Today is the last day for the end of month 'window dressing' for May. The SP futures for June are now at 1407. What is provoking this rally? The 'better than expected' GDP number? What justifies this burst of optimistic buying?
The rally on the US equity markets, with the financial sector leading the way, is a distribution of stock in troubled companies to the 'greater fools' whose money is moving out of the US Treasury bonds and into US equities now that they are 'safe' based on analyst recommendations.
Most likely it is not the people themselves buying into this, but the managers of their pensions and savings, the managers of 'other people's money.' There are also huge tranches of public money being supplied by the Treasury and the Fed directly to the banks who are playing these markets actively. If you hold US dollars you are paying a price for this one way or the other.
This is a game being perpetrated by the Wall Street banks and the processes which have been corrupted by them, like the AAA rating being assigned to a barely solvent $3 stock like AMBAC because it is expedient to call worthlessness the highest of quality.
Its a disgrace. Its what is wrong with our country. Its the hallmark of the last two presidential administrations, to shift wealth from the many to insiders, to hand out pardons and tax cuts to the privileged few while the mass of people dumbly accept it while arguing over trivialities provoked by a corrupted press. This is exactly what Thomas Jefferson warned against.
Patriotism is not support for a "single great leader." We do not have Der Fuhrer or Il Duce or some Decider who is above the law, who rules us. We have elected representatives and a limited form of government by the people, for the people, and of the people. Elected representatives are answerable to the people, and the notion of an executive privilege to govern in secrecy is repugnant to our freedom.
If you do not understand the notion of the power residing in the will of the governed under a republic, if you dare to consider the US Constitution 'just a goddam piece of paper' and the president as someone above the law of the land, then you are not a patriot no matter how ostentatiously you drape yourself in the flag.
US and European debt markets flash new warning signals
By Ambrose Evans-Pritchard,
International Business Editor
UK Telegraph
6:40am BST 29/05/2008
The debt markets in the US and Europe have begun to flash warning signals yet again, raising fears that the global credit crisis could be entering another turbulent phase.
The cost of insuring against default on the bonds of Lehman Brothers, Merrill Lynch and other big banks and brokerages has surged over the last two weeks, threatening to reach the stress levels seen before the Bear Stearns debacle. Spreads on inter-bank Libor and Euribor rates in Europe are back near record levels.
Credit default swaps (CDS) on Lehman debt have risen from around 130 in late April to 247, while Merrill debt has spiked to 196. Most analysts had thought the coast was clear for such broker dealers after the US Federal Reserve invoked an emergency clause in March to let them borrow directly from its lending window.
But there are now concerns that the Fed itself may be exhausting its $800bn (£399bn) stock of assets. It has swapped almost $300bn of 10-year Treasuries for questionable mortgage debt, and provided Term Auction Credit of $130bn. (Don't be too concerned. The Treasury and the Fed have a plan to monetize the bad debts, bail out the banking system at the expense of the real economy, and make whores out of all holders of US dollar assets. Trust us on this one. - Jesse)
"The steep rise in swap spreads this week is ominous," said John Hussman, head of the Hussman Funds. "The deterioration is in stark contrast to what investors have come to hope since March."
Lehman Brothers took writedowns of just $200m on its $6.5bn portfolio of sub-prime debt in the first quarter even though a quarter of the securities had "junk" ratings, typically worth a fraction of face value.
Willem Sels, a credit analyst at Dresdner Kleinwort, said the banks are beginning to face waves of defaults on credit cards, car loans, and now corporate loans. "We believe we're entering Phase II. The liquidity crisis has eased a little, but the real credit losses are accelerating. The worst is yet to come," he said.
The jump in corporate bankruptcies has not yet been picked up by the usual indicators, which tend to lag the market, lulling investors into a false sense of security. The true losses are already known to specialists in the business, said Mr Sels.
