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Mike Krieger: Twisted
From Mike Krieger of Libertyblitzkrieg
Twisted
Zealotry of either kind — the puritan’s need to regiment others or the victim’s passion for blaming everyone except himself — tends to produce a depressing civic stupidity. Each trait has about it the immobility of addiction. Victims become addicted to being victims: they derive identity, innocence and a kind of devious power from sheer, defaulting helplessness. On the other side, the candlesnuffers of behavioral and political correctness enact their paradox, accomplishing intolerance in the name of tolerance, regimentation in the name of betterment.
- Lance Morrow
It is unclear how disarming law-abiding citizens would better protect them from the dangers and threats posed by those who would flout the law. It is at just such times that the constitutional right to self-defense is most precious and must be protected from government overreach.
- Rick Scott
TWISTED
In my email of two weeks ago I wrote the following:
Barring a market catastrophe in the next two weeks I do not expect the Fed to act at the June meeting. With rates where they are and stocks where they are there is little upside to action; however, this lack of action is precisely what will set the stage for the massive action that must come later.
Well the Fed meeting came and went, and in my opinion, they did less than zero. The extension of operation TWIST is the biggest non-event, nonsense move in the history of the Federal Reserve. In fact, it does more harm than good on several fronts and it would have been smarter to have done nothing at all. Most significantly, the fact that they felt the need to “do something” should tell you something. With stock prices near their highs and the 10 year treasury at 1.60%, or just shy of record low yields, what is the rationale for any action? The answer to this question of course is that many of the world’s economies have been in recession for much of the year and as I have said for weeks, publicly and privately, I believe the U.S. joined the recession club at some point in May of this year. I think The Bernank understands this but dares not say it. Just like he rambled on about how “there was no housing bubble” and that the “subprime crisis was contained” back in 2007/08 as the world tipped into financial implosion, he employs the same strategy today. The core strategy at the moment, as I mentioned previously, is “talk up the economy, talk down printing and pray.” While this is all well and good, the biggest problem that the Bernank now faces is that the financial markets are such a distorted hologram that all asset prices are vulnerable to flash crash type moves.
No one believes in their positions (other than people that hold hard assets like precious metals outside of the banking system and will not sell until the system is reset), rather investors and traders are forced to be involved in positions as a function of their mandates. Their decisions are no longer driven by economic or business prospects but rather by some view on what the Central Planners of the world will do next. The markets seem calm but there is a storm brewing beneath them and the pressure will be released one way or the other. We are now in the crucial six week period between Fed meetings. The reason I think this is such an important time is because not only will investors come to grips with the reality on the ground (recession) but it is also earnings season. As I pointed out during the last earnings period, stocks that had even a whiff of weakness in their numbers or outlook were decimated. Even names that had good results did not break out. This sent a clear signal that too much goodness is priced into many shares out there.
Today we see a similar sign with Bed, Bath and Beyond. Another high flier returns to earth…
Bed, Bath and Beyond Chart
The Saudi Stimulus
In my recent piece titled Saudis Pump All Out as the Global Economy Crumbles, I outlined how the Obama administration and the Saudi government clearly came to an arrangement. Bascically, the U.S. and other OECD nations would not release SPR (strategic petroleum reserves) oil in exchange for the Saudis pumping all out. Of course, when faced with an SPR release the choice for the Saudis was pretty simple. At least this way if prices are headed lower they can sell the volume. I believe that with the Bernank terrified to act given the populist backlash (and rightly so) agaisnt the Federal Reserve, this was the “stimulus” that the administration agreed upon. It was a very crafty move. This is because 99% of investors out there have no idea what is really happening in the oil market and all of the geopolitical forces involved in the recent manufactured crash. As a result, your average investor, and more importantly, your average computer algo just sees oil collapsing and thinks this will be some boost to the economy. The following chart sums up this brain-dead trade perfectly.
Oil vs. the SPX
Disneyland Lives!
No ladies and gentlemen, oil is not falling from the sky like manna from heaven. No ladies and gentlemen, the Bakken shale is not a global oil supply game changer. Yes, the Saudis are purposefully crashing the price. Yes, demand is plunging as the world economy tips into recession. So where does this leave us? In a very, very bad position. First of all, just like all of the other “stimulus” this is a band-aid kick the can down the road move. Sure the Saudis can live with low oil prices for a while, but certainly not forever as their population is young, restless and needs consistent payoffs. Second, all of the new sources of supply are expensive, such as oil shale, oil sands and deepwater. Projects will be canceled en masse at these prices. Then, when the Central Planners of the world finally give in with the Big Print oil will skyrocket higher as confetti money meets supply declines and any economic recovery gets stopped dead in its tracks once again. Also, what about the fact that oil shale has been one of the highlights of the U.S. economy over the last few years. You think it is just a coincidence that North Dakota has the lowest unemployment rate in the United States at 3%? Of course not. The oil boom has been the one bright spot in this disaster financial ghetto economy we’ve got, and at $80 oil that doesn’t work. The oil shale workers can sadly now join the ranks of Obama’s food stamp nation. Oh and I’m sure green energy will really be stimulated at these prices! Great work guys. You are killing an entire nation to maintain your petty little power structure. But it won’t work because we are in the Forth Turning, and when it all blows up, trust me, we will never forget who’s responsible.
Peace and wisdom,
Mike
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Can anyone explain me this?
http://agstock.blogspot.co.uk/2012/06/risk-on-and-risk-off-at-same-time....
Best explaination: http://www.youtube.com/watch?v=uOoXwxqeVzg
Zugzwang, bitchez.
Gold, guns, beans and a cave, bitchez.
You forgot to add a cave girl. Life would be meaningless without cavegirls...
You are killing an entire nation to maintain your petty little power structure. But it won’t work because we are in the Forth Turning, and when it all blows up, trust me, we will never forget who’s responsible.
It's kind of comical that this is what the greatest country that ever existed on the planet has been reduced to.
Sure. There is twice as much money and it has to go somewhere. Everyone in the pool!
Equties and bonds (price, not yield) typically go in the opposite direction, standard textbook answer. During a liquidity crisis, this move is even more prevalent. During a liquidity induced bubble however, as we are seeing thanks to easing, they will go in the same direction.
rock on, mike. interesting how many of the contributors here refer to the fourth turning.
It's funny just how much everything is tied to Fed intervention anymore. And really the only thing they can do is some iteration of CTRL+P. Pretty sad.
I don't understand why the Fed has to buy TWIST bonds from Goldman, complete with markups and commissions...and not directly from the Treasury. Oh, wait...yes I do.
The world is starting to resemble the end of A Cabin In The Woods.
I'm fairly certain I'm not the only one who doesn't want to play this stupid game anymore though, some comfort while we daily test our intestinal fortitude...
Mike Krieger provides good insight. The market is rigged and illogical. The US, EU and CH are sesspools of white-collar welfare; local/state/national/regional government funded employment, contracts and kickbacks; eg. teaches, police, government employees, contractors, subsidized farmers, etc. It is impossible for status quo to sustain itself much longer and it is also impossible for them to willingly to cut their standard of living in half; so kick they will kick the can until an external force, natural or man-made, takes the can away. I got properly fucked by gold and silver the last few months but I'm still buying the fucking dips and stacking physical because all other bets look like a digital fantasy sham and I can get better odds at the craps table. Fuck you Bernake, Obama, Romney and all the warmongering neocon chickenhawk traitors out there.
what does the VA say about centralBankster-coordinated fungible QE based on global population fiat hypnosis as a support for companies which will benefit from the increased margins due to commodities tanking?
The VA says we need more disabled vets to justify our existence and so the VA lobbies the neocons - Obama and Romney - to start or sustain more wars. The VA are part of the white collar welfare establishment. We veterans made a mistake when we were teenagers and signed up for something we really knew very little about. It's a great society that feeds off the young and relatively poor (relative to those that went on to college either through affirmative action monies or parent's monies; in general of course - don't take it personally if you were the exception).
just remember what FELIX ZULAUF said (& i took his advice) : "Everything you own needs to be held outside of the banking system, that's where the problem is ." get the hell out, stockpile everything & be grateful for what you do have. those bankers are going away & a better day will dawn .
Tahir Square=Bail on Gold. "save your powder for another day" folks. This party is OVER.
i will NEVER EVER bail on gold, not after what i've learned over the past few years. EVER !
the bush crime syndicate and its wall street clients have struck again to keep their stranglehold on energy supplies and perpetuate the myth of energy shortages.....
the energy shortage is not a myth... if it were a myth, risky deep ocean drilling or "largest machines on earth" oil sand projects are the biggest bluffs in world history.
the myth is global growth. i disagree with kreiger, the bottom falling out of oil was not just saudis pumping more.. it was a reflection of global deflation.
the only thing that can reflate this mf'er now is world war 3... >> see syria/turkey; muslim brotherhood in egypt; israel/iran..
If you're willing to ignore the environmental issues there is a great deal of oil to be had at $80-90 0er barrel. The Saudis don't want that. Their best price structure is long periods of $100+ oil with periodic crashes that kill off the competing sources. I don't imagine Obama had to do much arm twisting to get them to go along with the plan. Mainly they had to wait for enough of a downturn so their small excess capacity could actually affect the market.
The Fed is squeezing the President before the election. They will starve the nation of liquidity until he comes to some agreement with them and then will magically open the spigots and blather out terrific economic news. This is plain old extortion.
Finally I can feel the normalcy bias moving from acceptance of bad news to acceptance that everything is Fucked....
The propaganda machines can never fully cover the steanch of decaying meat for long
See ya down there!
A few good flight of capital reports will be out this week to keep markets up. Flight of capital into housing and equities should make for a good week.
Register at BBBY. Yeap all the crap one can have , piled high in the garage. American Dream comes true. More crap.
Yes, we are entering global recession AND Central Bank policies are played out. For the US, I plotted house prices against M2 Money Velocity. See a pattern?????????????????
http://confoundedinterest.wordpress.com/2012/06/24/the-limits-of-fed-mon...
And now Meryn King wants to relax lending standards in the UK. Merv: it won't do any good!!!!!
WE LIVE IN A WORLD WHERE CENTRAL BANKERS HAVE THE LAST SAY ABOUT EVERYTHING...THIS IS VERY SAD AS MANIPULATION IN THE PRECIOUS METALS AND CURRENCIES CONTINUE AT EXPENSE OF THE RETAIL INVESTOR AND IGNORANT TAX PAYER..TIME TO TAKE ACTION AGAINST MANIPULATED PLANNING AND HAVE A VOTE ON WHAT ASSETS ARE REALLY WORTH...END THE GAME OF THE CENTRAL BANKERS PLANNING PERIOD
I very much doubt that the threat of an Obama SPR release had anything to do with Saudi pumping. That empty suit is an accidental single term ring kisser...not to be taken seriously onshore or offshore.
Market is manipulated by the Fed, no question. So instead of shorting when it's obvious, traders are forced to go long. Then the Fed pulls back from the market one day when no one is expecting it, and the long only gets caught in a stampede for the exits, they can't turn as quickly as a short term trader. Companies start laying off people in response to the market performace and future outlook. Every trade has to be short-term; there is too much risk in holding onto anything for any length of time. Especially when the Fed could step away at any time and you'd be the last person to know.
Decimated indeed.
Krieger gets it.
So we sold SPY Jul 133 calls at profit toward Friday close and bought QQQ Jul 65 and SPY 134 puts...
http://richcash8tradeblog.blogspot.com/
Mike has written a sentence that captures everything that's going wrong in a few words.
"You are killing an entire nation to maintain your petty little power structure."
I think they are killing us financially to get their grubby hooks into the hard assets we are struggling to defend and hold in reserve. The last cash, the last gold, the last silver, the last productive company or farm. They want it all and will starve millions if that's what it takes to shake it loose.
The 'Great Depression' was a calculated shearing of the sheep, and so is our current situation.
DOW weekly chart shows uncertain market & fluctuating consensus with likely bullish pattern contained within megaphone wedge.
http://www.zerohedge.com/news/2012-12-24/market-analysis
Your important chart shows the market going up for the next two years. Perhaps your simplistic megaphone pattern needs a little upgrade to something more sophisticated, or maybe you just need a little common sense.
It is difficult to get a man to understand something when his job depends on not understanding it.
~ Upton Sinclair
In politics, few talents are as richly rewarded as the ability to convince parasites that they are victims. ... generosity is seen as an admission of guilt, and the reparations as inadequate compensation for injustices – leading to worsening behavior by the recipients.
~ Thomas Sowell
The author writes: No one believes in their positions (other than people that hold hard assets like precious metals outside of the banking system and will not sell until the system is reset), rather investors and traders are forced to be involved in positions as a function of their mandates. Their decisions are no longer driven by economic or business prospects but rather by some view on what the Central Planners of the world will do next.
This is so ridiculous because 1) he doesn't know what's in the mind of everybody out there and 2) to think that the only 'real' investment is one made up of hard assets like previous metals reveals more about his lack of understanding of investing than about the ones he's pointing his finger at.
I am more than happy to be buying good companies and good prices. They are good companies because I know what they will be doing in 10 years from now, they do have the competitive moats required to continuing creating abnormal ROICs, technology won't affect their business models and I can reasonably forecast cash flows into the future. They can also forward inflation to their client base, albeit delayed push throughs. Considering that an asset is only worth what cash flows are expected in the future, I'm not sure where precious metals falls. Speculating about the future of the world capital markets is something I leave for those a lot smarter than I am. I simply stick to what I do, and clients are more than happy with that.