SP 500 and NDX September Futures Daily Charts; Gold Daily Chart; Corporate Bonds

The stock market was hit by a double whammy with the miss in revenue by bellwether Cisco after the bell last night, and then the dreadful unemployment claims number this morning, with 484,000 more people unemployed versus 465,000 expected.

Stocks opened much lower as expected, but as the selling subsided they managed to climb back regaining much of the losses in a low volume trading day.

I think the Street, dominated as it is by the big TBTF banks, will rally around this pivot point of support on the major indices until the General Motors IPO comes out, which should be next week at the latest. CEO Ed Whitacre announced today that he will be stepping down to make way for someone that will stay with the company for a longer time horizon, to give investors confidence in the new share offering as GM becomes a public company again.

So while volumes remain light and 'nothing happens' to trigger hard selling, I would expect these down days to be met with the purchase of the SP futures in particular to give it support. While the SP futures may see unusually high volumes as a fellow blogger noted yesterday, this is indicative of organized Street support to prop the market keying in on the SP 500 futures in the style endorsed by Robert Rubin, and not legitimate investor interest in buying the dip.

There are not many investors in these markets at these prices; the market is primarily consists of speculation and momentum trading, and therefore prone to sharp sell offs like the recent flash crash. This is why I have put out the 'black diamond' sign even though I do not anticipate a serious downleg until the IPO of GM is priced and put out to market. If it is withdrawn that will be a deadly sign that the Street believes there is insufficient liquidity to get it out to market, even though the government wants it to happen, and badly.

By the way, I was just thinking today how fortunate that Bush Jr's proposal to 'privatize Social Security' by investing it in the stock market was turned down, even by Alan Greenspan who never met a pedigreed Wall Street scam he couldn't support.

SP 500



Nasdaq 100

Cisco's weak results (for them) and their weaker forecast sent tech into a tailspin last night. It managed to hold itself together today for the reasons cited above.



Gold appears to have recovered from its FOMC-inspired smackdown and has resumed its uptrend. Do not expect this to be straightforward or easy, and you will not be disappointed.

But anyone who says that gold is a bubble is either talking their book or operating on a badly mistaken theory of money and value. This undeniable bull market in gold and silver is a direct reflection of the well deserved and justified deterioration in the financial system and the currency, the perception that Wall Street is rife with fraud, cronyism and corruption, and hidden counterparty risks.

The way to fix the problem is not by engaging in further fraud and market manipulation, like trying to silence the smoke alarm to keep everyone calm and confident. It takes a particularly perverse Madoff-like view of the world to write that prescription. The way to repair confidence is to reform the markets and weed out the crime, and establish a more equitable and self-governing system of global trade, because the current dollar reserve regime is no longer sustainable.

Failure to reform is gold's best friend. And this is why the crooks hate it publicly, while stuffing their personal vaults with it privately.

Gold



A Sign of a Top in Corporate Bonds

US corporations are issuing large amounts of new debt to take advantage of the exceptionally low rates created by quantitative easing. IBM recently did a major issue of three year notes that went out at one percent. Johnson and Johnson came out today with ten and thirty year notes at record lows.

Johnson & Johnson sold $1.1 billion of debt at the lowest interest rates on record for 10-year and 30-year securities amid surging investor demand for corporate debt.

The drugmaker, in the first offering by a nonfinancial AAA rated company in 15 months, sold $550 million of 2.95 percent, 10-year notes and the same amount of 4.5 percent, 30-year bonds, according to data compiled by Bloomberg. That’s the lowest coupons for those maturities on record, according to Citigroup Inc. data going back to 1981.

Great deal, if you wish to have record low returns in a depreciating currency with counter party risk correlated to an economic recovery. No risk in corporates, right? Maybe less for J&J, but most of the others will be promises writ on water if a major Depression ensues. But perhaps the Fed can buy them.

I obviously cannot predict when and if it will happen with certainty. But if the economy turns down and a dollar currency crisis ensues these corporate bonds will suffer a meltdown between foreign selling and corporate defaults.

Nassim Taleb believes that government bonds will collapse and is betting on it. I think corporates are a better bet, because a business slump and corporate failures could do the trick, even while the dollar and the short end of the curve is viewed as a safe haven.

But if there is a fear of hyperinflation and a greater dollar crisis, even the relative safety of Treasuries will melt down, and the longer end of the curve will drop in value faster than you can say "Sell."

China's Cunning Plan to Destroy the US Dollar

This economic paper might have been funny if it had appeared in The Onion, or on Fox News, and not in a serious journal of economic thought.

This rather clever argument proposes that China is 'destroying the dollar' because they are jealous and hate the US for its happiness and freedom. It is not completely new, but I have not seen it in print. Someone that I know who sometimes spreads spin and stories which they get from highly placed contacts in the banking cartel told me about this diabolical plot about five months ago as I recall.

There reminds me of a long standing corporate tactic that says if you have been doing something underhanded to someone and the shit is about to hit the fan, accuse them of doing the same thing to you first. This was standard management procedure at the multinational where I worked for many years, as it tottered towards its eventual self-destruction.

The theory promoted by this paper is funny because I did not know that Ben Bernanke is Chinese, or that the Federal Reserve is a Chinese state agency. Are the Chinese the cabal of international bankers we hear so much about? How cleverly they disguise themselves.

But it would not surprise me if a portion of the Congress is in on China's payroll. They will take money from anybody and everybody. And after all, the Chinese military were campaign contributors to Bill Clinton (remember that scandal the Clintons tried to pin on Al Gore?) just about the time he opened up trade with them despite their recent 40% currency devaluation and continuing currency peg. And China owns Wal-Mart, and Goldman Sachs, Citi, and JP Morgan there rube, don't ya know. And W doubled down on the deal and went along with this commie plot. Maybe Putin hypnotized him while the Chimp was staring into his soul.

I would file this one under "prospective scapegoats to blame when the dollar currency crisis hits" and everyone in charge denies they could have foreseen it coming. After all, the dollar is as a god, all powerful and immortal.

So this must be an economic sneak attack, a conspiracy of crafty foreign devils. Therefore it's time for a pre-emptive strike on (Venezuela/Iran/some weaker country that has something we want preferably oil). After all, the mighty dollar could NEVER fail because of pernicious abuse by a banking cartel conceived in Georgia and ratified in 1913 by a Congress anxious to go on its Christmas vacation.

Here is another clever plan for the people of the US to consider, when the puffed up dollar finally hits the wall and the Congress and Banksters deny all involvement and responsibility.

* admit that one cannot control one's compulsion for debt and fraud and rule by crooks and idiots;
* recognize a greater power that can give strength and guidance, that most definitely does not work for Goldman Sachs;
* examine past errors with the help of a sponsor (the Constitution and probably the IMF);
* make amends for these errors by cleaning up your corrupt financial system and jailing the white collar criminals involved;
* learn to live a new life by honoring a code of behavior (the Constitution), a hard currency, and give up the idea of empire;
* help others that suffer, as a benevolent US did many years ago before it was hijacked by a group of irresponsible sociopaths.

The dollar has been in the process of self-destruction since that clever Chinese agent Richard Nixon defaulted on the US gold obligations in 1971.

And of course that Sino-Soviet agent Ronald Reagan who convinced the nation that 'deficits don't matter' if it involved tax cuts for the wealthy. And the coup de grâce has been delivered by Wall Street and their crony capitalists in the government as collateral damage in the reckless promotion of self interest, corruption and fraud.

The sad truth, America, is that you were sold out by your own people for their own personal gain. And the crony capitalists and oligarchs are still leading you around by the nose, and telling you what to think, which is whatever is good for them. And this goes double for the UK.

Economic Policy Journal
Is China Executing a Cunning Sun Tzu Strategy to Destroy the Dollar and Cause an Upward Price Explosion in Gold?
By Elizabeth Brinsden
August 12, 2010

Could China be coveting the role of the next economic superpower, thereby supplanting the USA? If so, is China planning to do this by design or is it simply awaiting this result by default as a result of the total collapse of the American economic system?

Whether we like it or not, China has already become the 800 lb Gorilla in the dining room, economically speaking. We ignore this fact at our peril. Thus it may be advisable to reorientate our thinking from that of the rationalist, pragmatic thought processes which arose out of the Enlightenment and complement our thinking with something more akin to that of the Chinese.

In order to accomplish this, it is constructive to take a closer look at the ancient Chinese philosopher, Master Sun Tzu. In an earlier article , based on a book by Harro von Senger on this theme[1], I have attempted to do this in connection with the Special Drawing Rights[2], as advocated by the Chinese earlier this year. However, I will now examine this idea in the context of the the Chinese possession of US Bonds, a subject not only of relevance to these two countries, but also for the stability of the entire international economic system.

At a superficial level, it may appear to the onlooker that China has been sucked into a giant malinvestment by purchasing these bonds, but a closer look at Master Sun’s stratagems may reveal a well conceived and even cunning plan...

Read the rest of this paper here.

Whitney: Obama Is 'a Public Relations Hologram'

As you know I have been trying to 'figure out' Barack Obama and his mysterious background and equally mystifying rise to power, without having done anything notable, either in business, or civil service, or even military service. Granted, he talks one hell of a game but always seems to fall short. He seems to have less substance, far less accomplishments than his fellow actor in the White House, Ronald Reagan, who had been a governor before becoming President.

Perhaps the answer is as simple as this.

"It's hard to believe that a two-year senator from Chicago with a background in 'community organizing' presides over this elaborate and opaque system of imperial rule. He doesn't, of course. The real leaders remain hidden behind the cloak of democratic government and all of Washington's phony institutions. Obama is merely a public relations hologram, a friendly face that conceals the machinations of a global Mafia. Other people--whoever they may be--control the levers of power moving the pieces as needed to assure the best outcome for themselves and their constituents." Mike Whitney, Kill Hugo?

Well, unlike his predecessor, at least he has not tortured anyone that we know about.

SP 500 and NDX September Futures Daily Charts; Gold Daily Chart

Today we had the reaction to the FOMC announcement that I was expecting, a failure at overhead resistance that dropped down to the support at our pivot, almost exactly, and going out on the lows.

What next? It's hard to say. The best that can be said for the bulls is that the selling today was on volumes that remain light. But that is also a negative, because this means the market has not yet flushed out to the downside.

This leaves the equity market open to manipulation by the big trading desks, who will trigger a snapback rally if too many specs pile on to the short side. But the momentum is now to the downside.

I would look for the futures to test the lowest levels of the overnight trade during that session, and then a recovery and probe back down after the New York open, and most likely a snapback rally during the day to squeeze the spec shorts. At least, that it the strawman, but we'll trade the market we are given.



Cisco missed its revenue after the bell, but hit its earnings, which is a almost a slam dunk given their acquisition and holdback style of accounting. This does not bode well for the techs.



NYSE Volume



Today we had a pullback in gold to support. The traders on chatboards greatly exaggerate these moves in their chatter. Try not to fall into that trap. So far the trend is well intact.