Test of Wills...L&C

"...all due respect, you got no f*****g idea what it's like to be Number One. Every decision you make affects every facet of every other f*****g thing. It's too much to deal with almost"
- Tony Soprano

Last week while the US stock market debated Bernanke's "taper" of QE comments, the rest of us celebrated our Independence Day Of course, there was more things taking place in the world news that test some one's conviction like more unrest in Egypt, a possible financial crisis in Portugal, continuing civil war in Syria and this tidbit: the People's Bank of China(PBOC) has had it with its various regional banks. The central bank stated over a year ago that it would not guarantee regional banking transactions in an attempt to slow down the use of credit resulting in over building of malls, apartments and offices. Apparently, this memo fell on deaf ears as there was the largest spike in short term notes to $1trillion yuan or $163B in dollars. This credit does not show up on bank's balance statements and used by banks in poor financial condition to hide shortfalls in cash which was the Lehman MO before it died.
Contrary to Bernanke's Fed who likes to talk to the market, the PBOC placed strict limits on short term credit which caused a spike in rates on these Chinese financial transactions. The central bank didn't blink and whether the message was received only time will tell because this is a time bomb with nuclear financial destruction written all over it. There are over one million new apartments that have not turned on the electric meter because no one lives in them. That is unbelieveable!
Liars and Crooks: President Obama said that he will delay the company mandate in his Affordable Care Act until 2015 in order to give companies time to adjust. Yeah, right! Instead of a nation of part time workers in 2014, we will have time to seek that second part time job before 2015 as the economy improves or we collect food stamps.

Fed's Gambit= Truth!...L&C

"Put the Fed in charge of the Sahara Desert, and in five years there will be a shortage of sand."
- Milton Friedman

Here is an idea, suggestion and more all included in what happened to the market in the last month. Like I and many others have been saying, the Fed has no exit strategy. The Fed began to feel the heat as $61.7billion got taken out of bonds. This is the second month in a row of outflows. To attract new money and stem the tide of withdrawals, rates began to rise. This dear reader, means control is no longer in the Fed's hands and their worse fear. Bernanke responds by saying that the "tapering" mentioned in the release of the FOMC meeting notes was in theory and no actual slowing to QE has commenced. Now, consider this: what if I and all who criticize the Fed are correct. Bernanke understands that the Fed's actions were in response to the financial crisis of 2008 and worries about addressing their response will be addressed at that time whenever it happens. This is so typical of bureaucratic agencies. Think Bush and "mission accomplished!"
We Are At That Time
so Bernanke wages a gambit. He says the change is on the horizon and he tests the market. He found out what Warren Buffett once said about the Bernanke's strategy,"anyone can buy bonds, it's the selling that gets tricky." Bernanke has made an "owl" market. "Who" is going to buy low yield bonds? This is why the market had its first down month this year. This is why global bonds lost $61.7b. No one wants a low yield when higher rates are coming.
The truth hurts! That is so true and that is why these bureaucratic agencies like the BEA said back in January that they see GDP at 2.5%. Later, they lowered it to 2.4%. Both of these are close stats and good news for the economy except it is a lie! Final results came out last week. GDP came in at 1.8%. How could anyone be so wrong? Lies!!!! Corruption!!! These people are hired because they have ideas to spin the truth. Do you think that someone like me could ever be hired when all I consider in CPI is food and energy? Those two components are not included. Can you believe me now when I say these people are all corrupt!
With the above being said, do you think that the market would be up double digits like it is? No way, Jose!
Bernanke will try to regain control of interest rates in the sea of bonds, but boats like the Titanic cannot weave like a PT boat. Iceberg's are in the water!
Liars and Crooks: the government can claim that the economy is creating jobs, however they are mostly part-time. In fact there are 2.7million temporary workers at this time. This is the highest ever, but I predict this record will be broken time-after-time. Why? Because Obamacare will kick into gear and companies will not hire full time workers due to the fact that Obamacare forces them into providing medical coverage. They won't do it and as a result, we will all be working part-time.

What Now, Big Boy?...L&C

The four title words are used by my friends and myself in games of friendly competition. They come out at inflection points. Your down, but you make a comeback until the defense stops your plan with time running out the question arises, "What now, big boy?" Lebron James had an answer, while Tim Duncan didn't. In the economic world rising rates are throwing central banker's plans out of whack. They will try to calm the market. They will try to bounce back with the usual spin offs: stay the course, buy the dips, nothing has changed in regards to low inflation and "cheap money." There will be some weeks that these fiat agents(bulls) take control again and some weeks where the natural forces of the market(bears) seek redemption. The above sentence is skewed, you say. You point the finger at the bulls as manipulators and the bears as the true market purveyors. My case is justified in the reaction to the "taper" comments of the Fed and Bernanke. If phony, fiat money is stopped, the market crashes. The word out of the Fed is easing maybe ending. Last week showed what the results will be of this decision.
Bull vs. Bears
Not all bulls are manipulators. They understand the concept that you do not fight the Fed. They realize what the Fed is manipulating the economy. They are just capturing the gains. In the same way not all bears are for true free markets. They see the Fed as wrong. They understand demographics. They want the gains just like anyone else. The problem is the market can be wrong longer than you can stay solvent.
So, What now, big boy?
In my limited market skills I learned one important aspect to the market: volume. Volume on the exchanges has been very low since the market crash in 2008. As the market climbed higher and higher, the number of shares has shrunk lower and lower, however whenever the market declines like last week, the number of shares exploded. This is a tell. The market is saying, we don't believe in the evaluations, but we'll continue to take them, if it climbs higher. On the flip side if the market shows weakness, we are going to get out as fast as we can. Keep in mind what I previously told you, this is a trader's paradise and one of the few times where the individual can make some money by trading. Institutions move shares that number in the millions. We don't. They are the ones who are trapped at higher prices. Short the hell out of them whenever stocks reach their highs and sell at lows using charts for the proper range for a stock. One other important reminder, use your stops to protect against large losses.
To answer the paragraph question, this is what I see for the near-term in the market. Volatility will be with us for the summer and I see the market drifting down to the lows of December 2012. At that point of inflection the question will arise again, What now, big boy?
Liars and Crooks: The NBA is still a phony league because the game is decided by the referees who are appointed by the league to do its bidding. Bosh fouled Green in the last shot to game six with no call. This championship was one of the best ones due to the limited calls by the refs, but true to character, their calls picked the winner. This is just one of many aspects that cloud the NBA like no compensation for a player leaving one team to go to another. The best always end up in LA or Boston. I became aware of these crimes way back with Stockton and Malone in the small Utah market. As good as they were, fouls were called against them to allow their opponents to beat them in crucial moments. This was because of the small TV audience and all the economics that go with it. That is why I love the National Football League. It is more open and fair to all its members. Any team can win in any year. Go Niner's!

QE=quicksand exit...L&C

The stock market had a down week as one important indicator trumped the known knowns while another one is simmering in the background. The Oracle of Omaha cannot always be trusted to speak the truth nowadays, but in unscripted moments his inner soul bursts out. He reminded the Fed that anyone can buy bonds, however selling them is the tricky part. Bond rates rose over 4% and this was the real force in bringing down the market.
Investors had jumped on the train of rising home prices, coupled with low rates. This added to the positive impact in the economy and GDP. Suddenly, the train hit an obstacle on the track. Higher prices means less buyers. Higher rates means lower prices. Together, it spells trouble. Let me remind you what boomers learned about credit and what young adults are doing today with credit.
In the past our egos were stroked by the credit card industry offering new cards everyday in the mail. We could buy anything: cars, clothes, take a vacation, whatever. This was Friday afternoon. With Monday's mail came the bill tagged with 18% interest or more. Never again!
Today, the rate of young people not owning a credit card has doubled compared to boomers at their age. The kids listen after all. They will be better for it with their finances.
In the World
countries use bonds to finance everything. The problem is most have abused the system because offering bonds is easy, paying them off is hard. Added into the equation new bonds are offered to pay back past bonds utilizing the concept of rollover. Governments can recall a past bond at 6%, put it into a new bond of 3% and skim off some money to make ends meet. What this is is a version of robbing Peter to pay Paul.
Greece
Argentina, US and many, many more have dipped into this pool on Friday only to suffer the hangover with Monday's mail. The Fed and central banks all use some sought of quantitative easing to lower rates, so their governments can find money to operate and keep the status quo. The problem surfaced when these bureaucrat's decided that their economies needed new revenues and the best way to get new money is through taxes. No one will sponsor taxes, but jobs do it for them. Everyone pays taxes on income. Jobs increase income. 
Protectionism
comes in many forms and currency manipulation is on top of the list. A lower currency means more exports. Japan decided to outdo the Fed with its own form of QE. It would debase the Yen. The yen went from 95 to 103 in a few weeks. This is a monster move and behind the scenes, the derivative market I think, was about to explode. Last week, the yen is suddenly back to 95. Why? There was a crisis, but it was kept out of the media. Nevertheless, this change in currency in such a short period of time resulted in interest rates moving upwards. This is the one area where central banks do not have control and control is key here. If rates hold at this level, it means higher rates are coming. Higher rates spell trouble for the stock market and the global market. The Fed will seek to calm the market next week, but there is one aspect that they cannot change. Money left our treasury notes to the tune of $37billion last week. This is big and like the Titanic, these moves, once started, cannot turn on a dime and weave away from a new iceberg that just appears. No one wants to be standing when the music stops. No one wants to own something that is sinking in value. Why would you hold a 3% note when you can get 4% or more? The Fed built a house of low rates on quicksand, and like I have stated repeatedly, they do not have an exit strategy. The market picked up this idea like Monday's mail.
Liars and Crooks: President Obama says he will help the rebels in Syria with small arms. President Johnson said he would help South Vietnam with advisers, military aid and then, ten years of death not to mention one trillion in debt. The rebels have my sympathy, but this is their revolution, not ours. Ours is taking place in Detroit which had 1.8 million people in 1950 and today, 701,000 and that is being kind. One-third are in poverty because of the lie of free trade. According to American Water Works Association, there is a water pipe break somewhere in the US every TWO MINUTES! We need leaders to face the truth at home. I have an answer for our water problem, but who is JFL? He didn't go to an Ivy League school and worse, he went to Catholic school. We cannot allow him a platform to speak. It could ruin everything. This is why we need an evolution in our democracy. The rule makers pass rules demanding an oath of allegiance and then, violate the law. Edward Snowden will suffer for speaking out for a higher oath, the one the Founding Fathers fought for. End the Fed!   

Conundrum Time!...L&C

I didn't go to a Ivy League school, but that does not mean that those students get special knowledge. I read the same info as they do. They may express themselves in terms like the title piece, whereas I use street terms like stuck between a rock and a hard place to describe a similar situation. The one difference that I do make to note is this: I will take a stand as to what the info is telling me as opposed to the clinging plant that will hem and har as to what it all means.
Greek Myth
expresses it like this: the choice is Scylla or Charybdis? Wall St. likes Hobson's Choice:take it or leave it. What do all these different expressions with identical conclusions mean? Volatility in the stock market.
Trader's Paradise
this is one of the few times that the individual can make money from trading in the stock market. It almost makes me wanna sing:Celebration Time, Come on! Let's celebrate good times...
Let me back-track for one moment. Individuals do not move the market. Institutions do. For example, take gold. It is definitely in a down trend. Why? Because big money and the dollar are against it. While at the same time, the buying by individuals has never been higher. Our demand cannot match big monies fire power. Recently, when gold declined from over $1600 per ounce to $1200 price range, it was because $24billion was set against it. We don't have that kind of influence. Don't fret. When the smoke clears, gold will show its luster. The point of this is simple, the market has declined in two out of the last three weeks. It is singing MEATLOAF.
Housing
builders have run up with housing prices and activity, however interest rates jumped to over 4% and that makes housing less affordable which translates into a lower stock price for builders. Study charts. Find the recent highs and lows. Sell short when prices approach their highs. You can do this with almost all sectors, but I would avoid commodities as too little truth in media info as to their true direction. Also, prices in these categories are set to move in a breakout, but up or down is anybodies guess. If you look at a monthly chart of oil, it is reaching a triangle confluence point, and it will break, very soon. This break will tell you the true strength of the economy and thus, it will point to either a short or buy sectors.
Summer Camp
As stated in my last article, I am in the bear camp, however Jeremy Siegel says the Dow will hit 17,000. He is not alone as almost all hedge funds jump on the Bernanke Put. They may not know COOL & THE GANG, but the tune has been playing in their elevator since 2009. When these people increase share prices, we can take their money for a change. Afterall, there are some people who want to end the dollar because it is too expensive. They want a dollar coin or change. Get it?
My camp has Porter Sansberry, Michael Lombardi, and Harry Dent as counselors. We listen to all types of music and we allow for individual choices, but we all agree that we will beat the other side when we meet in the August competitions to end the summer season.
Liars and Crooks:This week goes to the self serving bureaucracies, specifically, the EPA and DOT. The ideas behind the thinking to form these agencies is all well and good except that once formed they become a political tool and lose their effectiveness. GM has a car called, SAIL. This vehicle cost less than $10K and it gets over 42 miles-per-gallon, however it will not be sold in the US due to the above agency rules. Keep in mind that before these zealots took control this car would pass muster with our environment, safety and mileage along with auto jobs. It would add in the positive, but then again, bureaucracy must be served. This needs to be changed and as always, End the Fed!

Bradley Model: June 22 Is Financial D-Day...L&C

Bradley Model. Ever hear of it...follow it? It is based on planetary movements. Laughing already? Do I read a scoff across your face? People in the know never mock Arch Crawford or Peter Eliades who follow the concept developed by Donald Bradley. Maybe you don't recall when Eliades sat on  Barron's Round table and he was scoffed, mocked and more when he said correctly, I might add that the Dow would not breach 10,000 for years in 1999. Recently, the model correctly predicted the 15% rise in the stock market with a positive call on November 2012, which the model says will last until the 22cd of June this year.
Donald Bradley felt that natural forces affect human emotions and he categorized planetary position combinations into Long-Term and Middle-Term indicators. When these dates occur, you can generally expect fast and hard price action.
Direction
is for a reversal that continues into the next date which is 8thOctober and the down-trend extends until the new year with a dead cat bounce which turns into a sideways movement.
Bull or Bear
I'm in the bear camp and my call two weeks ago has been fortunate to see the first signs of a turn in the market. It is nice to know even if I was early with the call that such a distinguished financial expert has left us a respected model that sees the same results, although gathered from different sources.
Second Opinion
On Friday the sell off triggered the Hindenburg Omen for the second time this year. When was the first, you ask? Tax day, April 15th. How's that for an omen? Need another? This all falls under bullish stats, however this screams to be in the contrary camp. Bullish sentiment is at 90% and Consumer Staples hit 100% for the first time ...ever. Folks, only GOD is 100%. By the way margin loan values set a new record at $384billion. Of course, not everything is up. On the opposite spectrum, gold miners is on the bottom and if the Bradley Model is correct, everything will sink, including gold.
1%
have lost touch with the rest of us and this disconnect is reflected by the power structure that fails to understand this next point on the vertex. This is sad, but true fact: 45% of children in Miami, 50% of children in Cleveland and 60% of children in Detroit live in poverty. When President Obama took office, there were 32million Americans on food stamps. Today, that number is 47million and...growing. The number of Americans on food stamps exceeds the COMBINED POPULATIONS of Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia and Wyoming.
We have a problem and it will get worse when the lines of the disconnect intersect with the lines of the connected.
Case in point: Before NAFTA we had a surplus with Mexico, and now, we have a $61.6 billion deficit. Free trade is a lie and all of the above proves my point.
Liars and Crooks: Sallie Mae(SLM) the student loan agency sponsored by the government wants to split into two separate divisions. Of course, they do. With student loans being the second highest consumer debt and with default rates climbing, what better way to survive a bureaucratic disaster than to shift the blame to somebody else.

Does Anyone, Tell It, Like It Is?...L&C

Does anyone know the 1965 song, Tell It Like It Is, sung in the lamenting R&Bs style by Aaron Neville? It should come back in play because today, everyone practices first their escape from the truth with publicist, think tanks, private questionnaires, et al. There is only sound bytes and spins of the truth. The best society can hope for is a 60 Minutes revelation sometime in the future or some insights by blogs like mine.
Lois Lerner
gets a bold type here, but is it because she was the whistle-blower which started the IRS scandal into tax exempt status as the head of that arm within the agency or because once she started it, she refused to answer questions about it, claiming her fifth amendment rights? Going further, is it because she is on extended paid leave of absence at the taxpayers expense? We get headlines, but no truth or substance.
Anthony Weiner...Cruz vs. McCain?
all attention getting names, but for what? Weiner wants to be mayor of New York and Cruz is fighting his fellow republican over a budget deal because he doesn't want a debt ceiling amount included. Yeah, really important stuff. Did the media ever get deeper into the bridge collapse in the state of Washington? Of course, not! According to the Society of Civil Engineers, the US needs $3.6tillion for infrastructure. It gets worse. Of the 607,380 bridges in the US, one in nine is structurally deficient and the average age is 42 years, but then, we need money for drones, ships, any military escapade imaginable. Do you know what this means? Taxes. Since the Republicans oppose taxes, there will be some type of deal, probably gas taxes which the federal government has not raised since 1993. Both parties will spin with the shale bonanza resulting in lower gasoline costs which by the way are actually two cents higher than this time last Memorial Day, but who knows or remembers that? I do.
Housing
sales rose along with prices, but Dr.Copper is telling a different diagnosis. In fact Goldman Sachs is getting out of their long-term contracts in the commodity due to new Chinese rules against financing changes addressing it as an asset and this should cause a surplus. Now, they see lower prices. Don't forget I told you about mandatory PMI on all mortgages if the buyer does not have 20% down payment.
Business Spending
is down 21% according to a Bloomberg report. This adds one more lie to the rising stock market which keeps rising according to the media because of higher earnings. Is it higher real earnings or Pro-Forma gimmick? Is it because the company bought back its stock to hide the fact that earnings are lower? Did you notice how many companies claimed higher earnings, but with lower revenues? Too many to list here, but S&P 500 projected earnings growth is only 1.6% according to a Mutual Bond find. Did you know that company insiders sold $350million just last month? Why? If prices are going higher, why, I ask again?
Default
If I asked you to name the country with the highest possibility to default, who would you name? Greece? No, but a good guess. Argentina has a 84% risk. In fact they are serial defaulters with the most recent being in 1989, 2001 and again in 2005. This time it is over previous bonds that they defaulted upon and people want their money. The judge hearing the case said, "Argentina is contumacious." I looked it up. It means obstinate to authority. Not good, however the ramifications do not end in that court room. In Europe many financially troubled nations are looking at this case and thinking, maybe we should default too? Not good.
Banking
and the lending of money is at a 60 year low. This is M2 money and it is just sitting in banks. There is no velocity of money and this is not good.
Outsourcing
continues under President Obama even though he campaigned against this loss of jobs in the economy. According to labor advocate, Robert E. Scott the US lost 400,000 jobs just to China from 2008 to 2010. In fact the US only added .1% of new jobs in exports while China has added 1.5% during the same period due to exports. The Obama administration continually seeks to rewrite the rules to allow US corporations to avoid paying taxes on income generated overseas and this too, he campaigned against. Not good.
Finally
Did I hear someone say, Yea!? Wiseguy
60% of all the stimulus money put into alternative energy forms helps foreign companies. That's right! Many of the most expensive and important components are made elsewhere like wind turbines, and this is from a study by the Department of Energy.
Liars and Crooks:with the terrible news of the killing tornadoes in Oklahoma, we must look into how terrible our insurance companies deal with their customers. I know people who suffered from Hurricane Sandy and for example, they receive only partial refunds for total losses. A new heater/ boiler cost over $8K and these crooks only write checks for $3750. Get out of town!