Stocks Goosed Higher Despite Ongoing Budget/Debt Impasse

Between the dovish Yellen nomination, and the IMF virtually pleading for more money printing, stocks are now moving modestly higher. Dow up today.

IMF Presses for Even MORE Fed "Unprecedented Measures"

Obama's Gives Yellen the Nod As Fed Chair

from the WSJ:

Even the Wall St Journal recognizes that Yellen is going to push the envelope and risk even greater dislocations. And WE are their guinea pigs in this grand experiment!

Will There Be Treasuries Issued Next Week?

Treasury bills have maturities of anywhere from a few days to 52 weeks. Treasury notes have maturities of between two years and ten years. Treasury bonds have maturities of 30 years. And the Treasury also sells Treasury-Inflation Protected Securites (TIPS), which have terms of 5, 10 or 30 years.

Cotton Prices Crushed As Storm Weakens

via Reuters in Mumbai, India:
Oct 7 (Reuters) - Cotton futures in India, the world's second-largest grower, are expected to fall this week on hopes of higher output as rains lead to better yields and due to approaching supplies from the new season harvest amid sluggish exports.

by Reuters US:

* Dissipating Tropical Storm leaves cotton crops unscathed
* Fiber sinks to one-month low, extends losses on sell stops
* Global stocks slide as investors remain jittery over U.S. gov't shutdown
* USDA will not release World Agricultural Supply and Demand Estimates report on Friday
NEW YORK, Oct 7 (Reuters) - ICE cotton sank on Monday to post its biggest loss in over six weeks as the weakening of Tropical Storm Karen eased worry over crop damage in the United States, the world's top exporter, and as the U.S. government shutdown and budget impasse kept investors skittish.

Cocoa Continues to Rise Due to Global Long-Term Supply Pressures

from Bloomberg:
Money managers raised bullish bets on cocoa traded in London to a record as global shortages loom for the 2013-14 season that started this month, according to data from NYSE Liffe, the derivatives arm of NYSE Euronext.
Investors were net-long, or betting on higher prices, by 64,759 futures and options in the week ended Oct. 1, the Commitments of Traders report on the exchange’s website showed today. That was the largest bullish bet since publishing of trader holdings began in 2011 and compared with the previous record of 63,419 contracts in the week ended Sept. 24. The beans for December delivery fell 0.5 percent in the latest week.

from  the Business Recorder of Pakistan:

NEW YORK: ICE cocoa climbed to a more than one-year high and London futures rallied to the highest in about two years on Monday as the International Cocoa Organization forecast a deficit in the next four years and as recent rains stoked worry of supply concerns in West Africa, the world's top growing region.

 by the Public Ledger of Agra.net:
Cocoa futures closed significantly higher on Monday, underpinned by reports that global demand will outstrip supply, industry watchers said.
According to the International Cocoa Organization (ICCO), the global cocoa deficit will be 69,000-70,000 metric tonnes in 2013/14, up from 52,000 tonnes in 2012/13.

Corn Leaps Due to Storm Risk

Wheat and corn futures rose Monday after storms in the Midwest over the weekend threatened both crops.
Wheat for December delivery rose 7.75 cents to $6.9475 a bushel and December corn rose 6 cents to $4.4925 a bushel.
Weekend storms delayed the harvest of the corn crop and also caused delays in planting the winter wheat crop, said Todd Hultman, a grain analyst with DTN/The Progressive Farmer in Omaha, Neb.

Stocks Sink Into the Close

News that a major broker doubled stock futures margins, along with the pressure of the continuing budget impasse in Washington, sank stock markets in the last hour of trading today, with the Dow closing down 136 points.

This was somewhat surprising, given that stocks had rallied out of the starting gate from deep losses, cutting those losses in half by mid-day.

Budget Impasse Doesn't Worry Wall St

Dow opened down more than 130 points, but is rallying sharply at the open. The continuing budget impasse doesn't appear to worry Wall St.

Stocks Decline Sharply Overnight, Rally At Open

Stocks Down 9 of Past 11 Days

Stocks Continue Selloff!

Dow down 185, and stocks have broken through support from last week.

Despite Turmoil in Washington, Stocks Still in Bubble Territory

Even after all the temporary and partial shutdowns of various government agencies, and even with the decline of stocks by 128 points today, the long-term charts of the S&P 500 show that stocks haven’t declined very much, and remain in bubble territory!

"No Deal" Sends Stocks Plunging 125 Pts

Wall St Unconcerned About Partial Government Shutdowns

History would suggest that it will be short-term, but this time, Obama is refusing to negotiate at all with the House. Stocks are down only modestly, but appear to be in waiting mode, confident that imminent resolution will provide support for a relief rally. They may be waiting longer than they expect. Wall St has been blinded by both hubris and Fed easy money.

Why Are Energy Costs So High?

Answer: Because high energy costs are the agenda!

After Being Down 130 Points, Stocks Rally At Open

This despite that the budget and Obamacare impasse continues. Dow down only 90 now.

Credit Bubble At Historic Highs

Stocks Crushed on Obamacare/Budget Impasse

Dow is down 115 points! There appears to be no resolution in sight.

What a Farce!

It's up! It's down! It's UP again! It's DOWN again!

And now, it looks like it's starting to go up again!

Stocks Reverse Again, Rocket Higher Following Kocherlakota Speech Promising Still More Fed Intervention

from Business Insider:
Today, Minneapolis Fed President Narayana Kocherlakota, is suggesting we may need even more stimulus to get unemployment down and the economy humming.
The dovish Fed official employs buzz phrases like "whatever it takes," and he even suggests the Fed should ignore warnings of asset bubbles as it stimulates.
Quoting Kocherlakota:

"Doing whatever it takes in the next few years will mean something different. It will mean that the FOMC is willing to continue to use the unconventional monetary policy tools that it has employed in the past few years. Indeed, it will mean that the FOMC is willing to use any of its congressionally authorized tools to achieve the goal of higher employment, no matter how unconventional those tools might be. Moreover, doing whatever it takes will mean keeping a historically unusual amount of monetary stimulus in place—and possibly providing more stimulus—even as:

• Interest rates remain near historic lows.
• Economic growth rises above historical averages.
• Per capita employment begins to rise appreciably.
• Asset prices rise to unusually high levels, leading to concerns about “bubbles.”
• The medium-term inflation outlook rises temporarily above 2 percent.

What he's really saying is that they won't stop until the blow up the house. This is the level of ego and hubris of this Fed. And they'll succeed -- at blowing up the house!

And stocks have reversed again and are moving higher, after going back to dead flat.

Stocks Give Back All Gains, Now Lower

Stocks Scream

The economic news must be terrible, because stocks levitated 100+ points in the first 30 minutes today.

Complete Reversal From Wednesday

The Fed appears to be losing not only its grip, but its credibility as well.

Stocks Give Back Most Post-FOMC Gains

Dow down 127. Post-FOMC stocks closed up 147.

It's not just stocks, either. Gold, grains, and even crude oil have collapsed. The Dollar has also taken back most of its post-FOMC announcement losses.

Still More Fed Fatigue

Even Jon Hilsenrath, the Fed's "voice", has admitted that the Fed has a communication problem. The Fed is losing credibility. This is the consequence!

Fed Loses It's Muster

Virtually all the commodities that rose following the Fed's "no taper" decision on Wednesday have now reversed and declined sharply again, including soybeans, corn, and gold. The Euro has sold off again, and the US Dollar is rising!

Bernanke's Bubble, Commodities Version

This is the reaction to Bernanke's surprise non-taper announcement yesterday! It's Bernanke's Bubble, version II!

Gold's Best Day in Nearly Five Years!

Bernanke's Bubble

This is what will one day come to be known decades from now as "Bernanke's Bubble". He has been perpetuating it now for nearly five YEARS! Today's Fed announcement is just the latest installment.

 

Note also that on this chart, stock values are at a level on the Bollinger Bands where they have historically reversed and fallen back to the Exponential Moving Average. Will they do that again, or continue even higher, taking us well outside the Band that represents two standard deviations, and propelling us toward levels that represent three standard deviations? If so, then the bubble behavior is even more compelling, and is even more likely to collapse in a house of cards.

Today's Dollar Devastation

What more need be said? The Fed has said there will be NO tapering. None!

Prepare for destruction!

Bubble Status

Are we closer to a top, or a bottom?

This chart shows the stock market since the year 2000.

You Know You're In a Bubble When...

The stock market levitates 120 points on NO news whatsoever!

Crude Hits 2013 Price High

This is now the highest price for crude oil since May 2012.  It's currently hovering around $109/barrel.

Pricey Pork

Corn Collapse

Cotton Crash

I'm No Prophet, But I DO Make Profits!

I have studied and used various analytical techniques. In grad school, I studied "financial analysis" (balance sheets, P/E ratios, etc.) and "fundamentals analysis" (news, trends, etc.), and "market analysis". I've since studied technical analysis also. And now, of course, we have the dominant current analysis technique -- FED analysis (what the Fed is doing, saying). :) I've also studied Elliott Wave analysis with one of its most prominent practitioners. I've also studied what are called "fractals" and chaos theory. I've also recently studied bubble analysis with Didier Sornette, who is widely considered to be THE expert on log-periodic exponential asset bubbles. NONE is perfect, and ALL have serious flaws.

Technical analysis is not really a single analytical technique. There are as many variations as there are people who practice it.

But in my readings, I eventually ran across a book by Phillippe Cahen, who used a technique unlike anything I had seen before. He was an upper-level executive for one of Europe's largest investment banks, so he had instant credibility. I then bought others of his books, and the most recent ones were written in French. I spent 8 weeks translating them into English. Cahen had developed and mastered a method which he copyrighted called Dynamic Technical Analysis.

He points out in his book that most other forms of technical analysis are static, but the financial markets are dynamic. I think this is one of that technique's flaws. Thus, in order to correctly reflect the dynamic nature of the financial markets requires a "dynamic" form of analysis.

Over time, I developed my own, which is as dynamic as the markets themselves. I use the market itself to tell me when to get in, when to get out, etc. It takes bits and pieces from various analytical methodologies. I don't dismiss any analytical technique, but I also don't limit myself to any method either.

In my studies, I also made the acquaintance of a man whose name I never learned. But a close friend of his revealed to me that Phantom is a famous investor on Wall St, and a immensely wealthy man. He referred to himself only as Phantom. He offered me a book online FREE called "Phantom's Gift". In it, he doesn't offer a technique, but instead, teaches principles. That struck a chord with me, and I absorbed those principles into my own methods.

As for accuracy, I know of NO ONE, and NO analytical method, that is consistently accurate. Kyle Bass accurately predicted the real estate housing crash, so I follow his writings. He has credibility due to his track record. He made billions for the investors of his hedge fund. But other people who have accurately predicted other market phenoms have subsequently been wrong. This anomaly appears to be the rule rather than the exception. Just because someone hit a home run today doesn't mean the won't strike out tomorrow. This has lead me to devise and state to myself a little aphorism:

"Predicting the future is for prophets, not profits."

I'm no prophet. But I do make profits!

The Bubble From a Time Perspective

Wall St investors have long forgotten the previous two crashes, which declined 45% and 55% from their peaks.

Not Much Correction Here

The recent correction in stocks hasn't changed the appearance of the long-term charts very much. Stocks still haven't even dropped to the 20-period moving average, and are closer to the top, than the bottom of the channel. Stocks haven't even come close to the exponential moving average!

This is just more evidence that the bubble is alive and well!

The Bubble Lives On!

We're seeing a short-covering rally today in stocks. Wall St is still asleep!

“...a pack of lemmings looks like a group of individualists compared to Wall Street once it gets a concept in its teeth.” Warren Buffett

 “Faith in central banks today is equivalent to faith in the word dot-com in 1999 or faith in the eternal rise of housing prices in 2006.” John Mauldin

Post-Close Hints At New Recession

Is This a Bubble Yet?

This was tweeted today with the following message:
"Wow. I didn't think we could push the Sornette bubble singularity beyond May, but we've gone to the edge of the edge." John Hussman, PhD

What Is the Triffin Paradox (or Dilemma)?

from FT.com:

This is where incessant foreign demand for a reserve currency would force its issuing country to run persistent current account deficits. [1]
A reserve currency is a foreign currency that is traditionally held in countries’ official reserves because of its global importance as a medium of exchange and its inherent stability.
The reserve-currency country enjoys the consumption benefit of running a trade deficit, while the rest of the world benefits from the additional liquidity, which helps facilitate trade.
The cost comes from the declining value and credibility of any currency which runs a persistent trade deficit - eventually leading to a reluctance of creditors to hold the reserve currency. [2]
ExampleAs Francis Warnock (professor at the University of Virginia's Darden School of Business) points out in a paper for the Council On Foreign Relations, in 2010, the US confronted a dilemma first identified in 1960 by the Belgian-born Yale economist Robert Triffin.
To supply the world’s risk-free asset, the country at the heart of the international monetary system has to run a current account deficit. In doing so, it becomes more indebted to foreigners until the risk-free asset ceases to be risk-free.

Boom Bust Fed

China Crushed By Bad Debt

What Is Backwardation?

from Mish Shedlock:
Recall the definition of backwardation: Current price above future delivery price.

There are many reasons this can happen with commodities, but the typical explanations are: temporary short-term supply shortage, expected future supply, or expected falling demand.

Ben Bernanke Is Going to Blow Up the House

"What all this clearly demonstrates is that everywhere you look, the language emanating from governments and central banks is becoming more and more difficult to sort out; and I am afraid there is a very simple reason for that: they have ventured into uncharted realms and have absolutely no idea how they will ever find their way back.

"The one thing I am certain of, though, is that the trip our so-called leaders are taking us on will end in disaster, and perhaps by using a disastrous outcome as the cipher key we may find that all the symbols fall neatly, if disturbingly, into place."
Grant Williams, chief investment strategist for Mauldin Economics

"Thus, when I contemplate the amount of damage that will be done by four years (and counting) of QE, I really just shudder in wonder at how big the disaster might be, though there is no doubt it will be a disaster. The Fed has expanded its balance sheet to $3.5 trillion and now owns over 20% of outstanding U.S. debt.

"Either it is going to continue to buy bonds forever, which is impossible, or there is going to be a massive dislocation at some moment in time because someone else is going to have to buy that debt when the Fed ultimately stops, even if it doesn't choose to sell anything (and just lets the debt run off). There will be no painless extrication from QE, and as I have said, I don't believe the Fed will be able to leave ZIRP willingly."
Bill Fleckenstein of Fleckenstein Capital

Bernanke is Trashing the Dollar

Again!

Stocks Just Inches From New All-Time Record Highs

After two days of record closing highs near the end of last week, stocks are now just inches away from fresh all-time record highs. Once Ben Bernanke indicated that he was going to continue QE indefinitely, stocks once again have gone endlessly skyward in true bubble fashion.