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We're Rapidly Approaching the Crisis to Which 2008 Was a Warm Up

Submitted by Phoenix Capital Research on 02/26/2011 00:05 -0400

Stocks broke
down in a big way this week, falling below the trendline that has supported
them since late August. Indeed, it looks as though we not only broke below this
line but have since rallied to retest it: a classic pattern during corrections.

The question
now is if this is just a minor correction or the start of something more. The
S&P 500 appears to have formed a rising bearish wedge pattern (see above),
which usually is a termination pattern that results in the underlying security
falling to retest its base (in this case 1050 or so on the S&P 500).

However,
with Government intervention in the markets being what it is, we could also
simply see a minor correction here followed by yet another ramp job. Indeed,
this is exactly what happened in 2009 when stocks broke a near perfect rising
bearish pattern only to bounce back and begin yet another ramp job:

Thus, the
BIG question for US stocks is whether the market has already digested all the
QE hype to the point that threats of additional liquidity does nothing, OR if
the Bernanke “Put” is still in play.

While this
might not seem like a big deal, I can assure it is THE most significant issue
the financial markets face right now. The reason for this is that IF the
Bernanke “Put” is no longer relevant, that is additional liquidity and
bailouts, doesn’t actually induce a rally anymore… then the entire financial
system will collapse in one form or another.

Remember,
the only thing that pulled us from the brink in 2008 was Bernanke printing like
a lunatic. It’s the ONLY thing that has held the market together. And while it
may have kicked off a major rally in stocks… it FAILED to address the underlying
issues that caused the Crisis in the first place: namely excessive debt and
leverage.

In fact,
Bernanke has made the financial system even MORE leveraged than it was in 2008.
So if the Fed’s moves no longer have an effect on the markets, then it’s time
for the REAL Crisis… the Crisis to which 2008 was a warm up.

Why?

Because when
the stuff hits the fan this time around, the Fed will be powerless to do
anything. Bernanke’s already shot every bullet he’s got. So when he loses
control this time around, not only will the market crater, but the belief that
has kept the financial system afloat through every Crisis of the last 30 years
(namely that the Fed can always save the day) will shatter.

And when
that happens it will be the US financial system, NOT just stocks that goes
down.

Prepare Now!

Graham
Summers

PS. If
you’re getting worried about the future of the stock market and have yet to
take steps to prepare for the Second Round of the Financial Crisis… I highly
suggest you download my FREE Special Report specifying exactly how to prepare
for what’s to come.

I call it The Financial Crisis “Round Two” Survival
Kit. And its 17 pages contain a wealth of information about portfolio
protection, which investments to own and how to take out Catastrophe Insurance
on the stock market (this “insurance” paid out triple digit gains in the Autumn
of 2008).

Again, this
is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com
and click on FREE REPORTS.

PPS. We ALSO
publish a FREE Special Report on Inflation detailing three investments that
have all already SOARED as a result of the Fed’s monetary policy.

You can
access this Report at the link above.

- advertisements -

Sun, 02/27/2011 - 11:46 | 1001587 RockyRacoon

It's all gonna come out in the wash guys. A debt that cannot be repaid won't be. The only question here is how much wealth will be transferred first, and how much pain the populace is willing to endure. The worm will turn when living conditions get worse faster than people are willing to lower their standards.

Sun, 02/27/2011 - 13:51 | 1001744 akak

The worm will turn when living conditions get worse faster than people are willing to lower their standards.

To judge by how rapidly Americans, at least, have been willing if not actually eager to lower their standards socially, culturally and morally in the last couple of decades, that worm is going to have to turn pretty damned quickly indeed!

Sat, 02/26/2011 - 13:32 | 999796 Kayman

Rocky

FASB and the Fed (and all the political whores) need to get the little guys back to the party.

It is criminal fraud. However, when the lawmakers and those who are paid to enforce the law, are part of the scheme, we are back to the law of the jungle.

As a country, we should have taken the $10 trillion hit and should have started to rebuild.

Now we have at least a decade, perhaps a generation of tough sledding.

Sat, 02/26/2011 - 01:58 | 999189 hugolp

Remember, the only thing that pulled us from the brink in 2008 was Bernanke printing like a lunatic. It’s the ONLY thing that has held the market together. And while it may have kicked off a major rally in stocks… it FAILED to address the underlying issues that caused the Crisis in the first place: namely excessive debt and leverage.

While debt is a important component of the problem, there is more, a lot more to the capital structure distortion. Debt is only a manifestation of this distortion.

The other big problem is all the capital and workers from the housing related industry. There is overcapacity is these areas, while other areas suffer from undercapcity, because all the resources to create capital went to the bubbled industries and the workers specialized and trained in the bubbled industries also, taking away from other areas the needed resources to develop.

Now, a lot of the capital in the bubbled industries is malinvestment, and more investment is needed towards the industries that suffer undercapacity. Also, the workers need to retrain and find new types of occupation. But this process its not easy. The entreprenuerus need to discover the needs and wants of the people, but all the meddling and regulatory changes of the government only creates uncertainty making this slower. Also, for a lot of workers changing industry and retraining is a hard thing to do. It takes time.

And on top of all this, the government has not allowed the debt to be liquidated as you pointed, slowing even more the described process.

Sat, 02/26/2011 - 09:38 | 999501 rwe2late

To get a fuller picture of how deformed the economy is, one must also include the unproductive military and financial sectors.

60% of federal civil servants work for the Pentagon, Homeland Security, or the CIA. Add to that the uniformed military, and unclassified political appointees.

A trillion dollars a year is spent DIRECTLY on militarism. Add to that private weapons, privately paid security, and overseas arms dealing.

The trillions of dollars handed out to the MIC, the arms industry, and the financial racketeers are a primary cause of the imbalanced economy, and the inequity of wealth and power.

Professional engineers warn the roads, rails, electrical grid, sewage systems, dams, levees, water pipelines, and bridges have not been maintained, repaired, or replaced as needed. Trillions of dollars are needed just to bring the systems up to minimal standards of safety and usage. Trillions and trillions more to upgrade to what‘s needed for a first-rate economy..

But we will continue to spend double the percentage GDP that others spend on similar healthcare in order to subsidize the insurance and health industries. We’ll allocate trillions more to keep financial speculators afloat.

We’ll spend trillions more to kill illiterate peasants half-way around the world, prop up drug mobsters, subsidize corrupt despots, and enrich warfare merchants. We’ll build more prisons, persevere in the counter-productive drug “war”, and cut back municipal schools and public colleges. Notwithstanding, we’ll pay for more NSA, TSA, and Homeland policing of ourselves.

Mon, 02/28/2011 - 12:19 | 1003939 Which is worse ...

Which is worse - bankers or terrorists's picture

Don't forget about the amount of US taxpayer money spent to fund the military of Israel and other authoritarian dictatorships.

Sun, 02/27/2011 - 02:56 | 1001237 Joseph Jones

Well doggone it, at least we're free, and at least we got a democracy!!!! And think of the peace of mind we get from spending a couple-three trillion on the Defense Dept. Fly your flag proudly!

Sun, 02/27/2011 - 01:58 | 1001169 lincolnsteffens

+100 short and sweet.

Sat, 02/26/2011 - 17:25 | 1000340 Raging Debate

+1001 RWE.

Sat, 02/26/2011 - 16:50 | 1000254 minus dog

"A trillion dollars a year is spent DIRECTLY on militarism."

And that amount is dwarfed by the sum that leaves the government in the form of checks cut to individuals. We can cut military spending; good luck cutting entitlement spending. That's when things start burning.

Sat, 02/26/2011 - 22:32 | 1000828 prophet_banker

"A trillion dollars a year is spent DIRECTLY on militarism."

good for profits, bad for life on our planet, therefore war IS NOT GOOD FOR ECONOMIES

Sat, 02/26/2011 - 17:21 | 1000332 Escapeclaws

entitlement spending. Yes, we should cut the welfare payments to the banks to the tune of $23 trillion.

Sat, 02/26/2011 - 11:13 | 999598 Biff Malibu

100% Agreed. Yesterday I talked to an Iraqi woman that had to leave the country after our invasion. I asked her if things were better now that we were in control. She said absolutely NOT. That the militias were in control and there was murder everywhere. Her whole family had to leave. She said a brother was in Germany and another in Ireland. She did say that Americans in this country have treated her very well. I told her from an American to an Iraqi that I was sorry that we had invaded her country and that most of us knew that it was an unjust occupation.

Sun, 02/27/2011 - 07:55 | 1001420 cranky-old-geezer

Agree.

Wana see delusional blind sheep first hand?

Talk to a mom (or dad) with a son or daughter in Iraq. They really believe we're over there defending freedom.

Sun, 02/27/2011 - 15:24 | 1001912 akak

Talk to a mom (or dad) with a son or daughter in Iraq. They really believe we're over there defending freedom.

And not just the parents of willing cannon fodder, but many millions of others believe the same Goebbels-esque lie. Humanity is insane.

Sun, 02/27/2011 - 15:19 | 1001902 Things that go bump

How else can they justify it to themselves?

Sat, 02/26/2011 - 11:54 | 999627 Arch Duke Ferdinand

"No Food" Spreads Revolution

'When the Money Stops Flowing Down to the Man in the Street, the Blood Starts Flowing in the Streets.'

http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/02/when-money-stops-flowing-down-to-man-in.html

Sat, 02/26/2011 - 11:17 | 999552 Arch Duke Ferdinand

""Professional engineers warn the roads, rails, electrical grid, sewage systems, dams, levees, water pipelines, and bridges have not been maintained, repaired, or replaced as needed. Trillions of dollars are needed just to bring the systems up to minimal standards of safety and usage. Trillions and trillions more to upgrade to what‘s needed for a first-rate economy..

...Which is why Canada's four Western Provinces, w/ a plethora of natural resources and only 12.5 million citizens....repeat...only 12.5 million citizens and led by gateway city Vancouver BC, is the world's leading, safest location on our planet today....hands down, no disputing the facts folks....

Includes Western Canada factoids and statistics...

http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/02/vancouver-bcworlds-most-liveable-cities.html

Sat, 02/26/2011 - 12:41 | 999698 Kayman

Uhh...

without Chinese purchasing Vancouver real estate, wouldn't prices fall in half ?

Been there- looks like a second Hong Kong. Locals are priced out of the market.

And all the killings in Vancouver and drug violence is ignored in your propaganda.

Sat, 02/26/2011 - 10:10 | 999535 janchup

RWE says it all...

Sat, 02/26/2011 - 01:56 | 999184 penisouraus erecti

How long can the crummy economy and high unemployment continue to not matter?

Sat, 02/26/2011 - 22:25 | 1000817 prophet_banker

til the 3 trifecta hits, no food, or lack of affordability which is more likely

Sat, 02/26/2011 - 01:55 | 999180 Bubbles...bubbl...

But Paulson said he could fix it. He's even got his own coin.

Sat, 02/26/2011 - 01:50 | 999174 Dan The Man

its how the game is played, isn't it?

Sat, 02/26/2011 - 01:47 | 999172 boeing747

Only less than 3000 Youtube users viewed the video clip in which Greenspan admitted he was wrong. I wonder few years later we will see Uncle Ben is on the same hot seat saying same thing.

Sat, 02/26/2011 - 10:42 | 999567 dick cheneys ghost

"The Violent Twilight of Oil"

http://nakedempire.wordpress.com/

Sat, 02/26/2011 - 00:16 | 999010 Dyler Turden II Esq

Would that include PM stocks?

Sat, 02/26/2011 - 01:26 | 999144 BigDuke6

Mainly yes, my gold stocks have underperformed the last 2 weeks despite gold holding around $1400.
During a dive everything takes a hit.
Physical is a different matter.
Thats getting nice and tight.

Sat, 02/26/2011 - 08:27 | 999455 johnQpublic

well, what i remember is the price of both gold and silver fell about 30% or so, but you couldnt get ahold of either one in physical form unless you were willing to wait, or pay a hefty premium through ebay/dealers(local) and the like

when silver was eight bucks it was a 2-6 week wait or 25 bucks off ebay and the like

that would suggest a drop to the 23-24 range, but you wont be able to get it at that price, and then over a couple year timeframe, a new rise to the 90-100 dollar range

thats my two cents(both are 1909 s-vdb's in au-50)

Sun, 02/27/2011 - 14:24 | 1001803 RockyRacoon

From Jim Sinclair, for what it's worth:

Dear Friends,

Between now and Monday, February 28th be prepared for panicked short sellers who cannot make delivery to try every trick in the book to buy back their short positions.

The following is information from Dr. Jim Decosta:

Here is the URL:

http://www.finra.org/Industry/Regulation/RuleFilings/2010/P121892?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+FINRARuleFilings+(FINRA+Rule+Filings)

Quote: There's 3 new laws gaining attention in the NSS market reform arena: FINRA 4320 goes into effect on 2/28/11. It mandates 13 day buy-ins for open delivery failures FINALLY applying to shares of non-reporting corporations. FINRA 2010-043, also starting on 2/28/11 reinstates the "short sale exempt" (SSE) marking requirements for trade reporting and the OATS system. Those MMs accessing the bona fide MM exemption from executing pre-borrows or "locates" before admittedly naked short sales must now FORMALLY acknowledge the accessing of that universally-abused exemption. Being that these trades are theoretically being made to "inject liquidity" then the excuse to hide the related trade data from the public's eyes goes out the window. You can't have it both ways and claim the bona fide MM exemption and later claim that the related trade data needs to be kept secret because it might reveal a "proprietary trading strategy".

Truly bona fide MMs that are able to legally access that universally-abused exemption cover their naked short position on the next downtick after their short sale when buy side liquidity is in need of being ejected as share prices fall. The 3rd new rule which is in effect now states that the offers and bids that MMs post must be of approximately the same size. No longer can the offers be of 1 million shares and the offsetting bid good for the minimum 5,000 shares.

The verbiage in 4320 is especially well done as it FINALLY puts the clearing firms that aid and abet this crime wave on the spot. With the FFETF, which is made up of 25 different agencies, now on the scene the transparency has increased markedly. You can imagine how critical the lack of transparency is to a crime involving selling nonexistent securities and then refusing to ever deliver that which you sold AFTER being allowed access to the funds of the investor being defrauded.

Here are the links to the rules SR-FINRA-2010-028 and SR-FINRA-2010-043:
www.finra.org/Industry/Regulation/RuleFilings/2010/P121522

Notice the part I marked in bold in the quote above:
"FINRA 4320 goes into effect on 2/28/11. It mandates 13 day buy-ins for open delivery failures FINALLY applying to shares of non-reporting corporations."

Sat, 02/26/2011 - 09:16 | 999480 Fearless Rick

You're full of it as far as ebay is concerned. I've never paid anything more than 10% over spot for silver no matter what the circumstances. You can say a lot of things about ebay - good and bad - but I've found the silver dealings there to be first rate with plenty of supply and buyers who are not morons who will pay hefty premiums.

Sat, 02/26/2011 - 22:24 | 1000812 prophet_banker

you better recheck your facts, when they shorted silver down to under 9$, NOBODY WAS SELLING PHYSICAL at that price, it was just a paper price

Sun, 02/27/2011 - 01:53 | 1001161 lincolnsteffens

Maybe investors weren't selling but the endless stream of sterling silver was being sold at small and large auction galleries and for the metal value if it was plain or damaged. The same is the case now as hoards of metals traders comb auction houses for any chance to make a buck. They bring scales, calculators and computers to check the spot prices on line. They wouldn't be going to that effort if it didn't pay.

Sun, 02/27/2011 - 06:07 | 1001367 BigDuke6

Good chat , and very correct in my experience.
Even in jewelry silver is getting more respect because it was treated like shit for a while - sure sign even my wife has picked up on silvers ascendency somehow...
Ebay can give you the odd bargain - if you are patient and go for the right coin and seller then you can get bargains. i'd also use sniper software.

i used to get aussie coins with certificates for less than their coin value in 2003.
i go for country that you know coins , less well known which will usually have a certificate of authenticity.
safe, legal tender, coins who people can't be arsed counterfieting.

its harder to get what i call a bargain nowadays - sure sign things are hotting up. i buy 75% less often now than i did 4 years ago

Using this technique you mostly get around spot or under.
i paid over spot price once for krugs from a dealer.

i not as concerned about big-brother as many on this site but if i was buying PM's i wouldn't want to be found on a list stolen or forced from a shop.

reasonable? or stoopid

Sat, 02/26/2011 - 15:16 | 1000058 The Duke of Skiatook

www.BullionDirect.com is the best place to get PM. IMO

Sat, 02/26/2011 - 12:31 | 999680 ElvisDog

I've bought junk silver coins on Ebay too with good success. Although, here in WA there is no sales tax on PM purchases so I mostly go down to my local coin store.

Sat, 02/26/2011 - 11:52 | 999639 Cindy_Dies_In_T...

I've seen junk silver on Amazon too for what its worth.

Sat, 02/26/2011 - 00:19 | 999008 JR

Sorry, this post was intended for Leo.

Sun, 02/27/2011 - 02:03 | 1001179 bigelkhorn

I always love listening to the guys from FFT. They are insanely accurate with their stuff.

This is their latest stuff, and analysis of the S&P 500 chart. It is well worth a look, pretty cool!.

http://www.forecastfortomorrow.com/video/27th-feb-2011/rrt.html

Sat, 02/26/2011 - 01:23 | 999142 WaterWings

Dang it! Okay, I'll go over there.

Sat, 02/26/2011 - 09:54 | 999518 Thorny Xi

This site's position is that the market's manipluated by policy.

So, why does anyone pay any attention to technical analysis? What are you analyzing?

The market will go up until we're using 1000 Trillion Dollar Bills and it will still go up after that, if its manipulated. There's no alternative investment out there for fund managers, after all - what, they're going to buy physical PMs? Real estate?

Sat, 02/26/2011 - 12:29 | 999679 ElvisDog

Just look to Egypt and the rest of the Middle East to understand why Ben can't keep QE forever. Because a lot of the money flows into commodity speculation and the lower economic classes don't get pay raises based on the QE. When the poor can't afford food (and in this country gas and heating oil) they game is up. Ben will be forced to stop QE.

Sat, 02/26/2011 - 11:45 | 999631 Founders Keeper

[So, why does anyone pay any attention to technical analysis? What are you analyzing?]---Thorny Xi

I agree. IMO Tech Analysis died in Sept '08; Fundamental Analysis died years ago with the introduction of off-book derivatives. The stock market today is simply a tool of governments controlling public perception to avoid---as long as possible---marshal law.

The only folks paying attention to Technical Analysis is the Fed. When bearish indicators mount, the Fed intervenes to thwart anybody left who is fool enough to act on their formations.

I liked this article from Graham. It's hard hitting. However, the importance and impact of the article are not served by the charts. Unfortunately, the charts and the "portfolio protection" solicitation weaken an otherwise important message.

Sun, 02/27/2011 - 14:39 | 1001824 Warren Zevon

[I liked this article from Graham. It's hard hitting. However, the... "portfolio protection" solicitation weaken an otherwise important message.]---Founders Keeper

_{Constant, shameless solicitation is insulting to the intelligence and integrity of ZH.}

_{Will Graham accept cattle and VIX calls as payment?}

_{Or do you prefer worthless cash and bank cards?}

Sun, 02/27/2011 - 16:51 | 1002098 Founders Keeper

[Will Graham accept cattle and VIX calls as payment?]---Warren Zevon

That's a good question. Better yet, how will Graham pay me if I invest with him.

Really. Graham says: ...IF the Bernanke “Put” is no longer relevant...doesn’t actually induce a rally anymore… then the entire financial system will collapse in one form or another.

Then he says the financial system will "shatter."

Now. I agree with his prognosis for the economy and financial system, but how in the world should I expect to receive my investment gains under his management?

Sat, 02/26/2011 - 14:59 | 1000027 hound dog vigilante

XmarshalX

It's martial. Martial law.

Carry on...

Sat, 02/26/2011 - 21:02 | 1000651 Founders Keeper

[It's martial. Martial law.]---hound dog vigilante

Right you are. Thank you.

Sun, 02/27/2011 - 11:48 | 1001371 Antipodeus

Greetings. I was thinking about that apparent spelling faux-pas, when it occurred to me that there's actually a logical connection.

"Marshall Law" vs. "Martial Law"?

I suppose it depends on who is IMPOSING the Law. Does not America have a certain tradition (especially in more 'frontier' areas) long before state police were invented, of deputising temporary law-enforcing citizens in times of 'emergency'? Nowadays the 'Government' (or 'government agencies') appear to have the legislative & organisational tools to do just that on a national scale, under certain 'emergency' conditions. Then you could justifiably call it "Marshall" Law, no?

If the Law is imposed by the armed forces, then "Martial" Law would be more appropriate.

Sun, 02/27/2011 - 16:21 | 1002028 Founders Keeper

[Greetings. I was thinking about that apparent spelling faux-pas, when it occurred to me that there's actually a logical connection.]---Antipodeus

Thank you for your kind Reply. (It's refreshing to receive a Reply beginning with "Greetings.")

Your spelling, Marshall, with two "L's" leads me to think: Marshall Plan. Do you live in Europe? Obviously though, you mean Marshal, as in US Marshal.

As far as I know, we in the US do not use the term "Marshal Law." The US Marshal and Deputy US Marshals discharge the duties of our 89 Federal District Courts. A rather small department under the Executive branch compared to the US Department of Defense.

Yes, Deputy US Marshals did have the authority to deputize persons ad hoc, on approval of the court in the 1800's. I assume they still do. (In all honesty, I had to do a quick Google look up on "US Marshal" to verify I wasn't misinforming you.)

Nevertheless, I too see the faux-pas.

Best wishes.

Sun, 02/27/2011 - 13:35 | 1001720 serotonindumptruck

Martial Law seems to be a euphemism for the "suspension of habeas corpus" and an imposition of military rule.

http://en.wikipedia.org/wiki/Habeas_corpus

http://en.wikipedia.org/wiki/Martial_law

We're Rapidly Approaching the Crisis to Which 2008 Was a Warm Up

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