The Market

 

Excerpts from the Avid’s Live Chat Room…

I have said it before and will say it again this market will not be allowed to correct meaningfully. I think the action over the past couple of days by the FED and other Central Banks confirms that. Of course it will end at some point but my guess it will only end when the rest of the world decides it has tired of subsidizing U.S. debt. The one thing that I find alarming is just how clueless some of our Elected and Appointed Officials truly are! When someone like Paulson (Sec of Treasury) comes out and says China would be crazy to sell U.S. denominated assets and even if they did it wouldn’t really be that big of a deal because their holdings only represent less than one trading days total volume I almost passed out laughing. Yes, I’m sure if they decided to sell their 1.3 TRILLION in bonds and converted their Dollars into Yen and the effect that would have on the Yen Carry Trade I’m quite certain it would be No Big Deal!! LOL

Although I doubt it will happen – it seems the greedy thieves on Maul Street simply can’t steal enough money in such a restrictive environment with FED funds at a whopping 5.25%. The whining is thunderous for the FED to cut by .50 or even 1.00. In other works undo a years worth of tightening in one fell swoop. Given the FED’s jawboning that they are more concerned with inflation which of course does not exist, a crash could be engineered in order to scare the FED into cutting sooner and by more than they really want to or should.

Funny how when the housing bubble was being created, and people were borrowing money for a down payment on a house they couldn’t afford with a 2% adjustable ARMS, and anyone with half a brain KNEW it couldn’t go on forever, Wall Street couldn’t sing loudly enough about how GREAT of a job the FED had done and how they should stand aside. Once they began to raise rates, if you can call it that, with their .25 basis point hikes strung out over two years, Wall Street was crying about how the FED should stand aside and let the markets work! Now, we have a 5% correction and panic has set in, WE ARE CRASHING and the FED needs to CUT!

All I know is (1) if a 5% correction is enough to scare the FED into cutting rates to save the market Congress should have the balls to limit the FED’s role, and (2) If this country is so dependant on the stock market going straight up it speaks volumes about what “They” know about our Social Security System and future retirees relying on it for their retirement.

Bernanke is showing that he is cut from the same cloth as the rest of the spineless Central bankers who opt to postpone the “day of reckoning” for reckless lending and money creation policies in order to prolong the myth of a sound US banking system and to promote dishonest money creation…. it all has worked thus far because “a rising tide of liquidity lifts all boats” or put another way “genius is a bull market” … everybody who participates in a bull maket i.e “greater fool theory” feels like a genius… for a certain amount of time… all bad financial decisions get papered over by an ever increasing tide of (debt) liquidity.. until…. it doesn’t…. because debt must be repaid WITH interest. Ttime has run out… I think we have reached that point now because the “bull” psychology is broken… and a (large?) part of the banking system is illiquid. Bankers know this and that is why they are panicking even as the Dow is still UP for the year and only a few percent off the high…. this attempt to liquefy will fail.

The problem now is global in nature and our creditors will not stand for this. They will look to liquidate US dollar assets at the first opportunity… watch for long interest rates and gold to rise in direct proportion to the Central bank liquidity injections and asset reallocation by our creditors. Pandora’s box has opened…. it has clearly taken ever increasing amounts of credit creation to keep asset prices at these levels. In fact, credit creation in the last 15 years is on a parabolic path that is 400% above the level of 1990 and it took is 225 years just to get to 1990 level. The difference IMO is that long term history – ptr 2002 and certainly pre 1990’s consisted of “Real Individual Investors” and not a Government Backed Guarenteed Casino. All one has to do is look at the liquidity created by the FED since 2002. I saw it posted on some other site not long ago where it took years for the FED to add 1 Trillion, in 2006 alone they created 2 Trillion and were on pace to create 2.3 Trillion in 2007. It became so shameful they quit publishing M3.