Stock Market Fault Lines

By: Barry_M_Ferguson

What else can go wrong? In the last decade, investors have withstood a barrage of seismic catastrophes along fault lines of vulnerability.

Our political leaders have initiated military conflicts that were justified from prevarication and outright lies. It seems that all wars are fought on the foundation of a lie.

Our same political leaders have initiated legislation known as the ‘Patriot Act’ supposedly in response to manifested threats. It seems the ‘Act’ was nothing more than a surrender of personal freedoms of the citizens resulting in a functioning autocratic government. The bullying, belittling, intimidation, and humiliation at the hands of the power-emboldened government effectively imposed submissive behavior on the citizenry.

Our central banking system has served to promote the biggest bubble in history by employing the illusionary effect of wealth through real estate propagated by artificially low interest rates and non-existent standards of lending prudence. It seems the central bank is, as Andrew Jackson knew, an enslaving tool of the rich and a malicious plague to the poor.

Our elected ‘representatives’ (Congress) have betrayed the electorate in the face of manifested financial crises as they surrendered the citizens’ Treasury to the banking cartel to use as it wished. TARPs, TALFs, and POMOs entered the lexicon portrayed as programs that would lead to ‘economic recovery’. It seems instead, this betrayal of duty has led to a constant state of spiraling debt.

The US Constitution was written by the geniuses that were our forefathers and it was meant to serve as a foundation of our laws and individual rights. The treasonous Congress of the past decade have spent their time erasing those rights and subverting those laws so the plethora of lies told by government would not be exposed to the average citizen. When members of Congress walk by a statue or painting of Jackson or Jefferson, they should not even be allowed to cast their gaze upon them. Instead, they should affix their eyes to the floor and walk by their superiors in silent reverence. They are not worthy! It seems that when things get difficult, our laws and rights become problematic for a government dedicated to banking cartel servitude.

The stock market has been ravaged by the ineptitude and greed of the Wall Street banking crowd. Their derivative scam came unglued and threatened to vaporize the government banking system. The government threatened the citizens with everything from depression to catastrophe. Falling stocks and falling real estate erased vast wealth from the hands of the citizens. It seems that the wealth lost by citizens was claimed by the banker elite. Their balance sheets were restored and the bonus shower resumed. Bankers have again resumed record profits! Yet, the average citizen now makes less than the average citizen in 1971. The real beauty of capitalism is it is indiscriminate about punishment. Corporations that lie, cheat, and steal are pummeled into bankruptcy by a free market when fraud is discovered. It seems, however, that capitalism had to be neutralized when it threatened to wipe away the banker frauds.

Autocratic governments have been hoarding wealth and extracting it from citizens all over the world. Wealth concentration is only a problem when the citizens finally realize that their means are limited and their resources are rationed by the government that supposedly represents the citizens. So far, 2011 has been the year of riots born of disparate economics. It seems the citizens of every country are coming to the conclusion that their government does not represent them. The people are merely subjects. It is not surprising that there is a populous uprising across the globe.

And now we have earthquakes pummeling countries and citizens. The latest (March 11) is the earthquake in Japan. The human tragedy is horrible and I have no intention of minimizing the suffering in Japan nor do I mean any disrespect. However, investors must digest all news as it relates to investing. But the truth is this. All of these events are fault lines to investors. They are investment changing events. Let me explain.

Market based economies periodically have contractions. Free markets respond with bear markets. Central banks hate this idea because 1) they hate freedom, 2) they hate capitalism, and 3) they are arrogant enough to think they can better control economies and markets with their money printing machines. They have been orchestrating events since money was first issued to further their dominance and control. In the most recent decade, Fed Chairman Greenspan couldn’t let the bear market (that he brought on with bumbled monetary policy) of 2000 play out. There is a fair amount of evidence that the twin towers were brought down intentionally in part to cede more power to the Fed. They revived the economy with derivatives, free money, and credit that in turn, blew the real estate bubble until it burst. The Fed again assumed more power over the economy and the markets with  the Pelosi Congress surrendering sovereignty to the central bank. Again, the bear market in stocks was the key. The citizenry apparently no longer has the intellect or courage to face bear markets and therefore surrenders to anyone promising an eternal ascent in prices. Unfortunately, the citizens are too ignorant to know for what they ask. The only way to perpetually spiral prices higher is to welcome and foment inflation. Inflation is the only answer the central bank has for anything. It is their specialty.

So, to avoid bear markets in stocks and recessions in economics, the citizens have surrendered their power of price discovery, the virtues of capitalism, and ultimately personal liberty. The central banks have assumed total control and as each fault line threatened to bring down their ‘house of cards’, they expanded their power. Each fault line has been met with intervention, both central bank and government, the likes of which has never been imagined. Now, we must entertain, at least, if not accept, that the central bank controlled government has expanded the HAARP program to include earthquake events. There is plenty of evidence that I am sure most readers have already digested. It is rather odd that the twin towers in New York and the earthquake in Japan both occurred on the eleventh day of the month. It is also rather damning that the HAARP wave has been turned on before several recent earthquakes. Whether we want to even believe in the program or intent of the program, we must acknowledge that many people in the world blame HAARP for the earthquakes in Chile, Haiti, China, and now Japan. We must also entertain the idea that given the quest of central bankers to control everything, they might employ absolutely anything at their disposal to cement their goal. Every fault line that threatens to topple the stock market is just another opportunity for them to grow their power over us.

Let’s look at the central banker reaction to Japan’s earthquake tragedy. Again, the stock market is the key. Ben Bernanke had set off a stock rally with his QE2 announcement on September 1, 2010. The Dow had hardly stumbled until riots broke out across the Mideast and Northern Africa. When the rioting expanded into Libya, the price of oil finally looked poised to push high enough to produce a drag on stocks. The Dow began to tumble. Bear in mind that under control of the central bank in QE2 mode, the Dow has hardly put together more than two or three down days in a row before resuming its rally. But this time was different. Yes, oil was firmly over $100 per barrel but the entire commodity complex was rising to painful levels. Incredibly, even the greatest propaganda machine ever on the face of the earth, the US Commerce Department, admitted that food prices were rising. Although, I think they did say something like excluding everything that grows on vines or branches or roots, there really wasn’t any inflation. In addition, it was also becoming apparent to anyone with a functioning brain cell that any economic activity that seemed positive since March 8, 2008 (a major fault line - the introduction of TARP and bailouts for all the ‘too big to fail banks’) was due to government/ central bank stimulus. To make matters worse, some of these central bank knuckle-draggers were talking about ending all stimulus with the end of QE2 in June. So, another fault line had to be manifested.

This story is really about central bank control and not human suffering. The central bank doesn’t care about that. Their control is in their money that they issue in exchange for assets. They then devalue the currency and keep the assets. If they keep doing that until the currency is totally worthless, who wins? Yeah, I think we all ‘get it’ now! For instance, the central bank has used all the previous fault lines to develop the DTCC such that it clears derivative trading but also stock trades. If you don’t know, their name goes on the stock certificates that you buy with your money. They settled over a quadrillion trades last year alone. So, the key to the confiscation of assets is the currency. The central bank is not going to allow anyone to mess with their master plan. They have been devaluing the US dollar at a rather brisk clip of late and they need the Chinese and the Japanese to keep buying the US debt. Constantly increasing the debt works to devalue the currency. Of course, they also need brainless members of Congress to carry out the deficit spending that increases the debt but I think we all know they have that totally covered.

The Chinese of course started the SCO with the purpose of moving to an alternative currency of the US dollar. Suddenly, the world is having a terrible problem with earthquakes. Coincidence? The central banks are determined to peddle their currency. Paradoxically, the more currencies weaken, the more central bankers grow their power. The earthquake in Japan served to strengthen the Japanese Yen because the re-building process will require a lot of yen. Thus, yen demand is expected to increase. However, the yen had already been on a tear mostly because of the declining US dollar. Since Japan is, to a large degree, an export driven economy, a strong currency can hurt the economic growth. All modern economic growth is built on debt. So, the BOJ announced a record yen injection into the financial system. That didn’t work. So, surprise - surprise, the Federal Reserve and other G-7 nations announced an ‘intervention’ to help devalue the yen. We must ask a question: Why do central banks always work to devalue currency that they issue? The answer is, they want to exchange their currency for assets but they also know the economies that they control are crap. The only way to make crap more expensive is to make the currency that it is denominated in less valuable. There you have it.

As an investor, it is important to watch the Fed fault lines. I included a chart of the Dow so we can see the turning points (blue circles) from these fault lines. The chart shows the markets response to QE2 and if the Fed has its way, we might see a similar response to the great ‘yen intervention’. Of course, we should be mindful that the fault lines could lead to down trends. Nah. The Fed rules the world now - earthquakes, economies, and stocks! Every trend change comes from a central bank intervention. If the trends go down, we all might catch on to their scheme. Fault lines now give the central banks the excuse to turn the stock trends up.

 
8 months DJIA - blue circles are fault lines
Chart courtesy StockCharts.com

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
Primary Tel: 704.563.2960
Other Tel: 866.264.4980
Industry: Investment Advisory
barry@bmfinvest.com
www.bmfinvest.com
www.bmfinvest.blogspot.com

Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

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