The perversion that is Wall Street has once again left us dumbfounded this evening. Banks with cratering earnings, "but beating the street estimates" are recognized as "market leaders" as the Dow extends it's suckers rally off it's technical low in an expanding Bear Market. Oil prices drop for a third day in a row, and my heavens, the threat of inflation has evaporated before our very eyes. New housing starts rise on the back of new apartment construction. Have any of you gotten a mortgage to buy an apartment? Initial jobless claims last week were not as bad as expected, but there were thousands more than the week before...fears of rising unemployment evaporate before our eyes. Gold prices, that fell 5% as Oil prices rose 37% between March 16 and July 16, dropped as Oil prices fell again today. Does that make a damn bit of sense? On March 16 Oil was $100 a barrel, and Gold was $1000 an ounce. Today Oil closed at $130 a barrel and Gold is still below $1000. Does that make a damn bit of sense?
Wall Street surges again on falling energy prices
NEW YORK (AP) -- Wall Street shot higher Thursday, extending its rally into a second session as tumbling energy prices bolstered an already upbeat mood that followed stronger-than-expected quarterly reports from big names like JPMorgan Chase and United Technologies. The Dow Jones industrial average rose more than 200 points, bringing their two-day advance to more than 480.
"The sentiment has just been so negative that even a whiff of positive news is driving the markets," said Kevin Dorwin, principal at wealth management firm Bingham, Osborn & Scarborough in San Francisco. "Oil the key factor right now because inflation has been on the top of investors' minds and a reduction in the price of oil signals that perhaps inflation will not get out of hand. That's very positive for both the stock and bond markets."
The two-day surge lifted the major indexes out of bear market territory, which is defined as a 20 percent drop from the market's recent high, which was in October. However, given the great uncertainty that remains about the economy and earnings, the market may well fall back into bear territory.
Wall Street also appeared placated by economic figures. A Commerce Department report showed construction of homes and apartments rose in June by 9.1 percent. The gain follows a change in New York laws that has given a boost to apartment building. Construction of single-family homes fell by 5.3 percent to the slowest pace in 17 years. Applications for building permits, one indicator of future activity, rose by 11.6 percent.
The Labor Department said the number of newly laid-off people seeking unemployment benefits rose by 18,000 last week to 366,000. However, the increase was below the number economists expected.
"There were some better-than-expected numbers out of the banks. I think we're maybe getting a little bit of a sigh of relief rally. Things had gotten so scary there for a few days," said Denis Amato, chief investment officer at Ancora Advisors in Cleveland.
http://biz.yahoo.com/ap/080717/wall_street.html
As John Gordon, radio voice of my Minnesota Twins is so fond of saying when one of the Twins hits one over the fence, "Touch 'em ALL." Only in the US financial press could a sack of burning dog pooh on your front porch be spun into a gift from Santa Clause for a Christmas in July. What a JOKE.
JP Morgan's profits dropped 53%! In just ONE quarter! There is NOTHING positive about that. They will be as bad or worse next quarter. Beat the Street? LOOOOOOOOOOOL! "...a reduction in the price of oil signals that perhaps inflation will not get out of hand." Are you freaking kidding me? Would you let somebody with this ridiculous notion manage your wealth? Pal, inflation is going to get so far out of hand it is going to destroy all the wealth you pretend to manage, and it won't need a penny of help from Oil prices. Home building projects started in June surprisingly rose 9.1 percent due chiefly to a change in New York City building codes that, if it were ignored, would have seen starts decrease by 4.0 percent . A lot of people are STILL losing their jobs, but not as many as were expected, so let's just ignore those that have met this misfortune. Doomed I tell you, DOOMED. The entire investment community has become delusional, unable to see or admit the truth.
Despite another day of shenanigans, misinformation, and the absurd notion that falling Oil prices will eradicate inflation, Gold and Silver held up fairly well...until the after hours Crimex Crew got their hands around them. Both are hanging tough around the support that has developed near their broken resistance levels, 952 Gold and 18.50 Silver. A quick thought on the fall in Oil prices... This action was to be expected because Oil is way overbought, but Oil is "seasonally weak" in mid July annually. Also, consider that with Oil coming with in a whisper of the $150 prediction by Goldman Sachs late this Spring, it would be no surprise that they have been madly selling futures contracts at the behest of their puppet masters in Washington and maximizing their profits. Look for "predictions" about Gold prices soon from Goldman Sachs as they look for a home for all their Oil profits.
White Lies Save the Day
Our leaders are getting closer each day to acknowledging the dire condition of the economy, even if their statistician have yet to cop to the fact that the country has been in deepening recession since around December. President Bush, Treasury Secretary Paulson, and Fed Chairman Bernanke all made public appearances yesterday to soothe frayed nerves in the wake of the Fannie/Freddie “mess” and a run on California’s IndyMac bank. Echoing Hoover, the President advised people “to take a deep breath” because the financial “system basically is sound.” No un-truer words have ever been spoken about the economy, but we should forgive Mr. Bush this white lie, since, except in times of war, it has never been a President’s job to tell it like it really and truly is.
Nor is it Mr. Bernanke’s, although we do wonder what the Day After would look like on Wall Street if the Fed chairman took to the airwaves and said, in so many words, that “we are effed!” Would investors send stocks into bullish spasms because the air had finally been cleared? Or would they take the message to heart and dump stocks as they have not been dumped since October, 1929? Whatever the case, America has no choice but to rise to the challenges presented by a bankrupt financial system and a political system that is ineffectual at best, hopelessly corrupt at worst. It’s hard to believe that, unpopular as President Bush is right now, Congress sits even lower in the polls.
Paulson told some white lies of his own, such as that “continued confidence in the GSEs is important to maintaining financial-system and market stability.” No one could quibble with the importance of this task – just that there is almost no confidence left to maintain. And while it can’t hurt Fannie Mae and Freddie Mac to have the explicit guarantee of U.S. backing that was only rumored before, investors should not be cheered by the fact that all of us, collectively, may be taxed into bankruptcy to provide that backing. We don’t think John Q. Taxpayer is in great shape to shoulder the additional $5Tr burden represented by the GSEs, on top of all of the other liabilities that will come with seeing the Baby Boomers through their golden years.
http://news.goldseek.com/RickAckerman/1216188060.php
Don’t Buy the Head Fake
This week, we were treated to strong statements by both Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke about the desirability of a “strong dollar”, and the intention of policy makers to pursue strategies that will enhance its value. To the relief of many, the dollar responded to the moral support and managed a mild rally. The move is inconsequential. The harsh realities have not changed in the slightest, and the dollar is set to continue its overall decline.
http://news.goldseek.com/GoldSeek/1216311551.php
They’re dumping oil, because it will inevitably and eventually respond to the drop in economic activity. But they’re buying gold, because they also want safety – from the dollar...from defaults...from bankruptcies...and from the claptrap solutions of public officials.
-Bill Bonner, The Daily Reckoning
Gold to Replicate Oil's Parabolic Move; 30-yr Treasury Yields to Soar
In essence, what is happening is that the US government is taking on very large amounts of debt at the same time that their revenue base (i.e. tax collection) is declining due to higher unemployment and high inflation, which curbs consumer spending on discretionary items and hence produces slower growth for US corporations and therefore less corporate tax generation. Think of the US as a large company with debt levels climbing significantly and revenue and profit declining. What usually happens in a situation like this? Well, lenders usually begin to become much less willing to lend capital at prevailing rates, and at the same time the debt-laden institution is more likely to want to raise additional capital to maintain sufficient debt to equity ratios (and/or bailout failing financial institutions. The rising debt levels coupled with declining income lead to the perception of higher probability of default (even if slightly), and the higher probability gets priced into borrowing costs in the form of higher rates needing to be paid to lenders.
What will happen is that demand for newly issued treasuries will begin to wane and large current holders of bonds (i.e. China and Japan) will likely be more inclined to reduce their holdings of US debt as risk levels associated with these bonds rise in conjunction with the fact that the value of these bonds continue to decline due to the devaluation of the dollar.
http://seekingalpha.com/article/85236-gold-to-replicate-oil-s-parabolic-move-30-yr-treasury-yields-to-soar?source=d_email
Bankers Bullsh*t & Bullion
We are at the end of an era. Capitalism, itself, is a misnomer. It should instead be called creditism or referred to by its subsequent state, debtism, for capital de facto is credit, not money. This does not mean credit is not important. Credit is an integral part of functioning economies but its use should be constrained within gold and silver based monetary systems in order to prevent its abuse.
But in its present form where credit-based money (fiat money) completely replaced gold and silver based currencies (savings-based money), central bank originated credit has led to today’s unsustainable levels of debt.
Trillions of dollars of that debt are now beginning to default and, as a consequence, credit is being withdrawn by banks, the intermediaries of credit in today’s system. It will soon begin to appear that money is becoming scarce. But that’s an illusion. The money was never there in the first place. It was only credit.
Real money, gold and silver currencies, were the first victims of central banking in the US. The latest victims are those who are about to be affected by the collapse of the US and global economy. Central banking and its spawn, credit and debt, are now everywhere and, unfortunately, so are the consequences.
http://www.24hgold.com/viewarticle.aspx?langue=en&articleid=287173_Bankers+Bullsh*t+%26+Bullion
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