It is still 2010, but the New Year trade has begun, even under the last blizzard of the decade.
What was strongest (autos) are weak. What has been weakest (banks) are strong. The over-riding action though, remains the liquidity and inflation trade in commodities. Oil is above $90 and copper is at record highs.
Many market prognosticators will tell you that these and other commodities are rising because of the weakness in the dollar and the robust economic recovery. Throughout all the commodity rise and QE, the DXY is remarkably stable, so it’s not the dollar. Some will blame China, again, yet end user demand is stable at lower levels. We have nobody to blame but ourselves for the rising price of materials.
It is beyond the scope of comprehension that the FED actually wants and needs to CREATE inflation when their job is to supposedly suppress and limit it. But it is all a part of the perverting of the price mechanism of today’s markets. Does this sound legal to you?
1. The FED and Treasury (THEY) creates money out of thin air.
2. THEY then lend it to banks for nothing (0%, free money).
3. Banks then lend back to THEM.
4. THEY allow banks to act as intermediary to make a guaranteed profit.
5. THEY buy Treasuries from banks for cash and allow them to Hypothecate that money the standard 11:1.
6. THEY allow banks to take the hypothicated money and buy other assets on margin.
7. THEY allow commodities to have the lowest margin requirements of any financial instruments other than Treasuries.
Can you see the money machine at work? THEY create a dollar and it can become $100 and allows it to buy anything and everything market-related. Then prices rise and everyone is happy!
Do you wonder who is buying stocks and commodities? All this price perversion in the name of “saving the system”.
The desire is to get everyone hurrying to spend and invest before prices go too high. But the continuously rising prices crowd out end users because they can no longer afford the materials in question for end usage. The only buyers then become financial speculators. That is until the price is so high that nobody can buy and then prices crash from lack of buyers. Then speculators will need to sell to meet their margin calls.
The end result is that all the money THEY created will go to money heaven and we’ll be knee deep, again. And the higher the price of materials go, the closer we come to that end. I just hope my work will allow us to get in front of that end–but not too far in front of it. In the meantime, they can raise rates all day and it won’t matter. Not yet. But soon…
There are those who will tell me to wise up and get on board, 200%. Sorry, we were almost wildly bullish a few months ago when few were. Now, after less than one earnings reporting season, everyone is on board.
HAPPY NEW YEAR!
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It beats working for a living.
scotty,you know who would be proud of this whole mess. bernie madoff.lol, his beef is,he did the same as the ben bernanke.only difference is,bernie is in the slammer for it. what a country.
If the market didn’t tank in late 2008, the Madoff scam would STILL be underway…and probably bigger than ever…
All the scams come to light after a big market drop. When people rush to get their money out they find out it was never in to begin with.
Bernie was not Fed Chairman. And, he lied to a bunch of people on their financial statements. No comparison really between Ben and Bernie.
funny,arent all the banks lying about their balance sheets.i remember something alan greenspan said while addressing the banking committee in congress.he went on to say,”if all of you on this panel,understand what i am explaining to you,then you dont understand the economy”. and i thought to myself, wtf is this guy trying to pretend to be. the only difference between ben and bernie is,is ben has the badge of autonomy from the law to perpetuate a ponzi scam,and poor bernie didnt.yes,what bernie did was an out an out crime,no doubt. but it is also without a doubt,that to indenture someone coming out of the birth canal to the tune of 50k owed to the gubmint for its racking up debt. now thats a crime.
Brillant post once again. im still long though
Scott, your thoughtful post completes my evening. Thanks for being here.
Great Post….these are strange times indued.