Today's Market: Blindfold and Cigarettes
July 12, 2007
by John Galt
As I get back from another sales call filled with stories of adventure and news tonight I tune into bubblevision to see the entertaining news and fiction being promoted by the bubblevidiots. It's amazing that with the "Dow hitting new highs" too many people are so naive to think this is an important event today. The real news hit in precious metals and the dollar where there was a divergence from the US Treasury and the dollar index. But alas, that would disappoint my fans if I did not explain the title of this editorial.
As a courtesy, those about to be put up against the wall are offered a blindfold and a cigarette before being shot. So for those who despise my opinions, my writings and my historical perspectives, you might as well tune out now and enjoy your smoke. You've been blindfolded for years now as history will soon bear out. This courtesy was provided today by the institutional traders to try to squeeze not just the short positions out of the market, but to invigorate the sheep into pouring more resources and more money into U.S. equities. The hilarious part of this is all the cheerleading on television and message boards that "see, those bears are all wrong" and other such nonsense. For the ignorant and just plain stupid, you know those folks that believe bubblevision at all costs, your super rally today was based on very, very misleading data. The bulls got all gushed up at the prospect of WalMart having an earnings surprise this morning thinking that this was a sign that the "consumer" was not dead yet. But alas, the bulls also have a bad habit of running into sharp objects and get castrated also. Thus, enjoy your smoke, I say again.
The misleading data was hinted at in the news from other news this week. The headlines were stunners to those who pay attention to these things. For example:
Credit card debt increase drives jump in consumer borrowing
By Martin Crutsinger
The Associated Press
Consumer borrowing posted a hefty in≠crease in May, reflecting the big≠gest jump in credit card debt in six months.
The Federal Reserve report≠ed Monday that consumer credit rose at an annual rate of 6.4 per≠cent in May, far above the small 1.1 percent gain of April.
After reading this, the average person thinks to themselves "hey that's me" and realized that they are using their personal credit cards to make purchases of necessity. By now, you're wondering just what in the Sam tarnation that has to do with WalMart I'll bet. Look at the breakdowns of the reports. Apparel and electronics retailers were creamed last month. Wally world sells all of that but if you could sneak a peak into the numbers behind the numbers, you'll see that food and energy inflation are the primary reason behind their dollar increase in sales. There was no huge surge of people going to WalMart or anywhere else to buy plasma televisions and designer jeans. Everyone is spending more because they have to; to eat, drink, drive, go to work, etc. With real inflation running at over 6 percent, OF COURSE retail sales numbers at stores which sell food and energy will increase dramatically. Since WalMart sells gasoline and groceries, it's only logical that with the price inflation increases in food and energy, they might just experience a surge in retail sales. Also note, for those that don't read the reports, but listen to headlines, that is a sales figure, not a net sales or "profit" report.
So why are a bunch of investors about to be put up against the wall? The institutions are desperate to get this "all time record" rally in place. If I could only get my hands on the data for what was sold today into this rally, I would wager that a lot of large financial institutions liquidated positions in each other. Monday is another huge day and two key events that the average schmuck could care less hit the headlines that day. The Bear Stearns subprime hedge fund debacle finally gets some clarity, although in this writer's opinion it will be as useful as water guns in Ramallah during a raid on an Al Queda cell. The other news just so happens to be from Lebanon, but in the bull's world, real news, such as wars, don't have the impact that they should and will end up burning them, as usual, in the end. FYI, Lebanon is that 800 lb. gorilla sleeping between you and your spouse, not the family dog and when it wakes up, you will feel the impact.
For those who have listened to me and read the news I've been posting for the last two years, the events about to unwind should be of no surprise. The last minute "surge" in M&A activity is typical near market tops, but who wants to pay attention to history and facts when Kudlow's 3 hairs are standing up like Dr. J's afro because he's so excited today. Those of you that are enjoying your cigarette now and have lifted the blindfold a bit to read this, might want to put that out about now and take the blindfold off. But be careful when you put that smoke out.
There are explosives and jet fuel all around you and it's not grape jello as the bubblevidiots might have you believe......