SP Futures Hourly Chart at 1 PM

Wax on. Wax off. Generate brokerage fees and skin the small speculators.

The fundamentals continue to deteriorate but volumes are so light its a shadow puppet market slithering into the end of the month. Sell in May and go away.

Unless Ben has the guts to ignite a serious inflation this market will go back down to test the lows before the end of the year. We *might* be in for a long hot zombie summer.

It is interesting to watch these US financial markets on charts which have been deflated by some other measure of value such as gold or silver.

Ten Year Note Yield

While a steeper yield curve is good for the financial sector and those other folks who borrow short and lend longer term, it does no good if those higher rates choke off growth in the real economy. that is an overlooked detail in the Bankers' grand plans for financially engineering a recovery. This is a nation by the Banks, for the Banks, and of the Banks and their demimonde in Washington and the media.

It reminds this blogger of days gone by, when Jesse was a boy programmer writing assembler level code for IBM mainframes and other tedious tasks befitting his junior status.

A group of systems guys had been working long hours to bring up a large mainframe running VM 360 including the operating system, the peripherals, the FEP and coms, storage for a major university.

When they finally got all the bugs worked out and the system was up they quite seriously celebrated their success, saying: "Now if only we could keep the users off the machine all our problems would be solved."

Indeed. Watch the consumer along with the bond and the dollar, for those are the weakest links. From where we sit, the consumer has rolled over and won't be getting up anytime soon ahead of a rising median wage or some other sort of income increasing faster than their expenses and debt servicing.

And the rest of the world appears to be gorged on US debt and their reserve currency, at least the non-official segments that still care about spending and profit in the real world.

Purchase Accounting Rules Set to Deliver $29 Billion Profit Windfall to JP Morgan and Other Banks

"It's Not the People Who Vote that Count; It's the People Who Count the Votes."
Josef Stalin

One of the many benefits of being a leading citizen of the Potemkin economy and a silent partner with the Treasury and Federal Reserve.

There is an analog to this in the tech sector, in which some companies may choose to write down the value of their components and subassembly inventories in fat quarters, and then take them as an improvement to their Cost of Goods Sold (COGS) in lean quarters, to boost EPS even as the top line revenues are flat to down.

And as for merger accounting, there are several companies showing excellent and consistent results using that rolling paintbrush of accounting embellishments.

Things are not always as they appear, especially when viewed through magic lantern of Wall Street.


RTTNews
JPMorgan likely to reap $29 Bln windfall on WaMu bad loans purchase
5/26/2009 8:29 AM ET

(RTTNews) - JPMorgan Chase & Co. stands to reap a $29 billion windfall due to an accounting rule that lets JPMorgan transform bad loans it purchased from Washington Mutual Inc. into income, the Bloomberg reported Tuesday.

Last year, the Seattle-based Washington Mutual, or WaMu, collapsed after it faced $19 billion of losses on soured mortgage loans and its credit rating was slashed, leaving it with insufficient liquidity to meet its obligations.

On September 25, 2008, JPMorgan Chase & Co. acquired all deposits, assets and certain liabilities of Washington Mutual Inc. for about $1.9 billion from the Federal Deposit Insurance Corporation, or FDIC.

The New York-based JPMorgan reportedly has used purchase accounting, which allows it to record impaired loans at fair value, marking down $118.2 billion of assets by 25%. JPMorgan took a $29.4 billion write down on WaMu's holdings, mostly for option adjustable-rate mortgages and home equity loans.

The purchase-accounting rule provides banks with an incentive to mark down loans they acquire as aggressively as possible. One of the benefits of purchase accounting is after marking down the assets, one can accrete them back in, which is said to be favorable over the long run.

Now, as borrowers pay their debts, the bank reportedly says it may gain $29.1 billion over the life of the loans in pretax income before taxes and expenses.

JPMorgan aside, Wells Fargo, PNC Financial Services Group Inc., and Bank of America Corp. are also poised to benefit from taking over home lenders Wachovia Corp., Countrywide Financial Corp. and National City Corp., the report said citing regulatory filings.

What Caused This Rally?

"Consumer Confidence" came in higher than expected based on numbers from The Conference Board. The market started rising well ahead of the release of this 'news' which is no surprise as the source is a somewhat leaky bucket.

This despite the housing data in the Case-Shiller Index which was much worse than expected.

Our take is always that those who look for fundamental reasons for short term market moves are often on a fool's errand.

The reason for this rally today is best captured by an old stock market adage.

"Never short a dull market."