I once thought that people in positions of power, and influence were there because they just might be smart. Boy was I ever wrong. (Please forward all emails to the Easter Bunny if I offend anyone in my analysis. This article is for thinking adults only.)
Many of you that have followed my commentary on the stock market know that I have been calling for what seems like ages dire warnings that have not materialized. Some have scoffed at my clarion calls, and that's fine. But like I've said over, and over again, you can't find fault in my thesis. My timing is all that seems to be incorrect. The longer this charade goes on, the harder the fall into the rabbits hole will be. Let's look a little deeper into this shall we?
As I stated back in 2009, and have repeated many times, all you need to know is, "Dollar down…Market up." As of today the Dow Jones Industrial Average hit its highest level in over 3 years since the calamity in 2008. Guess what? The US Dollar just hit its lowest level in the same 3 years.Who'da thunk it? If your counter point is "but look at earnings?" Sure, however they are based on a corollary of the US Dollar weakness in world export markets, and productivity gains. In simple terms, cheap prices for our goods compared to other countries, and getting rid of as many human workers as possible. And how is this all being accomplished? Your friendly Government, and Central Bank.
Back in August of last year I was warning that if you looked objectively into the data that companies were in serious trouble. All the programs that were enacted through various Government agencies were at a point of causing more harm than good if they continued in their present forms. e.g.: TALF, TARP, QE1, and so forth. One could make the case for their implementation, and I grant that arguments validity. What I don't waiver on is the damage that could result from keeping these rogue market forces in place. And this my friends is being proved everyday, and is now clearly quantifiable.
In May thru August of 2010 the markets had begun to show just how vulnerable they were. As the talking heads on TV were touting that a market correction was well within reason because of the meteoric rise from the recent lows caused by the near Great Depression fall we experienced. It seemed however the powers that be didn't agree with the so-called "Smart Crowd." So scared, and feeling like he must have been looking into the gullet of a fire-breathing monster, the now famed "Helicopter Ben" (Fed.Chairman Ben Bernake) pulled from his scabbard not a sword, but a fire extinguishing water cannon costing $600 BILLION.
Since that moment also commonly referred to as "The Jackson Hole Speech" it has been another rocket ship ride to where we are now. For the US Dollar? Well let's just say from Benny's helicopter the dollar wasn't given any parachutes. It was just shown the door with the words emblazoned above, "Jump…or Else" Some would call that a double negative. But I guess we should be happy we were given a choice, right? Sure….Let's move on shall we?
Yesterday the President announced he's forming a commission to look into whether or not the oil markets are being manipulated. ( Warning save the emails or forward them to the Easter Bunny, this is about reality, not political sides. I don't care who has the job.) This is just about as laughable as the statement " We're losing money, but we're making it up on volume!" I mean, is there no longer reality based thinking on the planet Earth? Let's hit a few bullet points shall we, just for chuckles.
- Close down oil drilling in US Gulf.
- Issue no new Oil drilling permits for months.
- Increase regulatory requirements so punitive US companies detract from drilling or new exploration.
- Middle East uprising topples 2 of the longest standing regimes in oil-producing countries, and threatens to spread to worlds largest.
- US enters into its 3rd ongoing armed conflict in middle east.
- China declares its pulling any and all oil exports from world market, and will be 100% importer only, as to satisfy its increasing needs.
- OPEC announces not only will they not produce more, but they are cutting production.
- Oil is traded in US Dollars globally. The more the dollar falls, the more dollars it takes to buy a barrel.
- How much further do you want me to go? This is just scratching the surface.
Mr. Bernake since August has poured $600 Billion dollars onto the markets that has the leverage power at minimum of 10 to 1. There are numbers floated that some of the dealers that are privy to this free money are leveraging at 20 times, and higher. Just to give you an idea of the money we're talking, that's anywhere from 6 to 12 TRILLION DOLLARS! Remember, leverage is a bad thing we were told in all the hearings, but I guess it's "Good News" if privy players are doing it. They're wicked smart you know. Even though they're the same crowd that leveraged everything up the last time. I'll bet they're really cautious now seeing its your tax dollars, and not their money, I mean c'mon, they must have learned something, right?
Here's something I wrote back when this craziness all started. I feel it's more relevant today that ever…
"Markets right themselves with pain… That's Capitalism.
Back room manipulation to avoid pain only increases the severity of the pain to be felt down the road."
I feel this bunny has dug himself one heck of a rabbit hole.
© 2011 Mark St.Cyr