November 28th, 2014
Published Daily

‘Full Speed Ahead!’ on Wall Street

by Rick Ackerman on May 9, 2013 12:01 am GMT · 49 comments

Permabears who have waited patiently for The Mother of All Corrections should take encouragement from the blithe demeanor of yesterday’s 87-point rally in the Dow. It left the Indoos sitting above 15,000 for the first time and the network anchors oohing and aahing as though they understood what it means. Our take is that the little guy has not only returned, but that he is ready to party. And what better signal could there be that the end is nigh?  With yields on fixed-incomes at historical lows, there was nowhere else to go for the mullet-topped investor with a small wad of cash. Nor can you blame him for taking the plunge so belatedly, even if out of frustration. After all, the blue chip average had gained nearly 130% percent since March 2009 without a single correction worthy of the name.

Now, for most investors, the stock market has become the only game in town, even as the supposedly smart money levers up real estate in Phoenix, Tampa, Las Vegas and other by-now giddy redoubts of America’s induced housing recovery . Will John Q. Public’s desperate scramble for yields end badly? Of course it will. Any bull market that takes its inspiration solely from a government-sponsored housing bubble and fraudulent employment data is surely headed for trouble. But for the time being, at least, the individual investor can enjoy the H.M.S. Titanic’s amenities as it plows through a darkening economic tide at full steam.

Yellow Flags Everywhere

From a technical standpoint, but also a contrarian one, we see yellow flags all over the place. For at these heights, Mr. Market has a commanding opportunity to spring the Mother of All Bull Traps.  Accordingly, we have prepared subscribers for an imminent top in the broad averages, advising them to lay out tightly stopped shorts at price targets derived from Hidden Pivot Analysis. But even we would have to concede that if the technical obstacles are easily swept aside — always a possibility — a blowoff phase most likely awaits.  If past is precedent, in the months ahead, emboldened by the pundits, investors will find it frightfully easy to believe that stocks are fairly valued and cheap at these levels, notes our friend Barry Leonardini, a former heavy hitter on the Pacific Exchange floor. “I have one question for this collective group,” notes Barry: “What are the earnings of S&P companies if the Fed weren’t buying one trillion of Treasuries or mortgage-backed securities per year, along with the one trillion that Congress spends per year that it doesn’t have?”  Few investors seem to be asking that question now, but we have little doubt it will be the only question they are asking at some future date.

Take the Hidden Pivot course at your leisure, in recorded one-hour segments. The real-time Wednesday Tutorial sessions, the HP Tutorial video library and a confirmed seat at the next live Hidden Pivot webinar on Tuesday, December 16, 2014 come as part of the package.



{ 49 comments }

Deer in Headlights May 8, 2013 at 4:29 am

“What are the earnings of S&P companies if the Fed weren’t buying one trillion of Treasuries or mortgage-backed securities per year, along with the one trillion that Congress spends per year that it doesn’t have?”
Combine this with Europe and JPN and how the heck is gold sitting at $1450? I’m sure gary has a few reasons, all of them “legit”

gary leibowitz May 8, 2013 at 9:16 pm

I still can’t believe everyone is assuming a crash is near, especially since everyone acknowledges the FED is supporting this market. The argument that “if” the Fed didn’t buy bonds at the current rate where would we be, is a moot point. That’s like saying if the FED was to raise interest rates by 200 basis points the market would tank. You have to deal with the current reality, not a ‘what if’ mentality. No sign of raising rates or cutting the bond program.

As for the 1,000 times this board is anticipating a big drop, please explain where is it coming from? The current earnings picture is smack in the middle of this recent rally. It certainly isn’t going to cause a crash yet. The trend line, and almost razor thin drawn trajectory has made the last 18 moth move a text book example of “follow the trend”. It has not broken and will need to see a minimum of 10 percent drop to suggest otherwise.

Why do I need to say the obvious? If anyone is interested my take on this is that we have one more shallow drop, not breaking the 1580 SPX, followed by new highs. If April 18th was the low, and assuming a normal trend duration (like the other 2) we should top at around first week of June. From that point I see multiple scenarios. the one I favor right now is a drop of some 10 percent followed by a “V” or “U” shaped rally testing or marginally breaking the highs. Really too soon to tell.

As for Gold I still see a re-test of lows coming. This equities rally hasn’t given Gold much stronger moves, and I suspect a weak stock market will cause it to drop. A very non-technical view.

&&&&&

Go ahead and join the wilding spree, Gary. Sentiment alone, both anecdotally and statistically, is reason enough why the bearish minority shouldn’t have to defend its point of view. RA

Deer in Headlights May 9, 2013 at 3:12 am

Yes, gary i can agree that the current bull run is FED manipulated. I can also say that silver/gold are being manipulated. All you have to do is look at ebay and see that 1oz silver coins are selling for $30-$40. So people are buying physical at %30 premiums??? It would be interesting to see who is shorting the tonnes on Wall Street and when they started

Deer in Headlights May 9, 2013 at 6:17 am

Last comment I will be making. While its true the last stock bs run is good for the US and will help keep other countries running on huge surplus’ like China. Its especially good for the baby boomers getting set to retire who could care less what the employment % is, so long as nobody is trying to rob them. Everything should be just rosy until the boomers start withdrawing to make ends meet, or through inheritance.
ps. silver at $30-$40 + shipping on Ebay(which has almost 2x in recent months.) The silver chart has been a mess since the Obama/Osama weekend. But still hasn’t reached the D 2 years later.

Deer in Headlights May 9, 2013 at 7:26 am

Too bad cant edit comments. The part about the FED keeping huge trade deficits is probably incorrect. I dont have sufficient data to support this claim.

mario cavolo May 10, 2013 at 4:00 am

Hi DIH,

What IS the relationship between S&P earnings and the Fed’s buying? What’s the correlation? I don’t like the shenanigans in the financial system, but earnings are earnings from people and companies buying stuff, aren’t they? Concerning analyzing earnings, we can note that corporate earnings and productivity have increased, while wages have not, and while that’s definitely something to question and complain about, it presents us with the current situation which is that corporations have earnings. Are you saying that the Fed’s policies influences the purchases by consumers from companies like Apple and WalMart and Yum’s and IBM, to name a few? I don’t see much correlation there?

Despite all the shenanigans, retail sales are what they are. The top 30% in America have plenty of money and are buying stuff, more stuff than ever in fact because they are richer than ever in fact. The bottom 70% are buying less stuff and in fact, are poorer than ever in real world purchasing power. But they now represent a far smaller piece of the pie in total $$, so there impact is lower. Yes, they have indeed been marginalized in their society and economic system that used to be the good ‘ol US of A.

Another factor to keep in mind is that 50% of S&P 500 earnings are international, with the majority of that coming from a rising Asian bloc. At this stage in the game, if you own a select group of S&P500 companies with international exposure, you are pretty much buying the planet, not just the “American” stock market.

I just think these are meaningful factors to consider as we all continue pondering the big, scary picture of the new economics of the world.

Cheers, Mario

Troll May 8, 2013 at 5:06 am

Hmmm … what I see on the SPX is A = 666.79 C = 1074.77 and a direct hit on the midpoint on August 8th, 2012 which leads to 1778.56 somewhere on or around December 2nd of this year. But that’s Hidden Pivots for you, which don’t keep up with the news. Rick predicted (quite some time ago) for those of you who bothered to listen, gold would likely dump. And lo and behold … Rick was right.

&&&&&&

Trying to break the news as gently and gradually as possible, Troll, but looking at Silver’s weekly chart tonight, I’m afraid the forecast is not going to go down easy no matter how I try to soft-peddle it.
RA

Troll May 9, 2013 at 3:39 am

I’ll leave silver’s call to you. The chart is a mess :)

Troll May 9, 2013 at 3:40 am

As in a “choppy” mess.

Rich May 9, 2013 at 8:16 am

Derivative silver played by GS and JPM has an unbelievable PnF target of 9 to drive more people into stocks:

http://stockcharts.com/freecharts/gallery.html?s=%24silver

As several pointed out here, real physical silver is trading above $30 despite Big4 bear raids with naked derivative shorts.

London and the US can’t even deliver Venezuelan or German gold. What are the chances COMEX can deliver precious rather than settle in cash?

Ask Gerald Celente.

Numerous governments are laying unconstitutional retroactive bills of attainder legal groundwork (claiming customer assets are unsecured bank and broker property) to “bail-in” [seize] banker and broker assets and deposits like JPM, MFG and Jon Corzine did, which only Louis Freeh had the integrity to pursue despite hearings in Congress and Dodd Frank, so far not enforced or implemented.

This does not bode well for markets or muppets…

Rich May 8, 2013 at 9:31 am

AMAD 1 Feb peak suggests an equity top may be at hand
BPENER bottomed on 24 April
BPGDM bottomed on 19 April
NATGAS pulled back to $3.92 50DMA with $6.50 Target
XAU bottomed on 17 April
UST1Yr bottom today says Risk-Off

All tough contrary sentiment trades to be sure

Blanchard, Kitco American Eagle Bullion Silver trading around $30 if you can get it at all

JG told CR we were conned into debt, observing the more debt we had, the lower GDP went

HMS Titanic Market indeed

Trailing Sell Stops to enter and exit can be a trader’s best friend…

Bob May 8, 2013 at 11:42 am

Rick, I agree with everything you say except that the little guy is coming back. The lack of volume doesn’t support it in my view. What we have is simply the Fed pumping in 85 billion a month (averages out to about 4 billion per trading day), the usual monthly 401k allotments, and the constant computer gamed short squeezes. The little guy is still looking for a job that pays much less than he used to earn. He can’t come back in the market even if he wants to.
This suggests to me that too many of the big boys remain the bag holders. This is why most market drops which start at the open are hit within minutes with sudden, unexplained buying. (It took only about 2 minutes yesterday). The large banks in particular are deathly afraid of any pull back fearing it could become a run away. This is why I don’t think the next bear will start slowly. It will be something that causes big time selling and I suspect it will be swift. The 1929 crash took 2 months, the 1987 crash only 2 weeks, and with todays computers the next one could be over and done with in a couple of days. Pleasant thought, isn’t it?

Cam Fitzgerald May 8, 2013 at 3:13 pm

Make that minutes Bob and I might just agree.

Troll May 8, 2013 at 3:37 pm

The 2008 crash took a year and a quarter. Also, look at the activity that led up to the 1987 crash. The Dow went from 759 in 1980 to 2700 before selling off. That makes the past four years seem relatively tame in comparison.

Rick Ackerman May 9, 2013 at 1:30 am

You could be right about the little guy, Bob, although the ‘wealth effect’ engineered by the Big Guys will have made him thoroughly complacent by now. I completely agree that when the inevitable crash comes, it will be over before any of us, permabears included, have time to react.

John Jay May 8, 2013 at 3:55 pm

Don’t forget Student Loan Debt now North of one trillion Dollars, keeping millions of young people out of the job market.
And here is a link to Realtytrac for San Clemente, CA.
A nice little Orange County beach town.
http://tinyurl.com/c73tc6q
House prices there have recovered nicely, but there are still lots of properties in some stage of default.
Just click on the tabs Pre-foreclosures/Auctions/Bank Owned/Homes for Sale and you can see even with low mortgage rates, the banks have non performing loan problems.
And who knows what is off the books?
But all bubbles seem to go on much longer than you would think possible, especially Government Sanctioned Bubbles!

C.C. May 8, 2013 at 4:50 pm

“…there was nowhere else to go for the mullet-topped investor with a small wad of cash.”

‘Mullet’: Business up front, Party in the back…

ter May 8, 2013 at 5:29 pm

Rich–so many abbreviations I can’t ken what you’re citing as indicators of a top. You’re overdoing the brevity. ” JG told CR”. Who dey?

Rich May 9, 2013 at 4:01 am

ter,
wordpress does not like more than one Stockcharts.com link, but if you add $ in front of the tickers you can see them all in chart form.

JG = Jeremy Grantham
CR = Charlie Rose

Regards…

gary leibowitz May 8, 2013 at 9:36 pm

The idea that you can view this market to fit your extreme pessimistic views has already been proven wrong. It is undeniable. Make excuses and stick with them if you don’t want to learn from mistakes. It is analogous to Rick setting up a proprietary technical system that creates a 10 percent correct move, without adjusting or abandoning that system.

If I was you I would evaluate where you went wrong and try and figure out the “CURRENT” mechanism that makes it tick. Why have we doubles in 4 years time? What fundamentals and technical were aligned with this move and what went against it. How else can you hope to catch a major trend change. To declare it unfair and unfathomable on how we got here does no one any good.

Would love a discussion that doesn’t just take data for a one-sided proposition. Even if you think this government is some how “forcing” prices to stay high you must determine how it is being done and what will change to reverse this. All investors have just ONE reason to invest. To make money. If an individual or institution saw a dismal future they would exit. Break this down to its simplest component and work from there. Earnings and future expectations are the “ONLY” core reason to invest. It matters not that government rules changed. In fact government rules change all the time. Interest rates, and the Fed’s monetary system always plays a major part in determining future trends.

Food for thought.

&&&&&&

Enough food already. I’m limiting you to the three items you’ve already posted. RA

Bob May 8, 2013 at 11:45 pm

Gary, you’re running all over the place with your comments. Look, there is only ONE reason we’ve had this rally and that is Ben Bernanke’s QE in its several forms. Remove that and this market will discover price faster than at any other time in history. The idea that other changing economic paradigms are the cause is ridiculous. The minute Benny even hints at change this party is over — Big Time.

Rich May 9, 2013 at 4:08 am

When more people figure out that QE is a very tiny percentage of equity markets, there may be heck to pay …

mario cavolo May 10, 2013 at 4:10 am

I agree with the idea that if the Fed announced backing off QE, the markets would spew forth a nasty reaction. But at the same time, would the markets discover and stabilize price based on reasonable revenue and earnings? How far down would the indexes go and where would the bottom be as each quarter’s earning’s reports came out? Again I wonder, we can’t say that a 33% correction over several months would be a disaster, it would be a fairly normal occurence historically. If earnings softened over the next two year cycle and we had a 33% correction that would put the SPX leveling off in the around the 10,000 mark. Feel free to accuse me of being too simplistic here…

Cheers, Mario

gary leibowitz May 9, 2013 at 12:57 am

The mortgage implosion caused this debacle. If it hadn’t happened… The QE placement was a direct result of this implosion. Cause/affect. What will stop the QE reality?

I don’t hear people talking about the consumer wealth affect shifted from cash to debt starting in the early 80’s. Leasing, credit cards, lay-away, leveraging homes and real estate, pushing mortgage terms out, etc… No one argued that from early 80’s on this shift will doom us and you should stay away from investing?

Determine the new reality and how that affects us going forward. Clearly most here was wrong in assuming Ben couldn’t make it work this long. Determine what signs will be there BEFORE the destruction occurs. Is the dollar going to have to tank before this occurs? Is interest rates going to rise and by how much before this happens? Is Ben going to announce a policy change? Will a heated economy create an environment that forces rates higher? Has earnings hit its peak along with gross margins? If so what is the catalyst that will reverse earnings trend? is it over expensive now based on history or known assumptions on future economic activity?

There is always a cause and affect in life. To blindly say this is wrong and I can’t believe it is still working doesn’t change the reality of the situation.

Are you worried you will wake up one morning and find you can’t exit the market without losing 20 percent?

Rich May 9, 2013 at 4:16 am

QE works?
Jeremy Grantham’s point to Charlie Rose was that the assumption that QE creates economic recovery is demonstrably false, with a negative correlation between debt and GDP.
Monetary Velocity, the ratio of GDP/Money Supply, is the lowest in recorded history:
http://research.stlouisfed.org/fred2/series/MZMV?cid=32242
Defines pushing on a string…

gary leibowitz May 9, 2013 at 5:25 am

Rich, concerning Jeremy Grantham’s articles I found one concerning Gold. he seems to think Gold doesn’t have the hedge for systemic risk like most do. This might explain why it has acted so poorly this last year or so.

http://www.gurufocus.com/news/216608/gmo–present-and-emerging-risks-to-the-gold-trade

gary leibowitz May 9, 2013 at 6:16 am

Rich,

Thank you for allowing me to become familiar with Jeremy Grantham. Environmentalist, saw the previous bubbles develop, believes potash and phosphates will cost a lot higher due to population/food dynamics, as well as natural gas.

His take on the stock market and debt is spot on to my view. He believes this government should have allowed CITI to fall to send a message. He also believes direct investment into productive outcomes like infrastructure, education etc. was needed, not the silly notion of increasing debt. He also states Debt is Not the main problem. It’s how it is managed that counts, even though he sees current debt as way too high. Reducing debt over long period of time.

Here is his interview with Charlie Rose recently:
http://www.gurufocus.com/news/213029/charlie-rose-interview-with-jeremy-grantham

Rich May 9, 2013 at 8:34 am

Welcome G.

JG with $110 B under management cannot trade in and out without moving markets unless he is a contrarian like Big4. His long-term fundamental investment stance turned from bullish in the 90s and early 00s as most people were skeptical to bearish in the later 00s and 10’s as most became ebullient:

http://www.gmo.com/America/

Re gold, silver and copper, electronic prices may continue down, but physical appears headed up because it has less counter-party risk.

What do you do when you cannot access your accounts because the cyberkill switch was triggered on ATMs, cell phones and the internet?…

mario cavolo May 10, 2013 at 4:42 am

Rich, this is what I keep thinking recently. QE is a narrow bank thing. Its backing them and keeping the rich rich, so while we can blab on about how insane and illegal and unfair and misguided it may be, corporations are still out there in the world generating sales to consumers of their stuff.

China’s QE is as high and insane or more than the FED’s! And since China is the world’s strongest, growing economy and since 50% of S&P500 earnings are linked to that rise of Asia led by China, that’s what people should be paying more attention to, the “bigger” picture. And in that regard, here’s the comparison of these two economic powerhouses:

USA
1. Massive known debt problems and concerns of default and meltdown with respect to the federal and municipal government structure and the banking system.
2. Lower/middle class consumers under pressure, financially marginalized by big business. Official GDP growth at measly 1-2%.
3. Estimated 2 trillion now in the U.S. shadow economy, people who have left the system and are doing business in cash/barter, hidden from sight and impossible to track.

China
1. Same as the U.S. China’s banks have massively expanded money supply, are lending more than the U.S. banks. Equally scary situation.
2. Consumer spending and incomes on the rise. Success of focus on growing China’s domestic consumption, obviously successful and will continue. Exports and imports doing very well. U.S. exports to China in fact at record high $109 billion in 2012. Even with the world’s economic problems, no reason to believe China’s annual GDP growth will drop below 7%. And it damn well better not!
3. Estimated $5-10 trillion now in the China shadow economy, much higher than the U.S., not a new phenomenon, how the economic structure has been for decades, doing business in cash/barter, hidden from sight and impossible to track, complicit with government at many levels.

The BIGGEST problem I see in the world economy is how the system has favored the richest rich from all countries. They now have something like $20 trillion in wealth sitting there, doing nothing, much of it offshore. Regarding the system which allowed them to accumulate it unfairly in the first place should now tax a portion of it, say 20%. That will solve a lot of problems. So yes, I’m all for taxing the richest rich who, by the way are now holding and earning the vast majority of the wealth and income, especially the top 1% and even more so, the top .1 %. It is an egregious, disgraceful state of affairs. We consider easy to notice examples like Middle East oil sheiks living as billionaires while their citizens suffer poor. Now the United States demographic has joined them.

THAT’s the problem. Instead of the FED issuing $85 billion each month, they should be collecting it from the sum of unfairly accumulated wealth in the hands of the wealthy and would that be so “bad” or “unfair” for them. I don’t think so. Paying your 30% tax on ill gotten gains you’ve accumulated by gaming the system is fine with me, it really is. If I could, I would to. BUT, not if it at the expense of the economic stability of an entire society. That’s where governance is supposed to do its job, not allowing such a state of affairs in the first place. Alas, they usually do not and now are not. For example, in Switzerland, taxes are very high for high wealth individuals, like 50% right? They SHOULD be and if they were, we would not be in the situation we are in now.

The problem of execution lies in the incompetence of our leaders. I have no problem with a one time 30% tax confiscation of all the ill gotten trillions sitting idly in accounts, sucked out the economy. Same for companies like GE and Facebook making billions and paying a pittance in taxes. It is plain and simple, poor governance, corrupt governance that has placed the global economic system where it now is. Again though, the problem is how to fairly identify and target those rich upon which to enforce such a one time tax. To do it to all depositors as in the Cyprus effort, to do it to depositors who don’t have very much money is obviously not right or fair. But for the top 1% who have accumulated trillions, confiscate 30 to 50% and guess what, they will still have trillions left in the bank and it won’t make a difference at all to them. While this may sound outrageous to some of you reading it, I remind you that on a line chart showing how much wealth has been accumulated at the very top, the top 1% is in fact TEN times longer than the line next to it. THAT is the problem. A one time 30% to 50% tax on those monies will much farther toward fixing the problem than taxing lower and middle class income citizens. Obvious to me.

Cheers, Mario

Bob May 9, 2013 at 1:09 am

Gary, you continue to run hither and yon. “Is Ben going to announce a policy change?” He can not and will not. It would destroy the markets. But that change will indeed be forced upon him by events beyond his control someday. That day will indeed be the day when “you will wake up one morning and find that you can’t exit the market without losing 20 percent”. I repeat to you, Gary, that this is a QE rally and that only. Please don’t abuse your financial position by hiding from that fact. I truly wish you well, but I have to shake my head. Take care. :) )

Troll May 9, 2013 at 3:30 am

My one question, and I am not backing up or criticizing Gary one way or the other on this: If the Fed has pumped up the market on printed dough, and they are responsible for the last four years of a rising stock market, why would the Fed HAVE to dump stock? Apparently, they own most of it, according to many here. They can just hang onto their stocks, if that’s what they want to do. Can’t they?

Rich May 9, 2013 at 4:27 am

Not in the Fed’s charter to buy or hold stocks.
Since Executive Order 12631 on 18 March 1988 after the 1987 Crash, the Fed pays Federal Reserve Note balances to primary dealers for Treasuries to jump on the relevant derivatives. Options expire after doing their pump and park work. This will go on until people realize how small $160 B a month from Bank of Japan and the Federal Reserve really are relative to a $60 T global equity market…

http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets

Rich May 9, 2013 at 4:33 am

Posted CME and CBOE to profit from Fed/Treasury QE derivative machinations:

CME up 49% since last year

CBOE up +116% since 2010…

Troll May 9, 2013 at 4:56 am

The “charter” doesn’t mean anything to me. To say it’s “not in the Fed’s charter to buy or hold stocks” while at the same time people here complain the Fed is responsible for the past four years’ rise in the markets . . . either the people are wrong or the charter has changed. Which is it?

gary leibowitz May 9, 2013 at 5:13 am

How about the known entity buying bonds. Yes that certainly stabilizes rates and allows a recovery to find footing on its own. I also believe they try to mitigate big swings by buying into futures, but I have no direct knowledge of this. Perhaps Rick has a better handle on how the PPT works.

Troll May 9, 2013 at 5:11 am

What was it Kissinger said?

‘Illegal we do immediately; unconstitutional takes a little longer.”

Rich May 9, 2013 at 7:47 am

There were stories placed in the MSM re Central Banks buying equities, but most don’t because they are historically more volatile than debt or forex, which is death to institutions leveraged 20 to 1, meaning a 5% adverse move can wipe them out.

Ask Jon Corzine and MFG.

$45 B a month from the US Fed goes into Mortgages and Treasuries, leaving $40 B a month for “stabilizing” other markets.

When we consider credit derivatives in the USA are 80% of the $221 T derivatives open interest ($179 T), $45 B is a speck in the bucket. (45/179000 = 0.00025139664):

http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/dq412.pdf

Considering US equity markets may be worth $17 T plus another $2 T in equity derivatives ($40 B/19,000 B = 0.00210526315), we are talking about
numbers materially smaller than the +145% move in SPX since March 2009.

As usual, emotional contagion, hearsay, opinion, perception, personal liquidity circumstances and sentiment are for most people more powerful than logic or facts, so it takes time to wake up from the mass illusion/matrix opinion that the Fed is driving markets.

cf Wizard of Oz and the warning not to pay attention to the man behind the curtain.

Dick Fisher, Dallas Fed Pres, agrees with Jeremy Grantham the QE approach is not working and it is time for Congress to do its fiscal job…

mario cavolo May 10, 2013 at 4:46 am

Congress do its job? Yea right. Puke…

doggis May 9, 2013 at 1:13 pm

Rick,

As i understand it – bernanke has his “PUT” underneath the BOND market. There is no formal put underneath equities.

what is preventing this excess liquidity from shorting the equity market, rather than “pumping up prices”.

extreme bullish sentiment, combined with the forewarning of copper and the chinese markets, not to mention the near all time record leverage that has returned to the market in the “all – in – long” position intuitively tells me that the “equity market bernanke put” is all propaganda – and this is yet another “pump and dump” set up – the writing is all over the wall.

on another tangent – was the “sequester” originated from the bowels of Goldman Sachs? and if so why? was it actually created to describe the real “sequester” that is upcoming – which is the sequester of vast amount of 401k type retirement funds that are fully invested in equities?

“The idea of sequester as incorporated into the 2011 Budget Control Act was introduced by National Economic Council Director Gene Sperling. on 12 July, 2011. As a solution to the ever present debt ceiling crisis he proposed a compulsory trigger that would go into effect if agreement was not reached on tax increases and/or budget cuts equal to or greater than the the debt ceiling increase by a future date. (1 March 2013)

According to Bloomberg News, Sperling earned $887,727 from Goldman Sachs in 2008 for advice on its charitable giving and $158,000 for speeches mostly to financial companies. That is a million dollar money trail.”

Bob May 9, 2013 at 1:46 pm

Rich, with regard to the stock market, whatever amount of the monthly POMO finds its way into stocks is the pure lift of new money, whereas the vastly greater proportion of volume is simply the in and out trading of computers gaming one another. Those POMO injections consequently do have a buoyancy quotient well beyond what the straight figures might otherwise suggest. I do agree, however that the POMO program is otherwise a terrible misallocation of funds and when the market decides to straighten things out there will be no stopping it.

Rich May 9, 2013 at 10:26 pm

Maybe sooner than later Bob.
See below Santelli rumour re QE “taper”
on Solar Eclipse day…

isjosa1 May 9, 2013 at 1:57 pm

gary what happened to 1450 on the s&p you thought was coming?

gary leibowitz May 9, 2013 at 7:20 pm

1450? I said at the time it would be the low for a correction. Now it looks like 1490 or higher. I can envision a scenario that plays out as follows:

1 – Current rally, based on previous 2 runs, lasts till early June. Not sure at what price, 1650-70 perhaps?
2 – Ten percent drop from highs, lasting 3 to 4 weeks.
3 – Another try at the highs lasting till end of quarterly earning season, perhaps end of first week in August.

It’s fun to project, but I really don’t think it will play out exactly as I suggest. My rational is as follows. The timing of corrections matches the prior ones. This quarters earning season has sparked a rally in stocks suggesting that next quarters earnings will meet or exceed expectations. There has not been much of a reduction in assumed earnings going forward. Since the streets expects double digit gains I suspect any correction before earning season will be the catalyst for another rally. I do however think it will be a short one followed by a year long draw down of perhaps 20 percent, just based on a much needed breather from the spectacular run these past 5 years.

This is pure speculation on my part. I intend to bet on this assumption. If the market goes against me I bail out.

Phillip McKreviss May 9, 2013 at 10:11 pm

here’s my take…what’s super important to the current regime ? yes, that’s right…the midterm elections, which of course are not until next Nov, almost 18mos from now. i’m sure the standing orders to ben and whoever else, are to keep the market levitating until then, to keep the sheep happy. no large corrections allowed. could we have a 10% drop along the way ? sure, but i’d be surprised to see anything more than that. after the midterms ? anybody’s guess ! all i know is that i’ll be long vol (vix) and/or short SPs going into any ’symbolic’-type holidays/events (July 4, etc) .

Rich May 9, 2013 at 10:24 pm

CNBC Rick Santelli reported rumour today WSJ Jon Hilsenrath article coming out tomorrow that Fed about to taper QE. This would be consistent with Dallas Fed Pres media appearances this week talking down effect of QE on GDP.

If true, then top may be in for a -15% market correction…

Alyssa May 10, 2013 at 12:21 am

What about the fact that European banks have proven they will take depositor’s money to fund their own deficits, thus making the US stock market look like a pretty good/safe investment? If banks will take depositor’s money, why wouldn’t they also confiscate gold if it suited their purposes. Doesn’t anyone think that maybe the rally is due to investors moving from Europe to US stock market?

mario cavolo May 10, 2013 at 4:55 am

Banks should confiscate the deposits of the richest rich, plain and simple, including themselves. There are 20 trillion of cash sitting on and offshore by the rich who gamed the system to the degree they are now destroying it. 30 to 50% of that money should be one time confiscated by the government, whose system allowed them to earn it or abscond with it unfairly in the first place. It should have been taxed initially and wasn’t to some degree. The problem is worse than it has ever been, more egregious than ever throughout history. The problem is that those very same rich are the ones running the government, they won’t nicely part with their fortunes. And so, we the lower/middle class citizens pay for bailouts and eat cake. I hate politics and government systems that don’t take care of their countries, of the people, by the people, for the people. Billions in poverty and low income across the world, not because it is their karma or fate or will of God, but because those in charge of their government are greedy people. Bill Gates and Warren Buffet have the right idea, trying to gather up those who are ultrarich to help the bottom end of societies. It should become a declaration by law.

Cheers, Mario

Troll May 10, 2013 at 5:28 am

Good thoughts, Mario, but what society does that?

Gorillas and wolves and gophers do.

But people are “above” all the aforementioned “lowly life forms.”

That is why people are doomed. It has nothing to do with gold nor the stock market nor anything else where money is involved. People are collectively dumber than a swarm of locusts.

You may argue that gold is what makes us smarter than any other creature on the planet.

I will make an argument that gold is what makes us dumber.

Like it or not, people’s undoing will be our silly fascination for a completely inanimate object: Gold

mario cavolo May 10, 2013 at 8:02 am

Hi T, well the door’s been opened in Europe regaring the Cyprus situation, while not well thought out in implementation. Its the govt’s themselves that need to take accountability for the complex system and all its self-serving fancy loopholes they created and its results. If its time for the heads of state to say to all the ultra-rich, you need to donate 30% of your billions to save the world, then so be it. And if you don’t agree, we’re taking it.

That leads to the next problem, which is the how, what, and who of administering the proper deployment of the confiscated trillions. Indeed, the world’s leaders have shown themselves to be inept and self-serving every step of the way.

Alas, they are not going to do the right thing, they rarely do.

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