Finality Friday - Parabolic Blow Off Pending?

The "real deal" today was The Jobs Report.

It came in at up 110,000, unemployment at 4.7%, with huge upward revisions in both July and August. Hmmmm...... Nearly all of the August revisions were in government - specifically, teachers.

The instant futures reaction was up strong, and the dollar got a bid.. but not for long.

But look out - this says a few things, all of which are big trouble for the Equity Markets if the "Short Bus" riders get their IQs up above shoe-size category:

• Their rate cut on the basis of "weak" employment - the August release - was likely inappropriate. This puts the odds of the inflation monster poking his head out. Did the Fed Panic? It now looks like the Fed was driven by FEAR and not data, which is VERY BAD going forward. The last thing you want in a regulatory body is a reaction that is driven by irrationality and public cheerleading!


• The rate cut arbitrage on the futures market disappeared almost immediately. No, you think? But hasn't essentially this entire rally been on the backs of a cycle of easing in rates? The futures market now says that's GONE. Will the equity markets "price that in"? Regardless of whether the EQUITY markets do or don't, the FUTURES markets did - immediately.


• Average hourly earnings up 0.4% (oh oh, that'd be almost 5% annualized, and isn't that "inflation" in a place nobody at The Fed wants it - WAGE inflation?) How do we get more rate cuts in the face of WAGE inflation?


• Earnings growth is still going in the toilet according to the estimates.

The 10's yield exploded on this news, popping instantly to 4.606% - a 1.70% move - before easing back slightly to 4.592%, and then resuming its rise. As I wrote this it was at 4.61%, or up 1.84%. NOT GOOD folks - this is the bond market pricing in INFLATION, and is THE BOND MARKET saying that the Rate Cuts were the WRONG decision.

WaMu (WM) warned big to the tune of an expected 75% haircut. The premarket yawned and appears to be trading up on that news? A 75% haircut puts their quarterly earnings at half of the dividend but they also said they're keeping the dividend! Amusing.....

Merrill Lynch (MER) has now pre-announced that they intend to lose fifty cents a share this quarter. The immediate result in the premarket was a whack for a buck a share; that lasted all of 15 minutes before the "buy buy buy" guys were out in force.

RIMM reported a miss on earnings (by a penny) last night and guided to the low end of previous expectations forward, yet the market yawned (again). The Momo guys were out in force this morning adding the stock to "conviction buy lists" - based on..... lowered guidance? Hmmmm.....It looks like anyone who bought into this yesterday has done well - so far. How far does that rabbit hole go on the upside? I have no idea, but I ain't gonna chase it because I know full well how that story ends. It sure looked to me last night that the CALL buyers were going to be decimated from IV destruction, but it didn't work out that way - congratulations if you took that bet, it was a nice double. Hope you took your profits......

Oh, and if that's not bad enough, how about the Consumer Credit report?

Here's the short form if you don't want to read the whole thing - revolving credit increased at an annual rate of EIGHT PERCENT while non-revolving increased at a rate of 4-3/4%, both above the rate of increase in incomes but the latter ESPECIALLY BAD. And what's FAR WORSE interest rates on credit cards rose by over 3/4 of a percentage point in the last quarter, so not only are we seeing increasing revolving debt more and more interest is being paid on it, with the average now at 15.25%, up from 14.47% three months ago.

Did you see the media report on this?

OH FUCK NO because it says that Chuckie is in deep shit and is charging the piss out of his credit cards to keep spending, while the banks are hiking interest rates like mad because they know the wall is approaching at warp speed and somehow they have to be able to make money if the rate of default goes up precipitously!

Nor did you see them report on this!

"The U.S. Treasury Department wants to expand its power to regulate how Fannie Mae and Freddie Mac access the debt markets in a reform that could stifle growth of the mortgage finance companies' investments, according to a document obtained by Reuters."

That's good for housing and the economy, right?

Heh PermaBulls, your asshole is showing and it stinks!

Here's the basic read from market action today:

• The Fed cut rates into a false reading on employment (now proven, right?) and yet hasn't taken it back - and not only won't take it back, they'll cut more all the way down to under 4% in the next three months. They will do this even though inflation is ROARING in reality and will be getting worse - much worse!
• "Out of the blue" preannouncements that totally wipe out profits, either being huge losses instead of gains (Merrill) or 75% of expected profits (and indeed more, since there's a dividend that can't be paid from what's left) are good news, not bad, and worth share price increases. Remember, the estimates (and share price to that point) were based on profits, not losses.
• The Dollar doesn't matter. A loss of 10% in a year is immaterial; its all good because exporters can export cheaper, even though our trade balance is $800 billion a year skewed towards IMPORTS, not exports.
• Inflation doesn't matter, and especially not food or energy. They're "volatile" and thus to be ignored even though over the last TEN YEARS food and energy inflation have both been running at more than TEN PERCENT ANNUALLY OVER THE ENTIRE PERIOD.
• WAGE INFLATION doesn't matter either, even though the current employment report suggests a 4.8% (annualized) wage inflation rate which, by the way, is half of price inflation in the essentials (food and energy again.)
• The PEG RATIO doesn't matter, even though on current estimates for the Third quarter the PEG ratio stands AT MORE THAN EIGHT and assuming a 100% "beat" on those estimates still stands at MORE THAN FOUR. This, despite the fact that historically the P/E/G ratio for the S&P 500 is between 1.5 and 2. The last time we had P/E/G ratios ignored was in 1999 and early 2000, and we know what happened there, right?
• Consumer credit card revolving balance growth doesn't matter, nor does the precipitous rise in interest rates actually paid on those credit cards. Chuckie can just go on charging all he wants and never actually pay it off.
• The fact that 2007 ABX bonds are the worst performers ever doesn't matter either. That is, even though the fraud is nowhere near out of the system yet all is ok - higher prices please!
• We have disclosure of outright fraud in analyst calls from a former "housing analyst" who now is "self-employed" and stated that her employer required her to maintain an "aggregate" rating on the sector! Yet that doesn't matter either, so when we hear "buy" from an analyst we should immediately do so (even when the "analyst" who issues the call has a proven record of losing you 60% of your money in the previous year!) For the record - that's two DIFFERENT analysts referenced there..
• All that does matter is that prices are going up and China's market will provide all the supply requested into unlimited demand, and they will continue to EAT all of the inflation we export to them. Forever.
• The Fed has abdicated all responsibility for the nation's currency, caring only about one thing - the price of financial assets. Never mind that you can't possibly outrun inflation this way over any length of time. Oh, and CONGRESS has abdicated its Constitutional responsibility for the currency too. Time for a Constitutional convention?
• The cops are (still) absent from the system - intentionally. Intentionally-false rumors of buyouts are started and used to push specific stocks around, and it now appears that Bernanke's call logs (which were FOIA'd) lend credence to my belief that the Fed's moves, especially the discount rate cut, were communicated to firms that profited from that material inside information. WHERE ARE THE SUBPOENAS, INVESTIGATIONS AND INDICTMENTS? MISSING, that's where.

For me?

If it is confirmed that we're heading for a blow-off speculative top, which appears increasingly likely - I'm out other than for daytrades. I know how this ends; been there and seen it before. I'll daytrade the futures into this in an attempt to profit from the intraday swings but if you think I'm going to try to take positions in these stocks you're on some really good drugs.

For all intents and purposes we're there guys. Confirmation is literally a few points away on the S&P and Dow, and the probability tilts that way.

The not-amusing part of this is that down this road - which has been engineered by Bernanke, Paulson and Wall Street - lies the ruin of the American Middle Class and Retirees.

Not "trouble" - ruin.

And neither Wall Street, The Government, NOR THE MEDIA, WHO IS SUPPOSED TO BE THE CHECK AND BALANCE ON THIS SORT OF HORSESHIT, GIVES A FUCK.

Guys, facts are facts. We've had double-digit inflation in food and energy for the last five years. For those in the middle class this is the real deal and yet it is totally unreported.

What did it drive? It drove consumers to take "home equity" out and spend it to "make up the difference" and keep their lifestyles growing - or just going. That wasn't reported as what it was - blatant fraud and deception - either. Nor was the fact that you can't support home prices at 5x annual incomes, on average, for long - eventually you reach a tipping point where it all comes apart. We are now there and yet there is NOT ONE major media outlet that has HONESTLY reported on any of this.

NOT ONE.

You've heard it here, you've heard it on Housing Panic and a few other sites, but you haven't heard it on CNBullshit, in The Wall Street Journal, The New York Post or anywhere else in the mainstream media.

NOR WILL YOU BECAUSE IF THEY PRINT THAT ALL OF THEIR REAL ESTATE AND MORTGAGE COMPANY ADVERTISING WILL DISAPPEAR OVERNIGHT AND THEY KNOW IT.

THE FACT that Moody's just yesterday said that the 2007 mortgage trusts are performing worse than any others in history has been totally buried. Banks "fixed it" after the initial subprime blowup in early 2007? No they did not - in fact, the lies continued up until the secondary market shut down on them and forced them to stop that shit.

Yet this is what Bernanke is trying to bail out!

Media attention on this? ZERO.

Bernanke's phone records have been FOIA'd. What did it show? That he was talking to all sorts of "market participants" and others just before the Discount Rate cut. Where are the demands for CRIMINAL investigations on all of the prime brokerages to see who, that was on the "call tree" that originated there, traded on that inside information prior to the "surprise" on August Options Expiration? The trading pattern in the Spoos that morning and the previous day strongly suggests that illegal trades took place.

WHERE ARE THE COPS?

The last time we did this (speculative blow-off top time), in the late 1990s, rampant corruption was the rule of the day.

Analysts with clear conflicts of interest that were undisclosed. Front-running. Outright requirements that you buy stock after the IPO to support the price or not sell for some period in order to get allocations (and by the way, this is not a rumor - I was personally told that I would not receive any further allocations if I flipped the ones I was given! I said "fuck that" and sold into the run anyway, and sure enough, never got another allocation! Guess what? That company went bust. Good call right?)

What's worse I personally had conversations with people in the government and told them up front that the Internet growth claims being made by every one of the big Internet companies were knowingly false. Why did I know? Because we ran AS 3365 and had full access to the entire Internet Routing Table. I knew exactly how fast that table was growing because we saw it each and every day - and so did thousands of others. Indeed, I was the one buying more memory as it grew and more CPU to compute it so I was as plugged-in as one could be - and so was EVERY OTHER MAJOR INTERNET COMPANY.

Thousands of people knew those claims were utter bullshit but because that was absolutely "material inside information" and I don't believe in breaking the law I didn't short the fuck out of every one of those firms!

Could I get anyone to print the truth in the mainstream media? NO! Did the regulators give a fuck? NO!

Did thousands of firms subsequently blow up costing investors hundreds of billions of dollars, as both a direct and indirect consequence? YES!

Why did I go to 100% Municipal Bonds in the middle of 1999?

That's why - the fraud was just too pervasive and intentionally ignored by the regulators and the media. It was obvious that it was going to end in tears but there was no way to know EXACTLY WHEN.

Has any of this changed? Apparently not.

We're now learning that Sarbox, which everyone whines about, was in fact 5% of what had to happen to fix it.

MAYBE, when the dust from this settles, we'll get actual meaningful regulation - but I doubt it, because for that to happen journalists will have to do their fucking job and get this shit out in front of Main Street so that politicians cannot hide from it.

Just like last time, they will dodge their responsibility and claim "oh it was all a speculative bubble you should not have bought into", when in truth it was nothing of the kind - it was all based on OUTRIGHT FRAUD, just like the claims of "30% internet traffic growth monthly" was.

In fact, the game appears to be essentially identical to what it was the last time, with the exception of the IPO traffic because, well, there aren't any IPOs taking place. But we've still got analyst "upgrades" and "ratings" that we now know are based on an employers requirement that a given sector retain an aggregate rating - and that, of course, was not disclosed to the public at the time!

Is this an isolated incident? I bet not.

We've got a hell of a pattern here, and I'm indicting THE PRESS, because it is in fact THEIR JOB to honestly report this shit and serve as a check and balance on that crap.

Yes, this means CNBULLSHIT, The Wall Street Journal, Bloomberg and others.

ALL OF YOU in the so-called "mainstream media."

The entire media chain was complicit in the bullshit of the late 90s, you were complicit in the housing bubble and now you're complicit in this.

Of all of you RICK SANTELLI is the only one I've heard that actually calls 'em without bias and pays attention.

The rest of you?

You want off my "fuck you" list you can start doing your fucking job! When you do I'll list your name just like Rick Santelli's!

Guys and dolls, you do what you want. And no, contrary to a number of predictions and "moonbat" emails I've received lately, the Ticker is not going away.

It will continue to document the fraud, the abuse, the blow-off - if that's what we're getting - and I suspect we are.

I will trade this on an daytrading basis - fuck it - I've got enough time invested in fucking around with the market thus far this year that I'm sure as hell going to trade the shit out of the parabola if it indeed is occuring and make a nice wad of cash on the backs of The Pigmen and The Sheepie.

Far more troublesome however is the untold part of this, which is the raw destruction of The Middle Class in this nation. Social Security recipients and Medicare users are and will continue to get fucked up the ass by the cooked inflation numbers and blatant manipulation of the currency. When (not if) China unpegs the middle class, who have born the brunt of this, will be destroyed. WalMart's prices will go up 20% or more, which will push huge numbers of those folks under the poverty line.

The Federal Government will be forced to repudiate Social Security and Medicare, with the first of this coming in less than 10 years. Long before then the market will have imploded, sucking the 401ks of Americans dry. Then what?

Something sobering to think about......

Have a great weekend - I'll see you on Monday....

Here's your technical!