Thursday, December 01, 2011

In Which Yesterday's Big Dow Gains Are A Harbinger of Doom...

Sometimes to me the stock market seems like one giant coke addict.  Once it is out of its fuel of choice, it becomes despondent, and falls ever further into the pits of emotion despair (and physical disrepair).  But as soon as someone delivers the fix, and that first big, fat,  juicy line is sent through the nasal cavities and into the bloodstream - well, it's just a beautiful world again, with endless possibilities.

So it seems with the market.  Under the duress of the weak economic foundations of the West - caused by the socialism of Europe, and the crushing regulatory regime of the present American administration - the market staggers about listlessly, ever fading.  But when the big infusion of cash comes in - in the form of central banks, or deceptively positive earnings reports - the market skyrockets, for a moment.  Once the rush is gone, however....back to the aimless decline.

My point?  Yesterday's 490 point Dow gain, fired up by simultaneous collective money easing by numerous central banks, means most likely there is something much more worrying going on behind the scenes than we probably realize.  John Crudele at the New York Post:

The only real question is, which of the many dangerous financial situations around the globe caused the US Federal Reserve, the European Central Bank and financial authorities in England, Canada, Japan, Switzerland and China, to act in unison in the wee hours Tuesday morning?
The central banks did basically one thing: They made money cheaper so that financial institutions around the globe could continue to do business.
Nice move! Except that money is already cheap with interest rates at record lows. So the coordinated action led experts to believe there is some hidden danger lurking that we regular folks don’t know about.

The stock market, of course, rejoiced in the central bankers’ move and the Dow Jones industrial average — clobbered over the past three weeks — soared 490.05 points, or 4.24 percent, yesterday. It also helped that yesterday was the final trading session of November and professional money managers were wired to push stocks higher anyway on such a day.
Window dressing. That’s what it’s called on Wall Street. That’s when traders try to get their portfolios up in value so that customers won’t be so disappointed at how badly their investments have performed the other 29 days of the month.

What the financial markets didn’t know (but the central bankers probably were aware of) was that Standard &Poor’s, the US rating agency that downgraded Washington’s debt this summer, was about to lower its opinion on 15 major US banks.
The two most important downgrades were probably Bank of America, which is hobbled by a staggering amount of bad mortgage debt, and JPMorgan Chase, which seems to be under pressure from investments in complicated financial derivatives.
Bank of America’s stock price is now so low that many financial institutions might be prohibited from holding its shares. This could have been one reason for concern.
The S&P downgrade was officially announced after the US financial markets had finished trading on Tuesday. So this move could have tipped the central bankers into panic mode.

Looks like the central bankers wanted to prevent a rush on the banks, prevent a total loss of confidence in the financial and investment industry, and help forstall a Christmas collapse that would have shattered retailers and sent the nation - and maybe the world - into a Christmas depression.

So let me ask you this:  Based on that information, is your portfolio really worth more today than it was yesterday  despite the Dow numbers?

Or is what was possibly the biggest dead-cat bounce in trading history just an omen that things are about to get much ,much worse?

1 comment:

Anonymous said...

Things are going to get much, much worse.

“Turbo Tax Cheat” Timmy will soon meet with the premier socialist leaders of Germany and France to “reassure” them the U.S. is firmly behind their efforts to “stabilize” the EU.

Unfortunately, if this can happen at all, it will be at the expense of the American taxpayer!

What his meetings actually mean is that our Fed Window is now open - for all to pilfer and plunder.

Keep a close eye on the volume and $ dollar amounts of the upcoming European “money swaps”.

In the past, these “swaps” were around the $500 million mark and for only a few days. The maximum days WAS 88. I expect this figure to climb to above $300 billion with the “reversals” (transaction to clear them from the “books”) occurring well beyond 88 days – if at all.

Our pols insist there is ABSOLUTELY no risk in these transactions. I say, don’t bet on it!!!!!

To understand that there IS risk one only need to understand who is the keeper of the “debit” column of the ledger book and who is the keeper of the “credit” column of the ledger book for this transaction!

Last year I predicted the DOW to be at 10,123 by the end of September 2011. I was a tad off. The Dow reached a low of 10,655 on October 3, 2011.

For what it’s worth, I expect the DOW to be under 9,700 by June, 2012.

You can also expect our country to be mired in race riots by July/September 2012. Obama cannot win unless this happens!

So, hold on to your hats. It’s going to be rough ride.

Since I’m 60 years old, my goals and strategies have changed significantly in the past few years. If you are within my age bracket, you should be doing what I am doing. I already own 2 properties in southern Italy less than.8km from the sea. Within a few years (after Obama is gone and forgotten) the dollar will once again be king. Living part-time in the US and Italy will maximize my resources while living a dream.

If Obama wins, at least I can spend half the year away from the nightmare that will be the U.S.

Indeed, Italy is “socialist”. However, it never claimed to be like the U.S. and I don’t have the same expectations from it. Watching and living through the collapse of this nation is simply just too much to bear!