Friday, August 14, 2009

Let The Class Warfare Begin!

Hat tip to Ken Lay in comments for finding this. Take a look at Henry Blodget's piece on the current income distribution in the US:

My Take:

Its official. We are all nothing but a large group of serfs now after being robbed by the oligarchy in this country. As you can see above, the disparity in income distribution has now officially passed the heydays seen in the roaring '20's.

Half of the wealth in this country is now owned by the top 10% of income earners. This is quite remarkable considering the economic plunge that we experienced last year.

Isn't it interesting that the criminals that caused this nightmare are wealthier than ever before?

Meanwhile, as the oligarchs thrive after pillaging the taxpayer, the average serf in America is left with a 50% loss in their retirement portfolio, massive debts, and no job. Why doesn't anyone seem to care? I just don't get it.

History has shown us that if you let bankers run wild without regulation, they will eventually empty the wallets of everyone around them. When its all said and done, whats happened here in the US will be known as the greatest heist in the history of the world.

To this day I will never understand how Congress allowed this to happen. What's even worse is the fact that they are now allowing the American public to be raped once again by forcing the taxpayer to replace the consumer in the form of the Fed.

The Federal Reserve has become nothing but a giant wallet for Wall St. It's clearly evident that this recent move in the markets was generated almost exclusively using their balance sheet along with smoke and mirror accounting that allowed the oligarchs to hide their losses and "look" profitable once again.

What disgusts me most here is the fact that Wall St will once again be able to lavish themselves with huge bonuses based on the illusion that they are profitable. Everyone knows this is a lie. Almost all of these banks are insolvent. Congress knows it too and its a damn shame that they refuse to do anything about it.

The consumer sentiment number was horrible today because 90% of America is suffering as a result of a crashing economy. The only people getting richer at this point are the people that don't need the money.


This is an absolute outrage!



I am so tired of watching all of this stupidity. I think I will call it a day. Sorry for the rant. When I see this stuff I just want to vomit.

History Repeats Itself

Check out this powerful speech from Ronald Reagan. He does a great job explaining how socialized medicine takes us one step closer to socialism.

This enforces my belief that the anger we saw at the town hall meetings last week went much deeper then simple health care reform. It represents a belief system that goes against everything this great nation was founded on.

Take a listen and lets hope that we can find strong leaders that will protect what our founding fathers fought so hard for:

I will have a market update later today.

Thursday, August 13, 2009

How do we get out of this mess?

I think that's what Wall St is trying to figure out right now. Stocks were flat today as the battle at S&P 1000 rages on between the bulls and the bears. This was the 12th straight day that stocks have traded in a fairly tight range around the 1000 area.

I actually made my first trade in a few months today. I bought some August TBT PUTS before the 30 year auction results at 1PM on a hunch. I figured there was no way in hell the Ponzi machine was going to let a small $15 billion 30 year bond auction get in the way of the spring rally.

The FCB's don't participate much in auctions at the long end of the curve because of their fears around inflation so it was up to the Wall St to gobble up this paper and as usual the bubble boys did not disappoint. I sold my PUTS a few hours later at a nice profit as TBT tanked as a result of the strong 2.5 BTC on the 30 year auction.

For full disclosure: I still remain short treasuries over the long term. TBT is one of the holdings in my long term portfolio.

I continue to avoid trading this market. If you want to put positions on at this point you almost have to think like a criminal and play the bull tape. I also advise getting in and out quick because the stock market has once agin become a bubble for the 3rd time in 10 years. P/E's are once again insanely overvalued. Some forecasters have P/E's at over 100x earnings at this point.

We all know what happens to market bubbles folks. They often pop when you least expect it, and the resulting drop tends to be violent and very painful. If you go long be nimble.

Deutsche Bank Economist: The Exit Strategy Will Be Painful

Deutsche's chief economist Norbert Walter thinks the exit out of this stimulus by the Fed is going to be extremely ugly. I strongly advise you to watch this video. Norbert hits a home run here as far as I am concerned:

My Take:

I loved this guys take on this. He sees a triple U shaped recovery as the economic world works through a series of ticking time bombs that are unavoidable at this point as a result of spending so much money that nobody has.

Norbert also warns of a currency crisis via the US Dollar if one or all of the BRIC's lose confidence in our ability to dig out of our deficits. I couldn't agree more. Lets face it folks:


How in the hell are we ever going to pay this money back? How can the Fed create an exit strategy when so many parts of our economy are insolvent or bankrupt? I PERSONALLY DON'T SEE AN EXIT STRATEGY HERE WITHOUT CREATING A DEPRESSION!

The problem here folks is if we don't have an exit strategy then the dollar is going to crash as we continue to dig ourselves deeper into debt as more and more companies need to be saved.

Norbert explained above that if the currency collapses, the government is going to be forced to raise rates in order to find buyers for our debt. This will absolutely destroy the banks and the housing market. If these two go down the crapper, the rest of the economy will most assuredly follow.

The reality here is this:


The economy must recover and the consumer must start to consume once again in order for the Fed to have a viable exit strategy. At this point, we so zero signs of this happening:

Foreclosures are still rising at a record pace:

"WASHINGTON (AP) -- The number of U.S. households on the verge of losing their homes rose 7 percent from June to July, as the escalating foreclosure crisis continued to outpace government efforts to limit the damage.

Foreclosure filings were up 32 percent from the same month last year, RealtyTrac Inc. said Thursday. More than 360,000 households, or one in every 355 homes, received a foreclosure-related notice, such as a notice of default or trustee's sale. That's the highest monthly level since the foreclosure-listing firm began publishing the data more than four years ago.

Banks repossessed more than 87,000 homes in July, up from about 79,000 homes a month earlier."

And the consumer continues to not consume:

"U.S. retail sales fell 0.1 percent in July, after gaining a revised 0.8 percent the prior month, the Commerce Department said in Washington. The median forecast of 76 economists in a Bloomberg News survey was for an increase of 0.8 percent. The Standard & Poor’s 500 Index fluctuated, swinging between a 0.7 percent gain and 0.5 percent loss."

The Bottom Line

As you can see above, the economy has not turned like the bulls expected it to. The consumer number was horrendous and I see no reason why the trend won't continue.

Jobless claims were also back up again this week as companies continue to shred jobs. This will only put more pressure on the consumer as they continue to fold like a tent.

The reality here folks is there is no exit strategy that does not result in the worst depression seen since the 1930's. My fear is it could be even worse than what was seen in the '30's because the size of the deficit is simply mine boggling compared to any other time in history.

Despite the obvious evidence that their policy is failing miserably, the Fed continues to try and reflate the debt bubble.

When are they gonna realize that bubbles don't reflate? Ben needs to pickup a history book on bubbles and then start thinking of an exit strategy that results in the least amount of economic pain that is possible.

Delaying an economic reset will only make it hurt that much more when the economy inevitably collapses.

Tuesday, August 11, 2009

Tempers Flare Over Health Care!

Just a quick note tonight.

I have a busy day tomorrow. I will have full coverage of the FOMC meeting tomorrow evening. There are rumors floating on Wall St that another QE may be announced by the Fed. I expect stocks and bonds to be extremely volatile tomorrow.

Town Halls

I will have a few comments below around the anger that's being expressed by Americans all over the country at various town hall meetings regarding health care. Here is an example of a town hall meeting in Lebanon today that was conducted by Sen. Arlen Specter:

Quick Take:

I gotta admit folks. My first thought is the anger seen here is not really about health care. In a perfect world, free health care sounds great! Right?

I think Americans have had it, and they are using these town halls as a way to release their anger and frustration over their rapidly deteriorating standard of living.

The economy is rapidly collapsing in America despite what the media is telling you. Unemployment is in the upper teens when you include all of the Americans that have lost unemployment benefits or have simply given up looking for a job.

There is no economic recovery. We are just seeing less worse numbers following an economic collapse in GDP. "Less worse" should be expected after such a sharp contraction in the economy.

Losing ONLY 250,000 jobs is a not a green shoot despite what CNBC tells you. What makes me laugh is unemployment supposedly dropped when the economy lost 250,000 jobs. Ummmm....Sounds like the math skills of a 2nd grader if you ask me.

I am sure there is some mumbo jumbo green shoot spinning reason why the unemployment rate dropped during a month in which we lost a quarter of a million jobs. I just don't wanna hear it, and apparantly after seeing these town hall meetings, America doesn't either!

The Bottom Line

CONgress better start listening to their constituents or these town halls will start to get increasingly more violent.

The citizens of this country have had enough of the lying in Washington. They realize that this country is being destroyed by the politicians. Health care is simply a symptom of the disease. The disease is debt and out inability to pay it back.

I detect a serious underground movement that's about to turn Washington upside down.

The politicians better start listening because the torches and pitchforks are right around the corner.

Monday, August 10, 2009

Bond Talk With a Veteran Credit Trader

Just a quick note.

I wanted to share a conversation I had today with a veteran bond trader who has been on the street for decades. Let's take a look at the bond auctions today:

My Take:

As you can see above, the first auction was pretty ugly. The Primary Dealers were forced to buy up about 65% of the auctions. The bid to covers were respectable on both auctions.

Now lets get into my discussion with a my veteran bond trading source. He believes that the PD's aren't exactly being forced to buy these auctions. In fact, they most likely want to own of these bonds in the current trading environment.


He explained an classic old school Wall St bond game to me that's been going on for decades:

Basically, the bond market will often sell off treasuries for several days before an auction so that they can pick up the treasuries on the cheap at the auctions. They then turn around and make a nice spread on them when the auctions get done because treasuries usually rise once the auctions are closed out and the BTC is acceptable.

The bond traders make a nice spread once the treasuries rise post auction because they can sell what they bought at a higher price.

He explained that this is one of the reasons why Wall St trading profits have been so astronomical recently. He added that the major players in this game like Goldman are thriving in this environment, and they are also benefiting from less competition with Bear Stearns and Lehman out of the mix. Lehman was a major player in bonds.

As a result, with less competition and high volatility in bonds, Wall St is thriving(for now) as they participate in these auctions.

If you look at what yields did last week heading into the auctions today, it appears my source is dead right. Treasuries sold off hard as the 10-year yield soared to almost 3.9% by Friday. This allowed the PD to gobble up treasuries on the cheap at today's auctions. They then simpply turn around and sell them at a tidy profit as treasuries rose and yields dropped during the day.

A case could be made that high PD participation in these auctions could actually be bullish in the near term because the primary dealers are able to trade them so effectively. Remember folks, there is still a ton of demand for treasuries by people like us. Many want no part of the stock market right now so the Primary Dealers have plenty of cutomers to sell to.

Don't get me wrong, I believe the world is backing away from our debt. However, its not happening in droves yet, and this sets up a highly volatile trading environment in bonds where good bond traders can make a fortune.

This trade(for now) is working most of the time unless the BTC is awful(which is rare).

The Bottom Line:

Wall St is a mighty smart bunch of thieves, and they are finding ways to make money in this market. I still believe that the bond market will eventually collapse as a result of the massive deficits that we are running.

For now however, Wall St is laughing all the way to the bank as they use your taxpayer dollars to make billions in stocks and bonds.

Sunday, August 9, 2009

Jim Rogers: Listening to CNBC=Bankruptcy!

Its a You tube Sunday!

Take a look at these two videos from Jim Rogers. The first one tears down CNBC. I love it:

Jim's latest thoughts on the economy: