers are turning to government aid to pay for groceries.
Nearly 39 million people received food stamps — now known as Electronic Benefit Transfers — in April 2009, up about 20% over April 2008. Retailers ranging from some Costco (COST) stores — yes, quarts of capers do qualify — to 7-Eleven to Target (TGT) are moving quickly to cater to cash-strapped customers.
To accept the debit-card-like EBT cards, stores must meet at least one of the following conditions:
•They regularly sell at least three varieties of foods in each of four categories — breads/cereals; dairy products; fruits and vegetables; and meat, fish or poultry — and at least two of the categories must include perishable foods.
•Or more than half of total gross sales must be in "staple foods," which means no candy, soft drinks or prepared foods.
In its third-quarter earnings report July 8, Family Dollar cited EBT as among the reasons for its success in this economy. Same-store sales were up 6.2% for the quarter, and food and beverages gained the most. Food stamps represent "a significant opportunity for us," said CEO Howard Levine. EBT spending at Family Dollar (FDO) was up 18% from March 2008 to March 2009, says spokesman Josh Braverman."
Is this what its come to folks? Is this how companies now plan to now grow earnings? Perhaps we can create a "food stamp bubble". We can start doing hundreds of food store IPO's on Wall St as the number of people on food stamps soars as a result of our Greatest Depression. I can already see the headlines now:
Soup kitchen.com stock soars to $300 a share as food stamp demand soars!
Bread for pennies.com soars to $500 a share as unemployment rises to 25%! (scarcasm off).
Where is the anger from the average American? At an annual 20% growth rate, in five years we will have twice as many Americans on food stamps. This means we will have roughly 80 million people on food stamps by 2013.
This would equate to about 30% of American households eating on the governments tab if you look at the census numbers in terms of the number of households in this country.
HOW BAD DOES IT HAVE TO GET IN THIS COUNTRY BEFORE THE PEOPLE RISE UP AND PUTS A STOP TO ALL OF THIS!
ITS TIME TO TURN OFF "AMERICA'S GOT TALENT" AND PULLOUT THE PITCHFORKS PEOPLE!
The Bottom Line
I am sorry for the rant today but I have had about enough of the fraud and manipulation by the Fed and Wall St. This is NOT going to end well folks. I had warned yesterday that a failed bond auction may very well be in the cards this week. We came within a hair of seeing one today.
We aren't done yet this week either. We have several more more auctions this week and some are on the longer end of the yield curve. Wall St may be able continue and hide this fraud and keep the market propped up as they temporarily trade with one another using their quants.
However, what the large trading desks are missing as they daytrade themselves into billionaires is the fact that the governments access to money via treasury sales is rapidly dwindling.
Wall St is slowly going to find themselves with less and less liquidity to trade with as the primary dealer firms are forced to buy up the treasuries that the FCB's no longer want.
The "quants" will then find themselves with smaller and smaller balances from which to make trades as the mounting treasury debt overwhelms their firms. As the availablity of cash shrinks, their ability to manipulate the market will dwindle as well.
Let the games continue for now. Once the Fed's pocketbook gets cutoff after a failed bond auction, this rally will end violently.