Stocks and Precious Metals Charts - Economic Donkeys - Market Cheers the 'Powell Put'

"The real problem with our financial system is that our economic and political system work together to encourage excessive risk, and this risk in turn leads to cycles of prosperity and collapse. In 1998, a much smaller Lehman Brothers was placed in financial peril by the aftermath of the Asian financial crisis and failure of Long Term Capital Management, a major hedge fund. The Federal Reserve responded by lowering interest rates and other central banks followed suit. This reduced the cost of obtaining funds, effectively bailing out Lehman and other institutions in trouble.

As markets have grown to recognize how quick the Federal Reserve is to bail out institutions (and executives) in trouble, they naturally respond. In the 1990s, people talked about the “Greenspan Put” a term which derisively suggests that it is always safe to invest in risky assets, because the Federal Reserve is ready to bail out investors (a put is effectively a promise to buy an asset at a fixed price if you are unable to sell it to someone else at a higher price – this is a way to lock-in profits or limit losses on investments). However, in months following the collapse of Lehman, we learned that the “Bernanke Put” is even more valuable since Chairman Bernanke, alongside the Bank of England, the European Central Bank, and central banks in much of the rest of the world, is prepared to take drastic measures to prevent asset prices from falling when there are risks of global collapse."

Simon Johnson and Peter Boone, Economic Donkeys


"I have marked my estimates of the quality of the bounce by levels it achieves.   Given that this market is running on hot money and adrenaline, I would not tend to underestimate it."

Jesse, yesterday

Fed Chair Jay Powell gave the markets a fresh whiff of hot money in his statement today, which was widely interpreted as a dovish 'walking back' of the statement from October 3.

And the markets huffed up that blast of fresh bubble brew and took off to the upside.

Stocks were up sharply, bond yields fell, gold got a big reversal the day after option expiry, and the Dollar took a dive.

Not that the real world matters but it was interesting that a huge chunk of the physical gold inventory in the Comex Hong Kong warehouses took a hike last night.   296,000 troy ounces is about twice the gold that is ready for delivery at these prices in New York. 

As you can see from the charts below, the stock futures went through the first two retracement levels pretty handily.

It should be noted that they were stalling around the first retracement target until Chairman Jay spoke around noon.

I found it to be interesting that despite the massive and relentless bear market squeeze, which took off and never once seemed to hesitate, the VIX did not drop by a commensurate amount.

Was this a 'set piece', a contrivance of some sort?   A systemic entitlement for the insiders and financiers, another easy score for the informed among so many?   No way to tell.

We'll just have to sit in the shadow of these dark markets, and see where it all goes next.

I did notice that the spokesmodels on bubblevision used the terms 'Fed Put' and 'Powell Put' about eighty times this afternoon.

I got a chuckle when one said 'Why not buy APPL if the Fed is protecting it?'

You just can't make this stuff up.   We have learned nothing, absolutely nothing, over the past twenty years.  And it just gets worse, each time that we allow this, and forget.

And why should things change, when the current scheme of things pays off so well for a few?

Let's see where we go next.

Have a pleasant evening.

Charles Biderman On the Markets and the Treasury Ponzi Scheme - The Speculative Life

I am not so sure the Bernanke put is dead. But this is certainly well worth watching.

I lost well over a million dollars, marked to market, underestimating Bernanke and Greenspan, and the government's willingness to whore out the public and the integrity of the markets in the most obvious of fashions once before, in the American housing bubble and fraudulent credit frenzy, whilst all the regulators, economists, and pundits stood aside and did or said nothing. Their hypocrisy knew no bounds.

I am not likely to do that again. That sort of experience leaves an impression. And I learned a great deal from it.

Traders will always tell you about their wins, but rarely about the losses. They think the wins are due to their superior intellect, and the losses are just bad luck. And it keeps them coming back for more, until most of them bust their banks.

I don't think you can really be called a seasoned trader until you have at made and lost a million and won it back again. Or more, if you are playing with Other People's Money. Most just lose.

But don't feel badly for me. I am well ahead of the game, in large part on the other ends of the same deals, both going in and coming out, and that I think is by the grace of God and not by my own devices.

I have made most of my money by taking a sound position and then doing nothing with it, not tinkering with it, or frittering it away in fees and small losses that add up over time. The mispricing of risk creates an enormous amount of transactional friction that is almost impossible to beat.

Investment is one thing, and speculation is another. One rises in wisdom by falling in folly.

The speculative life has a lot of volatility, too much my tastes now, although I have been a 'gamer' most of my life, from horsetracks to computer screens to casino tables. It is not for the money, it is for the effects of a game on a restless mind.

Although like the old dog that I am, I still rise to the hunt, just more slowly and quietly. But with much less interest, now that the markets are so obviously rigged. The Banks and wiseguys are destroying them with their excessive greed and cheating, as they have done so many times before.

When I first started trading many years ago the market was a dead fish, and no average person wanted anything to do with it. We will go back there again, if we are not there already.

As I told my son, who is going on so well at university through his diligent work and bright intellect, the speculative life is not a worthwhile use of one's time and mind, especially if I compare to to the creating of new products and technologies. Or even being a plumber, if one is a good one. They have my sincere admiration; water is unforgiving of error. Whenever I do it, it seems as though one thing always leads to another.

As Thomas More said to Sir Richard Rich, 'Better to be a teacher.' Speculators produce nothing, but a teacher can bring light to the darker corners of life.