By: Captain Hook | Mon, Oct 7, 2013
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Thought I would attempt to bring a little humor to the otherwise serious subject matter we are dealing with at this time - the political wrangling in Washington. So I went back in my mind attempting to find a theme that fit 'just right'. The result was a movie that is undoubtedly Warren Beatty's best comic performance ever, Bulworth, portraying the last days of rapping Senator Jay Billington Bulworth, whose real life counter-part is a far less funny (and non-rapper) Ron Paul, the proverbial 'conscience of the nation'. But in essence that is what a broken Senator Bulworth was on track to become - speaking (and rapping) the truth for the masses to hear, stirring up well-grounded change, and causing the 'powers that be' to anger - and take his life. It's just like what happened to JFK, which isn't so funny - is it.

In fact, a growing number of the stories out there these days are not so funny - not funny at all. Chief among them for American's these days is that they may have an almost immediate impact on living standards for the masses (some of the rich will get richer) if Obamacare is funded, which is set to possibly take effect next week assuming it passes the vote. This is because the crazy premiums (taxes) under Obamacare are a 'rip-off' by the psychopaths currently inhabiting the White House (and all of Capital Hill apparently), that will likely 'fall apart' on it's own anyway because it's the most outrageous tax grab in history. It's yet to be seen if it will pass given opposition is stiff. If it doesn't Obama is finished - the bullshit (BS) stories - everything. No debt ceiling deal - at least not right away. The GOP will want to make both him and the Dems appear as bad as possible. He might as well hit the golf course for the duration if that happens.

The other guy's BS stories are going to have to end soon too if Bernanke does indeed wish to maintain 'price stability' during his tenure with economies worldwide beginning to show genuine slowing and stress (here and here) that can no longer be hidden in faulty and fraudulent statistics. Because as alluded to in recent previous work, Bernanke is playing chicken with reality here by attempting to maintain his BS story (that the economy is strong enough to begin light tightening in order to boost the Fed's credibility), and growing numbers are beginning to realize this. Therein, everything from retail to housing is slowing down for real; again, to the point manufactued statistics can no longer hide it. So again, the BS stories need to stop now, because our fragile fiat currency economies are collapsing once more, meaning in order to maintain them QE needs to be increased never mind tapered.

And they dam well better realize this soon with leverage at all time highs and short sellers at record lows in the stock market or we may have an accident sooner rather than later. With short seller / put buyers apparently exhausted, the repeated strategy (by US price managers) of serial embroils in order to keep rubes speculating in stock and bond market 'protection' only to be subsequently squeezed out when the 'problem is solved', may no longer be effective if the speculators stop buying puts. This is why the embroils must get increasingly worse, and is a large part of the reason 'the powers that be' have no problem stirring up wars, etc. This is why with a manufactured war off the table for the US now, all they have is Obamacare and debt ceiling related embroils to inspire fear these days, which may not be enough. (i.e. because the population will now assume politicians will come to a compromise like last time and keep the government open like the last time.)

Along this line of thinking then, it's important to realize the debt ceiling is just another and ongoing manufactured embroil designed to keep speculators gambling incorrectly in the markets, anxiety levels increasing, and distraction from what matters. (i.e. like realizing corrupt politicians and high level bankers should be punished.) This way they can keep piling up the debt without people complaining, or throwing them out of office, which is what should be happening. The powers that be think they are quite clever because of their success in re-inflating the bubbles (stocks, real estate, etc.) since 2009, but it appears they may have finally 'killed the cat' in this regard. Again, and as per above, political infighting amongst the Beltway Boys might finally be here for real with other distractions insufficient (remember they need what appear to be increasingly serious distractions), causing stocks to tumble, and maybe then, renewed short selling / put buying.

Because you need to remember it's all about the stock market. The Warren Buffett's and Bill Gates of the world don't care how it's done - just do it - whatever it takes. Get'em buying puts again so that the perpetual short squeeze remains alive so we can keep 'milking the people'. That's all these characters care about. And they don't care how their dogs do it - the bankers and politicians. Political infighting is perfectly acceptable as long as it gets the job done. Going further down the 'rabbit hole' in this regard however, it's important to realize that this time it might be different because credit conditions are far worse than they were in 2008, and that although they may or may not realize it, the Fed will actually need to chase systemic collapse from behind the curve in coming years (accelerate money printing) - it's either that or face the wrath of the other 99-percent almost immediately.

This is because as with all fiat currency experiments we are now so addicted to the drug that any attempt to cut back will lead to convulsions, and eventual death. So again, if the powers that be don't watch themselves this eventuality will come sooner rather than later. What's more, it will be bloody when it comes, with everything from market closures, to bank holidays (already starting), to bail-ins (again, already beginning) to riots and increasingly 'road warrior' like conditions spreading everywhere. (i.e. just wait until oil starts to become noticeably scarce.) And again, increasing numbers are beginning to realize this, with the 'big question' for many being 'when'. It of course does not matter when, because process has already begun, and is accelerating. Sure, as charts below will show the powers that be may be able to pump the stock market up one more time before the 'big collapse' starts; but again, does this matter? (See Figure 1)

Figure 1
$GSPMS S&P 500 Retailing Industry Group Index INDX
$GSPMS S&P 500 Retailing Industry Group Index INDX

Because you should be accelerating your preparedness for trouble before it comes as well, not after. You should secured your finances to the best of your ability before trouble hits the fan not afterwards, because it may not be possible then. This includes everything from grounding your finances / portfolio in precious metals, to getting share certificates of valued stock holdings (in case your broker goes bust), to ensuring one does not have more than insured amounts in any one bank. And as you can see above, you may not have much time. Retailers are the lifeblood of our consumer economy, so when they top out expect bad things to happen. Recent news from Walmart indicates this is already happening, however a few more shorts might need to get squeezed before the impending supercycle top reverses lower. This is true of key multi-nationals as well, with 3M at the top of the list. (See Figure 2)

Figure 2

Further to this, and in adding well placed time-lines to the chart, as you can see in our regularly monitored S&P 500 (SPX) / CBOE Volatility Index (VIX) Ratio plot below, 'time wise' stocks are past what will likely prove to be a significant high, leaving increasingly less time for a price high to be put in place. Using the 2007 - 2008 sequence as an exemplar however, because the ratio topped with the financials in early in 2007, with the SPX not topping for some six-months afterward, again, it would not be surprising to see something similar here with authorities supporting the stock market like never before. That being said, as process unfolds time(s) can contract, so this time it may not take six-months (if at all) for the SPX to reach a new high. With the general public so broke this would make sense given Wall Street has less potential bag holders this time around. (See Figure 3)

Figure 3
$SPX:$VIX S&P 500 Large Cap Index/Volatility Index - New Methodology INDX/INDX
$SPX:$VIX S&P 500 Large Cap Index/Volatility Index - New Methodology INDX/INDX

And what appears to be an important Fibonacci signature in the long-term monthly plot of the Philadelphia Gold and Silver Index (XAU) / Gold Ratio is also suggesting the spread trade Wall Streeters have engineered (buy stocks / sell precious metals) still has 'room to run' on the downside, leaving the possibility of an October / November low (top in stocks) alive and well. Because once the politicos figure it's getting to dangerous to continue with debt ceiling related Kabuki Theatre expect a swift deal to be 'magically struck', and precious metals slammed. (i.e. who needs precious metals when the future's so bright you gotta where shades.) Da Boyz are definitely going to have a hard time getting stocks to new highs with so few shorts to squeeze, as represented in still low open interest put / call ratios, which is a departure from more recent standard behavior (showing speculators are exhausted), but precious metals should still be able to be trashed with so many of the key ratios remaining depressed. (See Figure 4)

Figure 4
$XAU:$GOLD Gold & Silver Index - Philadelphia / Gold - Spot Price (EOD) INDX/CME
$XAU:$GOLD Gold & Silver Index - Philadelphia / Gold - Spot Price (EOD) INDX/CME


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Captain Hook

Author: Captain Hook

Captain Hook

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