Swiss National Bank Intervenes, Market Not Convinced

The spike higher was the SNB intervention, but the market has subsequently sold off again, and both stocks and the Euro are now lower for the day.

Marc Faber Tells It Like It Is!

"I will tell you what the US needs. The US needs a Lee Kwan Yew who stands in front of the US and tells them, listen you lazy bugger, now you have to tighten your belts, you have to save more, work more for lower salaries and only through that will we get out of the current dilemma that essentially prevents the economy from growing."
"The problem i have with the investment universe is that i find it difficult to envision how the US and western Europe can return to healthy sustainable growth without a complete purge of the financial system and some type of catalyst. Something that restores some measure of social cohesion among people; it could be hyperinflation, a complete credit market collapse, widespread sovereign defaults, civil strife, major military confrontation.”

And regarding "Occupy Wall St":
"Basically we have the Keynesians and the Democrats and I'm not saying that all democrats are equal, but they want interventions and we have far too many interventions in the western world where the share of the total economy that goes to government and is government- sponsored has grown. And that essentially makes it very difficult for the western world to grow substantially. As to that huge level of debts, i don't see how the western world, including the US, japan, and Western Europe can actually grow. They're going to stagnate. And when you have stagnation over a longer period of time, people start to ask questions and then they go after minorities. And Wall Street is a minority – they are a minority and anyone else would have done the same. They use the system. But they didn't create the system. The system was created by the lobbyists and by Washington. So they should actually go to Washington and also occupy the Federal Reserve on the way."

Charles Hugh Smith: From Here, a Dead Cat Bounce

This is what I've been expecting. Wall Street is determined to rally stocks despite the atrocious economic news in the past three months.


Submitted by Charles Hugh Smith from Of Two Minds
The Turning Point
Some technical analysts are calling for a major rally from here, but the massive injections of financial insulin don't seem to be reviving the sagging global economy.
The stock market and economy are both at a turning point. Analyst Martin Armstrong's Economic Confidence Model (tm) set the turn date as June 13/14, 2011.

In the stock market, a number of technical analysts are issuing strong buys based on the negative sentiment of so-called "dumb money"--small investors--and the number of stocks below their 50-day moving averages.

Others such as Armstrong are predicting that Greece has no alternative to default and the Euro is untenable as "one size does not fit all."

It is rare to find a market where the technical evidence is so compelling for a strong rally yet the fundamental basis for such a rally so lacking. Exactly where do Bulls think the growth and rising profits are going to come from?

The answer for the past few years has been massive Federal Reserve/Federal intervention and stimulus, and a weakening U.S. dollar that boosted overseas profits via the legerdemaine of currency devaluation.

But three years of these policies have accomplished nothing but load the taxpayer with staggering amounts of debt: none of the causes of the 2008 implosion have been fixed or even addressed. As Armstrong notes, the massive interventions did not shorten the crisis, they have prolonged it.

This reality has filtered down to the political swamp, and now the politicos are hesitant to bet their own futures on additional trillions in stimulus and quantitative easing. For the first time in memory, the Federal Reserve is on the defensive. Simply put, its policies have failed to accomplish anything except prop up a rotten, insolvent banking sector that needs to be declared bankrupt and swept into the dustbin of history.

As I have noted here before, the next round of QE (quantitative easing) will fail to inflate the stock market regardless of its size or tricks. The fact that QE3 is needed will spook everyone who understands that it is a last-ditch effort to keep the Status Quo financialization from imploding, and since QE2's sugar-high was so brief, others will be spooked by the possibility that the next high will be even shorter.

This is the dreaded Diabetes Financial Syndrome--the Fed is pouring ever larger amounts of financial insulin into the system, but the financial "body" no longer responds to this insulin. The financial system then goes into toxic shock and implodes.

Let's look at two charts for context. Here is the S&P 500 from 1965 to 2011. Hmm, are there any aberrations visible here, any gigantic spikes of speculative frenzy? Just because these spikes of speculative, financialized frenzy have been normalized doesn't mean they are no longer speculative, financialized frenzies.



Has the economy really been healed? If not, then what is the basis of the market's spectacular rebound since 2009? We all know the answer: $6 trillion in Federal financial insulin and another $2 trillion in Federal Reserve insulin. The entire rally, in other words, is an artifact of Central bank/State intervention.

Courtesy of dshort.com, here is an inflation-adjusted chart of the S&P 500. This chart clearly illustrates that unprecedented Central State stimulus and intervention/manipulation have juiced the market higher than previous post-crash highs.


But the whole financial-insulin project is looking a bit long in tooth compared to previous post-crash markets. In the long run, perhaps we can attribute this extension of the euphoric high of "recovery" to the Fed's QE2, which pumped half a trillion dollars into stocks in a matter of months.

Short of the Fed simply buying trillions of dollars in stocks outright, then it looks like this "recovery" rally is about to have a Wiley E. Coyote moment, as it has raced off the solid ground provided by the Fed's QE2 injections and is now poised in thin air.

Of course the market could rally from here, but it's hard to see on what basis other than a technical dead-cat bounce. The Fed could announce another round of intervention, and that would certainly give the comatose body a jolt. But for how long?

If it does respond to gravity, then we might want to re-visit the definition of "dumb money:" small investors have been pulling money out of the stock market all during the QE2 insulin-rush rally while the "smart money" has been piling in, blubbering piously about the key tenet of their religious faith, "don't fight the Fed."

So which do you think is all-powerful, smart money--the Fed or gravity? We're about to find out.

BOJ Intervention Proves Worthless, Costly

from Zero Hedge:

The half-life of central bank interventions is getting shorter and shorter. After Shirakawa decided to show the Fed who is boss, only to be met with the biggest beatdown the dollar has experienced since March, tonight the BOJ decided to show Bernanke how it's done. Too bad the idiots at the BOJ have learned nothing from the SNB's Hildebrand, who was last seen cowering in a fetal positions, underneath his desk. After surging by 100 pips post the second intervention in a row, the "wolfpack" is back, and the yen has retraced more than half it losses in under 2 hours. This pathetic attempt to weaken its currency has just cost the BOJ another few trillions yen, while the end result is the same: a Japan whose export economy is about to be crushed, and a central bank president who will now be forced to join the ranks of the unemployed within a month.

German Finance Minister Reveals Fed Interventions In Forex Markets

I couldn't find a good article to clip and paste for this news story. I first learned about it on the Zero Hedge blog.

ECB Intervening in Forex Markets

This appears to be the fourth intervention at 1.2150 since May 19th. These interventions cost the citizens of these countries staggering amounts of money, but ultimately achieve very little.

from Zero Hedge blog:


With all the grace of a drunk Keynesian at an Austrian economists meeting, the Central Banks once again kill the EUR shorts and intervene to prop it up, for a ridiculous 250 pips intraday move. And thanks to Germany's Economics Minister Rainer Bruderle, we now know that the Fed is actively manipulating the FX pairs. Thank you Ben Bernanke for making sure that Atari has some confidence left in the manipulated market, as no humans are left any more.