Wow….really all I can say is WOW. I mean that was it – The Bernanke Show hit its climax, for those internet counter-culture fans we would say, Bernanke Jumped the Shark http://en.wikipedia.org/wiki/Jump_the_shark . What is there left to do, you may be asking yourself – plenty, I would answer. We have now moved to a fully SELF funded government economy. You could say (for those extremist) we just stepped into the nationalization of our collective debt. Bernanke hinted that his next move (and let me simplify this) – borrowing money from Hank to buy Hank’s Treasuries. Yeah – it sounds that absurd and it is. Those that live (or have lived) in the halls of academia (and not the real world) would argue that “provisional liquidity” is a legitimate way to finance the economy. Let me simplify this even more – in this little story for you….
Hank and Ben own a small store that make homemade wooden coat hangers, but no one is buying anything. Here is a little conversation they might be having.
"Hey Ben, why don't you buy some stuff in the
store?"
"I am your partner, I OWN the store with you - why
would I buy it?"
"Well we need to sell something - if you buy it we
can book it as revenue!"
"Let me get this straight, Hank! You want me to buy stuff
that we already own and make in our store? Are you a nut?"
"Ben, we NEED money and we NEED a loan to stay in business
- the only way we can prove that selling homemade wooden coat hangers is
profitable is to show that we have sales. So start buying some wooden coat
hanger and shut up!"
"Hank, I would - but I don't have any money!"
"Hold on, I've got a 10 spot - that buys 4 hangers -
here you go! Wait - where you going?"
"You just gave me 10 bucks - you think I am going to spend
it on our crappy wooden coat hangers that I already make and get for free? I am
going across the street and get a drink!"
"But what about the loan? We need to show
sales!"
"Just burn the place down and claim insurance - at
least we can get out of this mess! - see you at the bar!"
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The above story might seem silly if it were not so true. Ben has loaned 100s of billions of dollars via the Discount Window, (very questionable loans – note: Bloomberg wants transparency, but the Fed won’t give it) – now he has taken interest rates to ZERO (for the most part). However – they need to continue to SELF FUND the economy – so what to do? Borrow money from Hank and buy the very Treasuries Hank is trying to sell to fund the debt and budget deficit. It’s like one guy is printing money to loan to the other guy to buy back the loan – it’s a circle you idiots!!! It’s an act we could see Abbot and Costello perform – except it is done by (supposed) bright men in power and the TV knuckleheads just nod their head in agreement. And our watchdogs and oversight committee – you’ve got to be kidding - you REALLY think Barney Frank (head of Finance), Chris Dodd (head of Banking), and Nancy Pelosi (majority leader) KNOW how to make heads or tails out of the books, finance, and economics? Of course not and the hole system has run AMOK.
I think the Crazy Train has left the station – all on board, whether you like it or not!
Sorry – but this just makes me sick.
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Morgan Stanley follows Goldman – the lemmings jump!
Morgan just reported a wider loss than expected ($2.2 billion) – right in line with Goldman. The question we have to ask ourselves is do they NOW have enough to write-down these positions to a REALISTIC (not illiquid mark-to-myth). That is the REAL question that only time will tell. The stock is getting a little beat-up in the premarket – but after yesterday’s run - go figure.
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Damn those lemmings!!!
10-year treasury falls to below 2.15% - did you mark my words or not. I said if he cut by 50bps or more we would see the dollar fall – guess what the dollar is sinking fast. The only morons buying treasuries are those that can’t do math and REALLY believe IN the government. These are the times that socialism begins to breed. I had a talk with someone about the New Deal and FDR – they had NO IDEA that FDR raised taxes to over 70% and issued and excise tax on a majority of goods. He also set the wage barrier so that companies could not hire people for below that wage barrier (very high) – thus keeping unemployment HIGH. Unemployment stayed in the double digits for almost his entire term in office – until WWII. He got people work – no doubt – but working for the state and taxed into the stone age. I seriously hope we don’t head down that path – but getting back to it – Bernanke’s NEW policy and the current treasury yield heading into the toilet – leaves me to believe we are on our way.
Stop buying treasuries – tell your neighbor or friend – “Don’t be patriotic with your money!”, “Don’t be a fool!”, “Your money is safer in your own PHYSICAL hands – not LOCKED UP in a non-performing treasury whose credit rating is now coming into question!”
Fools –
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Futures Pre-market
The futures are coming off after yesterday’s euphoric rally as if taking interest rates to zero (when they effectively are trading zero) was really going to do ANYTHING. The spread is in so expect ARB traders to buy futures and short the basket.
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Support / Resistance
Well we got to resistance or just above it – one thing you can bet on is volatility.
INDU 8000 (8500) 9000 (We are just shy of the 9000 resistance level – futures are showing a decline in the premarket – do we head back down to reality at 8500?)
NDX 1100 / 1200-1250 (We are back to that upper band of resistance – again do we head back to the 1200 barrier and lower?)
SPX 800 (850) 900 (Just above the resistance – but looking at the pre-market futures it looks like we will be back right at or below it…interesting)
RUT 400 (450) 500 (Unlike the SPX or the INDU we didn’t get up to the 500 resistance level – the boarder market didn’t perform up to that and that leave me with a feeling that it’s a weaker knee jerk rally than anything else – again I could be wrong.)
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Conclusion
Sorry for the rant – but I mean when are the Sheeple going to wake up – the more I hear the more I believe the masses are asses, sorry but please think about it. We are on a dangerous road no doubt and the government is taking serious liberties with our economy and currency, enough so that we should be concerned. This isn’t against the Democrats, Republicans, Bush Hating, or Obama Hating – I seriously believe that we have pseudo-Republic, either that they are completely ignorant and have run AMOK (but there are some Democrats and Republicans that are very smart – so that can’t be the case – can it?) or we do not have a Republic, but a plutocracy – which if we were to follow the money being printed and loaned out seems more likely.
As for getting back to the market – I am skeptical at these resistance levels, I would lock in any gains – keep gamma on the sheets and look for more volatility. The news yesterday of a rate cut to ZERO (even with a market rally) is NOT good news! Don’t be a knee jerk economist – look at the big picture.
I have a couple other stories to share – but I will wait till tomorrow.
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