Wednesday, April 21, 2010


Jay Taylor: Turning Hard Times Into Good Times

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Powerful Stock Rally Could See Correction, Albeit Mild

Just about all my clients have been asking what I think of the stock market, and whether the powerful rally we’ve seen over the past year will continue. It’s taken a lot of people by surprise. If you missed this rally, you may be feeling left out, but there are ways to participate using futures and options, no matter what your view.

The S&P 500 has gone almost straight up since March 2009. A lot of the gains have come on lighter volume, indicating that not many people have been participating in the gains. It has been a slow-grind type of rally. When the rally started, the economy was still in bad shape, bailouts were being handed out left-and-right, and unemployment was steadily increasing. While many economic questions still remain, particularly regarding employment, traders who tried to short the market in disbelief paid the price. (more)

Gold Broken Support Becomes Resistance and the Palladium Rocket

Gold was down -24.30 for the week (-2.09%), closing at $1137.30 (continuous contract). GLD (gold trust ETF) lost about 2% as well, closing at 111.24. Just last week, gold had made a new 2010 high. In last week's report I said:

"Gold's daily chart is bullish, but it is also starting to enter overbought territory. Gold has been performing well despite a steady dollar. If the dollar were to correct, it would put a bid under gold. The chart has turned decidedly bullish if price holds the breakout.

The weekly chart is looking up as well, although a positive MACD crossover has not yet occurred, and is necessary, if a sustainable rally is to unfold."

With gold's drop this week, price is seriously testing the validity of the breakout. As the daily chart of GLD shows, horizontal support at 112 has already given way, and support at 110 is being tested. Broken support at 112 has now turned into resistance. (more)

Bove: Goldman Sach Crisis Sets Stage for Another Financial Collapse

The Securities and Exchange Commission’s case against Goldman Sachs is weak, but the crisis has ominous implications and is a "death wish" for the financial system, says star bank analyst Dick Bove of Rochdale Securities.

“It’s setting the stage for collapse (of our financial system) one more time,” he said in a research report.

Bove says media coverage so far has neglected to elucidate the demand side of the story.

The subprime mortgage security created by Goldman “was not a retail product sold to unsophisticated investors,” he pointed out. (more)

Next bubble: $600 trillion? Cities, states, universities could sink from monster derivatives meltdown

As interest rates begin to rise worldwide, losses in derivatives may end up bankrupting a wide range of institutions, including municipalities, state governments, major insurance companies, top investment houses, commercial banks and universities.

Defaults now beginning to occur in a number of European cities prefigure what may end up being the largest financial bubble ever to burst – a bubble that today amounts to more than $600 trillion.

The Bank of International Settlements in Basel, Switzerland, now estimates derivatives – the complex bets financial institutions and sophisticated institutional investors make with one another on everything from commodities options to credit swaps – topped $604 trillion worldwide at the end of June 2009. (more)

Is America’s Economic Recovery On The Whole Based On A Rotten Sham?

The economic “recovery” we are now witnessing is based on theft, greed and deceit. It’s a giant rip-off, a rotten sham. In this sleazy imitation of a free market economy, liars, cheats and deadbeats are the ones getting rewarded.

And as for the savers, the hard workers, the ones who chose to honor their debts and live within their means? Nothing but a bunch of suckers. (They’re the ones paying for it all.)

If you’re one of those “suckers,” at least you’ve got company. I’m a sucker too.

All this time, I thought working hard for my money and staying debt free was wise. I thought sticking with one credit card - paying down the balance every month, no exceptions - was prudent. I thought driving a five-year-old car - fully paid off, nothing flashy - was a sensible thing to do. (more)

Milton Friedman - The Robin Hood Myth

U.S. Treasury 2009 Financial Report Shows Dire Course

If you listen to certain politicians and talking heads you might get the impression that the federal fiscal sky is falling. Unfortunately, unlike Chicken Little, they may be right.

The Treasury Department recently issued the 2009 financial report of the United States government. Whereas there is lots of talk in Congress and in the press about the federal budget, the annual report was released to near silence. That’s too bad, not only because the annual report is untainted by creative accounting but also because its message is too important to ignore.

That message is that the sky is indeed falling. (more)

Shorting The Middle Class: The Real Wall Street Crime

The press is all abuzz with news of the SEC suing Goldman Sachs for fraud. While this is certainly big news in itself, even more important is what it says about what the financial elite has been doing to America for the last 30 years: shorting the middle class.

The SEC's action is a perfect moment for us to look at the bigger picture of how the American people were sold on the promise of never-ending prosperity while Wall Street was overseeing a massive transfer of wealth from the middle class to the richest Americans.

The results have been devastating: a disappearing middle class, a precipitous drop in economic and social mobility, and ultimately, the undermining of the foundation of our democracy. (more)