Saturday, August 1, 2009

CNBC Ratings Plummet

For those of you who missed this on Zero Hedge yesterday take a look:

Quick Take:

I thought this was pretty hilarious. Ratings are down 30% from a year ago. Shouldn't "Bubblevision's" ratings be soaring after a 40% bounce in the market?

Perhaps being obsessively bullish is starting to annoy the hell out of the sheeple as millions are losing their jobs and struggling to survive?

Notice the biggest drop in ratings was Larry Kudlow's show. He has lost 2/3 of his viewers from a year ago, and we all know he is the most bullish of them all! I think its time to hang up the bull horns Larry. No one is listening to you! CNBC could probably run a Shamwow infomercial and get better ratings.

IMO, CNBC is slowly becoming irrelevant because they are failing to connect with their viewers who are struggling financially. They are losing credibility with their audience because they are simply not painting an accurate picture of reality.

I also find it very interesting that Dennis Kneale and Charlie Gaspirino are now publicly bashing the bloggers. Could it be that the blogoshpere is threatening their "bull kingdom" as all of these websites viewerships continues to grow?

I also find it interesting that they have allowed Karl Denninger on air three times in the last few weeks. Has CNBC decided its time to make a change before no one tunes in?

Lets hope that CNBC is finally waking up to the fact that the economy stinks, people feel like crap, and they are tired of being told how wonderful everything is when the reality is things suck!

Most investors have lost 50% of their nest egg twice in the last 10 years after listening to all of these bulltards. Being an "all in" bull suddenly doesn't look so desirable anymore.

The ratings say it all folks. People want the truth and are tired of being lied too! Most our financial press has become nothing but a soundboard for both Wall St and the government's agenda.

CNBC: You know how TV works. The ratings are all that matters. Perhaps its time for a different, more balanced approach as to what is actually going on in the world.

Friday, July 31, 2009

Inflate or Die(Deflation)

It's pretty simple folks. We are approaching the moment of truth.

The government is slowly getting backed into a corner. The more pressure we see on the currency, the tougher it becomes for the Fed to continue and play their borrowing games.

I believe moving forward, successful treasury sales may be viewed as a negative versus a positive if the dollar continues to sell off. Currency traders are beginning to realize that we are risking our currency as we continue to dig ourselves into unthinkable debt.

Today was the first day the market didn't zoom higher as the dollar sold off. As we broke the USD trading range and broke to the doenside, I think some of the currency traders got spooked and bailed.

Treasuries rose as the move in the dollar put the fear of god into some investors. Other smart money ran into gold which also soared today. The VIX spiked sharply at one point during the day.

The volatility and action was quite remarkable today considering the small move that we saw in the market. Things appear to be quite unstable as we head into next week.

The Fed has a choice to make

Its inflate or die(deflation). We have hit the fork in the road. The government either has to slam on the brakes and stop spending which will lead to deflation, or continue to monetize the debt and inflate. This of course leads to us selling treasuries out the ying yang.

The big question here is does the government have the balls to walk away and let a lot of the economy die via deflation? Considering they can't even let a bank die, I am leaning towards further monetization for now. This should put serious pressure on the dollar.

The question down the road will be this: Does the Fed blow their head off and destroy our economy as they try to save everyone or will they decide to let the deflationary forces prevail which then leads to a deflationary collapse? I remain on the fence on this one.

1 Down 299 More To Go!

For those of you who think that housing is recovering take a look at this video. This is a sobering reminder of how out of control the real estate bubble was. The most recent Case Shiller Index improved but still was down 17% seasonally adjusted. This means housing prices continue to plummet.

Note to potential home buyers: Never try and catch a falling knife! There will be plenty of time to buy when housing bottoms. There is usually a period of years where housing prices stay flat after real estate bubbles collapse.

Don't be a victim like the family below!


The Sheeple are Getting Restless

A quick market update.

The Dollar is crashing today as our government spends itself into oblivion. GDP was down 1% despite a 13 percent increase in government spending! Green shoots? Where? This recovery is totally government dependent. This is proof that the consumer has virtually disappeared.

What would this GDP number have been without all of the government bailout/ponzi stimulus?

1Q was also revised downward to -6.4%.

The government spending in the GDP spooked the hell out of the market this morning. Gold and silver are soaring.

This is not going to end well folks. J6P is waking up!:

Thursday, July 30, 2009

Where is that Money Tree Planted?

Hello Folks

Well, it was another bizarro trading day on Wall St. The DOW surged 160 points in the morning before giving up half its gains by the close. Obama came out after hours and said that the GDP will show negative growth in the second quarter.

Gee? Do you think maybe that info was leaked to Goldman an hour or two before the close as stocks pulled back late in the day?

Treasury Auction

You gotta hand it to the boys in the bond market. They pulled it off and got the auction sold today. The BTC was a strong 2.62:

Here is a nice summary of the treasury sales this week:

Quick Take:

The one thing that sticks out to me here is how erratic these auctions were in terms of who bought them. One day its the primary dealers. The next day its the indirect bidders. This looks like one giant juggling act IMO. The problem is we all know what happens when a juggler drops a ball.

You gotta wonder folks, where is all the money coming from that allows the market to prop up both equities and record bond auctions? We all know it doesn't grow on trees.

I can only come to one conclusion(Please don't take this in a derogatory way):

Quick Take:

I am very anxious to see what the money supply numbers look like as these auctions continue to sell. I can't help but think that the government is printing boatloads of money in order to make all of this work.

If this is the case, inflation is right around the corner. Notice how the dollar dropped hard today as the auction got done. I think that the more successful auctions that you see, the more pressure you will see on the dollar.

In fact, CNBC reported today that someone bought 100,000 contracts in the options market today betting that oil will DOUBLE from here. In my eyes that's an inflation/short the dollar play. I am wondering if it might possibly even be a dollar devaluation play.

Things are getting very interesting and continue to make less and less sense. I smell a big fat rat.

Watch GDP tomorrow morning. This could be a market mover.

One last thing today. Here is a great video on the HFT games we have seen recently including something very strange that happened this morning. Take a look. Karl did some great work here:

Wednesday, July 29, 2009

The Corruption Continues

Alrighty Folks,

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:

My Take:

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:


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:



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."

Quick Take:

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 stock soars to $300 a share as food stamp demand soars!

Bread for 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.



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.

Tuesday, July 28, 2009

Green Shoots? Don't Think So

So how far has our mighty economy fallen from the peak from an earnings perspective? Take a look at this chart from the gold speculator:

My Take:

Earnings are down 98% since Q3 of 2007! Yikes!

Yet everyday, all we here on CNBC is how company after company came in above earnings expectations. What's obviously going on here is analysts are dropping their expectations down to practically nothing. At the same time, companies are slashing costs.

When you add these two ingredients together, you create the perfect "positive spin tool" for the pigmen. Almost instantaneously after a company beats earnings, the news media begins screaming recovery! and Green Shoots!

Hell, at this point, corporate earnings are released right into Maria's earpiece once they are reported after hours. The market pumping begins literally seconds after a company beats expectations.

The reality here folks is these earnings beats are a joke. The chart above puts these beats in perspective.

Nothing has changed folks. The economy has collapsed and there are practically no earnings when you include all of the companies that are reporting losses. The consumer is still hiding under a rock, and the only thing saving the economy is all of the government created liquidity.

This government stimulus has basically replaced the consumer. The problem is this game can only go on for so long. At some point the treasury sales will begin to fail and thats going to force the Fed to pull away the punch bowl.

Somehow despite reality, the market has continued to march higher.

I wanted to share some interesting comments from some of my favorite people on Wall St. It appears many believe we may have seen the end of the rally.

Art Cashin

Markets Sleepwalk To Another Plus Close The stock market meandered through much of Monday’s session only to lock in a higher close in the final ten minutes of trading. The force behind the ten minute pop appeared to be, once again, electronic program trading.

The uptick was no where near as broad as recent sessions. On the NYSE, Advances beat Declines by a meek 1.7 to 1. On the NASDAQ, Advances eked out Declines by just 248 stocks. Volume was also limp.

The lackluster session technically extended the rally but there were some signs of wheezing. Robert McHugh points out that the number of stocks trading above their respective 30 day and 10 day averages rose to 86%. The number above their 5 day moving average declined from 86% to 83%. The rise in the first two suggests to us that the rally is clearly overbought while the slip in the latter hints it may be tiring. The McClellan Oscillator was compressed again Monday. That builds pressure for that possible “big day” by Thursday. We’ll watch closely.

Jeremy Grantham

Jeremy Grantham has compiled a rather remarkable record over the last two decades. He avoided the tech bubble. It cost him some clients but he saved money for those who stayed. He stayed out of the finance/real estate play but made big bucks on emerging markets. He even began to buy as stocks were heading to their March lows.

He now thinks the bargains have disappeared. Here’s how he opened July Quarterly Letter: A year is certainly a long time in markets, and so is a quarter.

A year ago, equities globally – and everything else for that matter – were very overpriced, particularly if they were risky.

A quarter ago, in mid March, prices everywhere were cheap. Now they have all – or almost all – converged for a few unusual moments at fair value. A year ago, it was very easy to know what to be: a risk avoider. It was not so easy reinvesting when terrified, but most of us knew that we should have been doing more. But today? It’s difficult to be inspired at fair value.

Bottom Line:

Jeremy is also short treasuries. He has repeatedly said that this is his trade of the year.

So is the rally over?

I have a feeling we are going to find out very shortly.

The bond auction today was shaky at best:

"The U.S. Treasury sold $42 billion in two-year debt on Tuesday in a sale that drew lackluster demand by some measures and might not bode well for other bond auctions later in the week.

The $42 billion auction fetched a yield of 1.08 percent and a bid-to-cover ratio of 2.75. The results might not bode well for other bond auctions later in the week. Demand overall was above average, measured by the bid-to-cover ratio. However, a key proxy for foreign interest, the indirect bidder category, was below average at 32.6 percent."

Quick Take:

Keep a close eye on these auctions. We could very well see an ugly bond auction by the end of the week.

Also, keep in mind the primary dealers need to buy up whatever bonds are left in these auctions. The question you need to ask yourself here is do the primary dealers(Goldman etc.) keep liquidity on the sidelines in order to keep the bond auctions clean?

If so, do they sell or stop buying stocks in order to create enough liquidity in order to keep the treasury auctions moving?

Time will tell.

Stay Tuned!

Monday, July 27, 2009

At a Standstill

Hello Folks!

Sorry its been so quiet around here. Just a heads up: I may not be as consistent with my posts over the next few months due to some health issues within my family.

Alrighty! Lets dig into the market!

Stocks closed basically flat today as the bulls and the bears duked it out. CNBC was out screaming green shoots this morning based on the 11% jump in monthly home sales. They claim this was the biggest percentage in 9 years. That's quite a skewed statement considering we are now selling 300k homes a month vs. the 1 million plus per month at the peak of the bubble back in '05.

So basically, home sales rose by 30+k or so. Whoopty frickin doo! Let's see how home sales are doing a few months from now as the bond market continues to take interest rates higher!

I'll tell ya folks: You need to really read into the "green shoots" headlines when you hear them because 90% of the time they are exaggerated and mean very little when you look at the grand scheme of things.

Speaking of interest rates take a look at the 10 year today:

Quick Take:

Yields were up fairly sharply from Friday. The yield closed over the 3.7%. What I wanted to stress with this chart was the volatility seen in the bond market today. Yields came down a bit after two bond auctions went pretty smoothly.

To me, this volatility is a clear sign that the bond market is extremely nervous about the colossal amount of debt that needs to be sold in the oncoming week and months.

Take a look at the number of treasuries that still need to be sold this week alone:

52 week Bills, $27 billion (July 28th) 2 year Notes, $42 billion (July 28th) 5 year Notes, $39 billion (July 29th) 7 year Notes, $28 billion (July 30th)

Folks, in normal times this amount debt would be sold over the course of months not one week! Where is the money going to come from to buy all of this paper? Money doesn't grow on trees!

How long can this be sustained? Let me answer that for you: Not long! China doesn't have unlimited cash! Especially when they keep telling the world that they plan on diversifying their dollar assets by buying other assets.

Speaking of which, the dollar was down once again today. Gold and silver continued to rise. Anyone seeing a trend here?

My holdings remain the same

Until the government ends this spending game I expect these trends to continue.

I thought you all might be curious as to where I am putting my money now. Disclaimer: This is not trading advice. I haven't made a trade in months but here is where I stand. The majority of my retirement remains in cash and bonds with metals and BEARX(see below) as a hedge. My trading account philosophy has been simple recently. Short treasuries, long metals, short the market.

I have had these trades on for months and they have hedged out nicely. I expect at some point that we will see a 1932 scenario where both bonds and the market sell off simultaneously. This would be the best case scenario for my trading portfolio.

In terms of holding short for longer periods of time as a hedge in an investment portfolio, I love the Prudent Bear Fund(BEARX).

The nice thing about BEARX is they hold lots of metals as well as being short. As a result, they hedge each other out in times like this where the market is rising as the dollar drops in value.

When this market rolls over and deflation becomes a short term risk, I expect the shorts to hedge out any losses on the gold holdings in the fund. This is a nice conservative hedge to hold onto in a volatile market. Let me repeat: This is not trading advice. Its simply my approach to this wacky market.

The Bottom Line:

Its all about treasuries this week folks. If the government can continue to successfully sell these auctions in the short term, the market could flat line or drift higher.

I personally believe that at this point the market has come to a standstill. The bulls are not sure how much more upside they have after such a huge move. Meanwhile, the bears are jittery after taking such a beat down. They are also concerned that the slight(and I really mean slight) signs of economic recovery in certain areas of the economy may provide further fuel for the bulls.

This sets us up for a potential borefest that could last throughout the rest of the summer.

I believe at this level on the S&P, both the bulls and the bears simply don't have a lot of conviction as to where the market heads next. IMO, Its going to take some type of large trigger to move this market sharply in either direction.

What could this trigger be?

For the Bears:

A failed bond auction. A large bank failure perhaps?

For the Bulls:

More green shoots? Positive GDP growth in the second half of the year?

One thing seems quite apparent. Bernanke seems hell bent on not allowing any large banks to fail. He ignorantly believes that they can earn their way out of this.

If he really believes this, then we are going to see a generation of slow to zero economic growth in this country. None of the banks will lend to any great extent until their balance sheets are repaired.

If you want to see how well this kinda of response to a banking crisis works out go take a look at Japan. Its been 20 years since their bubble blew up and they still aren't lending!

Its kinda hard to start recovering economically when a potential small business owner has no to access to capital because the banks don't want to lend them any money. God forbid the banks are forced to take their losses.

Stay tuned. The bond selling bonanza continues throughout the week!