Surprise Fed Move

The Fed raised the discount rate 1/4%. This is probably the first of several moves. My guess is that there will be two more, until the discount rate is 1.00% above the Fed Funds rate. At that point, the Fed will halt, signalling that any further move would mean actual tightening. Ironically, while I think that the Fed is doing the right thing, I also believe they may be underestimating the underlying weakness of the economy. First of all, they have over-stimulated the "economy" (really just the financial sector. Much of the "real" economy is still in the doldrums, at best.) The financial sector has been so highly leveraged and is still grossly over-leveraged that even this modest move could have disproportionally negative consequences. I believe that the old dictum "Three Steps and a Stumble" applies. So while I would expect two more moves and then a market breakdown, I don't plan on hanging around as if that were guaranteed. It may be possible that the market is more fragile than even an uber-bear like me believes. It may not take much to knock stocks off their lofty pedestal.

Is the Olympics a Contrary Indicator?

It seems interesting that the nations that sponsor the Olympics find themselves in financial trouble a few years later. But this may not be all that surprising. With the money spent building Olympic venues and sprucing up entire cities to make a favorable impression on Olympic tourists, the debt overhang is probably pretty large. And what do you do with the "Bird's Nest" once the Games are over? You can't make "Bird's Nest" soup! But look at the recent history. Salt Lake City suffered a PR disaster after the 2002 Olympics were shrouded in a bribery scandal. The 2004 Athens Games are partially to blame for the disaster we now call Greece. The 2006 Games in Italy feature another of the PIIGS countries. 2008 marked the peak for the Chinese market. Will 2010 mark the peak of a Canadian economy overly dependent on real estate and commodities? Will 2012 be followed by a British collapse of an overly leveraged economy losing its one source of tangible wealth: North Sea Crude Oil. And will 2014 mark a high point for the Russian bear, once the Games are played out at Sochi? Not much to lay out an investment plan, but something to keep in mind in a world teetering (and tweeting) on the brink of a global debt collapse.

Sovereign Money Laundering

The sovereign debt situation is getting uglier by the day. Revelations of chicanery involving Greek debt and Goldman Sachs are very amplifying, but should hardly be surprising. By now, most people should realize that GS is nothing more than a sophisticated financial version of the mob. And the fact that they have a money laundering operation is not surprising.

Iran Steps it Up

The tensions in Iran is building. Demonstrations (which I believe are at least partially fomented by the West, a la the Orange Revolution, which just came to a crashing halt in Ukraine. Missile deployment in Bulgaria, Romania, etc. Who else could they be pointed at? Rhetoric on both sides about uranium enrichment. Hillary Clinton denying that we are going to attack Iran. My guess is that an attack on Iran is very likely by the end of 2012. It is the only thing that could conceivably same the Obama presidency.

Phony Fannie Breakout?

Here's a pretty good "textbook" 'cup and handle' formation that is a precursor to an upside breakout. The problem is that it is a 60 min chart.


The daily does not necessarily support it, so I suspect it to be a sucker play. My guess is that it will pop higher during the day and draw in buyers, only to give the gains back and fail. Either way, I am just watching. But this is an interesting setup.