FedUpUSA

Archive for August 8th, 2011

… confidence is lost.

After being down 634 points today the DOW futures are down 264 more overnight at this point, or approximately 900 points in less than 24 hours.

After being down a stunning 80 points today, the S&P futures are down another 28 overnight, or more than 100 in 24 hours.

Global confidence has been effectively shattered.  The outright lies of governments worldwide – that there was no need to de-lever, there was no need to take insolvent banks into receivership, we could spend more and more on “stimulus” programs along with social spending and that demand represented by deficit spending was all sustainable GDP – all is being exposed as an utter load of crap and the “valuations” these lies have supported are being systematically shredded.

There is no floor as things sit right now.  From a volumetric perspective we have broken key levels with the next serious support in the 900s on the S&P 500.

Price is now back to levels last seen in the early part of 2009 and if the market does not hold up there we are headed for the 666 lows and below.

This evening we are losing about ten points per hour in the overnight session, implying that we will lock-limit down at -50 on the S&P 500 before midnight!

The arrogance of our government – at all levels – has finally reached the point where the markets give the finger to it all.  What’s worse is that it’s not just us – it’s also Europe, where the willful and intentional refusal to deal with the peripheral nations’ problems have turned into a monstrous mess.

To put this in the proper perspective over the last ten trading days we have gone from 1328 on the S&P to 1081, a loss of nearly 19%!

The DOW has gone from 12458 to 10450 – a loss of nearly 20%.

The Russell is down more than 20%; that barrier, incidentally, defines a “Bear Market.”

The panic is not confined to the US and Europe, however.  We are now generating the same sort of panic worldwide!

All of this compels one to ask: Is this “the one”?   The detonation of the markets that results in the recognized entry to the Second Great Depression?

In my opinion, no.

Could it be?  Yes.  But that’s not the odds-on play here.

What I expected to see as indications in front of this decline didn’t happen, and the breakdown appears to be more driven by Obama and our Congress than anything else, along with the ham-handed ECB crap of the last few days than anything else.

The bad news?  The number of stops that have been cleared out – the people who have wildly thrown stocks over the transom during this plunge has cleared out what would have been bids on the way down.  We’re disgustingly oversold at this point to a degree that some of my daily indicators have a reading of “0″ – something that I have seen only replicated briefly last summer and during the depths of the collapse in 2008.  Not even during the terminal decline of early 2009 were these indicators pinned on the floor.  They are now.

The more-likely path is that these oversold conditions will produce a monstrous reflex move higher.  But in doing so those who shorted the market late or who sold out in disgust will both be caught on the wrong side of the move, and once again serious amounts of market liquidity will be destroyed.

No, what I believe is coming is that bounce, and then, some time not far in the future, the next move down is the one that doesn’t retrace.

Don’t get complacent.  It will be easy to do, if I’m right.  You’ll see 50, even 100 handles go on the S&P and perhaps as much as 500 or more points on the DOW.  You’ll think “it’s over” as there’s a relentless climb back from what looks like a date with The Devil.

If you are unprepared for what comes after that you will be wiped out.

Ok, someone please explain this one to us because we must be a little slow. Wasn’t the whole thing with the debt ceiling hike such that no more Congressional melodramas would have to be inflicted upon the population until after Obama [won|lost] the 2012 elections? Because according to the one again exponentially increasing debt balance of the US Treasury (there is another $51 billion in debt/cash coming in next week), the total US treasury balance (subject to the ceiling) is $14.54 trillion (and $14.58 trillion for total), an increase of $20 billion overnight, the Treasury will hit its latest ceiling no later than the end of September.

As the latest DTS statement indicates, the debt ceiling now is $14.694 trillion: a number which Tim Geithner will hit in about a month. So if this is due to a planned expansion as part of the two step plan, we would like to understand how it works, because the $400 billion additional ceiling is barely sufficient to cover the catch up in funding for the SSN and the various governmental trust funds.

And the far bigger concern is that tax receipts are about to plunge courtesy of the imminent double dip. So we wonder just based on what assumptions does the Treasury believe that its issuance needs will be met by this paltry debt ceiling.

ZeroHedge

Rick Santelli of CNBC, the man who ignited the fire for the Tea Party, vents his spleen about the blame game going on in Washington….and he’s precisely right.

Just how idiotic is it to seek to prevent what has already occurred? I suggest that is blatantly idiotic. Here is a case in point.

Earlier this evening, I noted ECB Seeks to Avert What Has Already Happened

I cannot help but laugh out loud at some of the headlines this evening. By any rational measure, confidence has collapsed, yet G-7 Seeks to Avert Collapse in Confidence

That the ECB needs to take these actions is a 100% sure-fire sign that investors have lost confidence.

That is ridiculous enough, but the height of absurdity is found in the G-7 Statement on Renewed Strains

We reaffirmed our shared interest in a strong and stable international financial system, and our support for market-determined exchange rates.

Today the G-7 advocated both currency and and bond-market interventions “whatever it takes” yet sings the praises of “market-determined exchange rates”.

I really do have to ask “Do These Idiots Realize How Stupid They Sound?”

Definition of Idiot

The above question is more complicated than it seems at first glance. In typical usage, “idiots” by definition do not realize what they are saying.

However, let’s throw out a definition as follows: Idiot – Someone devoid of common sense who lives in the shelter of academia or politics, with no real-world experience. Also included in this definition is someone with real-world experiences yet ignores the real world in favor of academics, politics, or desires.

Bernanke with a PhD, and Krugman with a Noble Prize both qualify as potential idiots under the above definition. Bear in mind that sometimes (when it suits their goals) both may say things that make perfect sense. I agree with Krugman about 20% of the time. Such is the problem with this definition of idiocy.

Common Sense vs. Purposeful Idiocy

On grounds of common sense, anyone simultaneously praising free markets and intervention on the exact same issue is an idiot.

But Wait! What if the statement was a lie on purpose, hoping that idiots in mainstream media would not catch the lie?

Recall that Jean-Claude Juncker, Luxembourg PM and Head Euro-Zone Finance Minister says “When it becomes serious, you have to lie”

Is the support for free markets just another purposeful lie?

One cannot easily determine the truth in these instances. However, in accordance with Occam’s Razor, the simplest explanation is likely the best.

One case suggests that potential idiots are telling lies on purpose. The simple case suggests that idiots can be expected to behave like idiots.

Thus, I come to the conclusion that “These Idiots Do Not Realize How Stupid They Sound”.

Mike “Mish” Shedlock
Global Economic Analysis

A picture is worth ten thousand words:

The futures this morning are down a massive 32 handles (2.65%) on the S&P and more than 250 DOW points.  The trading range last night encompassed nearly 30 S&P points.  As I send this out the S&P futures are tanking again, near the overnight lows, headed for a potential lock-limit (at -50) before the open.

Given the overnight range expecting extreme volatility is, of course, the order of the day.  But this much is certain: Coming just three years after our Congress and then-President Bush destroyed the value of retirement accounts by refusing to act against the “captains of industry” who had screwed millions of Americans out of their homes, we now have that very same Congress and our new President who tried to cover it all up with “free money” handouts continuing to play games - this time they ran into the wall with the federal government exactly as we did with our personal finances.

A wall that I, and a few others, warned existed and that we were headed toward at full-throttle with a maniacal Federal Reserve ChairSatan driving the bus called “America”, mashing the accelerator pedal to the floor with a chortle claiming that “I studied this stuff and knows how to avoid disaster.”

Well, how’d it work out America?  How’d it work out Congress?  How’d it work Mr. President?

Bernanke, for his part, even said that one of the goals of QEx was to pump asset prices – that is, make the stock market go up.  Unfortunately everything else went up too, except the dollar, which went down.  A lot.  The fact is that the dollar has been depreciated by about 20% over the last couple of years as a consequence of Bernanke’s actions, which means that the damage to your portfolio is far worse than it appears over the last two weeks in terms of purchasing power.  The ChairSatan continues to argue that “inflation is contained” but this is only true if you don’t need to buy energy – like, for instance, gasoline.  Nobody needs to buy that sort of thing, right?

You have lost not 15%, but in fact closer to 35% when one counts the currency depreciation!

Welcome to Hell America. 

You were led down this path of “easy” solutions (which weren’t) and “no pain” steps forward (which were lies) by a pack of congenital liars who refuse to speak to the very simple fact that any time two compound – that is, exponential – functions exist, and one has an exponent larger than the other, the larger will inevitably run away from the smaller.

That is: Debt, either in the system as a whole or in any specific subsector of the economy – can never grow faster than productive output does.

If you allow that to happen on an continual basis you will always wind up with a disaster.

This is a mathematical fact. 

I have long challenged any so-called “economic wonk”, no matter their credentials, to argue against this fact.  I further challenge anyone who presents a “solution” or “path forward” to put the outcome of their plan against this mathematical fact and either show that the condition will not exist or mathematically disprove the fundamental nature of exponents.

As I pointed out with a nice spreadsheet on 7/15 (and have written about for four years straight) this is an inevitable outcome any time debt grows faster than GDP.  We merely argue over how long we have before we blow up – not whether we will.  (The spreadsheet is here; copy it to Excel and play with the assumptions on the top right to your heart’s desire – you cannot change the outcome if debt grows faster than output – only how long it takes to blow up.)

Any “economist” or other policy wonk, no matter who it is – Federal Reserve Chairman, President, Senator, Representative, PhD in economics or otherwise – that is unable to do so is intentionally putting forward a claimed path for our society and nation that they know will lead to its destruction.

That, my friends, is a fact.