Saturday, February 20, 2010

MASTERMIND POST

Pulled off of SKF.......nice read.

The Fed's Grand Scheme 20-Feb-10 05:05 pm Don't overlook the possibility of another Fed surprise if they feel this coming week's UST auction might not draw good participation. Given the choice between high equity prices and the ability to service the Federal debt,the Fed will always choose the latter.

They made that choice in 2008,withdrawing liquidity 2 days before the markets tanked. The stock market provides a incredible funding source as a flight to quality for a extended period could easily be the reservoir of buying power they desperately need. Especially if Japan and China have scaled back purchasing our debt.

The past year the Fed balance sheet has skyrocketed with toxic assets and QE purchases of UST debt. This cannot continue for very long as after 2 years the reflation efforts have failed. The Fed is rumored to be instituting a plan of controlled deflation(similar to Japan). Thursday they took the first step to start that process.

This plan of controlled deflation is a little like, being partially pregnant, no such thing. The upside debt pyramid is too large and the current housing deflation cannot overcome the structural problems because of the bubble bursting. This will be the yoke around the banking system for the forseeable future. In May there will be a flood of short sales and foreclosures as the so called "gov't mortgage reset plan" kicks in for those holders that can't meet requirements.

As for the USD it will be on a long term upward path because of the deflationary enviroment. But also look for the Dollar to rise quickly as Bernanke's plan instituted in March 2009 to short volatility,create a huge pool of liquidity in a zero interest rate enviroment for the banks and the economy to reliquify quickly. This has been Fed policy or the M/O ever since the orthodox top in the stock market in 2000.

Keep interest rates at zero for a extended period,creating various bubbles in asset classes to reflate the debt pyramid, This policy first put in place by Allan Greenspan after the 1987 stock market crash,a minor bubble on the way to the dot.com bust, and then the next degree the "housing bubble". Now the plan is a busted experiment,failing to increase consumer confidence,expand balance sheets and another positive business cycle. All it has acomplished is the "grand daddy of all bubbles" the UST bond bubble and it will have disastrous unintended consequences.

The first is a bubble in equity prices, as the wall street investment banks put their cheap money to work in a far too familar frenzy of ponzi buying (the greater fool theory) causing a parabolic rise in a short period of time in the market leaders.

Also these zero rates have created a USD carry trade worlwide and as this equity bubble defllates rapidly will create a self feeding "China syndrome" as this incredible leverage comes crashing down, causing a USD bull market. This of course will have very negative effects on profits of the multi-national corporations. Thus another reason to sell stocks. A vicious cycle indeed.

So we will see how all this plays out shortly. I expect as the stock market comes down oil and Gold will also join equities in the price drop. But Gold will not drop as much as and will enter another bull market as the stock market bottoms sometime in 2013-2014

32 comments:

  1. If you had to trade and win, and could pick 5 people for advice, which online posters would you want to hear from to make those decisions including blogs and message boards?

    ReplyDelete
  2. 1. Tim Knight Slope of hope
    2. Doug Kass
    3. Peter Schiff
    4. Serge Farra ETF corner
    5. Ron Walker Chartpattertrader
    Jeff

    ReplyDelete
  3. Outside of the group here ...Pay attention to Cliff Droke.....He's a mthrfker......never rely upon a just a select few.....toooo much room for error....Walyat is a tough one too..Watch all the above too...except Schiff...hes not really a trader.... buy Drokes books or join his site....also some newsletters that Joe may or may not want to recommend.....I will leave that to him

    ReplyDelete
  4. Not all things are as they seem. Jeff, thank you for participating in my survey, since you were the person I was targeting. I assessed you and knew you could not resist posting to me based on your needs-based profile. You listed sources other than the participants of this blog as your source. Which begs the question of why you show up here and waste our time. Let me help you out with this, since you have the brain of a rat anyway. Your ego which is misplaced has you not recognize us, so that you can run to others to pretend you have a brain, while relying on us to prop you up. That makes you "in control" in your own mind. Otherwise known as a leech. So you bit on the hook like I projected, and you also will be broke in a natural transfer of funds to my account. I suggest you try not to have a debate again on blogs I am on. Please respond to my message, it will be worth the entertainment value.

    ReplyDelete
  5. Problem is still jobs.
    The short term strong dollar game by beggar thy neighbor (competitive devaluations by our trade partners mainly Europe and Japan, with China still pegging) will not change the stagflation problem as essentials still continue to rise and leveraged assets drop as the artificial supports are withdrawn.

    Joe and Kli are some of the best traders I have seen, Analyze is getting real good at catching on to the game. Cliff Droke knows the inside of the Kress cycle game which does not change.

    Personally I don't expect oil and gold to go down in tandem with stocks, oil and gold will start to act more like a currency as the competitive devaluations accelerate and the politics of war sap critical resources going forward in the name of creative destruction for the West.

    http://emsnews.wordpress.com/2010/02/20/volcker-cant-figure-out-how-free-trade-is-killing-us/

    ReplyDelete
  6. If you look at the 5 traders I posted Except Schiff which I agree is not a trader more of an entertainer like Cramer, they each give you different views of what is happening. I come here as well but I figured that was obvious since I was posting here. I did't put any of you since that was obvious. They all tend to be bearish, which is where I am at in this economy. I debate with would be fun since you are so arrogant. Typically arrogant people are so arrogant they don't even know they are wrong when they are wrong. Also, it is hard to debate you when you post anon. I don't really know if you are just some college kid screwing around. Just know I will not get mad at anything you post you have an opinion just like everyone else.

    Jeff

    ReplyDelete
  7. If I had to pick 5 I would go with the people on this site, Jon Najarian, and maybe throw in Cobra since he seems to have no bias and is purely mechanical. In the end I need to trade to my own analysis in order to improve anyway. - Analyze.

    ReplyDelete
  8. Guys just concentrate on the market ...focus on making money and surviving.....you don't need to worry about slapping each other.....GS is gonna knock the hell out of you anyway..so you better stick together......post your names by anon....this site is to help each other .....we're all gonna get it up the azz

    ReplyDelete
  9. Red-

    Disagree on the how of oil + gold staying aloft but agree higher they go.

    I can't say this enough - there is no appetite or desire for war amongst any western nations. It would take something completely unexpected and out of the geopolitical discourse to trigger a real war. Not that it won't or can't happen, but surely will not be intentional. Similar to WW1.

    Maybe someone can correct my thinking but I just get the feeling based on my own analysis that any games being played, whether by design or not, are at or in exhaustion and prone to fail at any point. I don't see anything which says it mus go on this way other than 'because it has this long already'.

    And I think kli would agree those enabling the oligarchy here are certainly not reaping any direct benefit yet, so other than the promise of future riches, why from a policy perspective would they push this facade into the stratosphere?

    Fabulescent

    ReplyDelete
  10. They will not push it into the stratosphere .....perhaps to 1240 level....but more importantly this is a "buying time" strategy. And that is important to them. Just as the supreme court decision was a needed item prior to accomplish politically ...there are many similar items left to accomplish. maneuvering a battleship requires time and they are buying. One aspect of the Kress Cycle includes the Fed behavior and its effects on the time cycle so it cannot be dismissed or your head will be handed to you. over the next 2 years the economy will continue to weaken but they will provide a 'range" in the market.

    ReplyDelete
  11. If Fed raises interest rate up, It is time to buy equities, guys!

    ReplyDelete
  12. Regardless of the merits of current wars both hot and simmering, there is a great appetite for war, small or large, among 2 western nations, the US and UK, to maintain their dying grasps of empire to support declining jobs and manufacturing in within their borders.

    Kli articulated the main reason to continue the fascade/ponzi is to buy time but more importantly stay in power at the top with as many of their supporters who are still solvent.

    As for the bearish list above, I have been bearish since the collapse of LTCM, but the reality is you must account for the interest and power of Central Banks in maintaining the current governing order in each of their respective countries, which leads to the Kress Cycle. Everything will be done to keep the illusion of prosperity going before the Grand Super Cycle washes out. That means rangebound trading for equities for another 1.5 to 3 years, short of a large EMP event which means Alpo is better than gold. At this point equities are just another tool to maintain the biggest Ponzi, US Treasuries alive. One of the reasons US trade partners still continue to pretend to hold US Treasuries in any amount is to extort unfair international trade concessions which will destroy the US by a 1000 cuts. When those trade concessions are no longer extractable (either the US grows some balls on trade or the consumer goes under) they will go for the economic jugular of the US. The military knows this and holds on to the many overseas bases as a projection of power even though it is slowly bankrupting the US.

    At this point the US has to consider disengaging from geopolitical conflicts and focus on rebuilding jobs, infrastructure and industry within it's borders.

    ReplyDelete
  13. Joe is the best trader I have seen, most of you have short term memory. I have followed his analysis and picks since he started posting, he understands Fed behavior, politics, economy, cycles, and overall he has a great knowledge of the system. He is brilliant.

    Jim

    ReplyDelete
  14. Fab, Foresight is much harder than hindsight. We will see what happens after events play out. Conjecture rarely accomplishes anything worthwhile. I am saying this as I see it. Thanks Klu, for your sage advice.

    ReplyDelete
  15. In the spirit of helping each other, I will explain a couple things that may help people who are not aware of the game. Here is one survival tip for these markets: He who trades to a composite index gets slaughtered. Most people online have fallen into the same trap in the way they approach the market in general. I usually post about SPY/SPX values and targets, but it is drawn from posture indices, I look at these daily and a couple hundred charts of individual stocks, and then once I have determined overall posture I roll that up and just speak to the composite indices. When I look at these, I force myself to make the bear and bull case, land on the highest probability, and then make the call on overall market direction. It is very typical for SPY to "look" a certain way, but it portrays a skewed summary picture since it has multiple trends overlaid in it, some bearish, some bullish, and can flat line and appear to lose momentum during a period when money flows out of one sector to rotate to another laggard sector to continue the ramp. Individual investors living online have become accustomed to looking at the markets in the way people do that run charts on free sites, and most of that is a disservice to people. Not that the people posting are meaning to be harmful, they just do what they have seen from others, but that is not the fashion in which market analysts operate, let alone our quant friends over at GS and other firms controlling the ponzi. The MMs are well aware the summary view is used by retail, and they slam people who are using this method on a continual basis by keeping its picture hard to discern or misleading. This is the root cause of failure, and you will hear people mention that their indicators and analysis are not working because they are trading to the composite view, which is not the random model they think it is. If you pull up a 5 minute chart of SPY recently it is a mess with clumped order spikes and multi-trend overlays, and periods of overlap corrective patterns versus impulsive trends that are not aligning with the real market direction. These anomolies in price action are due to this underlying sub-index model that is running that just rolls up to the composite. The ponzi lives and the chart shows it. Do not trade to the view they want you to see. - Analyze.

    ReplyDelete
  16. All,

    Just logged in and went thru comments. Red's last post is it folks, BINGO.

    "As for the bearish list above, I have been bearish since the collapse of LTCM, but the reality is you must account for the interest and power of Central Banks in maintaining the current governing order in each of their respective countries, which leads to the Kress Cycle. Everything will be done to keep the illusion of prosperity going before the Grand Super Cycle washes out. That means rangebound trading for equities for another 1.5 to 3 years, short of a large EMP event which means Alpo is better than gold. At this point equities are just another tool to maintain the biggest Ponzi, US Treasuries alive. One of the reasons US trade partners still continue to pretend to hold US Treasuries in any amount is to extort unfair international trade concessions which will destroy the US by a 1000 cuts. When those trade concessions are no longer extractable (either the US grows some balls on trade or the consumer goes under) they will go for the economic jugular of the US. The military knows this and holds on to the many overseas bases as a projection of power even though it is slowly bankrupting the US."

    joe

    ReplyDelete
  17. CBS....My trading is rudimentary not at the same level as Joe, Analyze and others...My strengths are elsewhere. My goal is to provide a format for readers to have access to an honest evaluation of this market and use that information for their level of investment. I attempt to provide a guide that lets a retail investor have a sucker's chance at least. If I can't make you understand just how dangerous this game is then I failed.

    ReplyDelete
  18. Keep in mind that Joe is far better than me, the gnat on the elephant's butt analogy that Kli used earlier applies in this situation. Ditto with me mentioning Jon Najarian, a lot of people rank him as the best options trader on the planet, although you get the media-washed version of him when he makes guest appearances on FM. There are some incredibly talented people around to learn from, Joe being one of those. I think it is better to have Joe's knowledge and experience, it can be a weakness to be buried in a T/A rathole which is where I tend to go. I continue to learn a lot from him. - Analyze.

    ReplyDelete
  19. Damn refresh button.

    Joe/Red-

    I disagree strongly about war...what I am hearing from friends and colleagues says it is off the table. I don't know what you guys are basing your conclusions from, if you can share them, it might help me ask some people better questions and get a better analysis. I think this is where I can contribute something to this group.

    On trading matters, you guys seem to have it nailed on the short term and I don't disagree with much of what you do.

    I suppose it's back to the interwebs for more research on the grand supercycle, but my gut is telling me something is missing from everyone's analysis I have read and even my own. I think there is an iceberg sitting right in front of everyone and it's completely invisible. I think the automation and AI and best and brightest computer scientists/mathematicians/statisticians working on wall street is going to have an impact we can't predict. Maybe that is what makes the grand supercycle so grand?

    Anyway, I trust my gut and I will have to do my homework. Something doesn't fit right and it's not just TPTB mucking with things.

    ReplyDelete
  20. Fab,

    Please stay focused, The direct war with Iran is not going to happen, I knew that long time ago. That's not the issue I am bringing up. There are lots of covert operations going on especially in the third world countries in a daily basis, and as far as abandoning the military bases in the world, we are not going to do it voluntarily since no one gives up power voluntarily. War is a huge business and it can be waged in different ways.

    joe

    ReplyDelete
  21. Fab ....Joe is your friends friend if ya know what i mean.

    ReplyDelete
  22. Fab,

    Kli is joking with you in his last post, I just like to read and think like them so I better understand what's up, that's all.

    joe

    ReplyDelete
  23. Joe is just an old retired pensioner

    ReplyDelete
  24. Fab,

    You do not have to ask any one about wars or be an insider or a military man to understand what's going on. If you keep your eyes and ears open and use common sense in regard to business of war, you will notice lots of action is going on using proxies,puppet regimes, arms dealers,,etc which helps the economic aspect and profit basis of wars for the powerful and corporations. That's the essence and bulk of the issue. Do not be side tracked by DIRECT and OVERT involvement of nations as sign of continued war or not.

    joe

    ReplyDelete
  25. By the way Fab, kli's joke aside, I am a recent retired telecom engineer ( avereage person) who always had a passion for trading/investing in the stock market.

    joe

    ReplyDelete
  26. Joe.. in my book you are far from average, as I mentioned earlier, you are brilliant.

    Jim

    ReplyDelete
  27. No one on this site is average especially Joe. Let's beat this ponzi because they are well deserving to lose. - Analyze.

    ReplyDelete
  28. Kli, aliright, I gotcha. I'm gonna be fine. I've already been kicked in the ass. I don't f*&k around anymore. Thanks for doing whatever it is your doing...;)

    ReplyDelete
  29. Most of the people here are contributing on a voluntary basis, no one is asking for shadow trades or to subscriptions to public/proprietary newsletters. Besides Kli most of us value some small level of privacy.

    Besides trying to exchange ideas some are trying to gauge sentiment to fine tune to positions be stock/equities/or stockpile of Alpo and ammo.

    If the intent is short or long side cheerleading sites like EWI will gladly take your money and send you their special insider reports.

    The trading mentioned here is more of keeping some level of interaction with the public visitors and interest. People like Joe don't really need any assistance trading. Most of the regulars here are not going to change their outlook of how the system works (rigged, corrupt ponzi) or under any delusion any individual will make a difference in the short term, only the law of nature will correct the severe imbalances as we enter Kondratiev Winter. To survive you adapt your trading/lifestyle each time the casino changes the rules not what you believe the rules should be.

    ReplyDelete
  30. Facinating... not one comment relating to Fed controlled deflation scenario. Did everyone dismiss it? Everyone locked and loaded on inflation with gold and alpo?

    ReplyDelete
  31. It's not black and white deflation or inflation at the moment. Deflation will continue in leveraged assets like homes, but stagflation will continue in the short term in essentials like food and energy.

    ReplyDelete