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10.25.2015 Financial Intelligence Report Bookmark

That’s It?

The market is doing exactly what markets are supposed to do…make people panic, then wish they didn’t panic and get back in…and then take their money again.  Right now as I’m typing this the market has put on a tremendous show, with the S&P gaining almost 200 points in rapid fashion. We came through September with no meteors, asteroids, Shemitah explosions, aliens, nuclear war, etc… AND the market is roaring higher.
So everyone that hunkered down for a nasty spill is breathing easier and wondering why they even bothered to buy some silver, or stock a few more bags of rice, or sell some stocks.  The reason is simple…you’re being conned at the highest level.

The two biggest stock market drivers this week was Mario Draghi promising more QE on top of the billions they dole out every month, and the Chinese saying that they have cut their interest rates by 25 basis points. That got people so excited that on Thursday we had a 300+ point day on the DOW.  

But I think a bit of real self examination is in order. Across the globe some 32 nations Central banks are cutting rates. China just told us that their GDP was expanding by 6.9% yet in the last couple weeks have devalued the currency, jailed people for talking negatively about stocks, and cut interest rates. In our wildest economic times here in the US, we’ve rarely ever grown 7% and certainly wouldn’t be cutting rates and devaluing the currency. Something stinks like 5 day fish here.

I understand that we live in a Dot-com world where things have to move in a nano-second. But empires don’t crash in nano seconds they take time. Ours has been in the process for decades ever since we left the soundness of a marginal gold standard. Yet I understand the herd mentality….the market plunges, people get scared, the market recovers and they  can’t wait to get back in so they don’t “miss the train leaving the station”. I get it. What I question however is…what is the train using for fuel?

The fuel for our new supersonic bullet train is printed money. Debt. Derivatives. Has any of that been fixed since the so called 2008 crash? Nope, evidently we’re 30 trillion more in the hole now than we were then. But frankly that’s not what’s got me more convinced than ever that I really need to do more “big picture” preparing. Well if it’s not the debt, the QE, or the cheerleading…what is it?

It’s the mindset. People are now convinced that any time the markets get weak, someone somewhere around the world will announce more QE and save the day. One time it might be Yellen and the Fed’s,  the next time it’s Draghi, then Abe of Japan, and round it goes. This is exactly what market’s do…they are there to take the most money from the most people. As more and more folks come back in, because “it was merely a 10% healthy correction and we’re going much higher” the market is wringing its hands with a snide smile on its face, because one day…it’s going to drop. And drop and drop faster and faster. Only this time it won’t stop at 10%, or 20. It might not stop until 40 or 50%.

However if it was just a good old fleecing as we’ve seen the market dole out to folks such as the 2000 crash or the 2008 – 9 crash, I wouldn’t even raise an eyebrow. But this one isn’t going to be your garden variety market repricing. We’re going to see all manner of crazy things hit us…this is why they are so very desperate to keep the markets up and psychology positive.

Consider the emerging markets. It’s no secret that they’re in debt up to their eyeballs and “most” of it in some form of dollar denominated notes. As the global slowdown advances, it doesn’t matter how much Draghi or Abe or Yellen print, the EM’s are going to DEFAULT.  There’s virtually no way around it. Add in China’s quest for first SDR inclusion and then what I believe to be a gold backed Yuan, and Dear ole’ dollar…is doomed.

That’s where we’re heading for folks. I’m not going to list all the ills, because you all probably know them. Some are more high shelf than others, such as the destruction being caused by low oil prices on the frackers and the banks/investors that loaned them money. Some are lower shelf like the trillion in student loans. But it isn’t any one of them that creates the issue…it’s the collection that causes the problem.

In other words, can the economy withstand defaulting student loans? Yes. Can it withstand the oil patch detonation? Yes. Can it withstand industrial sales such as Caterpillar falling for 3 full years? Yes. Can it withstand another folly into sub prime loans? Yes. And  on and on. However it can NOT withstand all that and more at the same time. Therein lies the troubles folks. When this puppy blows, it won’t be because of any one supreme issue, it will be exactly like the build up of snow flakes for months on end and then one more tiny flake lands and “boom” the avalanche occurs.

We’ve got snowflakes falling like a blizzard. One on top of the other they stack, and while the whole mound of them shifts to and fro in the wind, the foundation has held. But there’s that one last flake, the last straw the camel can’t take, that looms. Which one will it be? China experiencing gravity like everyone else? Some form of mistake in the Middle East that sets off a chain reaction? One more major bank found to be crooked, or bankrupt? We don’t know, we sit by the fire and watch the snow fall. But we keep the shovel near.

The US crude oil rig count is down 1,001 units from last year. Does anyone care? Nope, see we have google and they beat the estimates. CAT has seen global sales fall for 3 straight years, and in this last report not a single area of the globe was positive. Does anyone care? Nope, see Draghi mentioned more QE. The migrant situation in Europe is killing nations, as their budgets get stretched to the limits and the native peoples are close to revolt, does anyone care? Nope, see China cut it’s interest rates…..

You get the picture. We are so deep down the rabbit hole now, that watching them manipulate the market back up, matters little. What does matter is if you take the bait or not.  Do you think that we should have bounced so far off the Aug. lows that we’re within spitting distance of the highs?  Probably not.


I said I was more nervous coming into this fall than any period since 9/11 happened. NOT because of the stupid stock market, but because of global affairs. We’re traders here if the market was to roll over and puke, we’d go wholesale short and make a killing like we did in 08 – 09. No, I’m more worried over the sheer desperation that continues to fester. Negative Interest rates in Denmark have pushed Real estate through the roof, and now rents are up 60%. Things in the Middle East are more tense than I feel comfy with and evidently Israel asked the US for support in blowing up some of Iran’s nuclear facilities. Israel is freaking out about how things are going now that Russia has saved Assad. That’s always bad, because Israel will throw a first punch if they feel the need.  Here at home, they’re going to raise the debt ceiling again. ( and again) Obama care is blowing up, McCain spends more money on bombs for terrorists than medical for Vets…more snow.

This market romp means nothing folks. It’s showtime for the masses. Meanwhile, something wicked this way comes and not a lot  can change my opinion on that. If you’ve been reading me for any of the 20 years I’ve been putting out these letters you know I don’t go for the fear porn agenda to boost subscriptions. So don’t think I’m saying I’m  nervous so I can show you reams of horrible news, I’m not. But because there ARE reams of horrible news, I’m not much liking what I see coming.

Enjoy the market ride if you’re a trader, but don’t for a moment think things are fixed. It won’t do you much good to have the DOW at 25,000 if the global economy snaps and the dollar crashes. We’re getting closer to the snap every day.  Continue to look at the big picture, because it is coming into view.

The Market…

And the mindless romp higher continues. Bigger, stronger and faster than anyone might have thought possible. Times like this try your sanity, because you know in your heart that it is “fake”, yet up is up and you want the gains.

Think about it like this… the Challenger Grey layoff reports have been getting worse and worse for months. Yet via the magic of the BLS and their wizards, initial jobless claims are at multi decade lows. So, am I to believe that as MMM lays off 1500 people or Weatherford dumps 3,000 more people that they’re just going to say “not to worry, I don’t need any unemployment checks?”  Of course not.  

But if the initial jobless numbers were rising, people might start to think “uh-oh there’s a problem here”. So they LIE about them. Look at the housing sales numbers. They want you to believe in your heart that they rose 4% last month. But there’s an issue. Without layer upon layer of “adjustments” the true number fell negative 6.  Did CNBC tell you that? I didn’t think so.

My point since the Aug lows was this…the ONLY thing the Central planners have complete control of is the stock market. They can pin it exactly where they want it, about 95% of the time. Every once in a while, the market punches through ( to the down side) their protections, but they rapidly regain control. So, considering that the world is circling the toilet bowl, they can’t create jobs, they can’t save the economy…they make the market look as if all is great. It is great folks, it’s the greatest swindle of our time.

The market is NOT up on a great economy, or great earnings. The market is up because they need it up. If the market were to roll over and plunge ALL of their policies and QE’s and ridiculous money printing will be shown as a FAIL.  Well Central banks can NEVER be blamed for anything, it’s JOB ONE for them.

But it causes enormous brain cramps for people like me. I know the market is up for the wrong reasons, and I know they have not figured out a way to ignore reality and gravity for ever. So what do you do? Do you chase this market with all you have because you know they won’t let it go…or do you say that things are now so completely blatant and perverted  that on any particular day, we could crash by thousands of points?

David Stockman is a very bright guy. I enjoy almost all of his ponderings. Well I want to present you his last paragraph from his latest musings….

So there is no alternative except to take cover because the latest stock market rip is based on pure central bank hopium

Indeed, Mario Draghi has confirmed once again that the world’s central bankers have a monetary death wish. Unlike the gamblers who bought Cramer’s top 49 stock picks, the best course of action is to sell, sell, sell—–and do it now.

He’s right. But what if they use more band aids, and glue, and QE and print money, and Negative rates, and low and behold…the DOW hits 20,000??  Sure it got there for the wrong reasons. Sure it’s almost counterfeit. But 20K is 20K.

That is exactly the very decision each and every one of you has to make. Do you think that they can keep this illusion alive with ever more monetary voodoo, or is this the death throes of a very wounded market?  Don’t forget we’re working on 7 years of every artificial stimulation they can conjure…can they keep it going 1, 2, 3 more?

I expected the big blast up off the Aug lows. I suggested that it could possibly make it to S&P 2020. Well it did. But then, it didn’t stop. In fact it has simply blasted higher. So that’s it? Everything’s fine now?  I’m not convinced.

As I said up in the commentary above, don’t for a minute think we’re out of the woods just because they saved us from the August melt down. The desperation reeks, and even the most bullish of financial commentators has questioned the market lately. When people paid to lie to you start asking if this is “overdone” you know it’s beyond overdone and “burnt to a crisp”.

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