Saturday, April 28, 2012

Candid Market Thoughts: I see No Sign of an Immediate Market Crash; Bullish on Gold; Dollar Daze

Here’s a March 30 Tweet that I tweeted as @jkings1… “Bernanke not about to remove the punch bowl. Good spring setup for stocks. Now not the time for aggressive shorting via $SPY”.

I said essentially the same thing in this space on April 10, and now on April 28 I am still saying the same thing, though I would add a dose more of caution may be in order since the market is now becoming a bit overbought. As I stated April 10, at that time, I saw no signs of an imminent market crash. My indicators are still telling me that likely through the summer and fall, there shall not be a crash. The crash callers are too soon. They have a better chance of seeing market trouble after the election.

If you look back at my Financial Balderdash blog, I did call the subprime meltdown in late 2006 and stuck to a very bearish view of the stock market from late 2007 through 2008. I was working at Fox Business at the time as an editor where I would prepare the news plan (agenda as it’s called in the business) for the network each morning, but I still think they thought I was a crazy perma bear.  I was a non-mainstream media person, or a square peg in a round hole while I was at Fox. I shunned anything the smelled of market cheerleading.  So there were times when the News Director would add something to the Agenda akin to being either fluff, or overly optimistic at the time.  That was a source of conflict. The funniest irony of the experience, was the launch of the channel coincided with the peak of the market (Dow 14,000).

I dredge up my past calls, not to toot my own horn, but to demonstrate that I am quite capable of making bearish macro market calls when I see them, however, unlike many of my counterparts who blog and do bearish YouTube videos, etc., I am not stuck in a permanent bearish viewpoint, nor am I ever married to any permanent bullish outlook (although gold may be the exception).  I just simply think the agenda of the Fed comes down on the side of the market bulls for the time being.

I look at the fundamentals.  I have prioritized understanding the fundamentals MORE than charts of the overall market in the last few years as I have seen and heard dire predictions of the chartists and the fundamental people come and go. While I realize there are literally dozens of negative fundamentals, here we are still are going about our daily lives and the forces who control the game, the same Powers That Be who have been around for ages and who have become more powerful than ever, remain (for now) in control.

The point being, the markets are not going to collapse unless the PTB somehow loses control, or wishes to see the markets unravel. Many still underestimate the resolve of the PTB to keep the system going – even after the near meltdown in ’08, which miraculously turned into at least a stock melt up in mid 2009. In the world of finance, the biggest poster child for the PTB is the Federal Reserve. And it’s quite clear that at the end of the day, the Fed’s operatives are not going to be sleeping at the switch in an election year.  Ben works for the Banks who own the Fed, Ben works indirectly for the POTUS. He will not cross either one, or so it seems so far.

You’ll recall, when Greeny (Alan Greenspan) was in the driver’s seat he did make life miserable for Bush 1 with a higher interest rate policy that kept everyone thinking the U.S. was in official recession, until we found out some months later that the recession had ended six months before Bush 1 was defeated. “It’s the economy, stupid!” resonated loudly with the body politic and the elder Bush was out. Bernanke must have the song, "I've Got The Power" loaded into his iPod, but it's unlikely he will use it against Obummer and with it being a certainly that banks would be pulverized by higher rates, Benster is not going to raise the discount rate, but may lower it further should GDP growth move even lower.

Anyway, this time things are completely different as if we moved from Earth to Uranus. The NBER says we are not in a recession and the full court press is on from the daily White House press briefings to the corporatist broadcasters that things are picking up. The Fed will do everything to ensure that message can continue to be broadcast for the benefit of the present POTUS. The Fed will also dare not raise interest rates this year (Ben already covered by saying it won’t be until late 2014 before we see an end to near zero interest rate policy). For those of us who know the real score, it’s frustrating that Fed is such a tool of malevolent forces, but that’s the way things are.  

As John P Morgan once stated (at least is said to have stated): “markets will fluctuate.” I am not saying every day will be an up day for the stock market, but the 2% and 3% declines that have peppered the market record over the last few years have been more often than not been followed by rebounds which have taken us from the 2009 lows to the present approach to all time highs.  Retail may be dead on Wall Street, but the PTB have a vested interest in goosing market higher. A few institutional buy programs involving SPX futures and it’s off to the races. In the PTB view who needs the smaller retail investor. In other words, the weaker volume in this latest move up isn’t a great concern to me and in my opinion is causing market pundits to wrongly conclude that the uptrend is not real.  Let me tell you something, the uptrend is a real slap in the face to market bears and slaps are real, indeed. Al Einstein, it has been said, slapped a guy in the face for questioning reality and asked if the slap was real, or not.  A market gain, or loss is just that. It's real and any number of variable into the why of the market move cannot be used to condemn a trend in the market. 

The opportunity remains for those who “play” the markets, that they can convert their fiat profits to tangible assets. This won’t be the case forever. I will try to let you know in the coming months when the you-know-what is about to hit the fan just as was done by your writer in late 2006.

There’s no doubt in my mind that the fan is eventually going to get hit and will fall over and be destroyed.  Those are going to be perilous times, but for now the corrupt status quo is managing to hold things up. Anyway, to those who constantly harp on the coming end, I ask ‘why in such a rush for anarchy?’ All the gold standard people of the turn of the last century are dead.  All of today's society raised on the fiat regime have no idea about money backed by metals and how such a system would work. I even find it to be a perplexing set of thoughts. Fiscal rectitude is scoffed at and ignored by those who control the spending in Washington today.  Surely an end to our profligate paradigm shall eventually arrive, but the timing doesn’t seem right for it to happen as early as May, or June as I’ve been noticing on the Twitter feed.  Don’t fall in love with this bullish phase, hedging is always a wise thing to do, especially for larger counts, but those who have been staying away from the market have erred to the point of missing out on making a fortune that again can be converted into real, tangible assets.

If Wall Street wasn't viewed with such negativity by the general public, Obama could seize on the stupendous gains Wall Street has experienced since the '09 lows. We know, however, that would backfire since the gains have come due to the biggest corporate welfare schemes ever - such as TARP, the creation of reserves for banks know as QE, along with the Fed taking debt with zero value on to its balance sheet as face value. 

My bullish long term gold views have not changed. It’s been a tough slog only for those who have been looking to make the quick “killing” with dreams of $10,000+ per ounce gold, or for those who play GLD and its options. I think the day shall eventually come when we see huge spikes up in gold. One will be pleased to have something of such value, but the overall world – especially for the U.S. and the end of dollar hegemony – is not going in a happy place.  The best mindset, as I have noted in the past is to see gold in the light of human history – as a store of value, or insurance for the time when fiat currencies fail (which has happened time and time again). Gold gained acceptance as a currency eons ago -- all that I can say, is that many are arrogant in this day and age to condemn gold t the trash heap of history. Gold is an exception of the cover your ass mentality of 'past performance is no guarantee of future results'. Gold has withstood the test of time, thousands of years worth of time.

This blog noted the other day, the arrangements going on between China and Iran to conduct petro business in gold.  This is a wild card situation for the dollar and has the potential to do more damage to the buck. The trading of Iranian oil for Chinese gold is slated to start at the end of June. The gold bears had better be praying that China does not spark a short squeeze in gold since it has plenty of funny money from the West to make gold purchases in order to keep up with payments to Iran, or anyone for oil. Jim Sinclair of JS Mineset has also spread speculation in the last few days that China and Russia are considering making the Euro their reserve currency.  Should that happen, the dollar will be in imminent peril and the bull market for stocks would end. Keep that in mind as a must watch situation.

Dollar Collar
The developing and ongoing factors positive for gold (like heavy Central Bank demand to name just one) keep me in the long term mode of being a long term bear on the dollar. Sadly, the dollar benchmark measurement is the flawed dollar index which leaves out developing economies in South America and Asia.  There is already more damage to the dollar than realized. But having said that, a delicate balance has been maintained in the dollar index and the key euro overweighting in the index.  Why the euro remains fairly firm on a relative basis (relative to all of the European problems) is a mystery at least to me. While many argue the Fed’s is on a mission to keep the dollar weak to enhance our trade advantage which aids in keeping some modicum of economic growth and bring with it the potential to monetize debt, the exception seems to be the euro being effectively pegged in the $1.30 area. Is that an accident, and a true depiction of the state of the not so mighty Euroland, or are other strange things going on behind closed doors as Sinclar has suggested? It’s all speculation for now, but a link up of Russia and China to the Euro would not be such a good thing for the dollar, I write in an understated sort of way.

See You Monday!
Have a ___ rest of the weekend – only you can decide what sort of weekend you are going to have!  

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