Rush To Gold

I volunteer to rain on Wall Street's pompous parade today. Repeat after me: "Short squeeze."


Wall Street surges higher after upbeat earnings reports
NEW YORK (AP) -- Wall Street rallied Wednesday after better-than-expected quarterly results from JPMorgan Chase and two other Dow Jones industrials raised investors' hopes that companies and the economy are indeed recovering from the protracted global credit crisis. The Dow rose more than 250 points as investors shrugged off any concerns about oil passing $115 a barrel for the first time.

A market anxious about corporate earnings and their effect on the economy was relieved after JPMorgan Chase & Co., Coca-Cola Co. and Intel Corp. all topped first-quarter projections.

The battered financial sector advanced after JPMorgan beat analysts' expectations despite a 50 percent drop in quarterly profit. The nation's third-biggest bank, which is in the process of acquiring ailing Bear Stearns Cos., reported $2.6 billion of write-downs tied to its loan portfolio.
http://biz.yahoo.com/ap/080416/wall_street.html

Stop right there! "...beat analysts' expectations despite a 50 percent drop in quarterly profit." Ignore the fact that anal-ysts have been lowering earnings estimates from one end of Wall Street to the other for the past six weeks. Focus on the FACT that JPMorgan's earnings DROPPED 50% from a year earlier. Last time I checked you bought companies with growing earnings, and dumped those with falling earnings. Please, somebody correct me if I'm wrong, but I think that is the general theory behind "investing" in stocks of companies. JPMorgan's earnings DROPPED 50% and their shares were bid up 5% today because they beat reduced earnings expectations? No, their shares were bid up by shorts in JPMorgan covering their trades.

Nobody was really buying JPMorgan shares today. The media cannot comprehend a short sale of a company's stock, let alone the unwinding of it. Instead you get headlines like: Stocks stage big rally after earnings from Intel, JPMorgan, Coca-Cola ease profit anxiety. Stocks rallied today for one reason alone, short covering.

JPMorgan's earnings results were hardly a picture of recovery. After JPMorgan insiders unloaded their soon to be worthless shares onto the public they announced this less than glowing news:

JPMorgan Plans to Sell $6 Billion of Preferred Stock
April 16 (Bloomberg) -- JPMorgan Chase & Co., hours after saying the credit-market crisis is almost over, made plans to sell $6 billion of perpetual preferred stock, according to a person familiar with the offering.

Chief Executive Officer Jamie Dimon, 52, said on a conference call with reporters that the credit-market crisis is more than halfway finished as financial firms reduce leverage, and may be as much as 80 percent over.
http://www.bloomberg.com/apps/news?pid=20601087&sid=adwVNdeq_.jU&refer=home

Things are going so well at JPMorgan they have to go begging to the Street for $6Billion? CEO Jamie Dimon claims the credit-market crisis may be 80% over? That's wishful thinking Jamie. The credit-market crisis may have reached the end of it's beginning, but isn't even close to 80% over. I'd be surprised if it was just 20% over.

I could gleefully beat this horse to death for several more paragraphs. Suffice it to say that today's rally in stocks was little more than a Bear Market Rally. Yes, there were some legitimately good earnings reports today. Coca-Cola, Intel, and IBM. Bear in mind that these three companies are "multinationals" and stand to benefit in the biggest way from a falling Dollar. And speaking of a falling Dollar:

Dollar falls to record low against euro
SAN FRANCISCO (MarketWatch) -- The dollar remained under pressure against most major counterparts Wednesday, notching a fresh low against the euro after mixed U.S. economic data.

The euro was changing hands at $1.5950, after rising as high as $1.5977, according to FactSet Research data.

That marked the loftiest level since the single European currency began trading in January 1999. It moved up from $1.5799 in late North American trading Tuesday.
http://biz.yahoo.com/ap/080416/wall_street.html

Annual EU inflation hits record 3.6 percent on rapid pace
BRUSSELS, Belgium
Yearly inflation in countries using the euro jumped to record highs, pushing the currency to a new heights against the dollar Wednesday as oil prices soared above $114 a barrel.

The 15-nation currency hit $1.5978 after the EU's statistical agency Eurostat said that annual euro inflation for March rose 3.6 percent on higher prices for energy and food.

It was the most rapid ascent in 16 years, stifling chances of a near-term euro interest rate cut by the European Central Bank. The weak dollar sent oil prices to new highs as investors fled the struggling U.S. currency in favor of commodities.
http://www.businessweek.com/ap/financialnews/D90341I00.htm

The US Dollar is in a world of hurt, and is once again staring into a free falling abyss. As I mentioned yesterday, the ECB is mandated to control inflation in the Eurozone. The Dollar got crushed today as hopes for an ECB rate cut all but vanished. All the hot air from the G7 this past weekend is now left to contribute to global warming. Gold blasted through resistance at 935. Gold is, has been, and as long as there is a world of fiat currency smothering the planet always will be, a hedge against inflation. The 2008 "Rush to Gold" by global investors looking to insure their wealth begins today. Silver investors will be along shortly, and I presume rabidly.

Higher energy and food prices boost March consumer inflation; bigger increases expected
WASHINGTON (AP) -- Inflation rose again last month, reflecting big jumps in the cost of energy and airline tickets. And the forecast is for even bigger energy-related increases to come, including the possibility of $4 per gallon gasoline by Memorial Day.

The Labor Department said consumer prices rose by 0.3 percent in March, after being unchanged in February, as energy prices jumped by 1.9 percent and airline fares, reflecting higher fuel costs, increased 3 percent, the biggest one-month gain in six years.

Food prices, which have been steadily rising for more than a year, were up by 0.2 percent in March and 4.4 percent over the past 12 months. The price of some food staples showed even bigger increases over the past year, including a 14.7 percent rise in the price of bread and a 13.3 percent increase in milk prices over the past year.

U.S. March housing starts down 11.9 pct
WASHINGTON (Thomson Financial) - Housing starts and permits fell faster than expected in March, to levels not seen in sixteen years.

The Commerce Department said U.S. March housing starts fell 11.9 percent to a 947,000 unit annual rate, down from an upwardly revised 1.075 million units in February. That is the lowest level since March 1991.
http://www.forbes.com/markets/feeds/afx/2008/04/16/afx4896655.html

Crude Oil Rises to Record Above $114 a Barrel as Dollar Plunges
April 16 (Bloomberg) -- Oil rose to a record above $114 a barrel for a second day in New York as the dollar plunged to an all-time low against the euro.

The appeal of oil and other commodities as a hedge against inflation grew as the dollar sank as low as $1.5968 versus the euro. Oil is also gaining on demand from China, the world's second- biggest crude consumer, where the economy expanded 10.6 percent in the first quarter, government statistics showed today.
http://www.bloomberg.com/apps/news?pid=20601116&sid=ayel99Uc.hbc&refer=africa

China GDP grows strongly; inflation high
BEIJING (AP) — China's robust economy slowed only slightly in the first quarter despite global gloom, while inflation stayed above 8 percent in March, the government said Wednesday, adding to pressure to rein in prices that are battering Chinese consumers.

The world's fourth-largest economy expanded by a still impressive 10.6 percent in January-March from a year earlier, down from the previous quarter's 11.2 percent rate, amid weaker global demand for exports and government steps to cool an investment boom.

Consumer prices rose 8.3 percent in March over the same month last year, down only slightly from February's 8.7 percent, the highest rate in nearly 12 years, according to the National Bureau of Statistics.
http://ap.google.com/article/ALeqM5i_GnchsrOsWq07cOXj7f17XcUnjQD902TJLO0


There are too many headlines to post that would lend storm clouds to my raining on Wall Streets euphoric Bear market rally today. Inflation is running hot globally. The facade of contained inflation in the US by the governments BOGUS inflation numbers is realized by ALL outside the beltway in Washington. The emperor is stark naked. Wall Street can dream about the "end" of the credit-market crisis all day and all night. They wish it would go away...it is not. The price of Oil and gasoline is NOT the fault of Exxon as countless forwarded emails would have you believe. The US Dollar is crumbling before our eyes, and the last to realize it will be Americans too glued to their reality TV, incessant gossip magazines, and their belief that their government can fix everything for them while feeling no pain. Pain is on the way baby. PAIN...