Real or Memorex? $IRX Breaks Out
The counter-trend reset of human spirits has dragged on longer than I thought likely. Much longer, actually. Perhaps I was a bit naive last winter projecting a rally that might retrace 38% of the crash and last a few short months.
But it is notable that I am now so bearish I can taste it and it should also be notable that I was so bullish I could taste it a year ago. The big question revolves not around some blogger/newsletter writer. The big question is what was the mainstream media doing when the turn toward bullishness came about?
Come on now, I don't really need to address that again, right? The MSM scared the hell out of the public and aided a grand theft of the public trust, bolstering the coffers of a massive financial services apparatus that now collects mega bonuses, touts equities and attempts to lure the final holdouts - who capitulated in March - back into the water.
The meat of the rally has however, been to the benefit of the corporate welfare state, organized labor and the financial services industry, which tells the public "move along, nothing to see here... forget about what you saw behind the curtain last year... and by the way, would you like to see some of our new income products to help you make back your losses?"
The dollar is rising (as this blog has anticipated again and again, as did NFTRH as part of an ongoing thesis), interest rates are rising on the long end and now... may I present to you the yield on the 3 month t-bill? The chart has finally made a move. As you know, I have dragged out a chart of the $IRX quite often on FOMC day as the Fed pretended they had a decision to make, all the while 0% t-bill rates told them there is no decision. Well now, we have a change as the short end begins to respond to the lack of confidence going on in the long end.
The MSM and the troubadours on Wall Street spin this as positive. "THE" recovery is in process and the Fed will raise rates sooner than the sponsors of the euro-junk that ran with the anti-dollar inflation rally. It's all good. A strong dollar, whodda thunk it could be good for the US recovery. It's a solid one after all, right?
Well, it had better be. It had better be real or else the spendaholic ways of the Obama administration and the easy money policies of the Bernanke Fed are not going to be able to come to the rescue. That is because the treasury market is posturing through all maturity time frames as if it wants to return sensible practices to a treasury market that tells the macro inflators whether or not they can continue creating debt to spur recovery.
I guess what I am saying is that if the bond market does indeed signal recovery, the recovery is on its own. No more spoon feeding of liquidity. So it will be interesting to watch. Gold has taken the hit (again, as anticipated on this blog and in NFTRH) and with strong support at around the $1000 level, it will be an important sign post in determining the authenticity of what the Wizard is asking you to believe.
The pablum quoted below tells you that liquidity is flowing, "THE" recovery is in full swing and oh yes, we will need more spending and stimulus. You can't have it both ways. The stance here remains that the inflators need a downside event or else the inflationary monster they created is going to preclude their ability to continue manufacturing liquidity (treasury rates rising). Now, I look at NFTRH's biggest picture chart of the S&P 500 and that thing is bullish. So again, there will come a point where I stand aside from the moderate bearish stance (as opposed to my current full bearish personal sentiment).
But with Santa in play, Wall Street on full tout and the utterly useless (to real traders) MSM on the job, this mess is going to have to prove itself for more than a couple pumpy weeks in January. Gold is taking an oh so healthy correction, purging the momo's and players. When the correction concludes, we will find out the nature of many things.
Right now, on with silly season!
From Reuters & Bloomberg this morning:
This fanned expectations that the Federal Reserve could raise interest rates sooner than its counterparts in the euro zone and Japan, sending the dollar higher and pushing U.S. Treasury yields to four-month peaks. MSCI world equity index (.MIWD00000PUS) rose 0.3 percent, on track to scoring one of the biggest annual gains in the past 20 years. -- Reuters
Congress and the Obama administration are taking a bigger role in the rescue of the economy from the Federal Reserve, shifting the strategy to stimulus spending from central bank lending... "It may be tough for elected officials to quit spending, prolonging the bailout and adding to the federal budget deficit. "There's a danger of getting addicted to fiscal stimulus programs," said David Wyss, chief economist with New York-based Standard & Poor's, in an interview. "The Fed can print money. Government has to raise taxes or borrow more." -- Bloomberg
U.S. consumer spending probably rose in November for the sixth time in seven months as households took advantage of holiday discounting, economists said before reports today. China's growth may surge to as much as 12 percent next year, according to Citic Securities Co., the nation's biggest listed brokerage. Consumer confidence in Italy unexpectedly rose in December to the highest in more than seven years after Europe's fourth-biggest economy emerged from a recession.
"The path of least resistance will continue to be to the upside," Robert Doll, who helps oversee about $3.2 trillion as chief investment officer for global equities at New York-based BlackRock Inc., said in a Bloomberg Television interview. The economic recovery "means earnings should be somewhat better and liquidity should still be plentiful. That's a recipe for equities moving higher," Doll said. --Bloomberg