If You’re Looking For Something, You’re Sure To Find It .

October 3rd, 2012 by Leonard



Hello Traders and Friends,

Back from a summer break, away from the blogosphere, but like you, I have been watching the ongoing drama  ”Which Way Now”, the elections.

The C.E.O. of America Inc.

The market has climbed to new 4 year highs. Romney wants to be CEO of America Inc.

C.E.O.s get hired by Board of Directors. In fact they are usually members of the Board of Directors (which is a complaint). So the real trick is in how to become a member of the board. Guess you have to get invited and that means working your way up the ladder through bonding and friendships, networking, and connections and you have to have management experience and memorize corporate lingo like “drill down”, and “skill sets”. You have to be able to stand behind a podium and “sell”, “sell”, “sell” .Deals take place in quiet rooms.


One problem with a C.E.O. running America Inc is that C.E.O.s are not required to reveal their future plans for the corporation to the corporate share holders. Shareholders don’t make decisions. Again, deals take place in quiet rooms.

Having been through a few corporate mergers myself as a commodities futures broker in the 1980s, it was always done the same way.

The employees are last to know that a merger has taken place. Everyone is promised that nothing will change, and that there will be vast improvements, and benefits.

6 months later everything changes as the new C.E.O. and his team bring in all their friends they were quietly hiring, and the old management heads begin to roll, or employees quit because they hate everything about the new environment.

I predict that Mr. Romney will become a billionaire within the next 10 years whether he wins the presidency or not. He seems to be made for money. A hobby would probably be good.

Ben Bernanke

In the meantime Ben Bernanke continues to baby sit the economy while the negative spin bloggers continue to sell the end of the world scenarios. The public seems to be getting tired of this pessimism . I even caught an online news piece on CNBC today by one pundit claiming that the Fed announcing QE3 two weeks ago had no effect on the markets and that they’ve run out of bullets.

This 4 year rally has destroyed the reputations of many prominent Gurus getting caught calling the top, and now we have op-ed writers as economists challenging the Fed Chief.

It is a despised bull market because the economy as a measurement relative to stock prices doesn’t seem to make sense. Stocks appear to be doing much better than the economy. The Fed has kept most 401Ks in recovery mode for the working class who have 401Ks, while continuing to increase the wealth of those who can afford to buy stocks. That would include the super rich who are the investment class.

After almost 40 years of boom or bust cycles, deflation is beginning to level the playing field both here and mostly abroad.. Deflation has highlighted the imbalances and inequities of the income stratum as it continues to chip away at the excesses built up over the last 4 decades. This is causing change.

Trust me lower taxes creates jobs …no I don’t think so…Its a “passive hedge”.

Romney’s lowering of taxes by and for the investor class is a hedge against anticipated wealth loss. It is a strategy to offset lower anticipated income from a global slowdown  by keeping more of what you got.

Problem with that strategy is that it is passive, and defensive, at a time when there needs to be active growth. It creates a non productive environment where the wealthy can sit on their hands and it feeds on itself.

You can never get the taxes low enough to compensate for a negative spiral that creates ever slowing business. And then with the money being largely retained by the wealthy, but drained from the support system, services eventually fall off.

Mr. Bernanke has managed to keep equities elevated without the help of Congress.

Scorched Earth Retards

The economy has managed to lumber along much to the surprise of the regressives, the obstructionists, and the supressionists. The attempt to oust the president through inaction, hasn’t quite gone as planned. The public seems to prefer action instead of inaction  and the most vocal wing nuts in the Tea Party are now fighting for their political careers. But there is still hope for them. The Globe spins very fast, and anything can happen in the next month or so.

 The Markets

Click on chart to enlarge and then click again for clarity


At the moment, markets are trading near the tops of a large 12 year trading range. All trading ranges eventually break out. That would require more than Ben Bernanke’s help even if he targets mortgage rates to drop to 3%.

Should the markets drop first before staging an optimistic bull rally? Perhaps, particularly if the current global recession continues to grind downwards.

Should the markets move significantly higher before dropping down? They could, because bullish sentiment is not exactly beaming. There is no omnipotence showing up.

For now we trade day to day and watch the building of market structure that tells us stories about the internal mood of the collective traders. Traders are very aware of the position of the market relative to the old tops. If the movement begins to pick up, it could invite some unexpected bullishness. What we’ve seen is that down moves over the last 2 weeks seem to hold ground. No high level of fear or anxiety as of yet. I’ll have more on this in my next blog

Unemployment coming at the end of this week and corporate earnings around the corner

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