60% Rally and how it compares to prior ones.

Hope Springs Eternal.

* Year over Year Retail Sales: 9.3% average in prior 60% rallies versus -5.3% in the current one
* Consumer Confidence: 95.5 average; 53.1 now
* Capacity Utilization: 79.9% average; 66.6% now
* Year over Year Industrial Production: 4.1% avereage; -10.7% now
* ISM: 53.9 average; 52.6 now
* Payroll employment gains over period: 2.2% average; -2.0% now
* Decline in continued unemployment claims from cycle peak: -26.3 average; -11.6% now
* Year over Year growth in total credit market debt: 9.3% average; 3.0% now
* Year over Year growth in household debt: 8.8% average; -0.1% now
* P/E Multiple: 16.8x average; 20.0x now

With the exception of ISM, this 60% rally is completely nonsensical. On 9 out of the key 10 economic dimensions we are cruising purely on hope and on expectations that Uncle Sam will continue printing trillions of dollars simply to get us out of this mess. Or not even that, but merely the excess hundreds of billions in liquidity courtesy of Ben Bernanke, are following the path of least resistance straight to equities. Whatever the reason, the current rally, at least when juxtaposed with previous ones, is a complete sham. Anyone who believes there is any ounce of economic fundamental credibility to it needs to take a careful look at the data. Unfortunately, all will be happy to be blissfully ignorant until, as always, it is too late.

Single Best Investment in history = 258,449%

The single best investment — in terms of greatest return on invested dollars — has been the lobbying efforts of the major banks and finance firms and the bailouts that they received.

They spent $114.2 million dollars in contributions toward the 2008 election, according to the the nonpartisan Center for Responsive Politics. The companies that have been awarded taxpayers’ money from Congress’s bailout bill spent $77 million on lobbying and $37 million on federal campaign contributions, the Center finds.

These firms political activities have yielded them $295.2 billion from Recapitalization, TARP and other assorted bailouts.

The return on investment: 258,449 percent.

Why you shouldn't be invested in the market

The fed is blatantly monetizing debt. They issued debt and 30 minutes later bought it back.

click here for zero hedge where i got this information

Below is the 10:00 am announcement of a new $5 billion auction of 2 Year Fannie Agencies:



A mere half hour later, the NY Fed announced that as part of tomorrow's "Outright Agency Coupon Purchase" precisely this CUSIP would be one of the securities repurchased:

These shell games are getting tiresome. A half an hour turnaround time between issuance and buyback? Really Ben?

As Jim Bianco comments, some answers are far overdue, when trying to explain this most blatant example of monetization to date.

1. Who bought these securities at auction? The potential for foul play here is high if the news of such a buyback accidentally leaked to a few individuals in the market
2. Who does the Federal Reserve think it is fooling by monetizing in such a roundabout way?

Hey FED why is Goldman so special?

This is exactly why I own a ton of Goldman debt (bought last march).

A Short Question For Senior Officials Of The New York Fed

At the height of the financial panic last fall Goldman Sachs became a bank holding company, which enabled it to borrow directly from the Federal Reserve. It also became subject to supervision by the Federal Reserve Board (with the NY Fed on point) – hence the brouhaha over Steven Friedman’s shareholdings.

Goldman is also currently engaged in private equity investments in nonfinancial firms around the world, as seen for example in its recent deal with Geely Automotive Holdings in China (People’s Daily; CNBC). US banks or bank holding companies would not generally be allowed to undertake such transactions - in fact, it is annoyed bankers who have asked me to take this up.

Would someone from the NY Fed kindly explain the precise nature of the waiver that has been granted to Goldman so that it can operate in this fashion? If this is temporary, is it envisaged that Goldman will cease being a bank holding company, or that it will divest itself shortly of activities not usually allowed (and with good reason) by banks? Or will all bank holding companies be allowed to expand on the same basis. (The relevant rules appear to be here in general and here specifically; do tell me what I am missing.)

Increasingly, the issue of “too big to regulate” in the public interest is being brought up – an issue that has historically attracted the interest of the Department of Justice’s Antitrust Division in sectors other than finance. Should Goldman Sachs now be placed in this category?

Given that the Fed has slipped up so many times and in so many ways with regard to regulation over the past decade, and given the current debate on Capitol Hill, now might be a good time to get ahead of this issue.

In addition, there is the obvious carry trade (borrow cheaply; lend at higher rates) developing from cheap Fed dollar funding to the growing speculative frenzy in emerging markets, particularly China. Are we heading for another speculative bubble that will end up damaging US bank balance sheets and all American taxpayers?

The FED is the Mortgage Market

Here are the numbers according to Chris Martinson:

Federal Reserve Buys More Than 100% of Mortgages Issued in 2009
So far in 2009 (through August), a total of 3.2 million existing homes were sold for an average price of $217,000, while 263,000 new homes were sold for an average price of $264,000.

Taken together, and assuming that we live in a world where 10% is the average down payment, we get this table:
That is, a total of ~$686 billion in new mortgages were issued in 2009 (through August).

Now let's look at how many Mortgage Backed Securities (MBS) and agency debt obligations were accumulated by the Federal Reserve on its balance sheet over the same period of 2009:It turns out that in 2009 (again, through August), the Federal Reserve has bought $624 billion of MBS and a further $98 billion of Agency debt, for a total of $722 billion in money injection into the housing market through Fannie Mae, Freddie Mac, and the FHLB.

In other words, the Federal Reserve alone bought $722 billion of mortgages and agency debt when only $686 billion in new mortgages were issued. So, through August, the Fed bought more than 100% of the entire supply of new (purchase) mortgages in 2009.

That's not a free housing market; that's a market bought, owned, and sustained by the Federal Reserve's willingness to print up three quarters of a trillion dollars out of thin air.

Head over and check out the rest of the post.

An Interesting Fact about this Overbought Market (part 2)

The NASDAQ has had 13 straight positive days. Today will/might be the 14th.

An Interesting Fact about this Overbought Market

The S&P 500 is now trading 20% higher than its 200-day average. Although there have been rare occasions this deviation has been higher, note that this is typically an "extreme".

• During the 2002/2007 bull market, we never hit +20%.
• 1986 and 1987 saw 19%/20%, but no higher.
• 1982 saw the deviation briefly above 20%.
• 1975 saw a marginal move above 20%.
• 1943 saw the 20% deviation again prove good resistance.
• 1935 and 1936 though saw the deviation above 20%.
• 1933 saw the S&P 500 59% rich to its 200-day.
• 1929 saw the 20% deviation again prove good resistance.
• 94% S&P 500 stocks also now above their 200-day average.

Thank You Simon Hobbs

The man succinctly summarizes our current situation and absolutely owns the Fast Money talking heads.

For those of you who want to know who Simon Hobbs is click here

The Recession is Ending, so lets extend Unemplyment benefits by 13 weeks!

So all of the governments talking heads keep spewing this baloney that the recession is over yet they turn around and do something like this. From AP

WASHINGTON (AP) - Despite predictions the Great Recession is running out of steam, the House is taking up emergency legislation this week to help the millions of Americans who see no immediate end to their economic miseries.

A bill offered by Rep. Jim McDermott, D-Wash., and expected to pass easily would provide 13 weeks of extended unemployment benefits for more than 300,000 jobless people who live in states with unemployment rates of at least 8.5 percent and who are scheduled to run out of benefits by the end of September.

The 13-week extension would supplement the 26 weeks of benefits most states offer and the federally funded extensions of up to 53 weeks that Congress approved in legislation last year and in the stimulus bill enacted last February.

People from North Carolina to California "have been calling my office to tell me they still cannot find work a year or more after becoming unemployed, and they need some additional help to keep their heads above water," McDermott said.

They claim the recession is easing but need to extend unemployment benefits another 13 weeks? What this does is understates the unemployment number as those people covered under unemployment insurance aren't factored into the jobless numbers or jobless rates that the government announces.

Doesn't exactly sound like the recession is ending.

James Mill, Of the National Debt, in: Commerce defended (1808).

Were the exhortations to consumption, of Mr. Spence and others, addressed only to individuals, we might listen to them with a great deal of indifference; as we might trust with abundant confidence that the disposition in mankind to save and to better their condition would easily prevail over any speculative opinion, and be even little affected by its practical influence. When the same advice, however, is offered to government, the case is widely and awfully changed. Here the disposition is not to save but to expend. The tendency in national affairs to improve, by the disposition in individuals to save and to better their condition, here finds its chief counteraction.

[…] One of the most powerful restraints upon the prodigal inclinations of governments, is the condemnation with which expence, at least beyond the received ideas of propriety, is sure to be viewed by the people. But should this restraint be taken off, should the disposition of government to spend become heated by an opinion that it is right to spend, and should this be still farther inflamed by the assurance that it will by the people also be deemed right in their government to expend, no bounds would then be set to the consumption of the annual produce. Such a delusion could not certainly last long: but even its partial operation, and that but for a short time, might be productive of the most baneful consequences.

[…] It might be not useless to those who are the most averse to hear of the fact, barely to allow themselves for one moment to suppose it real, and then to ask themselves, whether it ought to be disguised or to be made known; whether the fatal cause is most likely to be removed by concealment or by exposure.

You do realize its a Recession Mrs. Obama

From the Washington Post:

Let's say you're preparing dinner and you realize with dismay that you don't have any certified organic Tuscan kale. What to do?

Here's how Michelle Obama handled this very predicament Thursday afternoon:

The Secret Service and the D.C. police brought in three dozen vehicles and shut down H Street, Vermont Avenue, two lanes of I Street and an entrance to the McPherson Square Metro station. They swept the area, in front of the Department of Veterans Affairs, with bomb-sniffing dogs and installed magnetometers in the middle of the street, put up barricades to keep pedestrians out, and took positions with binoculars atop trucks. Though the produce stand was only a block or so from the White House, the first lady hopped into her armored limousine and pulled into the market amid the wail of sirens.

Then, and only then, could Obama purchase her leafy greens. "Now it's time to buy some food," she told several hundred people who came to watch. "Let's shop!"

So i can't even begin to put a price on what this certified organic Tuscan kale cost us taxpayers. Why not just have some intern go out and get you some? It is this kind of showboating and wanton spending that drives me nuts especially during these hard economic times. Now I realize that Bush was a huge abuser of his privileges as president and spent more time at his ranch and in Kennebunkport than he did in the White House, but people are more willing to overlook these things when times are good. You are supposed to be setting an example for the American people. Exercise some restraint as everyone else in America is doing so.

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