That's two days over our 1,333 line for the S&P and third time will be a charm for the bulls. Now our attention shift to Nas 2,800 where, as David Fry notes, enthusiasm is weakening. Yesterday was MoMogeddon with NFLX, PLCN, GMCR, OPEN, BIDU... all dropping in synch about 4%. They moved so fast in a group that one would almost think that some sort of machine was trading all these MoMo stocks together and not millions of trades each making their own individual decisions based on the merits of each individual stock.
In other manipulated trading news - oil is once again at $109 this morning and once again we're shorting it off that line (with tight stops). Yesterday we got a nice ride down to $108 and if "they" want to keep handing us a Dollar a day in the Futures, I guess we'll have to take it. The same USO and DUG positions I mentioned yesterday will work again today but once again we are hoping they try to jack oil up to $110 and give us some really excellent shorting entries.
Deciding what to do with the market is a different matter. As we did on Tuesday, we caught another great shorting opportunity off of yesterday's open but it didn't last long and we grabbed the QQQ Weekly $56 calls at 12:45 for $1.10 as it looked like we were bottoming and those were good for .15 into the close. Of course we have our usual pre-market pump job this morning but only oil is making an exciting short entry so far - the indexes are not even back to yesterday's open yet and if the pumpers can't be bothered to put on a good show - I'm not going to play with them!
Americans watch protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in the U.S., 1% of the people take nearly 25% of all income - an inequality even the wealthy will come to regret, Joseph Stiglitz writes in Vanity Fair:
The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.
I am simply amazed by how many people in the Financial World and the Financial Media are able to pontificate about inflation not being so bad. This morning the EU is raising their rates from 1% to 1.25% to combat inflation. That was expected - the question, which will be answered at the press conference later - is whether the ECB considers this a one-off event or whether it will be the first in a planned series of hikes to "normalize" interest rates.
Trichet is expected to argue that a significant build-up of inflationary pressure across the euro zone justifies the rate increase. Inflation in the region hit a 29-month high of 2.6% in March, and it is widely forecast to accelerate further in the coming months, to about 3% in June. That's well above the ECB's objective of keeping inflation "below, but close to" 2% over the medium term.
The ECB is expected to stick to his inflation assessment, namely that "risks to the medium-term outlook for price developments are on the upside." Maintaining that rhetoric would reinforce that the ECB remains "alert," or "permanently alert"—other catch phrases he likes—against the backdrop of tightening price pressures.
We had (and are still having) a big discussion about inflation in yesterday's chat and I said to Pharmboy that he shouldn't be fooled by the fact that we are early in the inflationary cycle, as illustrated by the bucket chart. Quantitative easing began last March and TLT peaked out at $106.35 in August (5 months) and oil (hopefully) began to top out in February (11 months) and stocks are possibly topping out now (12 months) but maybe a few more months before we hit the part of the cycle where first corporations and then consumers decide not to spend more money at these inflated prices - at least until wages and profits begin to catch up. Both the ECB and our own Fed are aiming to turn off the spigot before that inflationary spillover gets down to the wage bucket because wage increases signal the start of the true inflationary cycle and that's the one that isn't good for the people who lend you money (see "Inflation Nation").
The chart above has the misleading caption that "only a few items are really inflating" but think about it - In absence of higher wages or credit card borrowing - how can all items go up at the same time? What if 6M people weren't collecting unemployment checks? What if 44M people weren't getting food stamp assistance? Where would that money come from? Obviously, some category would have to DEflate in order for another to INflate or even stay the same. As I pointed out to Members in Chat:
Money is being sucked away from discretionary spending to pay for necessities – they can’t all inflate without rising wages, can they? So you will always be able to point to a graph where some things go down and others go up because the amount of capital people have to allocate is finite.
Putting off the big ticket purchases of Computers, Furniture, Windows, Floors, Appliances, Tools etc let’s you buy dozens of tanks of gas but, eventually, you’ve spent the money you had put away for a new couch and they STILL want $75 to fill up the tank! What then? Don’t be fooled by the fact that we are still early in the cycle.
Unfortunately, the attitude that "only a few items are really inflating" is prevalent in the investing class, the media and our politicians because none of them (us) really care if gas is $3 or $4 a gallon (and don't tell me you do unless you went out and got a higher-mileage car or drive around looking for the lowest gas prices). We don't care or even know how much most grocery items are and we may grumble about it but we pay our rising health care bills (and half of us even vote to maintain the current system!) every year as if it's perfectly normal that a dose of a cancer drug should cost $45,000 or that it costs $25,000 to have a baby. We pay $10 for a movie ticket and we buy the "special combo" popcorn, soda and candy for another $10 from people behind the counter who would have to work 3 hours to do the same (as long as they don't live far enough away to need gas) and we don't give much thought to the fact that there are 230M of "them" in the United States of America and only 60M of "us" (top 20%). Globally, there are 5.5 Billion of "them."
How far can we push the bottom 80%? How long will they suffer the indignity of having nothing but a television, where they can watch various "Real Housewives" spend more money on a pair of shoes than they earn in a month? As Stiglitz points out, the bottom 99% fight over 75% of the earnings in this country but the next 9% get 30% and the next 10% get 22% which leaves just 23% of the nation's wages for the bottom 80%. How many of those people are going to be out hunting for the latest designer fashions? No, even the television shows aren't aimed at the bottom 80% anymore - they have no money to spend on discretionary items (or political donations) so the media and the government have taken to treating them like cattle - necessary to take care of until it's time for the slaughter.
Small wonder that revolutions are popping up here and there around the World but, as Stiglitz points out, other than China, no country on Earth has a greater wealth disparity than the United States of America. China keeps the people in line by controlling the media and issuing propaganda on their official outlets. We're lucky, we have 6 different corporations to tell us how to think!
As I said, we may have a week or we may have a quarter or more in which to enjoy the part of the cycle where stock prices inflate but Europe pulling the plug on free money is a sign that we may be a little closer to the end than many think. Until then, we can party just like it's 1999, as long as we are prepared for the inevitable crash. 1,552 was the top of the S&P in March of 2000 and we were back to 1,124 in August of 2001 (down 27%) and 1,576 was the high for the S&P in October of 2007 and we were back to 666 in March of 2009 (down 57%) - our job is just to play the channel and not get caught up in pretending that these prices mean anything - the same IBM, GE, SHLD, BTU, X, etc. were in the S&P in 2000 and 2001 and 2007 and 2009 and, frankly, their business didn't go up and down 57% - the market is all about perception and we will perceive pretty much whatever these 6 guys tell us to until the fundamentals overwhelm the BS.
Let's keep an eye on our levels and be careful out there!