Looks like we picked the right day to get bearish! Of course we’ve been expecting this, as noted Sunday’s Stock World Weekly – it’s not a POMO (permanent open market operations – QE2) day. No free money – Oh noooooooooooooooo!
In Monday’s Member Chat, we discussed the flight to defensive stocks and how the unwinding of POMO could cause BIG TROUBLE for the market. While POMO is not the be all and end all of the market movements – you do have to think of it as support that props it up so lack of POMO – like we’re having today – leaves us much more vulnerable to other negative news.
There was a ton of negative news in our intra-day notes yesterday and, as I mentioned in the morning post – we’re very concerned that the consumer has been pushed to the edge of a cliff so, of course, we took the opportunity to get much more bearish during the day with several disaster hedges and, of course, the same DIA $120.75 puts at the same price we had so much fun with on Tuesday. We also had fun shorting oil at the $105 mark – over and over and over again as it moved between $105 and $104 but 5th time is a charm as they finally broke hard this morning and fell all the way to $102.32 on the last drop.
So, let’s see which of the things we’ve been ignoring suddenly matter today:
- Japan’s GDP shrank 1.3% last quarter on LESS consumer spending and LESS capital investment. “Gee, I don’t know George, we raised all our prices and people bought less stuff – who’d have thunk?”
- China posts biggest trade deficit in 7 years. Prices go up and people buy less junk – even if it’s cheap junk.
- Moody’s downgrades Spanish debt. Really? Gee, we never saw that coming, did we?
- Borrowing costs for the PIIGS are back to crisis highs. Same year-old link as above.
- Only one in seven Americans believe we are in a lasting recovery and over 50% say they are WORSE OFF than they were two years ago. (And – don’t forget – they don’t even poll people who don’t have phones or homes anymore)
- Municipal Bonds are still in free-fall.
- The Mexican Peso hit a 2.5-year high against the Dollar. MEXICO we’re now worse than???
- Republicans finally busted the Wisconsin Unions – A great victory for Democracy, I guess…
- Republicans vote to shut down the Home Affordable Modification Program (HAPM) – Let the foreclosures commence!
- Bank of Korea raises rates to reign in inflation. Ben says: “What inflation?”
- Copper imports fall to 2-year low in China, down 35% in February. Gosh, if only someone would have told us that China had an oversupply of copper…
- Inflation swamps the planet – nice chart in WSJ.
Bill Gross (Pimco) dumps out of US Treasuries. Warren Buffett pulls out of long-term debt (inflation concerns). OK, this one is a big deal so let’s talk about this one. According to Bloomberg: “Some of the biggest private investors in the bond market, from fund managers to insurers and pensions, are preparing for an end to the three-decade Treasury rally, as interest rates near zero and unprecedented spending by the U.S. government and the central bank threaten to fuel inflation.”
“U.S. government bonds are not a safe haven,” Jim Rogers, the global investor who predicted the 2007-2009 housing-market crash, said in a telephone interview from Singapore. “I cannot conceive of lending money to the U.S. government for 30 years.” The Fed, after spending $1.7 trillion in the wake of the global financial crisis to end the recession, said in November it would buy an additional $600 billion of Treasuries through June to help the U.S. economy. The Fed and the Bank of Japan are alone among the major central banks in indicating they have no plans to increase rates.
Have I mentioned I like TBT lately? Come on people, wake up – these are rats leaving a sinking ship! We currently owe $14.2Tn and the Fed is borrowing $140Bn a month – NOT paying ANY back other than interest and we have NO PLAN to pay any back THIS CENTURY! Really do you not see how this can be a problem?
We will, of course be expecting to see a fairly aggressive POMO schedule released by the Fed this afternoon at 2pm and we’ll watch the market’s reaction to see if we still feel it is prudent to buy the F’ing dip or if it’s time to cut and run on our bullish plays and strap ourselves in for the ride down. (See Zero Hedge’s New POMO Schedule Released: Fed To monetise $102 Billion In Next Month.)
Our January Trade Deficit climbed to $46.34Bn, up 15% from December and 10% worse than predicted by “expert” prognosticators who are, amazingly, less accurate than a Groundhog in predicting the future. Why is it that the people who are paid to track these things have no idea what’s going on? Well, like everything else in America, they are victims of budget cuts and rigid thought processes that doom them to make the same mistakes over and over again.
Another “expert” miss is coming from Jobless Claims, which jumped back to 397,000 lost jobs last week, not the 375,000 expected but, then again, what’s 22,000 jobs between friends, right? Even Australia lost 10,000 jobs last month which, with just 22M people, is like the US losing 150,000 jobs. Experts there expected a gain too and that is really sad as you can pretty much just call everyone on the phone in a poll. This is Australia’s first contraction in jobs in 18 months and it just goes to show you how shockingly wrong everything you hear in the MSM can be.
On the bright side, “only” 225,000 homes were put into foreclosure last month (not even 3M a year!) but, as noted above, House Republicans are moving quickly to make sure that trend is quickly reversed and it’s very likely that the downturn was caused by the Bankers holding off on the proceedings until their pet Congresspeople could shove the legislation through that would remove any alternatives left to homeowners and leave them entirely at the mercy of their Bankster buddies. Muhahahaha!
Speaking of evil bankers – check this out (thanks Zero Hedge) – The following exchange between Ben Bernanke and Senator Kirk is a must watch for everyone who wonders how Ben Bernanke justifies the fact that America is now an open Ponzi scheme. Kirk’s question “in lay men’s terms this is one part of the government lending another part of the government money, which would not lead to long term confidence once the American people understood the basics a little bit better” relates to the open monetization that the Fed does each and every day at least until the end of June.
What Kirk did not ask is what happens when the American people realise just how truly preposterous the Ponzi is, and that all the interest “paid” by the Treasury to the Fed ends up being remitted as cash right back to the Treasury as revenue in essence incentivizing the Treasury to spend and borrow more in order to earn more!
Seriously – Be careful out there!