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Tuesday, March 19, 2024

Thrilling Thursday – Time to Put Up or Shut Down

They found the smoking gun that caused the last sell-off.  

It was a 54-page Goldman Sachs report sent to their institutional clients on August 16th which argued that as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China's growth may not be sustainable.  The report also included detailed information about European financial institutions and pointed language about the depth of the problems in Europe, the U.S. and China saying

Here we go again…solving a debt problem with more debt has not solved the underlying problem. …Can the US continue to depreciate the world's base currency?

As noted by the WSJ:  The report comes as Goldman and its major rivals vie for banking and advisory business from the same European nations whose fortunes it is counseling clients to bet against. On Wednesday, Goldman and two other major banks hosted a presentation in London in which the Spanish economics secretary, Jose Manuel Campa, planned to outline Spain's fiscal austerity measures and pitch Spain's case to investors, according to an invitation seen by The Wall Street Journal. Goldman has a leading position among banks in facilitating sales of Spanish sovereign debt.  

Goldman says in bold letters at the top of the report that other Goldman traders, or "Goldman Sachs personnel," may already have acted on the material in the report.  Isn't that special? 

So nothing has really changed since the sub-prime crisis, has it?  GS and the other Banksters create a crisis, then offer to "help" the countries in crisis by getting them into very expensive, very risky deals which they themselves bet will fail and, of course, we know how it ends – GS or one of their lackeys with downgrade the paper, cause a crash and GS will get rich while millions will suffer – Now THAT's Capitalism!  

Charles Hugh Smith wrote an excellent article yesterday that makes Karl Marx look more like Nostradamus as he essentially predicted everything that is happening right now as Capitalism moves into it's "End Stage."  It's a great read but let's skip to the end as we're already there where Smith summarizes Marx, saying:  

The fourth and final strategy was to exploit speculation’s ability to create phantom wealth. By unleashing the dogs of speculation via a vast expansion of credit, leverage and proxies for actual capital, i.e. derivatives, advanced finance-based Capitalism enabled the expansion of serial speculative bubbles, each of whcih created the illusion of systemically rising wealth, and each of which led to a rise in consumption as the "winners" in the speculative game spent some of their gains.

This strategy has also run its course, as the public at last grasps that bubbles must burst and the aftermath damages everyone, not just those who gambled and lost. 

It's not just the United States that has been turned into little more than a Wall Street casino, GS and their fellow Banksters have their operatives firmly entrenched in all the World's Governments and they aren't just the main campaign contributors or "kingmakers" in this country but in Europe and Asia and Russia – wherever an election can be bought, Investment Bankers are asking "how much".  

Timing is everything with the Banksters and the timing of the August 16th report accomplished several things including turning gold sharply higher and up to record highs (and don't miss Gold Week on CNBC as they work to get a double top out of the move).  

The markets were also on the way to a nice recovery off the panic drop at the beginning of the month and I had already predicted that GS et al would have none of that as they hadn't gotten enough retail capitulation – so we needed one more drop to turn off the dip buyers.  

And, of course, as noted above, GS helped drive the EU back into crisis mode because there's not much money to be made from a stable EU – just ask Dominique Strauss-Khan, who was on his way to chair an IMF meeting to stabilize the EU when he was, unfortunately, side-tracked in May (and look how well gold did after that!).    

Kahn's replacement, Christine Lagarde, makes gold friendly speeches like "Global Risks are Rising, but There is a Path to Recovery," which she delivered in Jackson Hole this weekend, where she says:  

Monetary policy also should remain highly accommodative, as the risk of recession outweighs the risk of inflation. This is particularly true as (i) in most advanced economies inflation expectations are well anchored; and (ii) pressures from energy and food prices are abating. So policymakers should stand ready, as needed, to dive back into unconventional waters.

Wow, they found someone to head the IMF who thinks the solution to the World's problems is giving more FREE MONEY to the Banksters – what were the odds?  

As you can see from David's SPX chart, from the Mid-Week Newsletter, we are in a tough zone for the S&P, along with our other indexes.  As I noted in yesterday's Morning Alert to Members, we expected a 2% pullback off the 10% move up and we got it intraday yesterday and may get it again today but, in the end, we MUST finish higher or we will be quickly turning into a failure pattern at that 50% line, which just so happens to be the same 1,235 that is the Must Hold line on our Big Chart.  

Just like yesterday, we need to take AND hold  Dow 11,590S&P 1,235, Nas 2,603, NYSE 7,473 and Russell 735 in order to make progress – because there are two ways we can go:  Either we are pausing on the way to a big leg up that mirrors the drop or we are topping out after a strong bounce off resistance that indicates only the likelihood that we will begin trading in a lower range through Q3 earnings.  

While the usual 409,000 people lost their jobs last week in America, Q3 earnings may be impacted by a 0.7% decrease in productivity as our Corporate Masters have, for the 2nd consecutive quarter, been unable to whip the slaves any harder.  Things are so dire on the factory floor that Unit Labor Costs have risen 3.3%, 50% ahead of the expectations of Economorons.  This is GOOD news actually, as it means our beloved Capitalists will finally have to give a little money to Labor, who make up 70% of our GDP through their spending (when they have money and jobs, that is).  

Just like in 3rd World countries, inflation is driving wages up but only at a 2.7% pace in Q2 but that's a big move over the trailing 4-quarter average of just 1.9%.  Hours worked also increased 1.3% so that's about 4% more money for the working man in Q2 – no wonder the consumers are "not dead yet."  That goes a long way towards explaining strong August same-store sales numbers from TGT (+4.1%), M (+5%), BJ (+11.5%), ROST (+4%), LTD (+11%) and COST (+11%) with more results expected as the morning moves on.  

We get our own August ISM Report at 10 am and it's expected to show shrinkage at 47, way down from 50.9 prior.  With such low expectations, I will remain bullish until I see a worse number.  We will also see Construction Spending for July, which doesn't matter at all and this afternoon we'll get Auto Sales, which may have been weak in August as Consumer Confidence took a dive.  If we survive all that – tomorrow is the always amazing Non-Farm Payroll Report at 8:30 with just 100,000 as our make or break number.  

It sure doesn't sound like the kind of data that's likely to take us up to the next level, does it?  

Fortunately, the market doesn't need an actual reason to move higher, just an excuse – or a rumor will do in a pinch.   We'll take what we can get this week and hopefully we can just nudge over our resistance lines into tomorrow's close to set us up for a nice, bullish move next week.  That's how we're playing it for now but we'll be watching our levels closely and ready to do a bit more hedging if our supports begin to cave in.  

Be careful out there! 

 

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