Tag Archives: stock market

The United States Economy is Doomed

Long sideways consolidations along with negative stories in the financial media are encouraged in order to draw in short sellers to squeeze in creating the next rally

A great number of poor and middle class have already noticed.  The easiest way to make the most money in the shortest period of time is to use money and power to buy the government. After that just make sure that the policies paid for are those which make keep you rich and make you richer. rich. The most prolific money gusher of all times is that of controlling central bank’s  policies so as to create an endless bull market in asset prices with money created out of thin air.

If you want to look at a bunch of charts and numbers and get a different explanation. find a Harvard trained economist. Any of them will do. Any of them can convince you that I am wrong and a nut case. Their credentials are impressive.  There are a number of reasons I don’t rely on statistics and numbers. The biggest reason is that numbers are useless in the present moment. Understand the incentives that create the numbers and it is easy enough to know what is going on and with more precision. Go to a Harvard trained economist to get bedazzled. Read my articles to find out how the future is most likely to unfold. I am completely fantasy free. Their work is heavily dependent on assumptions that are completely untrue.

How do I know the U.S. economy is doomed? Saving the status quo over and over again guarantees an allocation of resources that gets more and more inefficient with every passing moment. Show me you say. I am sorry, there are no numbers that show human beings acting on incentives they possess. No precise numbers are necessary. No charts are needed. The behavior is what counts.

Any good economic numbers are occurring as a result of rising asset prices. The rich spend a lot of their newly acquired treasure. Take that away and the economy collapses.

Here is the problem with funding an economy by delivering to the powerful a continuous stream of unearned wealth and income. Any positive incentives the rich have with respect to economics are changed. There is no reason to invest in plant and equipment if government is sponsoring an increase in value for everything you own without you having to lift a finger. Corporations become lately.

Central banks have no political incentives to back off of their asset enhancement initiatives. They won’t unless there is a breakdown in civil order and somehow they are force to quit by political will. Traders in the financial markets are still using old dogma which was developed to be used in a free market setting. All these techniques do is generate losses and confound the people who use them.

With central banks in charge of elevating asset prices, using unearned money; any international event, war, threat of war or strange election result is used to draw in short sellers who are subsequently squeezed out of positions to create a surprise rally. There is absolutely nothing in the news currently which will cause a market crash.

If necessary, central banks will buy up enough stock to have controlling interest in the world’s largest corporations. If that plays out, the corporations acquired will become fat, lazy and falter. They will be replaced privately with new emerging corporations which produce and earn. In such a case, economies world wide will take many years to reset. Poverty will increase and goodwill that has not already disappeared from consumer markets will be gone completely.

One thing that will be hard to ignore will be when Gross Domestic Product turns negative and stays that way. That alone will not put an end to Federal Reserve tyranny. What it will do is cause ordinary citizens to override their instinctive propensity to trust government. That is a rare occurrence but given enough stress, individuals can and will opt for individual thought. Herd behavior is the path of least resistance. Given enough pain and stress folks will break away from herding behavior.

Regardless of the exact path followed, the United States economy is being held together by driving asset prices into the stratosphere. The collapse will come when asset prices fall. If there is a way to prevent that from happening, the investor class will do everything under the sun to keep it from happening. Just know that it will collapse.

Central banks are buying stocks with both hands. They won’t stop until they have to. Don’t count on international events to make a difference. Be it war, a change in government somewhere or anything else, central banks will just buy more. Remember, you can only trade with money you have earned. Central banks have unlimited sums, restricted not by God or anyone. They will use that money as they always have to take what little you have and divert to others with political power.

 

 

 

 

 

Central banks are buying stocks with both hands. They won’t stop until they have to. Don’t count on international events to make a difference. Be it war, a change in government somewhere or anything else, central banks will just buy more. Remember, you can only trade with money you have earned. Central banks have unlimited sums, restricted not by God or anyone. They will use that money as they always have to take what little you have and divert to others with political power.

Government’s Plan for the Stock Market

Although we don’t know what it is, we know there is a plan to keep stocks moving higher. How do I know? Fantasy free means that we study people and institutions according to how they function and pay no mind to how they are perceived. Government is commonly perceived as a fatherlike benevolent entity that spreads fairness and goodwill across the land. In real life, government belligerently promotes the interests of the most politically powerful citizens.

Representation in government goes to the highest bidder. Representation is easily transferred. Send a representative to Washington and you have in actuality hired a thief. But, the thief is not loyal to you necessarily and you get outbid. You only voted. Money counts for much more than your vote.

Few doubt that for many decades, fiscal and monetary policy have been pointed towards enhancing asset prices on behalf of the highest paying political players. More is done in government with winks and nods that is ever accomplished by legislation. The public normally deals only in short, concise packaged ideas. What government actually accomplishes goes right under the average person’s radar.

From 2006 to present, support of stock prices has been massive. There is great public and private cooperation. The Federal Reserve denies directly buying stocks. They do accept equities as collateral and that amounts to about the same thing. They work with the primary dealers who, with winks and nods, provide assurance that newly created money will support the stock market. With off the record conversations, corporations are assured that if they buy back their own stock, the Federal Reserve has their back. Foreign central banks buy stocks with no reservations or restrictions.

Many lofty reasons are given for Federal Reserve activities but their only real purpose is to move stocks higher. Talk is that the Federal Reserve is out of tools and the market is about to fall under its own weight. It is pointed out that corporate buybacks are waning despite constant coaxing by the Federal Reserve and others. The Federal Reserve actually still has plenty of options and these options will be used. Over the coming weeks expect game changing, unbelievably good news for stock prices. The good news will be repeated despite being manufactured for the occasion.

The last thing the Federal Reserve will do is find a way to directly absorb any excess supply of stock by buying directly. So what if it is illegal. They will do it anyway. There is no limit to how much Federal support is available for the stock market. Honest investors only have access to what they earn. Central banks can buy stock with dollars that are really no different than monopoly money. If more is needed, more is made available.

Don’t automatically expect that the financial markets will finally reset and normal free market conditions will be reasserted. There is no incentive on the part of anyone in power to make it turn out that way. Chances are much greater that central banks will continue buying stocks until the majority of assets in the world are owned and controlled by governments.

There are many paths back to totalitarianism. The most likely one to enslave the world population is for government to control the factors of production, just by buying the institutions which own those factors now. Of land, labor and capital, capital is the hardest to control but there is a process currently in the works by which that task can be accomplished.

Stock Market’s First Day 2017

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My best estimate is that January 3 will begin with a sell off. Reasoning will be that our economic situation is so dire that higher prices are not possible. Don’t forget that any money you have available to lose, you had to earn. The Federal Reserve and its friends have any amount they can imagine. They also know that if they lose, they will almost certainly be bailed out by the government. Their gamble is heads we win tails you lose.

With all of the money the mind can imagine, none of which they have had to earn, it is easy to decide what happens to your money. Stealing it from you is not a difficult task.

Chances are extreme weakness will stabilize if not before the end of the trading day within a few trading days.  By then bears will have be loaded up on short positions and be ready to be squeezed. Those with profits will cover while they can and the averages will rocket to new highs.

The other possibility is that traders may have smartened up enough enough not to participate this time.  After all, the economy has been destroyed. The mob will cut and run. The Fed will be on its own and the market will crash like nothing you can imagine.

This is not a real market. I don’t trade in fake markets. Many opportunities will emerge after the crash. Again, I can’t time the crash well enough to justify trying. Buying opportunities after the crash are a certainty.

There are circumstances where I will go on the short side and I will keep you posted on that.

Lastly, assuming the mob maintains control of the market, look for AMZN, FB, APPL,  NFLX and other fantasy based stocks to be weak this year. Most goosing will be in the blue chips.  Be warned, the mob is not as strong as it was this time last year and any number of stunts will be tried.

 

Stock Market Fireworks Starting Tomorrow

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Before the mob gooses the stock market, they always feign weakness, draw in short sellers, then load up on bullish derivatives.  The measure I use as an indicator is an index of total ETF volume divided by total Russell 3000 volume which is an ETF-free index. For those unfamiliar with the stock market, we are talking about exchange traded funds. These are not the only derivatives the mob uses but it is an easy indicator to follow. Despite the complexity of the trading algorithms, the actual strategy is always simple.

Get free money from the Federal Reserve, manipulate short sellers into covering and buy enough actual shares to push up the price of the derivatives they trade. Loses on stocks are not a problem because derivatives profits more than offset that, always . Most importantly, anytime this indicator spikes, everything legal and illegal is going to be done to elevate the overall market. Assurance to corporations with stock buyback programs is signaled by the Fed that they have their backs. Success for the mob is not guaranteed but the number of times this has not worked perfectly can be counted with just a few fingers.

The investing public including professionals is extremely naive but they are slowly starting to smarten up. When this stops working, the market will crash like nothing you have ever seen but it is a bad bet that it will on any one occasion. Stock owners will regret having ever heard of the stock market. I have basically been in cash since early 2013.

 

Stock Market Through October

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bbbDon’t click on these headlines. They are images and just for display. September through Mid-October is the logical time for the market to crash. Will it crash? Everything under the sun is being done to hold it up. Headlines like the ones displayed here are not what they seem. They are designed to draw in short sellers to squeeze so as to help push the market up. The financial news, regardless of where it originates, does not report much genuine news. The financial news is an opinion management service and promotes faith in the financial markets. The only time a lot of bearish articles show up, is when there is a planned boost to equity prices. The more traders who short are expecting a decline, the easier it is for manipulators to drive it higher.

Who is buying stocks? The public is buying only a little and hedge funds are not buying much. Certain central banks are buying heavily. There is no way to tell exactly what the Federal Reserve is doing, but be assured, it is buying through surrogates if not outright. Friends of the Fed are creating artificial demand through the derivatives markets. These are large institutions which get advance information and other benefits from the Federal Reserve for helping make each day green. There are corporate buybacks. This is a type of corporate cannibalism that generates higher earnings and stock prices in the short run but that will eventually break the companies.  The Federal Reserve assures the corporations that they have their backs and that their buys will be profitable.

Think of this as a chain that will be broken. We don’t know what link will fail but when one does, the whole system will collapse.

Central Banks + Friends of the Fed + Corporate Buybacks + Short Sellers Getting Squeezed=Higher Stock Prices

The central banks will not fail. You as a citizen can only invest what you can earn and borrow. Central banks have no worry about taking losses. They get all the free trading money imaginable free, with just a click of the mouse.

Friends of the Fed are organized crime. They will participate as long as the Federal Reserve’s guarantees allow them to make a profit. They are the ones who squeeze short sellers. All of their trades are short term, sometimes just seconds apart. Friends of the Fed are the most likely link in the chain to break. When the Federal Reserve can no longer guarantee them risk free trades, they will disappear into oblivion.

Some corporations are already backing off of buyback programs. Many corporations have losing positions in their own stock already. The eventual losses will be devastating. Corporate officers love buybacks because they allow them to get paid the largest amount of money in the shortest period of time.  If the stock of their companies tank, corporate officers have little concern. Their cake has already been made and all they have already eaten it. Corporate buybacks could evaporate very quickly.

Short sellers amaze me. So many still trade is if they were in a genuine trading environment. They are shrinking in number because so many have gone broke.

There are two ways the market can crash this fall and they are both long shots. An enormous amount of stock could come on the market from unanticipated sources. A war or an assassination could trigger something like this.  Members of the Federal Reserve Open Market Committee could suddenly be overcome by guilt and confess as to what they have been doing and what the outcome will be. Definitely don’t count on that.  The other way is for one of the links to come undone. Friends of the Fed are not doing as well as they were. I know nothing of their exact profit and loss situation. They will cut and run sooner or later. I have no way to tell.

Central banks are not going to give up controlling stock prices. My expectation is that they will be successful in keeping the market up through October. It is getting harder to do. My portfolio consists of cash and just a few small positions in bear etfs. I am a good trader but I know my limitations.  Like everyone else who trades I would have to trade against the government based on what I expect the government to do. Even expecting the market to move higher through October I won’t go long. The chances of a huge one day washout are simply too great.

Stock Market Next Week

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081417

Very little has changed in a week. Notice the green index at the bottom of the chart. Again, prior to an acceleration to the upside, friends of the Fed load up on bullish derivatives ahead of time.  Usually, before the market launches there are multiple articles in the media outlining reasons why doom is just around the corner. This is to draw in short sellers to fuel the advance when the trigger is pulled. Those news stories are missing going into the trading week.  Again friends of the Fed participate in return for advance information. To participate they must make a profit. They will not take any risk.

When they cannot profit even when the Fed helps them they will cut and run. The market will crash. I know this is mostly a repeat of what I have already said.

The market will not drop as a result of supply slowly rising above demand. That kind of drop can be managed and it is often orchestrated as a way to draw in short sellers. If a fast drop occurs, it may continue.  The lack of etf volume is an indication that friends of the Fed are having trouble staying in the black. This has been a long standing feeding frenzy, so they won’t cut and run just because they take a one or two day loss. They will cut and run when they ascertain that there is no more profit to be extracted out of the unaware.

The free money for helping the Fed actually started during the Reagan Administrated and has continued to the present with very little interruption. The central economic planning also started during the Reagan administration and has continued to the present also. It is a testament to the free market philosophy that it has taken this long to destroy the system.  But, it has been destroyed and there will be hell to pay.

Again, the crash can occur on any day but there is only a low probability that it will happen on a given day. The potential consequences are to great to justify holding long positions. The market does look much more vulnerable than it has in a long time. We still cannot rule out the chance that central banks will just start buying outright with newly created unearned money. I am still holding a pile of cash and own just a few bearish 3X etfs. Sorry I can’t be more precise. I know my limitations and that alone has saved my neck more than once.

There is a good chance the European markets will start to tank prior to the U.S. markets. Keep an eye on that.

Can the Stock Market Move Higher?

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sell-buy-word-question-mark-background-30486243The informal consortium of cooperating interests is showing signs of breaking up. Never forget that the side that manipulates the market has an unlimited supply of unearned money to use. Both bulls and bears within the general population can only trade with money they have earned plus what they can borrow on margin.

Here is what I am looking at. Techniques of drawing in short sellers are not working as well as they have in the past. Pumping stock prices is difficult without the presents of short term short sellers with stops. Retail brokers are still sharing customer’s position information with high frequency traders. Very few retail customers short actual stocks. Even one customer shorting just one hundred shares or an odd lot, can trigger a short squeeze in a certain issue. High frequency traders follow retail transactions the same way sophisticated traders in days passed used odd lot short statistics. To a manipulator one small short sale transaction represents a general thought pattern of naive traders in general.

The news media hasn’t turned negative but occasional stories with real information are starting to bubble up here and there. The media and advertisers have the same general interest as wall Street firms. The media, however, can not take a chance on appearing stupid or seeming unaware.

Your government began the practice of supporting asset prices during Reagan’s administration following the 1987 crash. From that time on, government policy has supported stock prices indirectly 100% of the time. In 2003 as the 2nd Iraq war was starting marked  the beginning of direct intervention. Henry Paulson was appointed Treasury Secretary in 2006 for the express purpose of keeping asset prices elevated and moving them higher. That worked until 2008, The QE initiatives were introduced in 2009 and have been present ever since. From this point on, to move stocks higher, manipulators will have to carry risks themselves.

There is no question as to whether or not stock are getting outside support. This is the weakest time of the year, historically. Any follow through to the downside from here will hurt the general economy and could possibly cause enough fear to render any orchestrated attempt to support the market unsuccessful.

A danger they face now is a growing awareness of the general public. Most people are unaware that all of government’s gifts to wall street come at their expense.
Central banks can increase their investing directly in equities and they might. Any further decline in stocks will make corporations re-think their buy back plans. Losses on their own stock may become staggering.

I am still 70% cash and 30% bearish positions. I will say, so far so good. The increase from 20% bearish to 30% has come mostly from profits. If the market crashes suddenly, I am willing to live with that ratio and be less than fully committed to the short side. As dramatic as crashes can be, there is more money to be made on a slow decline of the same magnitude. When a market crashes, bulls can’t close their positions and bears can’t get fully invested. We have to live with circumstances as they are and not as we wish them to be.

The market is going down. That is for sure. Getting positioned for the coming decline is very tricky. Many times, bears who are impatient, lose all of their capital before the decline starts. That scenario needs to be avoided above all else.

House of Cards

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house-o-cardsIt takes a long time to build a house of cards. The house of cards collapses at a much faster rate. Since 2011, the market buying has been funded with lies and deception. Efforts to stabilize the market are ongoing. That will continue until panic sets in. It can happen any time.  I have gained a little more confidence that the sell off will continue through mid-October. I have increased my short exposure again to about 40% up from 20%. Be cautious of abrupt short killing bear market rallies. They can be orchestrated of they can happen naturally.

Again, I am the only economist in the world that sees the Federal Reserve policy as totally political. The members are not stellar citizens doing their best to right the economy. Any sane person knows that central economic planning transfers wealth and income only, and guarantees a disastrous outcome. Janet Yellen and her crew have no honest bones in their collective bodies.

The corporate buybacks that supplied orchestrated stock market gains are litterally going to kill the corporations that participated.

When the current round of manipulation began in 2008 and then in 2011, those bear markets were not complete. One of the values of a complete bear market is that a countries assets are very efficiently allocated when it is over. This bear market will probably end at a level lower than was seen in 2009 and certainly lower than what occurred in 2011.  Why? Those bear markets were not complete. Instead, they ended when government started supporting stocks. Reallocate resources is a natural function of falling stock prices. Currently assets are at least as miscalculated as at the top in 2007. This is going to get very bad. It will probably be a mistake to flip long before a considerable amount of time passes.

Folks with stocks in their IRAs will get cleaned out. Most will be unwilling to take penalties and will take bigger losses than they would by paying the penalties and closing the accounts.

These thoughts and opinions are based on sound economic principles on which numbers cannot be attached in the present. That is the nature of free market economics. People cannot be observed behaving in the present in ways that economic principles guarantee that they will. So, most economists ignore these things and look for numbers instead. That is to their disadvantage since the present is where the action is and where the principles apply.

 

No Honest Markets

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There is not one honest market in the world today. Dishonest markets always fail. I am still convinced that the bottom is going to drop out of the stock market. I am equally convinced that I cannot determine when. The best approach I have is to take short positions in a portfolio of stocks which are already in down trends. Close any positions which go up rather than down and rotate the money into different stocks showing weakness.
First Solar (FSLR) is one of my short positions. It also went against me last week. If FSLR closes above the red trendline, most likely I will get out with a loss and open a position in weaker stock. The whole idea is to stay short the weakest stocks in the market. In my opinion, there are no safe places to invest money other than cash. Shorting a portfolio of stocks is certainly not safe. There is a chance of getting a substantial return. For me it Is worth the risk.

First Solar (FSLR)