It’s a bitch being a bear. That is to say, when someone like Ures truly looks at markets and comes to a reasoned judgment that stocks are over-valued and goes short, should such deliberations have to be colored by Federal Reserve policies and interventions which prevent free market operations? Not if markets were genuine free – but of course, they are not.
The NY Fed issued a report that markets tend to run up before FOMC announcements, and if one were to back out the hype cycle around these, markets might be as much as 50% lower:
While it’s an interesting take on things, this doesn’t (in an of itself) really mean that the Fed has done anything untoward. It simply means that free markets do run up in typical “buy the rumor, sell the news” fashion. That much we know.
But where the free market concept gets clouded is with things like “quantitative easing” and other interventions (like TARP and so forth) are incredible extensions on the basic money role of the Fed.
Instead of being tasked with maintaining the purchasing power of money the Fed is under a mis-guided dual mandate: “…The Federal Reserve’s Dual Mandate – is to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.”
What this means is simply this: Instead of genuinely free markets, the Fed is hand-in-glove working with the politicos to achieve political, rather than economic ends. Sure, low unemployment is a nobel goal, but that’s demonstrably a policy hoax.
As a result, America is locked in deflation. The Fed has ballooned the M2 money supply by 9.3% in the last year and M1 is up a whopping 16% (June to June) and we’ve gotten a lousy 2%-range GDP growth rate. Or, in other words, systemic deflation is probably somewhere between 7.3 and 14%.
Having drunk the Kool-Aid, we’ve got commodity firms blowing up (PFG Best – see next story) and the arrival of the Second Depression’s first ngative interest rates and what comed into focus is that the Stimulus was too damn small and clear thinking too damn scarce.
When the Dow drops to the 10,500 kind of range and the Fed rolls out another QE, remember our discussion. Ain’t no “free markets.” There’s only a politically manipulated market and that’s a poor place for investing unless you’re an insider.
Oh, and the just out figs from the Labor Department on Producer Prices seals my deflation is here, look out below argument:
“The Producer Price Index for finished goods increased 0.1 percent in June, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods moved down 1.0 percent in May and declined 0.2 percent in April. At the earlier stages of processing, prices received by manufacturers of intermediate goods decreased 0.5 percent in June, and the crude goods index fell 3.6 percent. On an unadjusted basis, prices for finished goods advanced 0.7 percent for the 12 months ended in June, the same rate as in May.“
And this is after a 16% annual bump in M1 and 9.3% at M2. Tempers gains in gold for the morning because inflation is on vacation. That’s the kind of thing that happens in Depressions, but you’re not supposed to figure that out.
The report that the CFTC has called an emergency meeting for July 2th to deal with the bankruptcy of PFGBest is a little late, tardy, and lame. I will let you know how it goes when I try to move some of my own money out of a commodities account I had there. Fortunately, it’s a small amount.
But the bigger question remains: How cam crooked things happen in regulated markets unless the regulators themselves are… (go ahead, take a stab at finishing this sentence…).
All the pending financial collapse stems from repealing of Glass-Steagall and letting the foxes count the hens. You’ll note prisons and jails are not “self policing.”
More evidence? JP Morgan losses are now $4.4 billion and climbing from their London clustersomething. It it hit 10?
Romney as Bush IV?
If Obama is Bush III (which could be argued) then Mittster could be Bush IV. Not to sound overly cynical here, but since there has been no effective change in administrations for the past three presidents, it’s laughable that Condi Rice is now being promoted as VP choice by sites like Drudge. After buying into the WorldCop paradigm, bad intel, Patrioit Act and the lot? Sorry, time for some new faces, methinks.
[no, not the Chicago Mercantile Exchange silly] offers a reader. He was referring to this:
FAST WARNING ‘PRESTO’ MESSAGE from the SIDC (RWC-Belgium)
The X1.4 flare of yesterday evening triggered an Earth-directed coronal mass ejection that will reach the Earth on July 14 around noon, with an uncertainty of many hours. Strong geomagnetic disturbances can be expected. Auroras might be visible in the hours following the arrival for observers with local night time and clear skies.
Too bad the market won’t be open, since it’s fun to see how these things impact (crazy) traders./
March to War
How dumb or gullible are people supposed to be? Remember in the Iraq War lead-in how there were WMD’s all over the place?
Fast forward to this morning and now we’re seeing reports that the US thinks Syria is moving chemical weapons around.
More after this…