America has Become an Asterisk, Which means it Only Exists Conditionally

By: Barry_M_Ferguson

The conditions are explained by asterisks. For instance, big banks earn a lot of money as long as minor details like expenses, losses, and derivative valuations are ignored. The governments car company, GM, will soon release an 'electric' car that gets 280 miles per gallon equivalent. However, it is not really 'electric' as it has a small gasoline motor and at highway speed, the motor kicks in. In truth, it will return mileage equivalent to a Toyota Prius. Only, the US taxpayer will have to chip in about $7k per car sold to even make it seem competitive. It is ‘electric’ with an asterisk.

What about the stock casino? Well, as long as the Fed is hard at work every day manipulating the indices higher with POMO or TOMO or PPT activity, the casino appears to the dopes of the world to be a 'market'. Without the Fed, it's a yard sale and everything must go! For the week ending 10/22/2010, Monday was a POMO day. Tuesday was not. Wednesday was. Thursday was not. Friday was. You can now guess the up days. Up days for the indices should now be viewed like Barry Bonds’ home run record - they should have an asterisk beside them. Check the charts. Charts don't lie. Governments do.

The US government was overthrown in the coup of '07 by the Federal Reserve. I’m not new to this party. You can verify this with other articles from my blog at www.bmfinvest.blogspot.com. The Fed is now cementing its power of control with the tool of debt. It's not like they are acting in a clandestine manner. It's all in black and white. The Fed's own balance sheet lists a sum of just over a couple of trillion dollars for total assets. A trillion of those assets are MBS (Mortgage Backed Securities) paper  that they are using to steal $2 trillion in Treasuries from intellectual Treasury caretakers like Bernie Frank, Nancy the nitwit Pelosi, and the rest of the feckless Congress.

That MBS paper has an asterisk beside it. The corresponding footnote says that the trillion-plus MBS paper is all backed and guaranteed by Fannie and Freddie. I can't imagine a reader of this blog not knowing this but Fannie and Freddie is you and me - the taxpayers. The Fed has no risk in the bad mortgage paper. None. You can read my article entitled 'The Fed's Furtive Filching' but the outcome is sealed. The banks had bad mortgage paper in 2008. They lost all of their money in derivatives trading based on the bad mortgage paper. They were, and still are, bankrupt. Yes, I know. They all report good profits.

Go read the asterisks. So the Fed engineered the greatest theft in history. They got Congress to sign over a few trillion in Treasury notes so the Fed could issue the banks a dollar for dollar exchange of Fed cash for bad mortgage paper. At that point, the Fed had bad paper, the banks had Treasury notes, and the taxpayer had more debt. The Fed is now buying Treasuries from banks to complete the heist so they can replace the bad paper with good Treasury notes. Very soon, the Fed will have converted a trillion in bad mortgage paper into a trillion in Treasury notes, the banks will have converted a trillion in bad paper into Federal Reserve Notes, and the taxpayer will have converted stupidity into an extra trillion in debt. Watch the asterisks. They are important. And some people still don’t think the Fed is a ‘for profit private bank’. Who else paid out 6% in dividends to shareholders and increased their balance sheet by a few trillion this year?

Here is another one. On Tuesday of this week, the Federal Department of Pathological Lying said housing starts increased .3%. Not that anyone pays government data any attention anymore but I do get a kick out of the footnoted asterisk. It basically says, 

'The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can’t be sure whether starts increased or decreased. In September, for instance, the standard error for starts was plus or minus 10.3%. Large revisions are common.'

In other words, housing starts could have been up 10% or down 10% or anything in between. Who knows? Anyway, the market needed a positive number so it got one. Well, it came with an asterisk!

Meanwhile, every country continues to fight currency appreciation versus the terminally cancerous US dollar. China raised interest rates slightly to try and dampen economic growth thus lessening the yuan appreciation. Brazil imposed higher foreign taxes to bond purchasers outside of Brazil as did Thailand and other sovereign nations in a effort to dampen their respective currencies appreciation versus the US dollar. It seems that there is a flight from US dollars as the current US administration continues to scare the bejeepers out of the rest of the world with a continued maniacal economic policy of borrowing, lying, and surrendering to the central bank. Even the US debt comes with an asterisk. The debt is not very large compared to GDP unless of course you have the audacity to also count off-balance sheet expenses and unfunded obligations into the tens-of-trillions.

Let me leave you with a chart of the SPX for this past week. The chart is the last five days showing 10-minute bar intraday trading. As you can clearly see, the POMO days were positive. In case you are interested, next week looks promising with POMO days on Tuesday and Thursday. Also, the Treasury will be issuing over $100 billion in new debt so that should drive the greenback down. Combined with POMO intervention and manipulation, the dissolving dollar is likely to push the indices higher. Just don’t forget to watch your asterisks. These are the riskiest indices in history. Why? They are all based on an asterisk. Yippee!

SPX - 10/18//10 - 10/22/10 intraday 10-min bars.
Chart courtesy StockCharts.com

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
Primary Tel: 704.563.2960
Other Tel: 866.264.4980
Industry: Investment Advisory
barry@bmfinvest.com
www.bmfinvest.com
www.bmfinvest.blogspot.com

Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

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