Financial Sense Blog

Recently there have been some encouraging signs that Congress is finally willing to admit what should have been evident two years ago. Even after a $150 billion bailout, Fannie Mae and Freddie Mac are still bankrupt and should be abolished.

The fear of God—or the perception of power—this is the primary tool of the Fed these days. It’s not credibility anymore, as this has been damaged to the same extent as its balance sheet. This is widely understood as a primary fundamental within the larger scheme of things in that the dollar ($) is the world’s primary reserve currency, where expectations associated with renewed Quantitative Easing (QE) is commonplace, and now talk of hyperinflation is growing amongst the more plugged in market observers. And it’s this that accounts for the growing and extreme bearishness amongst speculators concerning the $.

It is of little wonder that investors are tossing their hands up in the air when looking at investment performance or economic data, what look’s promising on the surface is fraught with danger below (like the oil spill?). Early week data regarding homes was mixed, as refinancing activity was strong (for those that can!), and industrial production was surprisingly strong.

Prices continue to churn as traders and investors try to figure if they want their hard earned dollar in cash or investments. The market is very jittery simply because no one wants to get caught on the wrong side of the market if it makes another 30-40% move, which is why we are seeing money rotate in and out each with very little commitment and follow through. Until a major trend looks to be in place most investors will not me holding many positions over night or through the weekend.

The economic news has turned decidedly negative globally and a sense of ‘quiet before the storm’ permeates the financial headlines. Arcane subjects such as a Hindenburg Omen now make mainline news. The retail investor continues to flee the equity markets and in concert with the institutional players relentlessly pile into the perceived safety of yield instruments, though they are outrageously expensive by any proven measure.

In a CNBC debate last week, former Labor Secretary Robert Reich presented a set of contradictory beliefs that unfortunately reflect the conventional wisdom of modern economists. In a discussion with Wall Street Journal columnist Stephen Moore, Reich correctly and comprehensively listed the reasons why American consumers could spend so lavishly before the crash of 2008 and why they can no longer keep up the pace.

What is a "Bull" market? It is a market in an upward price phase of a market with the expectation that it will be followed by a "Bear" or downward phase of a market. This mindset is common to all markets.

Trading without indicators is like running blind and it encourages emotional trading that is the bane of successful investment and speculation. It is hard to know what to buy or sell let alone just when to do prudently. Thank goodness there are indicators available that provide information of stock and index movement of a more immediate nature making life during these times somewhat more bearable.

The S&P once again was rebuffed from falling markedly below the very significant 1,070 level which could mean we are heading higher once again, at least for the short term. Markets remain a very difficult and treacherous place to ply my trade these days. Although there are exceptions.

Last week I wrote an article explaining what I mean by the international banking cartel that operationally rules the economy–the Federal Reserve primary dealers. Some astute readers wondered why I didn’t report on the global regulatory institutions that have power over that cartel. Good question. And others asked for more clarity on the cartel itself.