Riddle Me This?

A couple of weeks ago I posted that the Fed ran out of suckers and conduits to keep the equity markets rising higher.  Last week we saw our first pullback, as oil, gasoline, Natural gas, the Yen, volatility, bonds and the precious metals were all squeezed or rotated out of to try and creating, the all is good, wealth creating, perpetual motion machine, capital gain generating, equity market.

The boyz ran out of runway, and had to throttle back for another try.

So, what are they going to target now that they capped the PM's?  My answer is a full on assault on the energy complex. Like the gold and silver market, paper dominates the oil markets, by a 10 to 1 factor, all traded heavily by the true owners of our country, the banks. Last week, we saw the first grenade thrown into the yard, and I expect a full on assault on energy, to allow the Fed to keep on printing, as it must, and to try and keep oil from destroying the economy, and their way of life.

The sequestration drama simply serves to allow the Fed to blame that action on commodities falling, and not on their next set up.

The good news is we now have solid markers where the Fed mus relent.  Please see my charts below.

My view on mortgage rates

165-177

Zero Hedge reported again this week that the Federal Reserve monetization is going into excess reserves of European banks, and like 2007, it is causing a run up in the Euro, and at some point Europe cries uncle.

http://www.zerohedge.com/news/2013-02-09/feds-bailout-europe-continues-record-237-billion-injected-foreign-banks-past-month

But who gets to decide when enough is enough?  Apparently Germany does.  They are on a mission to impose budgetary discipline in Europe, and they just out maneuvered France on the EU budget.  OK, so what.

http://finance.yahoo.com/news/analysis-france-runs-german-wall-115707907.html?l=1

Well I think it gives us the price for the top.

Everyone is talking about 155 as a top, all time highs are at 156.70, and if you take the last Fed fueled run in 2007, you had a 20% move over seven months before Europe could not stand the pain any longer, not to mention us.  That takes us to 161.

Now I read this from Deutsche Bank.  "A study by Deutsche Bank last month calculated that France's exporters start being priced out of world markets when the euro rises above 1.22-1.24 dollars - a level it has already long left behind to trade at $1.33 now.

Germany's higher value-added export products, however, only start to be disadvantaged when the exchange rate is above $1.54. Until that point, there is little damage to the German economy and indeed some benefit in a strong euro because it keeps the prices of imported goods and hence inflation in check."

If we get there we are looking at a SPY number of 177.  I put the range in as I am unsure how loudly the southern and Eastern belly of Europe will be screaming by then.  Also, I can't even imagine what the price of oil here will be, nor the ten year.  I imagine China will be a basket case by then, as well.

I am still looking at a pullback imminently, and my range is no lower than 147, unless the kabuki sequestration dance takes an unscheduled turn.   We have the State of the Union, then negotiations to give the "reason" for the pullback, then boom, shaka, laka.

Right now, I have sells on Oil, platinum, Paladium and Treasury prices, and SPY and VIX are overbought.  Gold and silver are neutral, and copper is a buy but only because of Friday's action which I discount due to volume.

If I am right, it will make the next twelve months (after the top) horrible economically, all because the banks are broke, and we must pony up to keep them alive.

The Markets Tax

The Federal Reserve would have you believe that their policies are helping the U.S. economy and at worst, they are benign.  The political elite would have you believe that all is well and getting better every month.  The financial elites are telling you time to rotate out of those bond and money market accounts because the Fed saved us, and the Administrations policies are working.  Get ready for the next boom.

As I discussed before, the stock market acts as a big, visible perceived report card on the economy, and the capital gains it can generate, fund the U.S. government. A lot of effort is going into creating an illusion of prosperity again.

But can a debt saturated, credit, import, and energy dependent economy thrive in an environment of higher credit costs, lower dollar purchasing power, and higher energy input costs?  As you will see in the charts below, in order for the Fed and their banker enablers to provide us this stock market illusion, they have set the stage for some very serious consequences.

These are all hidden taxes we absorb, in order to continue with the elites policy aims.  Future stock market growth will come with some great pain to many people.

www.arum-geld-gold.blogspot.com