That Giant Sucking Sound, Wall Street

[FranchiseKid]

As I type this the markets are all up 1.25% and the USD is down.

Isn't it a day like today that makes you want to "buy the dips"?

Isn't it a day like today that makes you breathe a sigh of relief that Greece will be "rescued"?

Isn't it a day like today that makes you almost feel that you are missing that next "leg up" of this "new bull market"?

Isn't it a day like today that makes you read that story on CNBlie titled, "Did the correction happen in January?"

Isn't it a day like today that makes you buy, buy, buy?

Yes, of course. The individual investor's fear of being left behind in this "new bull market". And what is this new bull market built on? Well, more debt, of course. Yeah, that's it. The stuff real good ones are made of. Easy money and cheap regulation, that type of stuff that says, "Not today Fundamentals".

The giant sucking sound you hear is the individual investor's money entering the market to "buy the dips" which is nothing more than the large bank's chance to sell you that stock at the top of this next crash. Where do you think you get your shares from when you buy them? There has to be a seller, right?

Oh, well certainly mutual funds are buying. They are so smart, those fund managers.... Um, no. Mutual fund cash levels are very low meaning they are fully invested. You think they would have lived to tell about how they sat out a 60% rally in the S&P in 2009? Nope. They are all in.

Oh, but pensions are so flush with cash.... don't even go there.

Well, municipalities are filled to the brim with cash, they must be buying... right. Dream on. We have entire states that are issuing IOU's. IOU's? What is this 3rd grade? Can I pay a toll with my ham sandwich, or trade you my cookies for some power?

If you think the smart money is buying right now, think again. This is how the individual investor gets hosed. We are always the last ones in and told to "buy the dips", and oh my favorite, "this correction will provide a great buying opportunity"..... right. Um, unless it doesn't.

Nope. This is it.

Do not be fooled. Do not think you can time this market. Remember, this market no longer operates according to any underlying fundamentals and/or economic data.

This market is now a funding tool for US debt and a profit center for the banks. Look out below.

The global debt bubble is now the largest on record and second place is not even close. We have no possible way of paying back all of this debt as the entire globe is easily 20 times leveraged. You think Greece, Spain, Ireland, Portugal, Dubai, et al are isolated events? Nope. China is on the verge of such a major lending bubble that they would need the entire population to come down from the hills and start leasing office space and buying condos to support what they have created. The largest mall in the world in China has ten tenants. Ten. And a few of them are the likes of Kentucky Fried Chicken.

I am more certain than ever. The script followed by Wallington is so transparent it is now scary.

I cannot urge you enough. Be prepared.

[River Rafter]

Thanks FK! So, tell the truth, is all your money in your mattress?

[jnr0104]

AMEN brother!

[FranchiseKid]

I also want to put in a note on PM's.

Although I really see the unwinding of the USD carry trade shaving a bunch of money off the gold price, perhaps back to the low $900's or $875, there are a growing number of factors/trigger events that could change that quickly and really lend support to the price in the face of an unwinding carry trade. Let me use an example.

All else equal, I see the carry trade on the USD unwinding and started by a nudge from Uncle Sam. Many of you already know my thoughts on this as to "why" this will happen and what it will look like. Risky markets will get obliterated.

Now, let's say war breaks out or there is a terrorist event that shocks the markets and causes a massive flight to safety (bonds and the USD). Well that would really enhance the selling of risky assets as the USD would rise from demand for safety and cause carry traders to buy the USD back quickly, there perhaps would also be a huge flight to PM's for safety as well. While that may not be large enough to send gold up to $2,000, it would certainly offset a bunch of that carry trade unwind and prevent a massive drop in gold. Since I cannot forecast the event and therefore the flow of money, I have no idea what the outcome would be, but it is a situation I can see happening.

Just wanted to add those thoughts as things certainly heat up from a geopolitical standpoint.

[FranchiseKid]

Originally Posted by River Rafter

Thanks FK! So, tell the truth, is all your money in your mattress?

I am long the S&P. I think we are in good shape.

[Steverino]

Originally Posted by FranchiseKid

This market is now a funding tool for US debt and a profit center for the banks.

Look out below.

and there it is... in a nutshell...

[HowardRoark]

Originally Posted by FranchiseKid

Isn't it a day like today that makes you want to "buy the dips"?

Isn't it a day like today that makes you breathe a sigh of relief that Greece will be "rescued"?

Isn't it a day like today that makes you almost feel that you are missing that next "leg up" of this "new bull market"?

Isn't it a day like today that makes you read that story on CNBlie titled, "Did the correction happen in January?"

Isn't it a day like today that makes you buy, buy, buy?

This represents another monumental shift occurring right before our eyes.

Last year when we bailed out the big financial institutions we essentially sent them the message that it is okay for them to take any risk because we - the government - will bail them out.

Today a new message is being sent. Greece's budget is a basket case. They mismanaged themselves into a corner. The IMF is ready to help but Europe is adamant that they will not allow it, partially because the IMF will demand extremely strict spending controls - the type of controls that we require right here at home.

So Germany has stepped in to save Greece from the IMF. They will stop - or perhaps delay - the plunge to the bottom and avert the messy splat on the sidewalk.

Those plunges and eventual splats serve a purpose. Whether you are a drunk, a drug addict, a diplomat, a derivatives trader or a dominion, you've got to hit bottom before getting up, putting yourself back together and moving on.

By saving the Greek government from their own mismanagement Germany has set a precedent. Fear of failure has caused us to avert it at any cost. Today any country struggling with a tough decision knows that big brother with step in and save them just like those too-big-to-fail financial institutions know our government will toss bags of money their way in times of crisis.

Today the safety net began accepting countries. It seems those countries are determined to use it as a hammock. I hope for their sake they don't mind company.

[greenhorn]

Don't care about commodities, dollar, economy, or Wall Street... I am Leary as hell of all of them...Things are no good and do not appear to have any reason to get better..

[Steverino]

Originally Posted by HowardRoark

This represents another monumental shift occurring right before our eyes.

Last year when we bailed out the big financial institutions we essentially sent them the message that it is okay for them to take any risk because we - the government - will bail them out.

Today a new message is being sent. Greece's budget is a basket case. They mismanaged themselves into a corner. The IMF is ready to help but Europe is adamant that they will not allow it, partially because the IMF will demand extremely strict spending controls - the type of controls that we require right here at home.

So Germany has stepped in to save Greece from the IMF. They will stop - or perhaps delay - the plunge to the bottom and avert the messy splat on the sidewalk.

Those plunges and eventual splats serve a purpose. Whether your a drunk, a drug addict, a diplomat, a derivatives trader or a dominion, you've got to hit bottom before getting up, putting yourself back together and moving on.

By saving the Greek government from their own mismanagement Germany has set a precedent. Fear of failure has caused us to avert it at any cost. Today any country struggling with a tough decision knows that big brother with step in and save them just like those too-big-to-fail financial institutions know our government will toss bags of money their way in times of crisis.

Today the safety net began accepting countries. It seems those countries are determined to use it as a hammock. I hope for their sake they don't mind company.

Howard - I wonder if people understand clearly the ramifications this really may have if it goes "worst case"... you know, the kind where all weak nations get bailed out, and all nations have to debase their currencies in the process to manage the debt they are taking on...

[kahn]

Yea I got out the November before the housing bust (around 13000), then back in at 7000, then back out at 10300......Now I'm staying out till some of the volatility settles down. You're right, you can't time anything anymore, I pulled out into cash, metals and bonds so I can still make a few percent. I'd pull it all out but, I'd get taxed to hell and back seeing that most of it is my 401k.

[Vergeltung]

great info fellas.

you know, I really enjoying spending 1/2 an hour sifting through the feces-laden posts on these boards, looking for the gems like this. we really don't need an economic survival sub-forum.

[HowardRoark]

Originally Posted by Steverino

Howard - I wonder if people understand clearly the ramifications this really may have if it goes "worst case"... you know, the kind where all weak nations get bailed out, and all nations have to debase their currencies in the process to manage the debt they are taking on...

I wish I understood those ramifications! The thing that makes me concerned is the fact that some of these European countries have problems very similar to our own. They are a few steps ahead of us on the path but we all seem to be headed in the same direction. They have bigger friends to turn toward in a time of need. We've got no one or everyone, depending on how you look at it.

Just as they are willing to drain their bigger neighbor, I can't help but wonder if we won't be tempted to drain the whole world.

Splat.

[Steverino]

Originally Posted by HowardRoark

I wish I understood those ramifications! The thing that makes me concerned is the fact that some of these European countries have problems very similar to our own. They are a few steps ahead of us on the path but we all seem to be headed in the same direction. They have bigger friends to turn toward in a time of need. We've got no one or everyone, depending on how you look at it.

Just as they are willing to drain their bigger neighbor, I can't help but wonder if we won't be tempted to drain the whole world.

Splat.

My friend you've just laid the ramifications out.

Occam's Razor is what comes to mind for me...