"Pssst, want to make a trillion dollars. We control government policy. We control fiscal and monetary policy and we will tell you where we are headed with our policies. They will be the opposite of what the majority is expecting. We will change direction when the consensus is extreme and the other side of the trade is available so we can take on huge new positions. Then we will switch course. It is risk free and the gains will be spectacular. They will help us survive this financial debacle." Question from a bank president. "But what about the citizens Ben?" Bernanke replies. "To hell with them"
When the government is manipulable it gives new meaning to the concept of a contrarian trade.
We will all be rich
It used to be that only a few countries could be wealthy, the United States was rich because it had became a manufacturing super power at the same time as it took advantage of third world countries by having it's multi national corporations, protected by the CIA, drill for oil, strip off various minerals and resources and keep all the profits. Sure they would throw the local dictator a bone now and then and keep him in power but most of the cash ended up leaving the country. They operated a protection racket on the Saudis for example to get cheap oil. Before the United States, Britain was the master of the world, through their military land forces and navy they brought the world to heel and basically pillaged it's resources.
Now the conventional wisdom is that everyone can be wealthy at the same time. All we have to do is wait until China and India grow into financial super powers then we all become rich. This at the same time that resources become rarer. That is crazy talk, globalization floats on a sea of debt, to me we are being sold a load of bull.
Lets double dip 'em
Things just do not add up, at least not if you are looking for benevolence. The bailout has been mainly directed at the banks or the money has funneled down to them. Is this new austerity idea an ongoing way to help the big banks make it through this crisis? It seems clear the Fed does not want it's reserve banks to lend to anyone unless the government is backing the loan. The Fed is continuing to hold junk debt from the reserve banks and pay interest to otherwise insolvent banks, government money I might add. This is a clear effort to make banks profitable, risk free, at a time when lending money is clearly not a profitable business. They are intentionally preventing the banks from making loans to the public and small business by paying out on deposits that are risk free.
Here's the thing, they could easily stimulate the economy by simply not paying interest on deposits held at the Fed. This is a big, obvious silver bullet but it seems to me they are so fearful of economic conditions that they have no intention of using it. A slow down will give even less reason to lend.
There is an even darker take on what is happening. It is that the Fat boys are using a weak President and a government full of hacks to swing the economy around and yo-yo the fundamentals that effect and stimulate the way money managers invest people's money. They are doing it after taking the other side of the all those money managers trades and essentially stealing the money, with no intention of helping the little people on main street. Now in hindsight it seems clear the plan was never to restore prosperity but to swing toward austerity. Keep in mind austerity is just another word for hard times. That is why the banks were not lending.
When you factor in malevolence things start to make sense.
The whole thing stinks.
In hindsight the austerity plan has been known to the big boys for awhile, the bond market is starting to look like a replay of the stock rally from the March of "09" lows.
Again, it seems like they set it up and will now make it look like something else caused it.
Neither borrower nor a lender be
The bankers are not Keynesian or Austrians or Globalists, they are greedy bastards, period. They have developed what is essentially a fascist partnership with their government lackeys. They don't give a rat's asset about the people. Think about this, in a depression the banks that made high ratio loans should be out of business by now. Are they? No, in fact they are declaring record profits in many cases. Ask yourself why.
Could it be that they loaded up on stocks when everyone else was selling. Why did they do that at that time? Could it be they knew the fix was in and huge torrents of cash were coming and would be directed into equities? Talk about insider trading.
Now they have loaded up on government debt right on the lows as the worlds financial geniuses were saying that they were the short of the century, certificates of confiscation.
The investment community has been sandbagged again.
In the chart below I shifted the bond ETF chart over so the lows line up. You can see how similar they are. If you look at a recent chart of the SPY and line it up with the bond chart on a real time basis you will also see they were dumping stocks to roll into bonds long before talk of austerity, in fact they were doing it as Europe thrashed in potential death throes. Hardly a time to be thinking of austerity.
Contrary to popular belief.
Some financial web sites have reader counters that tell how many people have read each contributor's articles and I have checked my readership in the past. I found it surprising that sometimes 5 to 6 thousand people had read a single piece I had written on just one site. I have found that the more ominous or alarming my title the more hits it gets. That suggests that there is a dark cloud of fear and nervousness overhanging society. It also shows that investors are searching for an edge, something that will help them make safe, profitable investments. It makes another thing crystal clear, most investors don't have a clue what they are doing.
Of course there are many readers that simply have an interest in economic matters and just enjoy reading and discussing these things but I think many are actually looking for help.
This is very disturbing because I read the same articles looking for strong commonality and consensus. Then I look for trades going the opposite way.
If this austerity program makes the banks stronger as the little guy goes under for the third time, I will not be surprised.
Remember Yo-Yos? The Fat Boys clearly do. Think as a contrarian, question everything you read, trust no one.
Bob Clark is a professional trader with over twenty years experience, he also provides real time online trading instruction, publishes a daily email trading advisory and maintains a web blog at www.winningtradingtactics.blogspot.com his email is email@example.com.
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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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