Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
China Hang Seng Stocks Index Collapses and Commodities - 24th May 19
Costco Corp. (COST): Finding Opportunity in Five Minutes or Less - 24th May 19
How Free Bets Have Impacted the Online Casino Industry - 24th May 19
This Ultimate Formula Will Help You Avoid Dividend Cutting Stocks - 24th May 19
Benefits of a Lottery Online Account - 24th May 19
Technical Analyst: Gold Price Weakness Should Be Short Term - 24th May 19
Silver Price Looking Weaker than Gold - 24th May 19
Nigel Farage's Brexit Party EU Elections Seats Results Forecast - 24th May 19
Powerful Signal from Gold GDX - 24th May 19
Eye Opening Currency Charts – Why Precious Metals Are Falling - 23rd May 19
Netflix Has 175 Days Left to Pull Off a Miracle… or It’s All Over - 23rd May 19
Capitalism Works, Ravenous Capitalism Doesn’t - 23rd May 19
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

A Regime Changer

Stock-Markets / Financial Markets 2011 Feb 12, 2011 - 03:24 AM GMT

By: Barry_M_Ferguson

Stock-Markets

Best Financial Markets Analysis ArticleYes, we all know what has been happening in Egypt over the past couple of weeks. Well, maybe most Americans don’t. The TV show ‘American Idol’ is back in season and some nitwit on some other reality show is thinking about changing her eye shadow or something. But for the rest of the world, we are witness to a profound change in the politics of Egypt and that change was brought about by determined and massive citizen dissent.


The people of Egypt were fed up with a lying, corrupt, oppressive governmental regime that had stolen the riches of the country only to deposit them in the hands of a minority elite while all the time promising reform and change. They were not only fed up the US, they were also fed up with their own regime. They were tired of their government regulating the citizens to death. They were tired of their government waterboarding the citizens with no regard for civility or law. So they did what they had to do. They revolted against the regime in charge.

Maybe it’s my Scots-Irish blood but I just love a good revolution. The yearning of freedom from oppressive governmental regulation should resonate within the soul of every human being. The people of Egypt deserve to be free and they shouldn’t have to be dominated by government of any kind. The genius of Thomas Jefferson and James Madison framed the US government as it should be - a servant of the people and not the other way around. But ever since the Constitution of the United States became law, the central bankers have been trying to erode and dilute the document’s containment of government power. It is only through government power and concentration of that power that a central bank can exercise its influence. That influence once rooted, grows unfettered until it is empowered through regulatory dominance. Occasionally, there is a populace uprising like we see in Egypt. May God be with the people seeking freedom!

Why do I bring central bankers into the picture? Because they are into everything and they seek power by any means necessary and by any action necessary. We mustn’t attach too much to any revolution in context to today’s environment. The crux of any political change does not lie in whether or not the populous is enslaved or oppressed. Political change does not lie in whether or not the populous is starving due to the inflationary tactics of central bankers. Political change doesn’t even lie in whether or not certain nations seek to militarily dominate their neighbors. No - we can, and do, live with all that. In fact, most of us turn a blind eye toward governmental abuse as long as our favorite stock index keeps rising. Central banks have been flooding the system with money and credit and ultra-low interest rates to sustain this stock ascent. Central banks and markets now work in concert. Of course, all of their activity is focused on dominance and centralized wealth. Centralized wealth allows for monopolized lending. The central banks control that lending. They, and their shill banks, insure that lending through derivatives and credit default swaps. Now, for a moment of truth.

The central bankers can tolerate revolution. They can even tolerate regime changes. But, when this activity begins to disturb the valuations of their credit default swaps, now we are talking about a call to action. Bankers now stand to lose money! Shown below is a chart of the credit default swap values for Egypt over the past six months. This is a graph of how much it costs to insure the credit default swaps tied to Egypt’s debt. As you can see, when the revolution erupted a few weeks ago, so to did the cost of the CDS’s. As the CDS cost threatened to rise further, something had to change. Either Mubarak had to resign or the bank would have to call in the military to do what the military does with all the weapons that the US provided. This is how I knew Mubarak would go. Military action would have escalated the CDS costs. Now Egypt will have to make a transformation in leadership. The CDS chart will be interesting to watch. Should Egypt decide to follow the US model and surrender to the banks, the CDS costs will likely fall immediately. Then, they will likely escalate like Ireland’s or Greece’s have as perpetual sovereign debt is established. Egypt will then be bound with the enslaving ropes of TARP or TALF or QE or POMO. They will have surrendered like the US did in 2007. Should they elect to follow Jefferson and Madison and Jackson and shun the central bank dominance, the CDS costs will rise in the interim and then fall to zero and perhaps even disappear. Then the central bank will have to make another decision. Look at Chart 1 and it is easy to see why Mubarak had to leave office.  

Source: http://www.cmavision.com/market-data
Chart 1 courtesy StockCharts.com

Given the potential market reaction to Mubarak resigning as President of Egypt, one wonders if anyone could have anticipated such an action. One only has to look at the DIA ETF from February 10 - the day before Mubarak’s resignation. The following chart is a 5-minute bar intraday chart. We can see what I call the ‘POMO’ pattern at work. The indexes sagged at the beginning of trading only to be goosed in fairly heavy volume by a ‘force’ that didn’t want the index to fall further.  From mid-morning, the index traded flat with light volume. Then, in true Federal Reserve fashion, the final fifteen minutes of the day exploded in trading volume and volatility. At 3:45, the DIA burst higher. At 3:50, a strong selling program hit that accounted for some 5% of the entire day’s trading volume over 5 minutes. However, at 3:55 (the NYSE closes at 4:00), someone was ready with more than 5% of the day’s trading volume in the final 5 minutes of the day to jack the DIA back up. Whew!! Did somebody know something was about to happen in Egypt? Or, was someone just determined to carry on with the stock index rally? Let’s just call that someone, ‘the central bank’. Look at Chart 2.

DIA 5-minute intraday chart 2/10/2011
Chart 2 courtesy StockCharts.com

Now, what should investors do? The problem of Egypt’s CDS’s was solved on a Friday with President Mubarak’s resignation. The Fed has the pedal to the floor on the stock rally. Unemployment in the US has dropped to only 9% and supposedly, the US is the only nation in the solar system that does not have any inflation. Well, of course not. What would one expect in a controlled, contrived, dominated, and oppressed society? What would we expect from our stock indices? Onward and upward my friends!! Oh, and a word for world leaders. You can do to your citizens whatever you please. Chain them, whip them, starve them, steal from them - we don’t care. But, if do something to mess with the credit default swap values - you gotta go!!

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.

© 2011 Copyright © 2010 Copyright BMF Investments, Inc. - All Rights Reserved
Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules