Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

ml,

not normal market action that one would expect.

Tell me about it! -g-
No, not normal by any stretch of the imagination....

I fully expect the averages to turn green on a day when there isn't much reasoned reason for them to do so.

This excerpted portion from last night's Jim Puplava Market wrap coincides with your view:

The Green Light to Speculate

In the financial markets, participants have been given the green light to go ahead and speculate because Greenspan has placed a put underneath the stock and bond markets. They will try to prop up the markets by whatever means necessary to keep it within a narrow trading range in the hopes that enough stimulus and pricing power can be applied to resurrect corporate profits, and along with it the stock markets. The same approach used in driving down interest rates and reliquefying consumer balance sheets will be applied to the financial markets. I would not be surprised if the Fed floods the market with enough cheap money and monetizes debt to create another round of mortgage refi’s to keep consumption strong. Instead of five percent mortgages you may soon see four percent mortgages if the economy weakens further. If you think the costs of things you need to live have gone up you haven’t seen anything yet. Another way of looking at dollar depreciation is to view it in terms of what it will purchase overseas. The graph of what the dollar buys in foreign currencies can be seen below. (See Mike Hodges' Editorial)

One problem all of this intervention is creating is the various anomalies that are now operating in the financial markets. You having rising bond prices that are now accompanying a falling dollar; you have lower interest rates with record trade, current account, and budget deficits; you have rising bond prices going along with rising commodity prices; and lastly, you now have rising stock prices that accompany poor and anemic earnings. Unbelievably analysts are now forecasting profit growth of more than 10-15 percent per annum for the next five years. These profit forecasts stand in sharp contrast to the ability of companies to raise sales, not to mention real earnings difficulties. You can’t grow your business 10-15 percent per year by laying off workers every year to achieve profit targets. From a macro perspective, this strategy is contractionary.

Capping The Gold Markets

The only problem the Fed is going to have in devaluing the dollar is the gold market. Gold is a barometer of financial difficulties and confidence in the financial system. As the Fed inflates, it must also cap gold prices. A rising gold market signals trouble for the financial markets, especially for the bond markets. Therefore the central banks, and especially the Fed, must keep gold prices from rising too rapidly. Just as they are trying to manage the financial markets, they must also manage gold. Rising gold prices and rising goods prices spells trouble. Even John Q. might put two and two together when he looks at what he spends each month to live and a rising gold price. It is not surprising to many in the gold markets to see the price of gold fall on days gold should do well. A depreciating dollar is good news for gold and silver and bad news for financial assets. At the moment that is one of the big anomalies of the financial markets. They aren’t acting and responding in the usual way. The alchemists are tinkering with the financial formulas in the hopes of creating economic and financial prosperity. In the end history teaches us that they will fail. In his new book “Adventure Capitalist,” investor and author Jim Rogers warns, “All knowledgeable economists in history have warned against debasing the currency—which Lenin advised was the most effective way to overturn the existing basis of any society, because it is so subtle and insidious…John Maynard Keynes and Ernest Hemingway have agreed. Keynes said, ‘Lenin was certainty right.’ Hemingway, who saw much of the world close to the ground, observed, ‘The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring temporary prosperity; both bring a permanent ruin. Both are the refuge of political and economic opportunists.’”

http://www.financialsense.com/Market/wrapup.htm

Covered yesterday's GM short for .40. Whooooopeeee!

Salute!
Dan