Zealotry of either kind — the puritan’s need to regiment others or the victim’s passion for blaming everyone except himself — tends to produce a depressing civic stupidity. Each trait has about it the immobility of addiction. Victims become addicted to being victims:  they derive identity, innocence and a kind of devious power from sheer, defaulting helplessness. On the other side, the candlesnuffers of behavioral and political correctness enact their paradox, accomplishing intolerance in the name of tolerance, regimentation in the name of betterment.
– Lance Morrow

It is unclear how disarming law-abiding citizens would better protect them from the dangers and threats posed by those who would flout the law. It is at just such times that the constitutional right to self-defense is most precious and must be protected from government overreach.
– Rick Scott

In my email of two weeks ago I wrote the following:

Barring a market catastrophe in the next two weeks I do not expect the Fed to act at the June meeting.  With rates where they are and stocks where they are there is little upside to action; however, this lack of action is precisely what will set the stage for the massive action that must come later.

Well the Fed meeting came and went, and in my opinion, they did less than zero.  The extension of operation TWIST is the biggest non-event, nonsense move in the history of the Federal Reserve.  In fact, it does more harm than good on several fronts and it would have been smarter to have done nothing at all.  Most significantly, the fact that they felt the need to “do something” should tell you something.  With stock prices near their highs and the 10 year treasury at 1.60%, or just shy of record low yields, what is the rationale for any action?  The answer to this question of course is that many of the world’s economies have been in recession for much of the year and as I have said for weeks, publicly and privately, I believe the U.S. joined the recession club at some point in May of this year.  I think The Bernank understands this but dares not say it.  Just like he rambled on about how “there was no housing bubble” and that the “subprime crisis was contained” back in 2007/08 as the world tipped into financial implosion, he employs the same strategy today.  The core strategy at the moment, as I mentioned previously, is “talk up the economy, talk down printing and pray.”  While this is all well and good, the biggest problem that the Bernank now faces is that the financial markets are such a distorted hologram that all asset prices are vulnerable to flash crash type moves.  No one believes in their positions (other than people that hold hard assets like precious metals outside of the banking system and will not sell until the system is reset), rather investors and traders are forced to be involved in positions as a function of their mandates.  Their decisions are no longer driven by economic or business prospects but rather by some view on what the Central Planners of the world will do next.  The markets seem calm but there is a storm brewing beneath them and the pressure will be released one way or the other.  We are now in the crucial six week period between Fed meetings.  The reason I think this is such an important time is because not only will investors come to grips with the reality on the ground (recession) but it is also earnings season.  As I pointed out during the last earnings period, stocks that had even a whiff of weakness in their numbers or outlook were decimated.  Even names that had good results did not break out.  This sent a clear signal that too much goodness is priced into many shares out there.  Today we see a similar sign with Bed, Bath and Beyond.  Another high flier returns to earth…

Bed, Bath and Beyond Chart       

The Saudi Stimulus
In my recent piece titled Saudis Pump All Out as the Global Economy Crumbles, I outlined how the Obama administration and the Saudi government clearly came to an arrangement.  Bascically, the U.S. and other OECD nations would not release SPR (strategic petroleum reserves) oil in exchange for the Saudis pumping all out.  Of course, when faced with an SPR release the choice for the Saudis was pretty simple.  At least this way if prices are headed lower they can sell the volume.  I believe that with the Bernank terrified to act given the populist backlash (and rightly so) agaisnt the Federal Reserve, this was the “stimulus” that the administration agreed upon.  It was a very crafty move.  This is because 99% of investors out there have no idea what is really happening in the oil market and all of the geopolitical forces involved in the recent manufactured crash.  As a result, your average investor, and more importantly, your average computer algo just sees oil collapsing and thinks this will be some boost to the economy.  The following chart sums up this brain-dead trade perfectly.

Oil vs. the SPX

Disneyland Lives!
No ladies and gentlemen, oil is not falling from the sky like manna from heaven.  No ladies and gentlemen, the Bakken shale is not a global oil supply game changer.  Yes, the Saudis are purposefully crashing the price.  Yes, demand is plunging as the world economy tips into recession.  So where does this leave us?  In a very, very bad position.  First of all, just like all of the other “stimulus” this is a band-aid kick the can down the road move.  Sure the Saudis can live with low oil prices for a while, but certainly not forever as their population is young, restless and needs consistent payoffs.  Second, all of the new sources of supply are expensive, such as oil shale, oil sands and deepwater.  Projects will be canceled en masse at these prices.  Then, when the Central Planners of the world finally give in with the Big Print oil will skyrocket higher as confetti money meets supply declines and any economic recovery gets stopped dead in its tracks once again.  Also, what about the fact that oil shale has been one of the highlights of the U.S. economy over the last few years.  You think it is just a coincidence that North Dakota has the lowest unemployment rate in the United States at 3%?  Of course not.  The oil boom has been the one bright spot in this disaster financial ghetto economy we’ve got, and at $80 oil that doesn’t work.  The oil shale workers can sadly now join the ranks of Obama’s food stamp nation.  Oh and I’m sure green energy will really be stimulated at these prices!  Great work guys.  You are killing an entire nation to maintain your petty little power structure.  But it won’t work because we are in the Forth Turning, and when it all blows up, trust me, we will never forget who’s responsible.

Peace and wisdom,


18 thoughts on “TWISTED

  1. That’s why they want to outlaw guns in DC. They know people will be coming for them once TSHTF. Is there a better place to round up the criminals than DC where they are all congregated together? I think not.

    “But it won’t work because we are in the Forth Turning, and when it all blows up, trust me, we will never forget who’s responsible.”

  2. Pingback: What you must know about the Federal Reserve and Bed, Bath, and Beyond « InvestmentWatch

  3. Some of the best commentary around Mike. Out of the insanity, some much needed clarity.

    Thanks and keep it up, your words are strength and comfort in this mire of lunacy we find ourselves amidst.

    May we move through this turning with love and integrity, as the souls of those who are responsible have already been damned.

  4. Pingback: TWISTED | Money Does Not Grow On Trees

  5. Ok, we know who’s the responsible. But who are getting benefit of that?, and how we can follow them, if we can, of course!

  6. North Dakota has a low unemployment rate partly due to OIL. BUT more importantly due to no CENTRAL BANK THAT CHARGES COMPOUNDED INTEREST!

  7. Hi!, Patrons Et AL:
    Did you see the post on the net about 2 weeks or so ago where childless folks can assemble for various reasons and this group forms the greatest demographic group here in the US? What does this portend for future tax collecting etc., if there are no people to take the place of the present underclass of taxpayers? Reminds me of the cattle rancher farmer who seggregated his bulls into one pen and his heifers into a seperate, seggregated pen. Not allowing them to get together and mate he couldn’t figure why his herd was diminishing year by year, although he enjoyed the declining feed bils. Now that we are in a totally confirmed population implosion without recoarse, future Social Security contributions will plummet to ? Maybe that means it’s presently a good idea that the baby boomers keep working unil they reach the pine box stage?


  8. Pingback: Twisted « Financial Survival Network

  9. Chris Powell on CNBC Asia last night. Honest candid discussion of central bankster manipulation of gold.
    Central Banks Manipulate Gold Markets

    THU 21 JUN 12 | 09:40 PM ET

    Chris Powell, Secretary & Treasurer of the Gold Anti-Trust Action Committee says central banks are manipulating gold markets as they are interested in supporting government bonds and keeping interest rates low.

  10. Don’t forget the Obama news journalist along with the other group when the tshtf. They are just as responsible for their action as well and the network. They cannot report the truth and carried the lies into the world just like the rest.

  11. Every time the price of oil goes up, the price of gasoline (and diesel) goes up. Every time the price of gasoline goes up, the economy tanks. It doesn’t take a Phd in economics to figure out this cause and effect chain.The Saudis have had years to invest their excess profits in the West and diversify. I don’t think they need to be bullied by a threat of an SPR sell-off to keep pumping until the price of gasoline drops back down. Why do I doubt what you say? I don’t think the SPR is that big of a reserve, and we need it to be able to run some incredibly hungry tanks and hummers and bombers and …

    I’m not saying there isn’t a conspiracy to manipulate the price of oil. There is. I just don’t think it works quite the way you think it does.

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