Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Correction Review - 26th Jan 20
The Wuhan Wipeout – Could It Happen? - 26th Jan 20
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Is The Stock Market Rally For Real…Or Just Part Of the Games Bankers Play?

Stock-Markets / Market Manipulation Jun 20, 2012 - 11:18 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleShah Gilani writes: The markets are rallying, again. Will this time be different? Or is this just another head fake?

The truth is the current rally is not surprising given what's coming out of the G20 meeting, what's likely to come out of the Fed's Open Market Committee meeting today and Jamie Dimon's Congressional testimony yesterday.


But things aren't what they appear to be. What's happening behind the scenes is far more important than what's being said publicly.

So, investors better understand what the real game is here and how to play it.

To do it, we need to work backwards.

Jamie Dimon, CEO of JPMorgan Chase, has repeatedly said under oath that his bank isn't too big to fail.

That fact that he's implying it's okay to let a bank the size of JPMorgan collapse and enter bankruptcy in the event of "a moon hitting the earth" (admittedly unlikely) or potentially huge losses from something like bad bets on derivatives, is a flat out lie.

Of course, that lie can't be proven unless the bank was to actually fail, so it's unlikely that Mr. Dimon could be brought up on perjury charges. But it's still a flat out lie.

JPMorgan Chase and all the big U.S. banks are too big to fail.

And in that lot we can also cast all of Europe's big "universal" banks. They're all too big to fail in a very real sense because they are all interconnected.

Between the crossover of portfolio holdings, interbank lending mechanisms, derivatives bets and counterparty exposure, all of the big banks suffer from real contagion calamity concerns.

As a result, the breakdown of trust anywhere impacts trustworthiness of banks everywhere.

The fact that many banks have gotten bigger since the financial crisis is no accident.

Precisely because they are too big to fail, by getting bigger still they've become more powerful than regulatory bodies (separately and collectively) and political entities, including Congress, parliaments, sovereign leaders and central banks, which are now political arms of the banks themselves.

More Money, More Money, More Money
And speaking of central banks, let's move on to the Federal Open Market Committee. The two-day FOMC meeting ends today and we're expected to get a statement from the Fed on their deliberations.

One thing is for sure. Whether they opt for more quantitative easing, a further flattening of the yield curve with more Operation Twist, or a statement that they stand ready to do whatever they have to do, the bottom line is they're going to pump more money into banks at some point.

That's not the same thing as saying they're going to pump money into the economy.

The Fed doesn't pump money directly into the economy anywhere other than through their favorite conduit. Guess who? Their singular constituents, the banks.

The markets have been rallying on exactly these prospects -- more money flooding into banks.

And as far as the G20 in Mexico, their concerted rhetoric is designed to assuage the free markets' fears that markets will be freed to fail.

In other words, the world's leaders, along with their finance ministers, and with a nod from central bankers shaded in the dark halls of Cabo, are telling the world that they're working together to stem economic stagnation and help heal Europe's ongoing crisis.

Translation: more money, more money, more money for the banks -- all of them.

That's the game. It's been the game. It's better known as "extend and pretend."

Extend more money, more loans, extend maturities and repayment terms, extend austerity demands and pretend that growth will eventually be financed by means of all that money that the banks are spilling out into the global economy and "this too shall pass."

What's sickening is that there are banks and economies, particularly in Europe, that are deathly ill.

The Banks are Running the Show
And instead of letting banks and even sovereign nations go belly-up and pay the price for greedily overleveraging themselves, the very same bankers who fed the monsters of mayhem are being given more money to keep feeding them. Meanwhile everyone else is stuck with a diet of austerity.

You can't have it both ways. But, the banks are running the show. So, as long as they can keep their lifelines open, as long as investors believe that throwing more money on the fire to put it out is the answer, the more asset prices will rally.

That's what's happening. That's why we're rallying.

So, what's the game? Well, it's follow the leaders first, then get out of the way second.

This rally looks no different than any other rally in recent memory. It started as a short-covering rally and is continuing on the prospect of more easy money floating asset prices higher in the short run.

Why? Because higher asset prices quell the fear of deflation. And its deflation -- not inflation -- that is the major concern facing the global economy once again.

Will it work this time? Is this time different?

No....But in the meantime: If you like follow the leader, you should be buying some stocks here, or at least you should have already bought stocks a few weeks ago.

But if you don't want your head handed to you when the top blows off, you better be ratcheting up your stops and adding downside protection on every big up move.

Of course I could be wrong. After all, banks may have become our new churches. Yeah, right.

Sincerest regards,

Shah Gilani, Capital Waves Strategist

Further Reading...

Starting on May 18, 2012, millions of hardworking Americans got ripped off for an estimated $35 billion in the span of a week.

It happened because they didn't understand The MATRIX.

But Shah does. And you can too. To learn more about The Matrix click here.

Source :http://moneymorning.com/2012/06/20/is-the-rally-for-real-or-just-part-of-the-games-bankers-play/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 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