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Institutional Love

admin on 04 22, 2010

Hopefully everyone has seen how the market as of last week was up 48 days straight without a 1% correction, until Friday expiration. It took Goldman Sachs and Google to make the market take a breather. We resumed the action on Monday.  In fact today, 4/22/2010 we saw a pretty negative day unfold, but magically the buyers appear out of the woodwork and drive the market back to slightly positive.  Great for all of those bulls.  The bulls must feel like they can do no wrong here.

The market has been absorbing good and bad news without any major breakouts or breakdowns.  The institutions are happy keeping the market above 11k on the DJIA.  The American public is happy that their 401ks are just back to above water. Banks are happy because they have gotten a free ride with:1)the bailout, 2)the cheap interest curve where they can profit,3)the reduced provisions on bad debt that allows them to look like they profiting, 4) the ability that they can mark their level 3 assets to whatever price they want and get away with it. The US government is just happy that they can tax people and that  they think they got away with this sham.  The sham that has been pulled over the publics eyes that as long as they keep the market up then people will be happy.  The plunge protection team has been more active then ever before.  The PPT is the group of market buyers(institutions) supported by the fed to step in when needed to support the market.  These days though, they have realized that they can bully the market in what ever direction they want.

Be prepared, these institutions will get the last investor in and then the already thinly traded bull market will be gone in the blink of an eye.

The entire retail sector was on fire today. What reason could get the entire market so hot that every retailer was up?  We don’t have a clue.  It couldn’t be that retailers were trying to stop using Visa for their in house card processing.  Does that mean more money for the retailers?  Sure, but enough to drive every retailer up by at least one percent.  When something smells fishy, we need to investigate.

One theory I have recently read and trying to follow up on is that only a small portion of the consumer is spending.  That portion is the people who stopped paying their mortgage.  One author attributed the entire rise in consumer spending last month to the people who stopped paying their mortgage lender.  This number is ever increasing.  Families making the decision to “strategically” turn over their keys.  In fact, a morning talk show they said it was “ok” to walk away from your obligations and that you should not feel guilty. They gave the example that Bank of America defaulted on its loan at a big building in NYC and just moved to another building.  If they can do it, why can’t you.

The banks don’t have to take the loss anyway, they can mark that house on their books at whatever price they want.  They will not have to write off the mortgage until it is “strategically” in their best interest.  We know if they put their shadow inventory on the market now, that they would crush the housing market. Seems like one big vicious cycle, huh!

It is one big cycle of lies.  Let’s hope the institutional love continues!