Archive for August, 2013
Let’s talk about Syria and how what’s happening there is affecting the markets.
I see oil rising to two-year highs. I see gold rising to three-month highs. Let’s see, what else is being affected? Oh, that would be nothing.
And today we find out that, with a touch of some levers somewhere, U.S. GDP growth wasn’t really 1.7% in the second quarter, it was really 2.5%.
Let’s talk about the GDP growth revision and how that’s affecting the markets.
I see oil coming off its Syria-inspired spike and gold giving up some recent gains. Let’s see, what else is being affected? Oh, that would be nothing. Well, maybe bonds just a bit.
Let’s talk about the U.S. government – the government of the most powerful nation on earth – and how its incompetence and interference and manipulation are affecting the markets.
Right this way…
Besides the “indictments” levied here on a regular basis, offering market “insights” is part of what we’re all about. And today it’s time for a little insight.
The markets have been on a tear.
Where are they going next?
Looking in the rearview mirror, we see a 150% move up from the 2009 lows. On a compounded basis, stocks have risen at about a 23% annualized appreciation rate over the post-crisis period. That’s phenomenal.
Putting aside the Fed’s stimulus efforts for a moment, the appreciation on corporate earnings gains – which have risen 32% in the same period (albeit from exceptionally knocked-down 2008-2009 crisis levels) – looks really good.
But “Houston, we have a problem.”
Here’s the “problem” I see and exactly what you can do about it…
On Tuesday morning, Goldman Sachs let its computers run; too bad for Goldman they got out of the corral and ran wild.
Some kind of programming error triggered unintended option orders. And within 17 minutes after the markets opened, the damage was done.
By some estimates, Goldman could lose up to $100 million.
So what caused it?
It could have been a fat-finger… or it could have been a “ghost in the machine”… or it could have been a window into the reality of high-frequency game theory and its application.
I say it was the latter.
Couldn’t have been a fat finger. There are too many lean and mean traders and pointy people in general at Goldman for that. The only thing that’s fat over at Goldman are their bonus checks.
A ghost in the machine? Nah. When your existence is overseen by “spooks” (that’s the name insiders call CIA operatives, and once a spook always a spook), it’s impossible to not have ghosts in the machines, in the hallways, in the underground offices protecting their building and operatives worldwide (and watching who threatens the Death Star). You can’t have a ghost in the machine when the machine is a ghost. It’s a Zen thing. But Tuesday morning wasn’t Zen-like.
Here’s everything you need to know…
Something very important is going to come out of these new criminal charges just filed against two ex-JPMorgan traders… at least, I hope it does.
It’s not about who did what to contribute to the London Whale’s billions in losses. Frankly, who did what in this case is worthless news, unimportant, and a sideshow. Of course, the public will be riveted all the same, and prosecutors can’t wait to ascend their microphoned podium and tell the world, “We got the banksters.”
But I don’t think they will be found guilty. If they are found guilty, it will be because prosecutors prove “intent” and blur the technicalities, which will be mindboggling.
The reason I don’t think they will be found guilty is because the technicalities will likely prove to be such a moving target that the defense lawyers will claim, and rightly so, that they did nothing wrong, because as far as their intent, what they did is being done all the time, and regulators know it.
For heaven’s sake, the regulators gave the banks the leeway to do it.
This is dangerous for all of us…
Here’s a bit of inside information for you.
It’s about how things really work on the inside of a bank.
Any big bank – any big bank with an incentive to make money, which of course would be all of them.
This is one lesson you won’t ever forget…
On Saturday I was researching a new article for Money Morning (it’s coming out tomorrow) about the effects of stimulus (or lack thereof) on the job market.
That’s when I Googled “list government jobs programs in the past five years.”
And there, on the very top of the page that had only 943,000,000 results, was the link to a page called “Government is Good – The Forgotten Achievements of Government.”
OMG (text-talk for “Oh My God!”), I thought to myself when I found the site, this is going to be funny!
Government is Good is “A web project of Douglas J. Amy, Professor of Politics at Mount Holyoke College.”
The professor cites 18 government “programs” that we are all better off because of. Some you can agree with; others can be opened and bled with an objective-edged scalpel, or a dull butter knife.
But it’s the first and most encompassing “program” he cites – that in fact isn’t a program at all but more of a pogrom – that deserves a swift slicing and dicing into reality.
The Professor should stick to politics, which is the art of doubletalk. When he’s talking about economics, markets, and business cycles, he’s in my house. And there ain’t no B.S. allowed in my house.
Let’s set him straight.
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Oh, to be a Washington insider… armed with what anyone with half a brain would call “material information,” the kind that moves markets.
Not, of course, that anybody in Congress would ever use their positions as crafty, I mean crafters, of laws, or disseminators of dollars, to make a wager on the roll of the dice they have marked up in their sweaty little hands.
Those illustrious lawmakers and budget breakers, no doubt by accident or by mistake, tried that for as long as they could get away with it. But once they got wrist-slapped, they have, I am sure, sworn stock plunging off their daily routines. Or at least they swear they have.
No, they didn’t swear off insider trading on their own. Inside the “club,” anything goes.
The pump-and-dumpers in Congress were actually straight-jacketed by a law they themselves came out with after some public outrage over a “60 Minutes” investigation put them in the hot seat.
The legislation was called the STOCK Act, or more formerly the Stop Trading on Congressional Knowledge Act. It was passed in 2012 to make sure the laws they said they weren’t breaking (because they don’t apply to them) weren’t going to be broken again, by them. It was designed to prevent insider trading among lawmakers and government officials by requiring them to post disclosures of their financial transactions online.
Any guesses on how well that worked…?
My good friend Mark Kot is the real Hamptons Doctor. He doesn’t make house calls because his Southampton Urgent Medical Care facility is where everyone goes for the best medical care in the Hamptons.
I asked him for his take on Obamacare. Yesterday he sent me the little ditty below, and I need to share it with you today.
He got it off the Internet. Which means it’s true. No, I’m not kidding. Well, at least this time I’m not kidding. This Internet ditty is true.
Before I share it with you, let me tell you why it is so true and so frightening…
Got some really good questions about trading and investing this month. I want to answer them first today.
First, a precious metals question.
Q: In times of uncertainty, gold and silver tend to go up in price. Do you have any idea why they are going the other way now? Is it a market manipulation, or people selling to cover margin calls, or survivalists selling to buy more ammunition, or who knows what? ~ RePete
A: Great question, RePete. I recently sent out two gold recommendations to my Capital Wave Forecast subscribers that were several pages long, explaining why we were buying gold now, when almost no one else will touch that . While the analysis is straightforward and encompassing, I’ll give you a few snippets here.
Gold can be manipulated. It has been; I have the evidence and proof of that. So, what if short-sellers, or institutions, or governments, or central banks want to own a lot of gold at lower prices? They could manipulate the price down to trigger selling, which triggers margin calls, which triggers more selling, which triggers talk that the gold rally is over and the gold premium is a myth. Then talk heated up that gold was only a good trade when there was the likelihood of inflation, or that currencies were going to be worthless, or that Martians were coming and weren’t interested in cash, they fuel their spaceships with precious metals. Whatever, the talk was that gold and silver were hyped up by fearful idiots. And look at them now. Nice try.
Gold and silver are tradable these days like never before. They are their own asset class and part of more and more institutions and individuals portfolios. The fix was in, the price was manipulated down, and it may not be over, and there will be a rebound.
If you want to get my recommendations, there’s still time. Click here.
Next up is Robert, who doesn’t believe in stop-losses.
Let’s set him straight…