iBankCoin
Read Scott here on iBankCoin and also at http://www.createcapital.com/
Joined Jan 19, 2010
717 Blog Posts

I Hate to Upset my Friend, Peter Schiff, But…

Gold is in the process of making a big, giant contracting triangle at the end of a decade worth of gains. The caveat is that I am forgetting about any of the economic or fundamental reasons for why gold should keep rising forever and just focus on the technical pattern.

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The Market is Great.

We have written and spoken about how the Central Banks are Training You and one part of that “training” is becoming perfectly clear.

Please notice that any time the market has a tough day to the downside–for whatever the reason–the following day is a rip-roaring, face-ripping, gap-up-at-the-open rally that acts as if there was or will be some great piece of news. The action is usually frenetic and wholly lopsided to the upside and begins at about 4:00am in pre-market futures trading.

Once the open has passed and there is no fade, the “locals” determine that the “all clear green light” is on and it’s OK to buy any stock on the board, regardless of industry or sector. And of course market internals run 90% positive.

This is all part and parcel of the “Illusion of Price”. This concept says that regardless of fundamentals, risk or reality of the overall economic situation, as long as the prices of market assets hold up, nothing fundamental is “too wrong”. This is the main lever as to how the markets are continually controlled by the Central Bankers.

FYI– Ben Bernanke and ALL the Central Bankers around the world are the Markets Primary Benefactors.

Remember back in last 2008 when the world stopped? Even then the markets stopped crashing long enough for the holiday’s to come and go. Between December and late January, markets traded quietly and in a tight range. Until the February-March final crash. So cover your shorts, buy the most levered-up or shittiest company because for the next three weeks nothing can go wrong.  Or at least until next week’s option expiration.

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Central Banks are Training You…

The lesson of the past three years is the ultimate in simplicity; Don’t fight the Fed.

It used to be that interest rate policy was the blunt tool used to shape economic and market activity. Making money cheaper or more dear was the “throttle” to make things go faster or slower. Simple.

Now is a whole different story. No longer is the cost of money used to shape an outcome. Money is free to  Central Banks and they have taken matters to their most extreme: creating money out of thin air to buy the bad investments that nobody wants to buy. And the capital markets think that is a reason for optimism or earnings multiple expansion. If you think about how bad the investment landscape must be in order to justify this type of action, and think about the market’s reaction, it is the very definition of insanity.

The money used to buy these investments will never see the light of day. They will be marked as a total loss. But it doesn’t matter to markets.  The SPX has rallied 100 points, again, for the eighth time in a few months and just in time for the Holday Season. Yet we remain in our trading range and below major resistance.

You are being trained that there will never be a reason to sell any investment because no matter what the situation, prices will not be allowed to fall more than 10% or so without a new printing or stimulus scheme. Over and over again, prices that should fall and investments that should fail are not being allowed to. Soon nobody will ever sell anything ever again. A new “permanently high plateau” will be reached and higher prices will be justified as “normal”.

Can this scheme ever end? I am beginning to exhibit “Stockholm Syndrome” as even I am being brainwashed into believing that regardless of the events of reality, the fantasy of price will be victorious no matter what. Unless Ron Paul becomes President, and he’ll probably be assassinated before that could ever happen…

 

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Well, I Should Have Known…

After Monday’s insane ramp on no news, I should have smelled a rat.

I knew that the FED would have to Print Forever in order to save the disorganized Europeans, but I did not think they would do it on the last day of the month and make all the negative performance for the month simply go away.

We have rallied almost 7% in just two morning opening ramps, Monday and today. We have now almost round-tripped, from SPX 1265 to 1165 and back to 1235 in 2 weeks, and one was holiday-shortened. That is a total of 170 points very quickly, yet we are still in our trading range.

There has been many instances of big market moves before a big government announcement this year. It stinks to high holy heaven. But it is the way it is.

Certainly our Santa Rally was heading for disaster until it was bought and paid for with an unlimited swap line between Central Bankers. It is the “Market by Central Bankers”, plain and simple.

Enjoy the ramp because endless liquidity for Central Banks won’t always be so great for the equity markets.

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