Saturday, February 5, 2011

Must Listen Podcast from Joe Saluzzi

Check out Chris Martenson's interview with Themis Trader LLC co-founder Joe Saluzzi.

Joe shreds the HFT's and discusses why the market is now based on speed versus investing.  Most of the liquidity and volume in the market is being created by these robots and Joe explains why this is extremely dangerous.

I have been talking about this for weeks now and it's nice to hear that it's starting to get some legs.

Pension Insanity

No wonder why this country is bankrupt. 

Before you watch these check out this article from the WSJ.  Apparently someone has repeatedly hacked into the NASDAQ:

"Hackers have repeatedly penetrated the computer network of the company that runs the Nasdaq Stock Market during the past year, and federal investigators are trying to identify the perpetrators and their purpose, according to people familiar with the matter.

The exchange's trading platform—the part of the system that executes trades—wasn't compromised, these people said. However, it couldn't be determined which other parts of Nasdaq's computer network were accessed."

Quick Take:

The manipulation of equities via HFT's is bad enough.  Now we have to worry about hackers.  IMO, this is just one more reason to stay the hell out of the markets.

What a mess.

Funny Stuff Below. 


Friday, February 4, 2011

Everything's Just Peachy....NOT!!!

Bondzilla(10 year):

Quick Take:

This is what the bond market thought of today's jobs number. 

Translation:  The recovery is a sham and every month that goes by where we see zero to little job creation puts more and more pressure on our government's ability to pay off it's deficits.

The reason for this is simple:  Without jobs there is no tax base.  Without a tax base the government cannot raise revenue.  Without revenue the government can't pay their bills.  When they can't afford to pay their bills they lose their ability to buy treasuries unless they print more money.  When they print money it devalues our currency and increases the risk of inflation.

The Bottom Line

This is not rocket science folks.  We are spending money that we don't have.  Stockman explains the numbers in the video below.  We are spending more than we bring in.

This is mathematically impossible to sustain without destroying the currency.  The fact that stocks don't understand this is mind boggling to me. 

SAdly, millions of people are going to get their 401k's shoved up their ass for a third time in a decade when the stock market eventually wakes up and starts calculating the numbers. 

The robots rule equities for now but this also can't last.  I am hearing more and stories around how some of the  the trading algos are starting to lose money.  The trading desks on Wall St had a terrible 4th quarter from an earnings perspective when you look at their quarterly reports.

Why is this happening?  Because the market no longer trades rationally.  It trades based on zero fundamentals.  At this point it basically trades based on positions that are held for seconds at a time.

IMO:  The problem the robots have right now is there is no accurate way to program their trading algos at this point because the market trades so inconsistently.   There seems to be no rhyme or reason in which it moves.  It often goes up on bad news days and trades down on good news days.

How in the hell can you program anything based on such nonsense?  I predict that you will see a drop off in algo based trading if the market continues to trade so erratically. 

One More Rant Before I Roll 

I started getting really angry today after watching yesterday's Bernanke speech a few times on the internet. 

This dude needs to seriously take his foot off the easy money gas pedal.
The Fed is creating political instability throughout the world with their disgusting policy of printing money.  

When I saw the bad jobs print this morning I immediately asked myself this question:


How many bad unemployment numbers do they need to see before they wake the hell up!!!! How many countries have to implode before they realize that their policies are creating destruction all throughout the globe?

Grrrrr......This is all getting so infuriating to watch. 

Well...I'm off for some cocktails.  Numbing my mind with booze is the only thing that keeps me sane at this point.

Happy Friday and GO STEELERS!!!!!!

David Stockman Nails It!

This is an absolute MUST MUST MUST Watch!!!!! 

The recovery is a sham and David provides the numbers to prove it: 

Thursday, February 3, 2011

Fleckie is God!

Awesome stuff below.  The money printing MUST stop:

Keep an Eye on the Bond Market

The guys in Chicago didn't care for Bernanke's speech today.  The 10 year bond is about to retest an important resistance level:

If we clearly  break through the 3.6% yield level then there is no resistance until we get to around 4%:

Should we be surprised by the bond yields given the inflation we are seeing in commodities?  Ben Bernanke actually sat there with a straight face today and tried to say there was no inflation.

My answer to this is what are you smokin there pal?  Whatever it is I want some of it.  Bonds are obviously rising because they are concerned about inflation.  The fact yields are moving higher at a time where we have great geopolitical instability in the Middle East is not a good sign.

I say this because bonds are a place that people usually like to run and hide when things in the world look unstable.  Today they have decided dive into gold instead.  The yellow stuff is up about $24.

The Bottom Line

The Fed shows no intentions of backing off from their easy money ways.  Bernanke thinks the Fed is doing the right thing and they use the higher stocks prices as a way of supporting their loose money policies.

The reality here is all they have done is created another bubble.  Today's bubble is a stock bubble that's been created with insane leverage thanks to the Fed's massively insolvent balance sheet. 

This of course comes at a cost which is inflation.  It's amazing that the man has the balz to say such a thing at a time when countries begin to topple as a result of rising food prices thanks the the Fed's money printing addcition.

Folks, if you thought the tech and housing bubbles were bad then you need to hold on tight because you "ain't seen nothin" yet.  These policies are not sustainable and we are starting to see the inflation that we have seen throughout the world start work it's way into our economy.

After watching the unprecedented events unfold in the Middle East the "guns and gold" crowd all of the sudden don't look so crazy to me anymore.

Wednesday, February 2, 2011

The Joke is on YOU!

I haven't laughed this hard in awhile:

Hopefully America will wake up and realize how badly the banks and the government have screwed their own citizens.

I sit here in awe as I watch the Egyptian situation.  It's dawn there now and the protesters are already gathering to throw more rocks in defiance of Mubarak.

This fat cat needs to go ASAP!

I can't help but wonder if the same thing is going to happen over here a few years from now.   Egypt and Tunisia are proof that the rich can only pillage the poor for so long before they rise up.

When you listen to how badly we have been screwed in the video above you would have to be stupid to think that it couldn't "happen here".  I hope it doesn't, but as things continue to deteriorate economically in this country the people will eventually rise up out of desperation.

As the millions of "99'ers" run out of unemployment benefits they will quickly realize that they are out of options.  Let's hope Congress is listening and learning from what is happening in the Middle East and takes this dramatic uprising as a wakeup call.

Remember:  When there are no jobs people lose hope, and in the famous words of Gerald Celente "when people lose everything they lose it!".

Sadly, we are really not all that different from Egypt at this point.  Their unemployment is 20%.  Our real unemployment is 16.7%.  That's not a big spread folks. 

The American dream has been taken away from us in the form of bailouts and corruption. 

My heart goes out to the Egyptian people today and I pray that Congress wakes up before it's too late.

Tuesday, February 1, 2011

The Pressure on the Fed is Rising and so are Prices

I have a few topics that I would like to discuss.  One of them will not be Egypt.  It's too early to see how this situation will play out.  All I have to say is good luck to the Egyptian people.  I hope Mubarak goes down ASAP.

OK, Let's talk a little economics.  Let's start with today's blowout ISM report:

Some Highlights:

"Manufacturing continued to grow in January as the PMI registered 60.8 percent, an increase of 2.3 percentage points when compared to December's seasonally adjusted reading of 58.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 20th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 18th consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the PMI for January (60.8 percent) corresponds to a 6.4 percent increase in real gross domestic product (GDP) on an annual basis."

Quick Take:

Great news right?  We saw our 20 straight month of economic expansion.  CNBC and the rest of the retards on Wall St couldn't wait to Ponzi up the market after seeing such a great number.

What the market conveniently ignored was the cost of doing business that was explained later on in the report:

"The ISM Prices Index registered 81.5 percent in January, 9 percentage points higher than the 72.5 percent reported in December and the highest reading since July 2008. This is the 19th consecutive month the Prices Index has registered above 50 percent. While 64 percent of respondents reported paying higher prices and 1 percent reported paying lower prices, 35 percent of supply executives reported paying the same prices as in December. A Prices Index above 49.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

The 16 industries reporting paying increased prices during the month of January — listed in order — are: Textile Mills; Plastics & Rubber Products; Primary Metals; Food, Beverage & Tobacco Products; Fabricated Metal Products; Nonmetallic Mineral Products; Paper Products; Machinery; Transportation Equipment; Miscellaneous Manufacturing; Chemical Products; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Wood Products; Printing & Related Support Activities; and Computer & Electronic Products. Furniture & Related Products is the only manufacturing industry reporting paying lower prices on average during January."

Take Continued:

Ummmm...Helllooo...Inflation anyone?  The reality here is sales are up but so are costs.  In fact, companies are facing their worst inflation since the inflationary crisis of 2008 where we saw oil Ponzi up to $140+ per barrel.

We all know how that ended.

You would think that the most logical thing for the Fed to do would be to tighten interest rates in order to quell the inflation that clearly showed up in this report.   At the very least you would expect them to stop buying treasuries in an attempt to start balancing out our outrageous spending.

Afterall, the economy is growing strongly.   Any policy maker with a brain would ask themselves:   Why keep flooding the market with liquidity after 20 straight months of economic growth?

As you can see below.the Fed has other ideas:

"Feb 1 (Reuters) - The Federal Reserve could debate extending its bond-buying program beyond June if U.S. economic data proves weaker than expected, Kansas City Fed President Thomas Hoenig said.

Another round of bond buying "may get discussed" if the numbers look "disappointing," Hoenig told Market News International in an interview published on Tuesday.

Hoenig, an inflation hawk who vocally opposed the Fed's commitment to purchase an additional $600 billion in government bonds, reiterated his call for the central bank to reverse course, according to Market News.

He called for the U.S. central bank to "normalize" policy by shrinking its balance sheet and raising interest rates.

Hoenig has argued the Fed should raise rates to 1 percent and potentially higher depending on the economy's performance.

The Fed has kept interest rates near zero percent since December 2008."

Take Continued:

The dollar continued it's decline following the news:

Folks, when we see extreme political instability in the Middle East the dollar should be soaring.  After all, we are the supposed safe haven of the world.  Perhaps the world is no longer seeing it this way as we continue to dig ourselves deeper and deeper into debt thanks to ridiculous spending policies?

The reality here is there is no economic recovery.  If there was one than the Fed would not take such an enourmous risk with QE3.  They understand that if the bond market blows it's over. 

The Bottom Line

I was surprised at the markets reaction today.  Egypt falls, inflation soars, the rest of the "governments" in Middle East start to panic and the DOW rises 148.  All I can say is LOL.  So much for the market hating uncertainty. 

I guess the trading robots of Wall St don't have the ability "feel" anything so this rule no longer applies.  I can't help but think of the Terminator movies where the young boy tries to explain to the Terminator why killing innocent people is bad and forces Arnold to stop.

The way I see it, Wall St is going to continue and do anything it can to keep the rally going at all costs. It's the only thing they have.  The economy is in shambles which makes them even more desperate to stabilize the market.

They realize that they have no chance to get out of this unless people feel wealthier and start spending.  This is a fantasy of course because Americans our jobless and saddled with trillions in mortgage debt.

This won't stop the pigmen.  In fact, they appear to be willing to risk the dollar in the process of trying to dig out of the massive hole they created for themselves following the crash of 2008.

I think we will see an inflationary crisis before the end of the year.  That is of things are status quo.  If the events going on overseas begin to spiral out of control it might force the Fed to reign things in as the governments of the world demand tighter fiscal policies from the US.

If the Fed is allowed to continue down their inflationary path then you can expect it to start showing up in lower earnings by Q3 thanks to higher input costs. 

IMO, the bull stampede is running out of fumes and I still stick to my early year prediction that the ending of QE in June will be the inflection point that decides where we go next.

Until then, I wouldn't be surprised to see equities rise into the March/April time frame.  At this point it will be time to take profits because the big money will sell realizing the Fed's decision in June will potentially wreak havoc in the stock market.

The risk reward ratio for stocks is rapidly declining because the Fed has painted themselves into a corner.  If they attempt a QE3 then they risk the currency.  If they end QE then they risk higher bond yields as the demand for treasury collapses.   This would tank the housing market and the banks.

Good luck with this one Mr. Bernanke.  You are going to need it.

Disclosure:  No new positions taken at the time of publication.

Monday, January 31, 2011

The Robots Strike Again!

Anyone who believes the trading robots aren't controlling the stock market must look at the chart below:

Quick Take:

This isn't some thinly traded penny stock folks.  This is the VIX which is highly liquid and it's used to measure volatility. 

There is no way the VIX can drop this violently.  This is especially true today because the volatility on Wall St has been very low.  The DOW has traded in a range of up 20-50 points all day.

The Bottom Line

This is why you should not be playing around in the markets long or short.  Stocks today are bought and held for seconds as the trading robots sell back and forth to one another in blazing speed.

Essentially there is no investing in the stock market anymore.  We now trade stocks versus investing in them.  Stocks used to be held for an average of 8 years back in the 1960's.   Today they are held for about the same amount of time as it takes you to sneeze.

Why anyone would invest their life savings in something as ridiculous as today's robot controlled stock market is beyond me.  

One day this is all going to end very badly.