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"People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome. Advertising [perception management] is the rattling of a stick inside a swill bucket."
George Orwell
Watching the commentary on the stock market and Egypt on US financial television today was an exercise in cognitive dissonance.
See, there are no problems in the world, because the Dow has hit 12,000. All is well, and now is the time to buy these shares from us, so that we can unload this misvalued paper just like we sold slop buckets full of collateralized debt obligations to the institutions and foreign banks, in celebration of the deregulation which we bought from the politicians, causing this financial crisis in the first place.
The hubris and arrogance of Wall Street is almost shocking if one does not realize that these fellows are very afraid, and probably trying to bluff their way out of this latest crisis. They are whistling past the graveyard, treading lightly over the bodies of their victims, keeping one eye on the exit and one hand on your wallet.
There may be a bull market in Swiss chalets and South American villas coming, depending on how steadily the winds of change sweep across the globe.
"It is not necessary for the politician to be the slave of the public's group prejudices, if he can learn how to mold the mind of the voters in conformity with his own ideas of public welfare and public service. The important thing for the statesman of our age is not so much to know how to please the public, but to know how to sway the public. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country."
Edward Bernays
"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
Charles Mackay
This index is particularly odd, if you take a look at the weighting of it as shown by the graphic on the chart.
It is difficult to imagine the euro continuing to strengthen against the dollar without howls from the German exporting companies. And the same can be said of the Yen.
FX trends often notoriously overshoot targets, since trading in forex, like so many other financial asset markets, a matter of the biggest boys sloshing the water around in the tub.
However, a break of this support could trigger another leg down. It will be interesting to watch the existing negative correlation between the dollar and US equities.
The futures achieved a nice bounce off the big dip this morning to close the month on a positive note. As January goes, so goes the year, and it appears that we are in for eleven more months of clumsy price manipulation, central bank subsidies for their pals on the Street, and accounting fraud.
I might have been more impressed if the VIX had fallen more, if tech had followed more strongly instead of the usual SP futures wiseguy jam-boree, and if the stock touts were not out so aggressively and desperately banging their drums with the same old clichés to entice mom and pop to take the handoff here. Stocks are good for 10% per year, so just close your eyes and buy (now). That is what passes for financial wisdom on the extended informercial that is US financial television.
The divergence between the SP and the Russell is worth watching. The SP 500 tends to be a showpiece for the carnies to lure in the fish. And that divergence became a small chasm around mid-month and never really recovered.
Thin market, suseceptible to exogenous shocks. Maybe it will grind higher, but I do not like it. I put stocks shorts back on today on the late day strength after having taken down all my gains on Friday afternoon. These are balanced with a slightly different beta mix of some select longs in the precious metals sector.
