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Guest Post: Ridiculous Productivity

Tyler Durden's picture


Submitted by Chris Martenson of Chris Martenson's Blog

Market Recap - Ridiculous Productivity

After digging around and sifting through the things both said and not said, I have come to the conclusion that what we are seeing are the likely effects of a rescue operation.

By this I mean a large injection of stabilizing cash to one or more parties, possibly related to the recent large bankruptcies. Two of my friends who have been actively trading for more than 20 years between them threw in the towel this week as their patterns and methods are no longer working.

Their conclusion is the same as mine; this market is not trading like it used to. It is trading chaotically, counter intuitively, and as if there's some sort of distorting influence involved.

First we might just wonder if this isn't the impact of a rogue firm with entirely too much power moving the market for its own benefit.

When we examine the results of Goldman's latest quarterly trading results, obviously we have a strong suspect.

Goldman Benefits from Trading Bonanza

Traders at Goldman Sachs recorded only one daily loss in the third quarter, highlighting the trading bonanza sweeping Wall Street as central banks continue to pump billions of dollars into the financial system.

The performance – revealed on Wednesday in a regulatory filing – compares with two losing trading days in the previous quarter and confirms that the authorities’ drive to revive markets after the crisis is yielding huge windfalls for some banks.

Before the crisis, banks regularly recorded trading losses on several days in a quarter.

Goldman made more than $100m in profits on 36 of the 65 days in the three months to September and recorded more than $50m in profit on more than eight out of 10 trading days, the filing shows.

Only one day with trading losses out of the entire quarter? A 98.5% win-rate? Sorry folks, this is so far beyond the realm of statistically possible that we must search for other reasons. There can be no doubt that Goldman is enjoying an advantage not shared by the rest of the market.

Goldman is a company largely housed in a single glass building in Manhattan vacuuming up $100 million in profits on 36 out of 65 trading days. $100 million is a lot of money. It is equivalent to the total earnings of a very successful mid-sized company for an entire year. One that might employ thousands of people.

But somehow we have a system where a few folks in a glass building are able to skim that amount day after day after day without anybody from any regulatory body even blinking.

Remember, in trading one person's gain is another person's losses. It really strains every fiber in my being to imagine that Goldman's services to this country are either that good, that fortuitous, or worth it.

Moving on to the markets, here's what the market has done for the past week as traced by the S&P 500 futures (which I like because it tells you what's happening 24 hours a day, not just when the cash market is open):

We see the volatility as the market first surged on the GDP report and then slumped the day after. Then there was a spike on the ISM (mfg) data that also gave up the gains shortly thereafter. Then we had the FOMC follies where the market looked like an EKG of a heart attack victim for a while before finally slumping away all the day's gains.

Today's 200 point Dow spree was said to be due to favorable unemployment data and excellent productivity gains but if you were watching the overnight futures you noticed that the lift-off actually began at 3:00 a.m. As a trader, I am quite familiar with this pattern. When large futures gains are recorded beginning at 3:00 you can nearly always count on those gains holding through the day.

Inquiring minds would like to know how the future traders seemingly know about the excellent economic news that has not yet been released. Hello SEC? I have a job for you.

Regarding the excellent economic news today, I might note that the market never sells off on an unexpected rise in initial claims nor should it. The data is noisy and not worth much week to week. Further we might note that while the number was less than expected it was still over 500,000; a lousy result by any normal measure.

U.S. Economy: Worker Productivity Surges, Costs Drop (Update1)

Nov. 5 (Bloomberg) -- Worker productivity surged at the fastest pace in six years, labor costs fell and unemployment claims were lower than forecast, signaling companies may be preparing to start hiring again after cutting costs to the bone.

When looking through this data we might note a powerful contradiction in the logic. Why should companies that have just secured a gigantic gain in productivity seek to hire anybody? I mean if they're any good a company that has managed to become more efficient and lean is not about to go out and hire anybody just because.

I should point out that the productivity measure is the worst of the worst in terms of usefulness or reliability. I hate how it is constructed. Some of my disdain is probably a holdover from all the years I had to listen to Alan Greenspan trumpet it to rationalize his reckless loose money policies. I thought it was bunk then and I do now.

If you want any further proof that this measure is junk, look at what was reported:

Productivity, a measure of employee output per hour, jumped at a 9.5 percent annual rate in the third quarter, exceeding the highest economist forecast, according to Labor Department figures released today in Washington

That's just ridiculous. At that rate we'd need half the workers to accomplish just as much in only ~7 years. It's silly and instead of spending any time wondering at it we should instead immediately suspect that it is flawed.

Next, labor costs going down is a bad thing if you are depending on consumers coming back to the shopping malls. Lower labor costs means less money going to workers. That's not a good sign at this point.

So at this point I really have no solid explanation for what I am seeing in the market besides noting that a lot of liquidity is hitting the tape. Gold remains over $1090 and the dollar is languishing about at ~76, bonds went nowhere today despite a powerful stock market rally.
All in all this adds up to liquidity and lots of it.

This is one reason that I am not a deflationist yet. While I have complete intellectual sympathy for the deflation argument as that is what should be happening, I am not yet seeing it in the financial markets.

Instead I am seeing what I presume to be behind-the-scenes injections of liquidity into the markets.

I have read numerous statements of fact from deflationists that are actually beliefs that really need to be carefully examined. One is "the markets are larger than the central banks." I used to believe this too, but now I am less certain.

Thinking back, I recall that the Soviet machine was bigger than the market because it was the market. It turned out not to be larger than reality, but that's a different story. The Soviets simply dictated everything from prices to false production figures until the system collapsed.

The tools of persuasion and market interference at the employ of modern central banks are far more sophisticated than anything the Soviets ever dreamt of.  Are the markets larger than the banks?  I'd like to think so, but I am growing more and more confident that the answer is "no" and that the distorting effects of untold trillions of fiat money can elevate prices for long enough to change people's minds.

I happen to think that reality is larger than our central banks but that too is a story for another day. You can review that thesis by re-reading the paired reports on oil that came out in April 2009.

Again, I just want to caution you to be ready for any outcome. I am open to the possibility of an immediate return of crushing deflation and I am also open to the possibility that the gigantic wall of fiat money will over-ride the deflationary impulses and whisk us into a fast date with high inflation.  Right now the data says that the money masters are winning the battle against deflation.

And not without help from the media - I am simply stunned that Capmark and CIT went belly up and I couldn't find a single article about either today in a major news outlet. It is as if they never happened at all. Sometimes what is not said is just as important as what is said.

This is, without a doubt, one of the most perplexing moments for those interested in wealth preservation.

Take care.


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Fri, 11/06/2009 - 12:58 | 122343 omi
omi's picture

We are so god damn productive that we don't need jobs.

Fri, 11/06/2009 - 13:30 | 122397 Anonymous
Anonymous's picture

Damn it! I was about to 'off' myself, and then you make me laugh.

Thanks for nothing, jackass...

Fri, 11/06/2009 - 13:02 | 122350 Takingbets
Takingbets's picture

This whole better than expected crap rally is a mind fuck. TPTB are trying to rewire the sheeps thoughts that bad is the new good. And I truly believe IB's are behind gunning these markets before the bad news, oops I mean good news get reported.

11:00 am : Financials continue to be a drag; the sector is now down 1.1%. AIG (AIG 35.48, -3.80) is a primary laggard in the sector. Shares of the insurer have been shunned for the entire session, despite better-than-expected earnings for its latest quarter. AIG's weakness has spread to its peers and dragged multiline insurers, as a group, to a 2.8% loss.

Fri, 11/06/2009 - 13:39 | 122412 What_Me_Worry
What_Me_Worry's picture

It really gets weird once you figure out that AIG may have actually missed on their earning estimates.  We keep hearing this $2 number, however they actually reported net income to common shares in the 0.60's.  Let alone, ON TOP OF THAT, they don't even report out net profit to common shares after accounting for the fact that there are warrants for 4x what the current outstanding is.  Their real earnings for common shares might be closer to 0.15ish.

They actually reported their net income before paying out their expenses.  I may be reading their report wrong.  I cannot believe you are allowed to report out your net income before paying out your expenses for your loans now?!?

Basically, financial institutions can truly pick whatever number they want their net income to be and then work backwards from that figure to make the rest of the numbers fit.

Fri, 11/06/2009 - 14:14 | 122487 omi
omi's picture

Oh the enthusiassm over a range trade

Fri, 11/06/2009 - 17:58 | 122859 Tripps
Tripps's picture

exactly right....they are trying to use positivity and the law of attraction to distract and to suck in even the bears to go long


the most stupid way to solve a great recession I have ever seen


they won't fix the monetary system , wont fix the debt, wont fix the tax structure, won't create jobs, etc...but they will throw trillions at stocks even though equity outflows increase


do they think we are stupid????????  

Sat, 11/07/2009 - 05:16 | 123338 Bear
Bear's picture


Fri, 11/06/2009 - 13:14 | 122351 Ned Zeppelin
Ned Zeppelin's picture

In a similar vein, I have decided that waiting to short the equities market is a losing game where QE is the reigning paradigm.  What has happened is that the S&P 500 at 1050 or 1070 today is the pre-QE S&P 500 at 650, or worse. Reinflation has successfully occurred in risk assets.  As long as QE is inevitable (either by reason of a Fed objective of holding down interest rates, so as to hold down the cost of borrowing AND maintain interest-rate-sensitive asset valuations, OR by reason of impossible to borrow U.S. federal deficits) then reflation works in terms of altering appearances of aset values.  In such an atmosphere, commodities will rise and gold should act as the measurement of the value of debased (i.e., printed rather than earned) fiat currencies.  I know there is alot of talk that the dollar is about to turn, everyone is ganging up on the dollar, and that somehow this thing wil lturn around, but all I see is that gold will keep rising (as an objective "price check" on the relativism of currencies), but as long as the Fed prints, isn't this the inevitable result? And even that behavior will last only until the outer rings of tolerance for such behavior are breached, and then currency collapse becomes a real possibility - does anyone know the trigger point? I doubt it, but it's out here somewhere in the darkness and we are hurtling towards it in a 1987 Oldsmobile with blackout glass and a mad driver sputtering nonsensicals at the wheel.  At least, I think that's where we are.  

And you are right about the manipulation - I think the scary part is that it is working, but the consequences of what is occurring are mind-boggling, as appearances become the substitute for reality.  The final victory.

Fri, 11/06/2009 - 13:47 | 122425 -273
-273's picture

But if reality for a growing number of people is that of unemployment, foreclosure and bankruptcy, then faced with the appearance (and fairly evident reality) of a few people gaming the system while they sink, it seems like a recipe for battle more than any ultimate victory. Lot of peeps are down, but not out. Game on. Next level.

Fri, 11/06/2009 - 18:11 | 122881 ZerOhead
ZerOhead's picture

The 87 Olds shitmobile is now rocketing down the road...  QE pedal to the metal with full ZIRP Nitrous Oxide (NOX) boosters... can't turn left... can't turn right... and no possibility of applying brakes evidentally...

Won't turn out well I'm afraid... kinda like what happens to a speedboat when it catches too much air...

Sat, 11/07/2009 - 14:49 | 123500 Anonymous
Anonymous's picture

It's a Talmudic Market... what more needs to be said?

Fri, 11/06/2009 - 13:08 | 122355 Anonymous
Anonymous's picture

I don't get it - I've been reading Zerohedge since the beginning, and, thanks to them, I came to this very same conclusion MONTHS AGO,... and you and your two buddies, with "20 yrs of trading between them," have JUST NOW come to this very same conclusion?

Wow, the three of y'all must've lost a SHITE load.

Fri, 11/06/2009 - 13:31 | 122399 Anonymous
Anonymous's picture

Precisely. I told a friend last year that my models stopped working in May 2007, when they screamed get the hell out.

Fri, 11/06/2009 - 15:51 | 122666 Pat Hand
Pat Hand's picture

May 2007 was good.  My early warning systems started up in late June and began screaming "red alert" July 25.  That day I was dining with a couple of hedge fund allocators and their trophy wives (only one trophy wife per allocator) at Del Frisco's.  Wednesday night, the place was packed.  They had a $120 lobster special and a $56 steak special.  Three deep at the bar, pre-Mad Men martinis flowing.  Plenty of high-end champagne (our table ordered Roederer at $150).  I turned to one of the allocators and said "this has got to be the hedge fund market top".

Went to cash.

Short 50% in December.

pissed it all away over the past six months (well, not all of it).

Right now it's all a dollar trade, I think.  

TIPS are the trade - no expectation of much return but protection in case of either inflation or deflation.

5% in lottery tickets

Still long 9mm futures

Fri, 11/06/2009 - 18:11 | 122882 Anonymous
Anonymous's picture

Never did go real short because I shorted GM about 9 months to early and it doubled from there. Got burned on another, Worthington Industries and figured I was wrong and simply went to cash.

Then to test whether or not I was getting any better, played with the GCI and OpEx practice accounts for 6 months, losing over $5,000,000. I was on the wrong side of 9 out of 10 trades.

Have only done a leetle bit better since then.

Interesting that you too went to the dollar trade. Been going back and forth with the BRL/$, $AUD/$, NOK/$, EUR/jpy,
and Euro/$.

Fri, 11/06/2009 - 13:12 | 122363 msscheiner77777
msscheiner77777's picture

How do labor costs fall (productivity figures)when wages are up in this latest employment (and I use the term lightly) report?

Which business in their right mind increase wages at a 17.5% (true) unemployment rate?

And how are government jobs flat when all I see are firings by cities and states?


Really good post, thanks.

Fri, 11/06/2009 - 13:12 | 122364 Prophet of Wise
Prophet of Wise's picture

Productivity increases as measured by output-per-worker [total output/total workers] should come as "no surprise" when we reduce the denominator by 7,000,000

Fri, 11/06/2009 - 13:13 | 122367 Anonymous
Anonymous's picture

Think like a criminal.

Fri, 11/06/2009 - 13:13 | 122368 vreporter
vreporter's picture

I believe that some serious restructuring (capital requirements, management change, etc) of the "questionable banks" has been underway for a few weeks. They have been sinking while the Dow has been hiding that damage at new highs. Rotation is a wonderful tool as long as there is a chair to sit on before the music stops. Today's major Dow hero is GE! Watch the banks because something is afoot in the REAL market.


After all, it's a market of stocks, not a stock market.

Fri, 11/06/2009 - 13:15 | 122374 Anonymous
Anonymous's picture

Sounds like someone is losing their arse.

Fri, 11/06/2009 - 13:17 | 122375 Anonymous
Anonymous's picture

Unemployment doesn't seem to matter...

Banks can borrow at 0% and lend at xx%. Those loans that cannot be paid back will just be bought by the government. Corporations will continue to buy things from each other with less workers which will show both top line and bottom line growth.

Government will finance the whole thing by printing more money, which will be purchased by foreign governments who have no other choice.

Individual investors that don't want to join the gambling will loose principle with little to no interest bearing equivalent available punishing saving/earners while enriching those that either comply and bet on black/red CNBC strategy or open their palm for the next government hand out.

Small biz will continue to fail, but who cares about small biz anyway?

Fri, 11/06/2009 - 13:18 | 122377 Anonymous
Anonymous's picture

Guys, what would you wish you'd done before you died?

Fri, 11/06/2009 - 13:43 | 122419 Anonymous
Anonymous's picture

...well..that's easy. It was in Westwood, on La Mirada, near Hollywood boulevard, early 90s, my first apartment and there was this lovely woman on a dark and steamy night possessed by a faint hesitation. But an urgent persuasive spirit pressing me on...and then my roomate's night shift got cancelled and he opened the apartment door 10 feet away shining the light from the hallway directly onto the sofa where the the lady and I, after a sumptuous dinner, lay in an embrace, I having finally got her bra unhooked with one hand and--------descending upon us was a lust-killing moment that I regret to this day.

I would have put that at the near top of my list of TTDBYD.

Fri, 11/06/2009 - 14:15 | 122492 Anonymous
Anonymous's picture

I guess that beats my "kick Liesman in the nuts"

Fri, 11/06/2009 - 16:18 | 122711 Sisyphus
Sisyphus's picture


Fri, 11/06/2009 - 16:01 | 122679 Anonymous
Anonymous's picture

Dude, sweet story, but it's an obvious fabrication. Hollywood Blvd. ends far east of Westwood and La Mirada Ave runs parallel to Hollywood Blvd. and, again, ends far east of Westwood. Even if you meant West Hollywood (not Westwood), it's still not true because both streets also end east of WeHo. And another things -- there are no "steamy nights" in Los Angeles; it's either hot and dry or cool and damp. Sorry.

Fri, 11/06/2009 - 18:18 | 122889 Anonymous
Anonymous's picture

Well OK I was taking a bit of literary license. The actual location, which was on La Mirada, in the Karnak apartments, in West Hollywood, and the 'steamy' was a reference to the climate in that room without an air conditioner.

Everything else is the truth, swear to god, hope to die, cross my heart, on my mother's grave.

I couldn't make that one up even if I tried sinceI have many times threatened to kill my roomy for showing up that time. Made me believe that some things are just not meant to be considering my two year up and down history with that particular velvet-touch woman.

Sat, 11/07/2009 - 01:08 | 123262 Anonymous
Anonymous's picture

I nailed her right before you had dinner.

Fri, 11/06/2009 - 13:19 | 122378 Anonymous
Anonymous's picture

And then of course there was this morning, where at the open, it looked like traders were forced at gunpoint to buy. I haven't seen anything like that since April/May; that was the work of the SLP program if ever I've seen it. This is getting ridiculous. Everone's talking about the head and shoulders forming on the S&P - if it doesn't take out 1080 on the next attempt, or it breaks through 1035, all the Elliot Waves guys are saying we're headed down in a big way.

And so I guess the one(s) who are running shit these days decided this morning that we weren't going down.

Let's see what consumer credit does to this. If the numbers come in horrible, and the market doesn't sell off (on a FRIDAY), you know something is deeply, profoundly wrong.

Fri, 11/06/2009 - 13:19 | 122379 mule65
mule65's picture

Two of my friends who have been actively trading for more than 20 years between them threw in the towel this week as their patterns and methods are no longer working.

Good.  Maybe they can find a real job and do something productive.

Fri, 11/06/2009 - 13:35 | 122405 Anonymous
Anonymous's picture

This is 'good' until you realize what it means. The market used to be made up of hundreds of smaller liquidity providers. Now it's shrinking and all that will be left is 10 HFT 'liquidity providers'. This is happening in a lot of markets - equities, futures, options.

Fri, 11/06/2009 - 13:46 | 122424 Internet Tough Guy
Internet Tough Guy's picture

Only a fool plays a rigged game. What will the squid eat when it runs out of fish and new fish won't play?

Fri, 11/06/2009 - 13:58 | 122450 Greyzone
Greyzone's picture

The squid will task its minions (Obama and Congress) to force you to play. They are going to raise 401K limits, require some minimum 401K deposits from everyone, and remove any ability to get the 401K money until you retire at 95 or some such crap, which in turn funnels money into funds that can then be screwed by the squid.

Just watch. Time to renew your passports, people, if you've not already done so. Like many in 1930s Germany, some folks may decide it's time to look for the exit.

Fri, 11/06/2009 - 15:48 | 122659 Mazarin
Mazarin's picture

re: "Screwed by the squid" - It isn't pretty:

Male giant squid have been found to have a long, muscular penis...

Scientists believe that the male squid literally injects his sperm into the female's skin during mating.

"The two of them mount beak to beak, so you've got arms and tentacles flying everywhere," Dr O'Shea said.

"The male is co-ordinating this enormous penis, and he's implanting spermadaphores into the female's arms.

Giant squid caught in Scotland Some giant squid have occasionally been caught by fishermen "He uses the penis like a plunger or a huge hypodermic needle, and he's physically stabbing the female's arms."

Fri, 11/06/2009 - 16:12 | 122698 Pat Hand
Pat Hand's picture

Predators aren't really interested in attacking big and strong things.  We're cowards & want to eat weak sheep.  If the sheep are all gone and it's wolf on wolf, well, that's life, but it's a very different way of living

Fri, 11/06/2009 - 13:22 | 122384 chancee
chancee's picture

If you want to see your future tax dollars at work, just pull up SPY on your time and sales screen and watch your children's inheritance scroll by.

Fri, 11/06/2009 - 13:22 | 122385 Anonymous
Anonymous's picture

Jealous? Mad? Has the squid ink clouded your vision?

"Invest in US Treasuries if you cannot get your expected returns while day trading" says Lloyd BankMafia.

Sat, 11/07/2009 - 18:30 | 123618 Problem Is
Problem Is's picture

That is Timmay G.'s Aunt Lloyd you are talking about...

Fri, 11/06/2009 - 13:25 | 122389 Anonymous
Anonymous's picture

the markets are larger than the central banks

anyone who believes this is a worn out retread from the nixon-ford days or earlier....get them horses and buggies out to go to market....eeehaaa

when 23.7t usd is available to backstop the markets and when derivatives are measured literally in the quadrillions (notional value) i assure you that central banks are vastly larger than the markets.....

the fed rules the markets through derivatives - but only certain ones.....until people recognize that fact they will keep whining their fucktarded whine about disconnects all over the place...the only disconnect is in their brains for refusing to realize that the vampire squids rule the world and do so through means far too sophisticated for mortals to comprehend...but they do it and it is with derivatives.....

irs are the single most important derivative in the world have gold derivatives....they guarantee insatiable demand for treasuries and arbitrary interest rates...the fed needed qe as an enforcer and they got the power....

until there are dead bankster-illuminists there will be no escaping the squid....

Fri, 11/06/2009 - 13:52 | 122441 Anonymous
Anonymous's picture


Fri, 11/06/2009 - 14:04 | 122463 Gunther
Gunther's picture

As long as everybody stays in the paper universe continued manipulation might work.

Shortages in commodities have the power to stop the paper; after all energy and food can neither be printed nor electronically created.

Another way to stop the paper is to buy and take delivery (!!) of precious metals.

I do not have US numbers, but I Germany are some 3 Trln Euros in savings. 1% of that is 30 billion Eu that would buy give or take 1000 metric tons of gold. Take few other saving nations too and that is enough money to buy all the gold of few central banks.


Sat, 11/07/2009 - 18:40 | 123621 Problem Is
Problem Is's picture

Wow... an "anonymous" that does not sound like Timmay, Aunt Lloyd or Uncle Jamie's sock puppet...

I shall have to categorize you as "Anonymous A." Please place an A at the beginning of your posts so I can figure out which anonymous I am reading...

It is like trying to figure out which Tyler I am reading...

I like the really sarcastic, caustic Tyler...

Fri, 11/06/2009 - 13:27 | 122391 Rainman
Rainman's picture

A consumer-driven revival requires that the gubmint try to push the stubborn sheeple out of their deleveraging foxholes.....with little or no easy credit in sight. And the long awaited inventory ramp up on slowing credit is another mirage.

So the GS/Uncle Slam conspiracy to artificially pump on equities must continue or the house of cards slowly crumbles. A crushed dollar isn't even on the radar screen of hazards.....for now. 

Fri, 11/06/2009 - 13:33 | 122393 Racer
Racer's picture

"Two of my friends who have been actively trading for more than 20 years between them threw in the towel this week as their patterns and methods are no longer working."

 I have been trading successfully for many years, but now... I give up..

I think the best option is to max out the credit cards and not pay them, sorry got no money left...that's what you did to me by your idiotic market manipulations

After all, the banks don't pay any interest to savers and prudent people do they?

Be reckless and get away with it I say.. well that is what they are showing me by their example

Fri, 11/06/2009 - 13:48 | 122429 Anonymous
Anonymous's picture

"banks don't pay interest to savers"?

It's far worse than that. They are charging us with their failures, along with their Pimps in Congress.

It's getting stabbed from both ends.

Fri, 11/06/2009 - 13:29 | 122394 Anonymous
Anonymous's picture

Re: MSM coverage of business, generally.

"...I couldn't find a single article about either today in a major news outlet.."

Very rarely do our major dailies carry anything significant about business, even though they have a separate "Business" pull out section. They never have.

They cater to the whims of their readers who apparently want Sports numero uno, a Magazine about people famous for being famous, and Car ads.

I only subscribe to one on Sundays for the KenKen, Crosswords, Sudoku and other puzzles, the Op-ed page and get my business news from other sources mostly the Web which is current, constant, and makes the next day's business news (and all other so-called news) in the papers obsolete by next morning.

No TV business watching unless there's a meltup or meltdown.

The "interweb" as Mr Monk would call it, is far and away the best source for up to date business data, and ZH is the leader of the pack.

Fri, 11/06/2009 - 13:31 | 122398 Anonymous
Anonymous's picture

the market is acting counterintuitively because you don't understand markets.. give up

Fri, 11/06/2009 - 13:32 | 122400 miker
miker's picture

Excellent article and make no mistake, the Fed is behind this market 100%. GS is the front man. Why do you think the Audit the Fed bill got gutted?  Because the Fed is pumping billions into the stock market.  THE MARKET IS  HOW THE FED IS INFLATING THE MONEY SUPPLY!!!!  The banks sure as hell aren't doing it with their reserves because there is little loan demand.  The first phase of the market rally was really quite easy and inexpensive.  Basically, they made sure no nasty surprises occurred on the downside (e.g., managed the news) and threw enough buy side support to key stocks while manipulating the sell side.  No one was selling much so up she went.  Now, it's getting dicier.  But still billions are being spent to hold her up.  Look at GE Today.  Up a frigging $1/share over what?  A well timed buy recommendation.  This on the day that GE announces closing their solar plant due to lack of pricing.  Goldman is making a ton of SURE money trading because they are the key maker of this market.  There attitude is "we're good" so pay us.  The Feds have little choice. 

One final note.  I've said this before and I still firmly believe that our government in conjunction with Saudis' is attempting to hold the price of oil "up".  If oil spirals down, all bets are off on preventing a deflationary spiral......because everything is pegged to it in cost.  Ask yourself why has natural gas dropped 2/3 in price but oil has held firm?  China and US have been buying to fill strategic reserves and using other techniques to hold the price up......for now. 

Also, don't expect Gold to move much over 1100/ounce.  When that happens, you will see the results of Ben selling some of the vast U.S. reserves into the market and scaring some of the weaker longs.  They will NOT let gold advance substantially from here.

This economy is is serious, serious straits.  I think worse than the 1930's.  Ben and Tim are pulling out all the stops; including a Treasury meeting with top financial bloggers to "show their human side".  Unprecedented. 

Fri, 11/06/2009 - 13:38 | 122408 Racer
Racer's picture

The Nikkei was over 1000 points higher than the Dow, now it is 200 points lower.

Beggar the rest of the world, the US is going to fiddle all the way to line the banksters pockets at the expense of the poor peasants at the bottom of the heap

Fri, 11/06/2009 - 13:48 | 122432 Burnbright
Burnbright's picture

If the FED sells Gold or Silver people like me will be buying hand over fist in the dip. Just FYI.

Fri, 11/06/2009 - 13:49 | 122434 Rainman
Rainman's picture

A Treasury meeting with top financial bloggers...??

Will Tyler be invited ?? Marla ??

I like your assumption on oil. There must be a manufactured demand and it would be good to see the strategic oil reserves report. The IMF gold sale didn't seem to spook the gold move, though, and it was announced the day after the spike to 1045. Fed might be reluctant to release its gold into the market. It would distract foreign investors from the forest of paper that needs to be sold. 

Fri, 11/06/2009 - 13:59 | 122452 SDRII
SDRII's picture

lots of commentary on the "sale" leave it for the goldbugs, but interesting nonetheless

Fri, 11/06/2009 - 13:42 | 122417 alexdg
alexdg's picture

Today seems like one of those days. Unemployment is supposedly at 10.2% and the market (SPX) has bounced off 1060, up 0.27%. 

The market has been going sideways for the last 3 months from an Euros perspective, bouncing off a support for 3 times already.

Banks are hoarding cash as if waiting for something to happen. Buffett spent his 34B on a cyclical company, is it safer there than in a bank?

Fri, 11/06/2009 - 13:57 | 122449 SDRII
SDRII's picture

again someone has to buy the treasuries at the auctions

Fri, 11/06/2009 - 13:42 | 122418 Anonymous
Anonymous's picture

QE,FED, wall of liquidiy wll take use to the moon yeah right this is just the thing GS and alike wants you to believe. A tip take the wedge that was formed from mars to june in 08 anad compare it tick to tick to this huge fakeout its identical. One nice thing is the double fakeout with a similar h&s pattern in 09 BUT if you study these three patterns you will se one big difference.If im right we will resume the bearmarket in late next week and the bulls WILL buy the dips....

Fri, 11/06/2009 - 13:47 | 122426 Gunther
Gunther's picture

"this market is not trading like it used to. It is trading chaotically, counter intuitively, and as if there's some sort of distorting influence involved."
Every time I see the chart of gold from 2008 I get the same feeling; I have never seen a similar pattern before.

Even in the direct comparison Dow industrials and transports look more chaotic during the last panic then the same group of stocks in 1929.

Fri, 11/06/2009 - 13:52 | 122442 chet
chet's picture

Posts of the last few days are starting to come together.  As Martenson said, it seems increasingly clear that large institution(s) are controlling the market. 

Either the government is directly involved somehow, or understands the dynamic and has let it occur for 8 months now.  Whatever it is has the government's tacit approval.

At the same time, we (the taxpayers) are effectively taking over the real estate market.  Fannie is going to own and rent out homes. Fannie is no longer a "government sponsored" entity (if it ever was) - it is now effectively a federal department.

Then you have AIG, and the auto industry as well.  Subsidizing of state government and pensions.

In effect, the federal government and central bank are now driving the whole cadillac.  The problem is the car is going 110 miles an hour, and the chances of losing control are growing, and then no one will be driving at all.

I'm not one who believes that the political left is really a conspiracy to put the government in charge of everything, but I do see that they've ended up in exactly that position.

Fri, 11/06/2009 - 14:15 | 122493 Rainman
Rainman's picture

Fabian socialism is a doctrine of governance. Capitalism and monetarism are critical tools. It is a movement in small steps that eventually grow larger and larger through non-revolutionary means. Political liberalism is much too simplistic to describe what is going on today in the USA and Britain. All we are seeing presently is discreet acceleration ....... right out of the 130 year old Fabian playbook.

Fri, 11/06/2009 - 14:26 | 122521 Anonymous
Anonymous's picture

+1. Replace "Capitalism" with "Corporatism" and you're +100.

Fri, 11/06/2009 - 13:56 | 122446 SDRII
SDRII's picture

Unemployment report:

1.B/D services added something like 49K jobs

2. Overall professional services added 18K jobs

3. Hours and wages for professional services declined m/m

Something or somone is wrong here.

Fri, 11/06/2009 - 14:00 | 122454 Sherman McCoy
Sherman McCoy's picture

The market is in what's called a "trend", and your short covering is fueling it higher. Don't think too much, you might blow a chip. I've been long since the 50x200 crossed 75 days ago. You intellectuals will make money again someday, but not anytime soon.

Fri, 11/06/2009 - 14:02 | 122460 bkrolik
bkrolik's picture

Interesting report.
"Right now the data says that the money masters are winning the battle against deflation."  - could you kindly be more specific about this data set.

Fri, 11/06/2009 - 14:06 | 122471 Anonymous
Anonymous's picture

A bit of a radical change? LoL. Talk about a mid-life crisis.

I'd sue the Internet if I were you.

Before: I am a 40-year-old professional who has worked his way up to Vice President of a large, international Fortune 300 company and is living in a waterfront, 5 bathroom house in Mystic, CT, which is mostly paid off. My three young children are either in or about to enter public school, and my portfolio of investments is being managed by a broker at a large institution. I do not really know any of my neighbors, and many of my local connections are superficial at best.

After: I am a 45-year-old who has willingly terminated his former high-paying, high-status position because it seemed like an unnecessary diversion from the real tasks at hand. My children are now homeschooled, and the big house in Mystic was sold in July of 2003 in preference for a 1.5 bathroom rental in rural western Massachusetts. In 2002, I discovered that my broker was unable to navigate a bear market, and I’ve been managing our investments ever since. Since that time, my portfolio has gained 166%, which works out to a compounded yearly gain of 27.8% for five years running (whereas my broker, by keeping me in the usual assortment of stocks, would have scored me a 38% return, or 8.39%/yr). I grow a garden every year; preserve food, know how to brew beer & wine, and raise chickens. I’ve carefully examined each support system (food, energy, security, etc), and for each of them I've figured out either a means of being more self-sufficient or a way to do without. But, most importantly, I now know that the most important descriptor of wealth is not my dollar holdings, but the depth and richness of my community.

I hope you find what I have to offer here useful.

Fri, 11/06/2009 - 14:08 | 122473 pooplagrande
pooplagrande's picture

Too big to jail...

Goldman has their dick jammed so far up Uncle Sam's ass that it makes the SEC or any other lame duck dept powerless.

The US Government is the GIMP and we are all getting fucked and there ain't nothing you can do about it.

(queue the deep sinister laughter from Goldman Sachs).

Fri, 11/06/2009 - 14:11 | 122480 Anonymous
Anonymous's picture

About five years ago Roach wrote an article about productivity gains, calling them a bad joke. Too bad he has been sent to Outer Mongolia. Speaking of a lack of coverage, the Refco failure was a Hall of Fame candidate.

Lastly, Tyler: Do you want a copy of the email that got Andy Xie fired? Has some dirt in it about Greenspan, Summers, and Volcker seeing the collapse coming and it was around 2005. (

Fri, 11/06/2009 - 14:12 | 122484 chancee
chancee's picture

I concur.  They simply WILL NOT let this market go down.  Anything that remotely threatens a major break in the trend is met with either a ramp up in futures before open, well-timed 'good' news from the government, or a bizarre upgrades on big cap stocks - or a combination of all three.  It's not conspiracy, it's fact.  Every single incident when the market should have sold off... and was selling off overnight (overseas markets falling) has been met with the above responses.  IMO the administration's goal is to not let this market break lower before the new year.  They're determined to do whatever it takes - including spend all our future tax dollars - to not let the market crash through the holidays.  This will all end badly.

Fri, 11/06/2009 - 17:32 | 122820 Tripps
Tripps's picture

agree with you somewhat but there is PLENTY of bad news


1. FANNIE mae needs 15 billion and will own like 25% of all mortgaged homes in the future in a public housing socialism


2. health care is back on


3. cap and trade is back


4.  gold is soaring implying armegeddon or very very stupid money chasing it


5. they want to tax traders 


the news is there...these money managers who are not selling are playing with fire. if they don't lock in their gains in orderly fashion this market will COLLAPSE thru the floor evenventually and i do mean that....because its setting up like 2008 again when herd mentality of selling crushed the market for 1.5 years straight

Fri, 11/06/2009 - 14:24 | 122518 Anonymous
Anonymous's picture

>This is, without a doubt, one of the most
>perplexing moments for those interested in
>wealth preservation.

Take a walk on the dark side:

Right now the "conspiracy theory" folks are hardly missing a single prediction. That pretty much says it all right now.

No joke, have a listen to them, just be ready to be depressed. :(

Fri, 11/06/2009 - 14:42 | 122549 Mark Beck
Mark Beck's picture

Productive investment should have steamed the tide of unemployment by now. The report released today shows the Administration and FEDs failure in its greatest light. The lagging indicator unemployment excuse is at an end.

Essentially, the US is now a noneconomy, it cannot support the government blood sucking parasite attached to it. The small tax revenue paying host, has a monstrous Gov-leach sucking harder with each misguided measure. 

The economy has been slowly gutted over time by ineffective national trade and manufacturing policies. I do not like protectionism, but we need to realize that without effective national policies, the states undermine each other in attracting foreign firms, and in doing so, needlessly destroy domestic industry. But, so much for history.

The only direction, consistently enforced and invested, was in fostering the financial, insurance and banking industries in the US. We need only look at AIG's profitable quarter, and marvel at the manipulation and malinvestment needed to pull off this minor miracle. My Federal Reserve Note fiat money should read, in AIG we trust. Just imagine if we used this investment to improve farming, or build a huge saltwater desalination plant in California for growing food, or to fund education. No, my fellow Americans, we spent our money on a failed and failing insurance company. Is this the direction of a great nation?

Fri, 11/06/2009 - 14:42 | 122550 AR
AR's picture

Very good thesis and points by all above. A colleague of ours recently told his investors that "they are having a progressively more difficult time analyzing the markets with any high probability of accuracy." Translated: Why manage your money if our traditional models of analysis are useless in this environment due to the unnatural intervention of government. This echoes some of the comments above. In-house, we too are exceedingly frustrated. Yesterday we were told that Goldman “is the vessel” the government is using (along with the other large dealers and European counterparts through the AIG bailout) to prop up the markets to achieve their goal of "buying time until all gets better" and to "change market psychology." This will only work in the short term, not long term, since the economic imbalances are to great. We were told also that Goldman been using the repo window to dollar exchange these buy orders back to the Fed (Tyler, you are correctly reading the increase of non-defined increase of assets on the Fed's balance sheet seen over the last 6 months). Anyway, these just aren't difficult, frustrating times – but rather, historical times. Never have we seen such overt manipulation of markets (Russia maybe). Thus, when in doubt, stay out. Unless, you have a lot of money to gamble with, or are trading on inside information of policy directives through firms like Goldman Sachs. Even the smartest guys we've known over the last 30 years are being turned upside down in this environment. Be patient. This will pass.

Fri, 11/06/2009 - 17:37 | 122828 Tripps
Tripps's picture

AR, by doing this they are setting up a huge crash ala bilderburg style


by not allowing a free market and more rational trading and REAL pullback trends they are providing more ammo that indeed this is all manipulation


no one is going to want to play. hell. i feel like pulling the plug now after this week, taking my chips off and never coming back until a few years


like you said not worth it. if this is indeed what is going on, fake propping up of equity markets by the FED and Treasury, we need people to expose it ASAP


this is criminal and unconstitutional 

Fri, 11/06/2009 - 14:42 | 122551 Joe Sixpack
Joe Sixpack's picture

The financial system has collapsed. It is terminal. The $trillions in stimulus are analogous to morphine for a dying man. It makes him feel a little better for a while, but even then it stops working and he dies.


Fri, 11/06/2009 - 14:56 | 122578 Anonymous
Anonymous's picture

Bottom line is that what we have now is a "reverse square root" as Soros has so eloquently pinned it. Plain and Simple - if you didn't buy in March you FUCKED UP! DEAL WITH IT! Looking back I see stocks like CAR,SCSS,DTG,IRE,GNW,DDRX,ARM,AXL,DAN etc etc. than were trading between 20 cents to $1.00 for months from DEC 2008 to March 2009. If you bought 100k of SCSS for $25,000 (for example) you now have over $500,000 from your $20k investment.


Now there is no catalyst to bring the financials down since the FED has rigged them up nicely. And the financials are what determines the direction of the market. Right now any significant drop below 10,000 (3 to 5%) is a screaming buy and if you try to short weakness you will continue to lose until you have NO TRADING MONEY LEFT. So here here are your 4 choices from this point in time Nov 6th 2009>>

1) Keep trying to trade and lose everything in this difficult environment

2) Wait for a buying opportunity. Do something else with your time until you see that the market once again has gone to hell (as Prechter predicts) and then swoop in and buy when there are less than 10% bulls once again. Although this scenario could by years away.....

3) Wait for another bubble to develop in the market and then place your short bets

4) Walk away and find another income source.... of course while doing this you can always take a peek to see if we are at a panic bottom or a bubblicious top yet.

Fri, 11/06/2009 - 15:12 | 122616 Anonymous
Anonymous's picture

It would be interesting to know how many went long in March and STAYED long till now.

What do you think? 1%? 5% 10% Somthing a lot less than 100%?

How many today that hold CAR,SCSS,DTG,IRE,GNW,DDRX,ARM,AXL,DAN bought them in March?

The only way that CAR, etc. could be where they are today is if the buyers in March sold it to someone else at a higher price, and then that buyer sold it someone else at a higher price. Someone has to bid higher and higher and higher, and higher and higher nez paw?

Fri, 11/06/2009 - 18:25 | 122900 Mark Beck
Mark Beck's picture

I like Chris, some may disagree with his approach, but he is concise and consistent.

Just a few comments if I may. Lets look at rigged Financials stability,

The FED and Treasury are selectively trimming its "financials" Christmas list. CIT was hung out to dry, even after 2.33B in bailout money. CIT main stream news coverage went to zip in record time, a political land mine. I can here the question now, So who's decision was it to invest in CIT Chairman Bernanke? How do we know your other investments will not end in the same dismal fashion?

Many financial "banks" are failing every week. The financial sector as a whole is taking a beating. Only a select few big banks are really turning a profit. Although the bailout exposure, even for Goldman, has not been completely reconciled, they are shoring up the balance sheet to cover future losses, and the accounting games skew the results.

Bailing out Fannie again with an additional 15 Billion is also very unpopular. I think the politicians believed that bailout measures would produce positive results, that would avoid bankruptcy.

In short, what I am saying is that the "Financials" time is running out. The government infusion of cash has not been able to adequately deleverage debt, or improve real estate prices enough to substantially correct losses.  

Lets talk about opportunity, not to challenge the implied straight line of the reverse square root by Mr. Soros. 

We are entering a period where the FED and Treasury will have to let some too big to fail, die. Especially, if TARP is not extended beyond the end of the year (another political land mine). If you read between the lines of Ben's last statement he talks about risk. What he is saying is, "I cannot continually save everybody". 

Technically, this has already occurred with CIT. You can see the Oh Crap look on Ben's face. At what point do we let firms fail? If we continually save these institutions, what motivation will they have to look after themselves? All it will take is a few more bail out sweet hearts to go under, and the financial sector is toast.

If a couple small fry fail like two of the following; Wells Fargo, Sun Trust, or Regions Financial Corp. This could be enough to crater the financial sector.

If Citi or BofA ask for more aid, are refused, and enter Chapter 11, KaBoom.

I guess I am not completely convinced that the fireworks are over, especially in financials.


Fri, 11/06/2009 - 14:57 | 122583 Margin Call
Margin Call's picture


As if it wasn't already bad enough, check out this gem:

Of particular note is the following passage:

This year, a subcommittee of the House Financial Services Committee held a hearing at which legislators sought no facts but instead threatened dire action if the chairman of the financial accounting board did not promptly make it easier for banks to ignore market values of the toxic securities they owned. The board caved in, which may be one reason why banks are reporting fewer losses these days.


But the board's retreat was not enough to satisfy the banks. The American Bankers Association is now pushing Congress to give a new systemic risk regulator -- either the Federal Reserve or some panel of regulators -- the power to override accounting standards. The view of the bankers is that the financial crisis did not stem from the fact that the banks made lots of bad loans and invested in dubious securities; it was caused by accounting rules that required disclosure when the losses began to mount.

Ladies and gentlemen, get ready for "held until eternity".

Fri, 11/06/2009 - 18:32 | 122917 Rainman
Rainman's picture

MC, these are two paragraphs of incredible bizaareness.

Why not just scrap all those old accounting rules....??  Let's just shitcan all financial reporting now that we've come this far.

I always knew the beancounters were spineless bagmen. I think there's more than enough for a RICO case. Institutionalized fraud in every sector.......including the CongressCritters. 

Fri, 11/06/2009 - 15:08 | 122606 Anonymous
Anonymous's picture

He he its best you poor all your money in this market beacause it can never go down....... you will geat real surprised when the volume comes in and trashes this thing apart. GS, FED and the rest is only puppets for the market learn your history. For a reality check out black wednesday when the mighty Thatcher thought she could control the market....

Fri, 11/06/2009 - 15:18 | 122624 Anonymous
Anonymous's picture

He he its best you poor all your money in this market beacause it can never go down....... you will be real surprised when the volume come in and trashes this thing apart. GS, FED and the rest is only puppets for the market learn your history. For a reality check out black wednesday when the mighty Thatcher thought she could control the market....

With most of you think heads having the assumption that the market never will fall because of Fed and the rest of the talking heads there is only one way this will end...... and it aint up.

Fri, 11/06/2009 - 15:46 | 122655 Anonymous
Anonymous's picture

Are all you people just showing up now saying the market is rigged? Where were in you late March?

The whole economy is rigged. Accept it. Uncle sam, run by Hussein (how ironic), is ruining your country. Wake up already. The stock market is being manipulated to save pensions and perceptions. The banks are being propped up to wage a financial warefare on the world. Don't think for a second if all the big banks were held accountable for their financial obligations under 'normal' accounting rules that China would immediately invade the US financially. The US is broke. Accept it.

This has more to do with global politics than anything else. It will keep going, until some external force pushes for answers. I say "external", because the apathy amongst Americans is astounding. Most are too dumb to know what's going on, so maybe apathy is not the right word.

Fri, 11/06/2009 - 17:46 | 122840 Tripps
Tripps's picture

I started buying heavily in Jan thru March dude


i wasn't hear feb i felt like a fool for buying a little early but i saw banks and some ag names bottoming


bottom line is like 80% of the stocks out there are very overvalued to me for the economy we have and will have. In March I couldnt say that nor did I.

Fri, 11/06/2009 - 15:53 | 122668 Hephasteus
Hephasteus's picture

Imaginary carrots of wealth. Real sticks of debt punishment.

Fri, 11/06/2009 - 17:57 | 122857 Anonymous
Anonymous's picture

Anyone else hear the news about GS getting some of their H1N1 vaccines even during this shortage?

Fri, 11/06/2009 - 18:57 | 122947 MinnesotaNice
MinnesotaNice's picture

Yep... the Today Show did an entire piece on it and made Goldman look like sh%t... and it doesn't take much these days to put them in the sh%t category.  The people who really need that vaccine right now are pregnant, under 5, or have significant underlying health conditions... and I am quite sure with the 200 doses Goldman received that the majority of those receiving it were healthy males. 

Sat, 11/07/2009 - 02:16 | 123294 Anonymous
Anonymous's picture

My long/short mean reversion model worked very well for years and years through ups and downs until last April. Since then we also get day upon day with a quick .5% to 1.5% move in the first few minutes, then no real change for the rest of the day...nope, no manipulation there!

For now, some in emerging and frontier etfs (honestly earned volatility is somehow invigorating), some in gold, and lots of cash to use after the next leg of the cycle. Wake me up when the time comes...

Sat, 11/07/2009 - 09:49 | 123387 HayeksConscience
HayeksConscience's picture

We get more and more productive which should mean that everybody is living better on less work.  However, the benefits only seem to accumulate to a few people at the top of the hierarchy ?  What's going on here.  As we automate more and more, it will take fewer and fewer humans to make the necessary things to sustain society.  What will we do with all the unemployed.  Seems like we all need to start thinking of how to solve Minsky's dilemna.

If you extend that thinking out even further, you come to Bill Joy's thoughts - The Future doesn't need us anymore.

These are solveable problems but we need a lot more scientests and thinkers of all sorts in government and a lot fewer lawyers and financial types.

Let's hope we start thinking soon and stop fighting the last war.  (We already lost it)

Sat, 11/07/2009 - 18:40 | 123623 Anonymous
Anonymous's picture

nice wired article. thanks

Sat, 11/07/2009 - 19:21 | 123641 Anonymous
Anonymous's picture

Barton Biggs came out in March with long rec. He is still long until 1700 on S&P. Y'all quit bitching here. Happy trading.,8599,1916047,00.html

Sat, 11/07/2009 - 22:14 | 123691 HayeksConscience
HayeksConscience's picture

I think this is known as the Bobby McFerrin Strategy.  Simple but brilliant - Fully endorsed by both Congress, the Fed, and the Giant Squid.

Who needs Empirical Decision making when there's faith (A Priori).




Sun, 11/08/2009 - 05:50 | 123790 Anabase
Anabase's picture

As (Anonymous) said on Friday about mid-life Crisis.


Being obscenely well paid in a Russian subsidary of a French bank (i've been prohibited to do anything), i suffer the same.

I'm back to 100% cash, increasing, since Q3 2007, when we start suffering the Liquidity crisis. From then, all forms of investments diverted from the fundamentals.

What are the fundamentals ? Peoples, their needs, their wish to progress, to evolve, to improve their quality of life.

Even peoples with an IQ lower than their body temperature rush to cash today, some others rushing to gold,confusing it for cash, pretending it wealthier.

Credit is dead, and monetary ratios from M6 to M1 will collapse to core M1 in the next 3 years, whatever FI will imagine to prevent it. 2008 was bad, 2009 was worst, but lets imagine what 2010 forward will be.

Half of earth population if flying out of american debt though pretending not to be, pushing up internal market, pretending still to respect OMC agreement, cutting on expenses, but mandatory ones, down the Maslow pyramid. Surely, most of peoples dont understand what CDS,CDO,RMBS,CMBS,IRS means, but what they know is that their neighbour lost his job, that the house nearby is for sale, that taxes will raise.

I think Securitization has a great future. We started Securitizing poverty and misery, and the job is not over yet.

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mbtshoe's picture

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