The downside risk of owning stock outright is that of taking a huge sudden draw down when reality sets in. Government policy is to support stock prices. This is accomplished with complete cooperation by the Federal Reserve. Privateer firms are given unofficial licences to steal in return for using high frequency trading systems to create and manage uptrends. Stock buybacks are encouraged. Assurance is given to corporate insiders that the Fed has their backs. Corporations doing buybacks, like privateer firms are rewarded handsomely for their participation. For individual corporate insiders buybacks are a way of getting paid far more than they would be with just salary and bonuses. Corporate buybacks elevate insider’s income by leaps and bounds. Only a fool would turn down the opportunity. Fools do not reach such lofty levels in society. Central banks around the world are buying stock outright solely as a way of rewarding their most valued citizens. Our central bank may be doing so also. Federal reserve transparency talk is only for public relation purposes.
This is the environment regular traders deal with. Technical analysis and fundamental analysis give traders no advantage, otherwise it would make sense to short both hands. All that can be done is to stay solvent until reality sets in. The HFT firms know everyone’s positions and they have complete permission to use that information to their advantage.
The economy now is completely dependent on the rich having huge disposable incomes as a result of the gifts they have been given. Their added wealth has been the result of government policy. If the elite investor class starts experiencing value draw downs in their investments the economy will simply tank. So, it is important that no stock market correction ever gains enough downside momentum to cross the point of no return.
Remember, that the economy is in the process of being destroyed. Stock market corrections and recessions are completely necessary for an economy to grow. Stocks retreat when their share prices cannot be justified by their business operations. Recessions occur when businesses are producing too many products and services that consumers don’t wish to buy. When downturns occur investors put money into new ideas and businesses produce less of what is not currently in demand and more things people want. When this natural process is abandoned an economy becomes less efficient with every passing day.
The problem of government using the stock market to reward the wealthy goes back much further than the current time frame. Since 2003 we have seen nothing else.
The stock market could continue higher until so much damage is done that the harm can no longer be hidden. Things could fall apart much quicker.
This is the current strategy I see. We are at the end of the normal fall weakness in terms of the standard seasonal pattern. From mid October until year end is seasonally a very strong period. Look for this dialog in coming days. “O.K., we’ve been down about ten percent. That’s the correction. Its safe to dive back in.” Chances are this will work for a while. The buy side will never run out of money. Again, all actual people can trade with is money they have earned. The manipulators have no limits on their buying power. They can borrow money at less than the rate of inflation in endless amounts. In addition they get a guarantee that they will get advance notice of everything central banks say or do. They are also assured they can violate any law with impunity. Of course, this is contingent upon their using effort to push stocks up.
When the economy is destroyed, the elites will have already made their money, provided they can get out in time. This is not a vendetta against the great unwashed in the rest of the country. Its nothing personal. The rich just have an once in a life time opportunity to use government to bolster their wealth. They are using it as expected. Regretfully, when the system collapses completely the poor will suffer out of proportion to everyone else. The ignorant in all income classes will suffer but that is just the price of not becoming enlightened.
Here are some risks for the market.
1.) Earnings will be bad enough to overshadow everything else. This is hard because accounting laws are not being enforced and all kinds of accounting tricks are being used. Non-gap earnings can be just about anything a corporation wants them to be.
2.) Privateer firm’s activities may turn unprofitable. The Federal Reserve may no longer be able to give them enough of an advantage to justify their continued efforts.
3.) Outright war might break out. I have no doubt that various countries around the world are trying to draw the U.S. into a very inconvenient ground war. We have fewer friends these days than we like to admit. Even our allies don’t like us as much as they pretend to.
4.) The American public could start waking up and discover the degree to which they are being fleeced. The stock market is being supported with tax dollars. Prices are going up. Discomfort is increasing. When people get uncomfortable, they start blaming government. Don’t count on it. Americans are extremely ignorant and their views are mostly determined by fantasy and the sound bites they hear.
5.) There could be a high profile assignation. This is a completely reasonable expectation when all of what government does is corrupt. Politics is the most ruthless profession in the world.
6.) The does seem to be a breakdown of cooperation among the elitists. Somebody could completely blow their beets at any moment. There could be a financial sector equivalent to Snowden.
These are just a few possibilities. When government is completely integrity free, time for the good life is limited. The elitists have been blessed with unrelenting good luck. It won’t last for ever.
From this point on I am looking for more of the same. Look for long consolidation patterns and a slow push to the upside. The market can’t rise on even moderate volume. It has to be low. Look for the same endless ratcheting up we have been seeing since about fall of 2005. Sudden enlightenment news announcements will be common to elevate the market on various given days. Prices will then be held stable until short sellers finally start covering. This pattern will repeat. Watch the manipulation long enough and you will discover that they only run a few plays. The logarithms are complex but what they accomplish is easy to follow.
In short, I am not expecting a vicious sell off until sometime next year at the earliest. That is unless there is an early catalysts. I can’t make that kind of a prediction. Just know it might happen.
The Grazin’ is Good, by Curbside Jimmy.
Available at: Curbside Jimmy’s Free mp3 Download Page