Cookin‚ the Books
Stocks were little changed last week as the S&P 500 and
Dow continued to consolidate below their recent highs,
while the Nasdaq spent most of the week rebounding from
last Monday‚s plunge. The dollar managed to strengthen
a bit, continuing in its attempt to eke out a minor bottom.
Meanwhile gold skidded to a new 2-month low and crude
oil busted out to its highest in almost a year.
Let me start off this week‚s commentary with a revealing
look at how the powers that be handle statistics in order to
create illusions of growth and economic health. Perhaps
it‚s not entirely „on topic‰ with a stock market update, but if you‚re putting your money into the markets, you should know the compromised sources of data that many other
market participants are keying off of.
Here we are with the market seemingly topping out and
the economy generating a massive short-fall of jobs. The
solution by the powers that be? Manipulate the numbers
some more, spew forth increasingly asinine levels of
drivel, and hope that no one notices the chicanery. This
topic could generate a multi-volume book series, but in the
interest of time and space, I‚ll stick with just a couple of
the most recent examples. My interest as always is not to
highlight the shortcomings and idiocy of politicians and
policy-makers, but instead to enlighten you, my dearest
reader.
Last week our esteemed manager of the fiat currency
system, Alan Greenspan, tackled some of our financial
problems with the suggestion of replacing our existing
Consumer Price Index with a „more accurate‰ measure.
The CPI, as you know, is the government‚s official
measure of inflation.
Why did Mr. Greenscam offer this proposal? Because in
his opinion, the current index OVERSTATES THE COST
OF LIVING. This is the same index that he refers to when
prattling off his incessant nonsense about „low inflation.‰
This is the index that refuses to measure the REAL costs
of living and excludes „volatile‰ measures and pretty much
anything and everything that most of us need in order to
survive. (I‚m exaggerating for effect. Is it working?)
Take a gander at your life, dear reader. Is your cost of
living up or down over the past few years? Did you enjoy
that refund check from your health insurance provider?
Mighty nice of those oil companies to fill your gas tank for
free every other Tuesday, no? And with all the money I
saved on groceries over the past year, I‚m debating
whether to buy myself a yacht or perhaps a second home
on 50 acres in Southern California.
Would you say an index which states that your cost of
living is barely rising is accurate? Gas prices are higher
once again. Health insurance continues to climb (mine is
up around 300% in the past five years.) Fruits, vegetables, meat, heating costs ˆ all on the rise. And yet Greenscam suggests that the government save some money by stealing from Social Security with a new index that more „accurately‰ reflects his inane observation that
the cost of living is barely rising.
Meanwhile, over at that big white house on the hill, folks
who are concerned about the lack of job growth are
considering a new way of generating jobs. Actually, it‚s
not that new. It‚s the time-tested government tactic of
manipulating data to make it more palatable. Seems the
latest brilliant plan includes reclassifying restaurant jobs
as manufacturing jobs.
You see, we‚ve been losing manufacturing jobs for more
than forty consecutive months. That doesn‚t make the
folks who talk about a recovery look so good. On the
other hand, low-paying hamburger-flipping jobs are on
the rise. So hey! How about we refer to „hamburger-
flipping‰ as „manufacturing‰ and thereby stop this sorry
track record dead in its tracks?!
Sound crazy? I‚m not making this up. In the words of
Congressman John Dingell of Michigan referring to a
recent presidential economic report: „It could be inferred
from your report that the administration is willing to
recognize drink mixing, hamburger garnishing,
French/freedom fry cooking, and milk shake mixing to be
vital components of our manufacturing sector.‰
Hey man, if you can‚t create jobs or bring down the cost of
living, no worries! We‚ll just fudge the numbers around a
bit so that it looks like jobs are being created and the cost
of living is falling! Voila! Instant recovery! And free cash
picked from the exceedingly deep pockets of the country‚s
seniors.
(Remember in the old days when government at least
TRIED to be sneaky and hide its manipulations?)
What‚s the relevance? Plenty. In good times these kinds
of measures are not considered. There‚s no need for
them. Everything is hunky-dorey and everybody‚s happy.
Nowadays, we‚re told that everything is hunky-dorey but it
just doesn‚t feel like it, does it? If indeed the economy
was on a powerful upside tear and happy days were here
again, there‚d be little need for desperate measures like
stealing from Social Security and reclassifying job stats.
So the next time some bubble-headed over-coiffed
buffoon on CNBC chuckles about the latest promising
economic data, know the source of that data. When the
market is responding to massaged, manipulated and just
plain moronic numbers, you have to REALLY wonder
about the basis for the advance!
And speaking of the advance, it continues to have plenty
of trouble. While the Dow and the S&P 500 are still
hemming and hawing below recent highs, the Nasdaq
decisively breached its 50-day moving average last week
and remains below it. Naturally it bounced off support at
the 100-day moving average, but the new pattern of lower
short-term highs and lows does not bode well for the bulls.
If the 100-day average falls, look out below!
We haven‚t yet had a breakdown to write home about,
mind you. As I said, the Dow and S&P are still holding up,
even if they can‚t seem to build on their gains. But things
are definitely growing increasingly questionable every day.
Last week‚s movement in the Nasdaq was the closest the
index has come to the 100-day average since last April.
In other words, last week‚s action is the weakest we‚ve
seen in almost a year.
Quite a few of the big name darling stocks have
completed major topping patterns and are in the process
of breaking down. Intel Corp. confirmed a triple-top by
breaking under critical support last week. (We got short
just under the high. Na na!) Amazon completed its top
with a major breakdown a few weeks ago, and the stock
continues to fall. Qlogic and Sandisk look awful.
Microsoft sucks. Chiron has broken down. Yahoo! is
falling.
The internal health of the market is waning, pure and
simple. Plenty of big name stocks have topped out and
are falling. (To be fair, plenty of them haven‚t topped out
and appear to be still rising.) The cracks are appearing,
the danger signs are there. And the divergence between
the Naz and the other indices is the biggest crack of all.
Does it imply the certain death of the mini-bull market?
Perhaps. Perhaps not. If there were any certainties in
this game we‚d all be too busy spending our billions to
bother reading this drivel. But like I‚ve said before, this is
about the most bearish I‚ve seen the market look since the
mini-bull began to gather steam. Market sentiment is still
high, the feds are working overtime to massage the
numbers, jobs aren‚t showing up and the Nasdaq is
breaking down.
Sound like a market you want to buy?
Mark M. Rostenko
Editor
The Sovereign Strategist |
