Morning Update: Market Thread Dec 1, 2009

The dollar is down substantially again and equities look like they are going to gap higher, the S&P 500 futures are back above the 1,101 demarcation line.

The dollar is down to the 74.4 level, getting close to a new yearly low. The Australians raised interest rates once again by a quarter point, but then played the B.S. U.S. game of “signaling” that they are likely done raising rates for now. Regardless, that pushed the dollar down and the equities went up in their usual knee jerk, devalued currency reaction. Again, I am not someone who believes that our problems will be solved by a falling dollar. In fact, I believe that path is MUCH more dangerous than accepting a bit of deflation. Of course had we accepted a little deflation a long time ago, then we would not need a ton of it today!

Bonds are down sharply. Oil is up, touching $78 a barrel again while rising back to near the top of its descending channel. Gold set a new all time high by breaking the $1,200 per ounce mark! There is no doubt that gold is in a parabolic rise, it’s still following the upper trendline which is very steep.

So, stocks are not too far from busting out to new highs and a higher range, the dollar breaking down to a new lower range. This is a VERY dangerous game. The game ultimately makes people in the U.S. the losers as their purchasing ability gets destroyed, while their incomes are arbitraged by our capital and productive capacity which has gone overseas. Just to remind everyone, the crash of 1987 was precipitated by a sliding dollar in the background.

And evidently the Dubai, Greece, and Japan happenings are not enough to remind people of the risks that this system of debt faces. Could it be that everyone thinks the government is just going to save them and save them forever? Well, with stories like this one, it seems reasonable that’s exactly the expectation:

AIG unloads $25 billion worth of debt

Two life insurance companies sold to Federal Reserve Bank of New York in completion of deal.

NEW YORK (CNNMoney.com) — American International Group announced Tuesday that it completed a deal wiping out $25 billion of its debt by selling two subsidiaries to the Federal Reserve Bank of New York.

AIG said it is receiving the money in preferred shares for its life insurance companies, American International Assurance Co. and American Life Insurance Co. The deal was originally announced in March.

This will bring the New York-based insurer’s debt to the New York Fed down to $17 billion. AIG also still owes the U.S. Treasury $44 billion from a separate Troubled Asset Relief Program (TARP) loan.

AIG Chief Executive Bob Benmosche said, in a press release, that the debt reduction “sends a clear message to taxpayers: AIG continues to make good on its commitment to pay the American people back.”

The Federal Bank of New York initially provided $85 billion worth of support to AIG.
AIG’s stock rose about 5% on the news in pre-market trading.

AIG shares tumbled 15% Monday, after Bernstein Research analyst Todd Bault told investors that he cut the 12-month price target to $12 a share from $20 because the insurer’s “loss reserves are significantly deficient again, much sooner than we would have forecast two years ago.” (emphasis added)

HUH? So let me get this straight. AIG is selling off companies and passing bad debt to the Federal Reserve Bank of New York? Are you kidding me? Since when are Reserve banks in the game of buying businesses that evidently no body else wants? This is NOT what the rule of law says is supposed to happen in such circumstances! This smells to high heaven to me, and what it appears on the surface is that they are simply going to monetize AIG’s debts for them – at least that is what this appears to me, unless they can show me where the money came from that the Reserve Bank is using for this “purchase.” Remember, this is the land of Jamie Dimon, and the former stomping grounds of the little Timothy Geithner we’re talking about here! Of course this sweet little move will go right above the public’s heads, they will simply not have a clue other than AIG stock’s bouncing back a little.

I would personally love to audit not just the Fed, but any Fed audit should go straight through to the Treasury and to all the Reserve banks and Primary Dealers to see exactly the flow of money that’s occurring. And it shouldn’t stop there, it should run right to the IMF and then into every central bank around the globe who is involved in “foreign currency swaps” and involved in any way with funneling money into the IMF. What would be exposed, I believe, is a money printing operation that would stun the world. Effectively the ability to coin money has been completely taken from the People and the central bankers have given themselves the authority to basically play whatever game they choose. It gets more disgusting by the day.

And talk about a country and central bank who even after 20 years of pain still don’t get it, Japan is simply going further off the deep end:

Dec. 1 (Bloomberg) — The Bank of Japan said it’s ready to pump more money into the financial system after unveiling a 10 trillion yen ($115 billion) program to help an economy battered by falling prices and the yen’s surge to a 14-year high.

“If there is a shortage of liquidity we are prepared to provide more funds,” Governor Masaaki Shirakawa said after an emergency board meeting in Tokyo today that decided to offer three-month loans at 0.1 percent to commercial banks.

“Shortage of liquidity?” Isn’t that a little like saying to a drowning man in the middle of the Pacific Ocean that the problem he’s having is that there’s not enough water? Japan is evidently determined, come hell or high liquidity, to completely destroy any confidence that is left. The world central bankers are on a very dangerous path, one where the exponential math is getting severely worse by the day. Hello, they are talking about a little infusion of only 10 trillion yen. Soon they will be needing to infuse 10 quadrillion yen and then the people will be left wondering why they cannot afford to eat. Gold at $1,200 an ounce, gee I wonder why?

So, we find ourselves just below the 1,107 pivot, once again knocking on higher. Should we break above that level, then the old 1,113 high is next, followed by the 1,133 pivot. Yesterday there were divergences in the percent of stocks over their 5 and 10 day moving averages as both fell against a rise in prices. The short term oscillators are in the middle, this market is still under huge divergences and is clearly living a life with Alice in central banker Wonderland. Truly the largest heist in the history of mankind, it’s enough to make one want to sit back, sip a good whiskey, and simply remind the people running the casino that they shouldn’t play that game too long, the people are going to eventually say they’ve had enough!

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