The S&P500 finally slipped a bit last week, falling 2.2%. The VIX index shot up almost 13%, but it is still closer to its long-term lows, rather than its highs. This suggests that there’s a lot more room for fear to enter the stock market party, IF the Fed’s perceived support of the stock market doesn’t succeed in keeping the fear at bay. Trade volume was average, also suggesting that the selling wasn’t panic driven, in which case volume would have soared.
There wasn’t a lot of macro news last week. Our trade deficit was still hugely negative, although slightly better than expected. Initial jobless claims still hovered near the mid 400 thousand level, a level that’s NOT associated with net job growth. Consumer sentiment, a warped survey due to the impact of the low interest rates (which have been openly manipulated down by the Fed), was slightly better than expected, but still at dismally low levels.
Technically, the S&P is still very overbought on the daily charts. Last week’s sell-off broke several technical support levels, but not decisively so. What’s interesting, and unexpected, was that the sell-off happened as the Fed began its second money printing operation. If the “sell on the news” didn’t happen when QE2 was formally announced, maybe it will happen when QE2 gets underway and traders have no more government-led price support programs to look forward to.
Author Charles Hugh Smith, recently posted and essay titled: Fraud and Complicity Are Now the Lifeblood of the Status Quo.
In it, he asserts that the status quo would collapse if the systemic fraud and complicity were banished. Instead of being acts of evil conspirators, fraud has become the foundation of the US economy and its financial system.
So today, the entire status quo is entirely dependent on fraud for its very survival. The status quo would implode if fraud and complicity were withdrawn suddenly from our system.
How so? Charles Hugh Smith presents a list of evidence:
1. The mortgage is riddled with fraud and misrepresentation. It’s so toxic, that nobody is will to touch this market except the federal government, through Fannie, Freddie and FHA.
2. The foreclosure crisis reveals a Banana Republic system of law, where the big banks and Wall Street can do no wrong, but Main Street can.
3. Housing and commercial real estate is still in a coma; organic demand has not returned. Were the government to pull out of the mortgage market, prices would instantly collapse.
4. Wall Street and the big banks epitomize control fraud, where winning decisions result in huge bonuses, but losing bets are paid off by the taxpayers, so that the huge bonuses can continue flowing to the banksters.
5. The stock market is constantly propped up by the Federal Reserve and other financial elites. Recently, the Fed (in a WaPo Op-Ed) has made explicit its desire for stock prices to rise, even as high frequency trading and other cheating programs make the markets vulnerable to total collapse (as these schemes take money away from Main Street investors).
6. Corporate accounting is a farce. When Congress forced the accounting standards board to approve mark to model accounting in early 2009, the integrity of the financial statements from the entire financial sector is in serious doubt. Many, if not all, the too-big-to-fail banks are effectively bankrupt, but the new accounting gimmicks allow the banks to hide this truth from the investing public.
7. The US political system has been bought and paid for by the financial elites. With its seemingly limitless campaign contributions, the monied interests have hijacked the political system to further enable their looting of the public and the taxpayer.
Charles Hugh Smith argues that when a system becomes dependent on fraud and misrepresentation of risk for “business as usual”, then all that is required of the complicit is to “dot the i’s” and fill out the report, court order, balance sheet, act of Congress, just like everyone else does.
In this way, asserts Hugh Smith, financial evil becomes commonplace.
Yes is has, Charles, yes it has.