Don’t you find it amazing that literally one trading day after certain FED Jawboners said that commodity inflation will be “transitory” that commodity prices are coming off, hard? So what happened? Why are they dropping after an unrelenting climb?
Our friends at the Federal Reserve know exactly what they are doing. They picked up the pieces of a broken system over two years ago and have been firmly in control ever since. They continue to fear the natural deflationary forces at work because it will hurt those with capital, and that status quo must be protected at any and all costs because they have already bought and paid for our wonderful elected officials. Our system is based on that high-level corruption and that may never change, so get used to it.
By running commodities and inflation, people (and machines) actually believe what the market is telling them–like it was the old days. And why not? “Investors” make out like bandits and get wealthy, and the hope is that it will all “trickle down” as Art Laffer would say. Except this time the only thing trickling down are higher prices for the things we need to live. Certainly there is no spreading of the wealth effect this time around, so after a record setting run the FED finally decides that commodity prices are too high and they will hurt the economy. Then the Goldman Strategist lowers his GDP estimates again and the market sells off. This sell off takes some of the pressure off normal folks who use commodities to eat and travel as opposed to rank speculation.
With the end of the IRA/401k money this week and barely one month of QEII left, the market is either simply undergoing a countertrend move or has reached a major inflection point. Without the direct injection of funds into the market via QE, the question is if the FED will still have the kind of control over the hearts and minds of “investors” who have been following their lead, no questions asked. Just look at the various charts of equity and commodity performance and their correlation to FED purchases of Treasuries through QE. Are you surprised?
The market’s recovery after Japan and the giant “V” at the top of a multi-year uptrend has brought a giant sigh of relief from investors, “proving” how bullet-proof the market is. That is why there are only 15% Bears. But the double top is there. The Candlestick “Evening Doji Star” is almost fully formed. QEII is almost done. Technically, this year looks just like last year (my sole prediction for 2011). Do you think the economy will speed up later this year? Do you believe the geniuses who tell you that oil prices don’t matter to the economy?
The markets have already embarked on what may be the long and dulling pain of an extended trading range with the lower portion of that range yet to be defined. First $SPX support is here near 1310. Then lower.
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lumber down 40 handle in less than 5 sessions.that is nothing to shake a stick at. every time it goes down.so do all the major indices. were not done looking at red yet.
Wow. Lbs’ just flle the gap @ 237.2
and copper are the two indicators
wheat been wild ping -pong of profits today !!
That is how it is. Short the rip. Cover the dip.
Have you looked at retail? The consumer is out there consuming. Are you just ignoring that?
i dont know about you, the consumer is deathly afraid. i hear it from all ages of man. my car has been parked in the driveway for a month. we are not the only 2 car household thats using just one car. what needs to be deeply looked at are needs-vs-wants.people always want,its just the needs are standing in their way.
Drummer – I agree with diverdan. You must know different consumers than I do. Never mind that retail has been on a tear because of great sales numbers but when I go to the mall, I see hordes of people buying – not what they need – but electronics, jewelry, handbags. I will tell you that the same mall saw fewer shoppers before Christmas. Something has changed. I am sorry for your difficulties. I hope they reverse for you. If you are having difficulties with your trading, I recommend joining 12631. We trade what what the market gives us instead of fighting it, and it works.
Nothing personal Scott.
Oh snap-a-do-da! Lol. “thewife” is patronizing me! Like I haven’t heard that before…
BTW–I LOVE 12631. But not everyone wants to trade like that.
lol – nice response! ;~)
Based on casual observation, I’ve noticed the consumers are packing the malls. They are going 70+ mph on the freeway in SUVs talking on cell phones, texting and burning 1/4 gallon of gas just to accelerate madly from a stop light just for the hell of it. People I’m fairly certain make minimal income are pulling out iPads, sporting new hair styles, clothes and fronting like nothing else matters. I have to concede the US Congress is doing an excellent job of reflecting the mentality and wishes of many people in the USA. Pull out a new credit card and keep it going baby!
I wonder if the SPY blows the roof off when the FED stops buying treasuries.
I ponder thusly
1.) FED stops buying treasuries
2.) Treasuries start to drop fast in price
3.) massive amounts of money run from treasuries into equities
I think it might happen like that. (even this late in the game)
That is a “market logical” outcome, but if interest rates rise it changes the calculus of the “interest rate model” that funds use to value stocks. It makes them less attractive…
ok – but the other “logical” outcome assumes a rate increase…do you really think the Bernanke is going to break down and raise rates? I mean even I see the Japanesesque 0 interest rate situation that could cause a nuclear meltdown…but I don’t see any changes happening to thwart it now. This is not to say that we won’t/can’t avert disaster better than Japan. But as long as influential uber bears keep saying the economy is shite, the Bernanke isn’t going to raise rates.
Assuming the Fed does step up and begin raising rates who will want to own US paper and what does that do to the cost of existing debt? Higher interest rates and balancing the budget (read: large cuts AND higher taxes) will certainly increase unemployment in the short term and damage the economy.
It may be simplistic, but if you can’t afford something at close to 0% then you definitely can’t afford it at 5%. This means haircuts to bondholders (when hell freezes over), default, or inflate inflate inflate. Incidentally as the Fed is stepping up its purchases of debt as a % of total debt purchased, the debt owned to other countries becomes smaller in real terms and until there is a new reserve currency (barring of course the precious metals) there is precious little to be done about it.
@TJWP – Very well written.