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DOW to lower to 8,000

MoGal

Well-known member
Economist: Expect Fed to lower Dow to 8,000 via "stealth methodology"

http://www.wnd.com/news/article.asp?ARTICLE_ID=60041


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Consumers should expect a deep recession, triggered by the "stealth methodology" of the Federal Reserve to "depress" the market even while lowering interest rates in an ostensible effort to stimulate economic growth, an economic analyst charges.

"The Federal Reserve is directly involved in manipulating the stock market," said Mike Bolser in a telephone interview with WND yesterday.

The New York Stock Exchange finished the day down 108 points, closing at 12,635, much as Bolser predicted, despite recent emergency Fed rate cuts of 1.25 percentage points aimed at stimulating the economy.

"Fed wants the Dow Jones Industrial Average and other financial indicators to descend in a managed way," Bolser said. "The Fed wants to drive the DJIA toward the 8,000 level, or below, in order to help create a deep recession which will have the effect of slowing consumption across the board and dampening the otherwise harmful effects of inflation.

"A falling DOW is only one element of the recession effects of the excessive Fed-created housing and credit creation, whose bubbles are now bursting," he added.

"Without this recession, we would be on quick trip to hyper-inflation," Bolser, the author of an internationally followed newsletter published in conjunction with his InterventionalAnalysis.com website, said, "and the Fed wants to prevent this."

In his twice-daily subscription newsletter, Bolser has devised a quantitative methodology for utilizing Federal Reserve repurchase agreements to predict upward and downward movements of the DJIA, measured on a 30-day moving average.

Yesterday, Bolser noted the Fed added $18 billion to repurchase agreements, edging the pool up to a total of $153.158 billion in unexpired temporary repurchase agreements.

Repurchase agreements involve a sophisticated use of government securities issued every day by the Fed, but little understood or followed, even by sophisticated investors.

A repurchase agreement, as defined by the Fed, is a government security offered by the federal government to a small list of specified primary government securities dealers, for a limited period of time, usually 28 days or less, with overnight return being the most common.

The government securities are "rented" by the primary dealers and they can be added to the primary dealer's portfolio or collateralized and then used in the open market to implement the Fed's open market policy.

At the end of the repurchase agreement, the Fed obligates itself to take back the government securities from the primary dealers, effectively canceling the contract.

Meanwhile, while holding the government securities let out by the Fed in the repo agreement, primary dealers are free to utilize the liquidity provided by the repurchase agreement to manipulate the economy in accordance with the Fed's true monetary policy, whether publicly declared or not.

Primary dealers use the funds provided by the government securities they hold under the repurchase agreements to buy dollar exchange futures contracts, stock market futures, or to buy commodities contracts, including gold mining shares. All of this is in accord with implementing Federal Reserve monetary policy to manipulate currency, commodity and stock markets up or down, depending on the goals the Fed wants to accomplish at any particular time, the economist alleges.

Over the past several months, however, the Fed has implemented a policy to issue smaller amounts of daily repurchase agreements, with the goal of reducing the total pool of repurchase agreements available to the Fed's short list of 20 banks that it qualifies to serve as primary government securities dealers participating in the Fed's Open Market Operations.

Only the 20 banks specified in the Federal Reserve Bank of New York's list of primary government securities dealers are allowed to participate in Fed repurchase agreements.

"The primary government security dealer banks are like a private club," Bolser told WND. "You get to stay in the club as long as you take the repurchase agreements and enter the markets to implement Fed monetary policy the way the Fed wants it implemented. Violate the unspoken rules, and you risk being thrown out of the club."

Yesterday's $18 billion addition to the repurchase agreement pool caused the total amount of the outstanding repurchase agreement pool to remain below the Dow's 30-day moving average in a clear trend.

Bolser used this data to predict the Fed was manipulating the stock market lower, a controversial prediction when most economists see the Fed's emergency actions to reduce the target Fed Funds rate 1.25 percentage points lower over an eight-day period that ended with last Wednesday's meeting of the Federal Open Market Committee.

"Ultimately, the government is in the business of inflating the dollar," Bolser said, "so the Fed is trying to engineer a recession, in order to cushion the pernicious effects of its own inflation."

"In my view, the government intentionally desires a deep recession not unlike that of the 1930s," he continued. "The Fed, however, dissembles, attempting to display the opposite impression with its rate cuts."

"Cutting rates will not boost the economy in an environment where the credit bubble has burst and banks are afraid to lend," he explained. "But decreasing the repurchase pool will push the economy down, especially when the primary banks execute monetary policy in accordance with the wishes of the Fed to short the market with future contracts that push the indices down."

Bolser argued the Fed's ability to manipulate the market by increasing or decreasing the pool of available repurchase agreements amounts to a "stealth methodology" where the Fed can now depress the market, while implementing a policy of lowering interest rates, which most economists would see as trying to stimulate economic growth and the stock market.

"You have to remember the primary goal of the Fed is to support the bond market, which the Fed has done for quarter century," Bolser stressed. "The Fed needs a strong bond market so the Treasury can sell the enormous amount of Treasury securities, especially to China, that we need to sell to finance what this year may be as large as a $400 billion dollar budget deficit calculated on a cash basis."

"As a result, the friend of the Fed is the bond speculator," he added.

Among the U.S. banks and securities firms currently on the list are Bank of America Securities, Cantor Fitzgerald, Countrywide Securities, Bear Stearns, Daiwa Securities America, Goldman Sachs, Greenwich Capital Markets, HSBC Securities (USA), J.P. Morgan Securities, Lehman Brothers, Merrill Lynch Government Securities and Morgan Stanley.

Also on the list are France's BNP Paribas Securities, Great Britain's Barclays Capital, Switzerland's Credit Suisse Securities, Japan's Mizuho Securities and Germany's Dresden Kleinwort Wasserstein Securities.

"These dealers are the foot soldiers of the Fed, as it implements monetary policy," Bolser said.

Studying Bolser’s "Repos/DOW" chart from Dec. 7 through yesterday, a broad correlation between the downward movement in the Fed repurchase agreements pool totals and the DJIA as seen by tracking the 30-day moving average is clear.

"With this strategy, the Fed hopes we won't experience the extreme 'stag-flation' we had in the late 1970s," he argues. "The Fed hopes to induce a recession to manage downward stock prices and commodity prices, including oil, gold, copper, and lumber, as well as the overall consumer demand for retail goods."

"Stag-flation" is an unusual economic situation in which economic stagnation is combined with inflation. Some economics believe that is happening now as the economy slows down while food and energy prices rise sharply.
 

MoGal

Well-known member
Since we're on such good news.... found this..... they are drawing money out not putting it in......

http://www.hussman.net/wmc/wmc071224.htm
for the full article and he backs it up with their charts.

Vanishing Act - Are the Fed and the ECB Misleading Investors about "Liquidity"?

John P. Hussman, Ph.D.
All rights reserved and actively enforced.
Reprint Policy

I'll begin with a brief note about the stock market here. Suppose you're considering riding a unicycle on a high-wire that by most evidence is not secure, but it's possible that the wire might hold up for a while. If you keep riding, people will throw small bills at you until the moment the wire breaks. Once the wire breaks, you will be injured and will probably lose whatever you gained initially. Would you keep riding?

A risk-averse investor (or even a risk-neutral one) would decline that bet, even though there's some potential for lost short-term gains if the wire doesn't break immediately. A myopic risk-seeker will ignore the risk and keep speculating, assuming that some spontaneous impulse will move them to quit just before the wire snaps.

Needless to say, our investment strategy is averse to those risks that have, on average, produced no return. We avoid such risks even though continued risk taking may produce further gains for a while, sometimes until those gains are abruptly forfeited. Currently, the combination of valuations and market action (not to mention recession probability) is one that has historically been associated with negative average returns. That doesn't mean that investors who keep riding the unicycle can't make a few more small bills, but it does mean that repeated risk-taking in conditions like the present has not been rewarding, on average, and has frequently involved significant and abrupt losses.

The high-wire act in the center ring is only part of the three ring circus here. In the other two rings are a couple of magic acts by the Fed and the ECB, where entirely mundane and inconsequential tricks are being delivered with great flourish as if they are extraordinary.

When I was a kid, it was entertaining to do entirely obvious magic tricks, like raising the index finger of each hand, bumping the hands together and making a finger “jump” - so that one hand suddenly had two fingers up while the other had none, or making a loop with the thumb and forefinger of each hand, putting the hands behind our heads, and bringing them back over with the loops suddenly linked. What's fascinating is that the recent moves by the Fed and the ECB should be equally obvious.

Simply put, contrary to the impressions they attempt to create, neither the Fed nor the ECB have "injected" material amounts of "liquidity" into the international banking system in recent months. This is not a call for them to do so - to some extent their hands are tied by inflation pressures, currency risks, and profigate government spending (particularly in the U.S.). The problem is that by creating the illusion that they are doing something material - when the problem in the global financial system is not confidence, or liquidity, but solvency - the Fed and the ECB misdirect the attention of investors, provide false hope, and will ultimately do a great disservice to investors and to their own credibility.

The eagerness of Wall Street analysts to hail the moves by the Fed and ECB as important, without even examining or understanding the data, is a discouraging reminder of how willing many investment professionals are to parrot common misconceptions rather than thinking for themselves. We should not be so alone in pointing out these issues.

Let's look at the data.
 

MoGal

Well-known member
the entire article is at: http://www.marketwatch.com/news/story/how-risky-uninsured-bank-deposits/story.aspx?guid=%7B03FBB3D6%2D6F11%2D455A%2D8730%2D04DC7082FEEA%7D&siteid=yhoof

CONSUMER BANKING
How risky are uninsured bank deposits?

PALM BEACH GARDENS, Fla. (MarketWatch) -- The Federal Deposit Insurance Corp. is gearing up for the prospect of a large bank failure. So double-check that all your deposits, including interest, are well within FDIC insurance limits.


The Federal Deposit Insurance Corp. is gearing up for the prospect of a large bank failure. So double-check that all your deposits, including interest, are well within FDIC insurance limits.
The agency seeks comment by April 14 on a proposed rule designed to help it make a quick insurance determination amid an increasingly complex quagmire of FDIC rules and tough-to-figure-out bank accounts. ...........................
snip....................

FDIC data indicate that as of Sept. 30, there were 65 institutions with assets of $18.5 billion on its list of "problem" institutions. Barr would not elaborate on their sizes. Nor will the FDIC name the institutions.
Institutional Risk Analytics, Torrance, Calif., based on FDIC data from that same date, puts Bank of America Corp.

BAC 42.33, -0.04, -0.1%) , Citigroup Inc. (C:Citigroup, Inc


C 26.92, -0.13, -0.5%) , J.P. Morgan Chase & Co.

JPM 43.72, -0.17, -0.4%) , Wachovia Corp.
WB 34.44, +0.26, +0.8%) and HSBC Holdings PLC
HBC 72.04, -2.00, -2.7%) , as the riskiest big banks. More recently, Managing Director Chris Whalen cited J.P. Morgan, Citigroup and Bank of America as his chief concerns due to their heavier trading activity.
He stresses that there is a 45-day lag time from the close of a quarterly period and the publication of FDIC data. Bank conditions can deteriorate very quickly. Fourth quarter 2007 FDIC data won't be released until late February.
Nevertheless, Whalen doubts that even uninsured depositors at those banks need worry.
"Uncle Sam is not going to let any of them fail," he declared. Some investors, though, could take "haircuts."

there's more.......................
this is in one of the comments.................

Could this be the reason why that social security debit card balloon was floated early January? That plan calls for Comerica bank to issue the cards and run the program; all ATMs in 7-11 franchises nationwide are part of the Comerica network. You would get one free withdrawl per month at a network ATM with a .90 charge for every network withdrawl above the first one. The stated purpose was to get people who still receive paper checks to have reliable bank access. Looks more like a damage control plan should social security recipients not be able to withdraw their money from a failed bank; those banks on that watch list have lots of social security direct deposits. It smells like someone knows something and is hinting at it hoping you pay attention. Also says a lot about how much trouble we could be in when the federal government tells you to get your social security from a 7-11 ATM.
 

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