November 2010

We have a total of six POMOs this week (two today and one every other day). So the Fed will literally be juicing the market by $6-9 billion EVERY day this week. If stocks can’t remain afloat in the environment and the US Dollar strength continues, then the markets are heading into some VERY DARK times in the near future.

Market not liking Monday much. Apart from AMZN which is the online retailer par excellence, pretty much everything else on my screens are red currently.

This is a victory for much maligned bondholders everywhere. I am pleased to announce we have effectively removed the word investing from the vocabulary of bondholders.”

“Starting today, bondholders need not be concerned with who they lend money to, why, or what risks there are in doing so.”

“Not only will this help ease turmoil in the markets, but bondholders can now think in terms of winning rather than the more mundane investing because the ECB and IMF will backstop all losses from trading bonds.”

This is the quote from Trichet, and the ECB. Essentially then, they are emulating the Federal Reserve and Bernanke, who are inflating to paper over every and any loss [investment] that they deem material.

The entire concept of investment of capital, of the allocation of scarce resources via the pricing system, is thrown out. Any marginal project, funded via bonds, potentially is guaranteed by the Central Banks.

This of course is simply unteneable. You will incur monstrous misallocations of capital that will require bailouts to make the bondholders whole again, as various enterprises and projects go bankrupt requiring the central banks and government to increasingly raise taxes, or print money to pay for these bailouts.

As the raising of taxes virtually guarantees the voting out of the sitting government, we will of course see the cowards way out, inflation, which is theft by stealth.

Looking at this data, you would have to conclude, even allowing for inflation, that the shopping spree was a success. Interesting to see how the market responds via the retailers. AAPL will if the market believes the data to be correct, be a recipient of a bump higher.

BRUSSELS (AP) — European Union nations agreed to give euro67.5 billion ($89.4 billion) in bailout loans to Ireland on Sunday to help it weather the cost of its massive banking crisis, and sketched out new rules for future emergencies in an effort to restore faith in the euro currency.

The rescue deal, approved by finance ministers at an emergency meeting in Brussels, means two of the eurozone’s 16 nations have now come to depend on foreign help and underscores Europe’s struggle to contain its spreading debt crisis. The fear is that with Greece and now Ireland shored up, speculative traders will target the bloc’s other weak fiscal links, particularly Portugal.

Bailout terms reached on a Sunday night for US markets, damned convenient as usual. I would expect markets to trade higher, at least initially on the removal of the uncertainity.

The big money are setting up for a fall. Corporate insiders are also continuing to sell into this rally. Will the dam break? I think definitely, it’s just the when that’s always the problem.

Again the Transports are leading the Industrials. They are however still moving in the same general direction. The Transports have also reached a resistance area.

If a true recovery is underway, we will need to see both averages break through this resistance area and continue to the final resistance area, and finally to new highs.

Feeling confident?

The shopping day that was supposed to signal the renaissance of the US consumer, and justify the massive overhiring by US retailers (not to mention the completely dislocated from reality surge in stock price for razor thin margin retailers like Amazon), is increasingly seeming to be a dud. WSJ reports, citing channel checker ShopperTrak, that “Black Friday sales rose only slightly from a year ago even though more shoppers visited stores, retail traffic monitor ShopperTrak said Saturday, setting the stage for another uncertain holiday season for retailers. Sales increased 0.3% to $10.7 billion, according to ShopperTrak, which installs monitoring devices in stores to gauge traffic. Traffic rose by 2.2%, ShopperTrak said.” For the observant ones out there, this is in nominal terms: adjusted for inflation there was actually a drop in end sales. Even so, the primary reason for the disappointment is that Black Friday actually started early on in the month, with most retailers offering comparable loss-leading deals such as those seen on the Friday after the national holiday early in November, reducing the actual purchasing power for the all important day. “The smaller than expected increase is due in part to discounts offered earlier in November as well as online-only promotions, ShopperTrak founder Bill Martin said.

Interesting. We’ll see Monday, how, if any, effect it has on the market. Especially with the Irish demonstrations against bailout money etc.

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