If analysts tell you this morning's booming market action is motivated by strong fundamentals, all one needs to check to prove otherwise is the volume of transactions in the underlying index shares in the European and Asian markets prior to the opening of the US exchanges.
You would have found that all the buying action was part of a colossal plan to jam the equity indexes higher. The lack of trading volume in the underlying shares that make up the index proves that the index gains pulled the shares up and nothing else.
What we are witnessing is simply the greatest power play in the history of markets. And it's all being executed by the Exchange Stabilization fund with credit from the Federal Reserve to the commercial banking system and via International investment banking firms. The intent of course is to prevent a total meltdown of an artificial economy whose pivot point is the huge mountain of derivatives that currently undermines our economic system.
Every penny available is being thrown at the index futures in hopes of establishing new highs thereby stimulating business psychology and producing the promised but hard to imagine 3.5% growth rate promised in the US for the second quarter.
What scares me to death is that this may be the totality of the Federal Reserve's strategy to prevent the horror of Zero Interest Rate Bound - a place of no economic return. It would explain why the monetary aggregates have not participated in the plan to hold off the ogre of Zero Bound interest rates.
We live in a world of manipulation that knows no bounds and is presented in the media as reality. Politics, markets, war, science, are all subjected to Spin Doctors before being presented for domestic consumption. And now - worst of all - market action today declares that our Spin City (Washington DC) masters have come to the point where they are actually believing their own (pardon me) B.S.
To rely on a strategy of total deception to rescue the equity and bond market bubbles is the height of insanity. We have needed fundamental change for so long without satisfaction that this act of desperation declares to me that the opportunity for fundamental change is now exhausted.
Some people lament that old men send young men and women to their deaths in war. I would like to add that old men making economic policy for political reasons can and do cause more suffering than any war ever did.
This day, although welcomed with joy by the puppets of financial TV, is possibly the most serious violation of fundamental economic management in the history of the world. Government and big money interests are attempting to do a con job on the public.
What has been forgotten is that the public is broke and unemployment is rising. There are no figures available for those that have dropped through the economic safety net as their time on unemployment has expired.
The "victory" in Iraq has taken an entirely new turn as the Saddam plan "B" has come into action with urban guerrilla warfare only beginning to take its toll. Troop moral in Iraq has reached rock bottom as deployment periods exceed those promised by the Administration and in fact may extend years longer than anticipated. The "Big Lie" is becoming very much a part of our everyday lives and at some point "we aren't going to take it anymore."
Profits have not returned to corporate America which has also lost its pricing power because of foreign imports that continue to exacerbate our trade deficit which could reach $500 billion this year. And this latest con job power play is credited to one company (Microsoft) dipping into its sizeable cash reserves to pay a dividend when its business is far from good but is still the best in a pack of rabid, emaciated dogs.
I would assume that this dip into its coffers was a payback of favors to the financial power structure knowing that some excuse had to be provided to cover the operation planned for Monday a.m.. I told you over the weekend that the war would start Monday morning.
The war has not only started as promised but it is the core battle in the war, a modern day version of the invasion of Europe. In one sense, I hope the power play works because the alternative is Zero Bound and by default the same fate as Japan. However, without a public to dump on, the pool operation now taking place is certain to fail -- big time.
Somebody should have told the Bank of International Settlements before they issued their recent and "authoritative" annual statement that everything was just dandy in the world of business. In an important article published July 6th by the Guardian out of London the following points were made:
1. "The global economy faces a fundamental dilemma, which is becoming more acute with time. How can imbalances in growth and external accounts across economic regions be solved while maintaining robust growth overall?" 2. The report speaks to the over dependence being placed on the depreciation of the dollar without focusing on the problems that depreciation will produce on countries like Japan and Europe. 3. The BIS says that "The institutional underpinnings of the financial system require further strengthening," pointing to the public's lack of comfort with corporate management and financial markets in general. 4. The BIS suggests that the flagrant abuses in financial markets in recent years still impact the credibility of these markets. 5. The BIS points out the large overhang of excess capacity that still exists in the US. 6. The BIS in its annual statement expresses significant concerns about the potential of deflation.
And directly on the heals of that article and last week's poor market performance plus technical signals of weakness, the pool operation blasted the equity indexes higher in a pure expression of "might makes markets right." If it does, then this will be the first time in history. What do you think this morning's operation does for the integrity of market?
To add more of a stink to this power play, it appears as if the bond bubble in Japan may have sprung a serious leak. Yields on long-term Japanese bonds leapt by their biggest daily gain last week as auction results turned in a poor performance. Last Wednesday didn't just take the bloat off the US long bond market, it also hit Germany and the UK too.
Now think about all this and the 4 a.m. U.S. East Coast time that the equity indexes in Europe found huge supplies of money at their door. There is no question whatsoever that this is the largest power play ever made in market history - limited by the fact that there is no public to fool.
There are only major fools to fool. They are called Money Managers and they are handling OPM (other people's money). This is a cashed-out public both in terms of cash reserves and borrowing power. Every operation needs a public to bail out on and there is none in this case. This artificially induced rally will fail and with it the reputation of US Federal Reserve managers.
No professional can be fooled into thinking that today's blast upwards in the equity indexes is anything but a sign of total desperation from a failed pool operation comprised of the ESF, Fed credit facilities, commercial banks and major investment banks.
Giants, when they fall, take everyone with them. That fall is coming soon.
