Shall we keep pretending?
Clearly that's the plan of the MSM, where you'd think we were in some kind of rally while critical index levels are falling by the wayside right and left on a daily basis. This is very much like 2008, when the Global Economy was collapsing and an endless stream of a-holes came on TV to tell you not to worry -- and they kept people from worrying -- until it was too late.
Amazingly, after looking at that clip, CNBC is still on the air but Jon Stewart is not. Now we face another serious crisis and we have 3 financial networks: Fox, CNBC and Bloomberg and none of them can seem to find any guests who don't think we shouldn't be worried about:
- Chinese Factory Gauge Drops to Lowest Level Since March 2009
- China Heads to Japan-Like Slowdown as Debt Swells, Chanos Says
- China’s Economic Growth Not at Rate GDP Suggests
- INSIGHT-China consumers tighten belts, a red flag for the global economy
- Hank Paulson: China economy has 'run out of steam'
- Japanese Stocks Tumble After Holiday, China Default Risk Hits 2 Year Highs As Yuan Weakens For 4th Day
- Volkswagen-Induced Pain in Auto Stocks Seen Deepening by Options
- Volkswagen Emissions Scandal Takes Toll in Corporate Bond Market
- Is The Bank Of Spain Quietly Pulling Its Gold From Catalonia Ahead Of This Weekend's Vote
- Brazil gov't sees deeper economic recession in 2015
- Brazil Real Drops to Record Low
- Brazil real tumbles despite central bank support of currency
- Petrobras Default Looms Under $90B Dollar-Denominated Debt
- After Commodity Meltdown, Citi Warns to Brace for More Losses
- Harvard endowment warns of market ‘froth’
- The Colossal Failure Of Central Bank 'Trickledown'
- Fuel fraud: Stealing millions from taxpayers at the pump
- Bears Are Back in Charge as Charts Flash Danger
And I don't want you to think I spend hours digging up bad stories -- those are just today's headlines! If it were not for the DESPERATE attempts of the G8 Central Banksters to prop up the markets, I'd be gung-ho bearish but, as it is -- I'm just cashish and very, very cautious. The next bit of bad news is likely to be the Durable Goods Report this morning (as I've been warning) and this should bring us to the lows for the week -- where we'll be saved by Yellen (hopefully) at 5pm.
Still, is this what you call an investing premise? Is this a reason to take your lovely US Dollars and trade them for stock shares of companies that have to do business in China and Asia and Europe and South America? Those places all have SEVERE problems, even if you believe our country does not.
Not only are stocks historically VERY EXPENSIVE at the moment (and, without AAPL income, we'd be higher than 1929 on the rest of the market), but the risk is VERY HIGH and a lot of the data you are seeing is suspect, at best. Forget the fact that VW's profits have been FAKE for the last 5 years, since they were based, in part, on the revenues of cars that they never should have sold at profit margins they only enjoyed BECAUSE THEY CHEATED (very sub-prime of them). Those profits will reverse the way Countrywide's fake profits reversed (and many others) and the way the dot com bubble burst when all those paper profits went up in smoke.
No, the risk I'm talking about is TRILLIONS of Dollars of FAKE GDP data coming from China and other countries. The image on the right is a recent directive issued by China's official Xinhua News Agency and the relevant paragraph reads:
In keeping with the spirit of notifications from superior authorities and Agency leadership requirements, the focus for the month of September will be strengthening economic propaganda and guiding public opinion (the related notification is in the attachment that follows). This includes taking the next step in promoting the discourse on China’s bright economic future and the superiority of China’s system, as well as stabilizing expectations and inspiring confidence. We request that your departments take immediate action to plan related reporting; identify individuals to take responsibility; and confirm reporting topics, individuals responsible for those topics, and publication dates.
And don't act all shocked, the same thing happens at Fox and CNBC every day -- they just aren't dumb enough to put it on paper! State and independent media in China have been pressured to keep economic reporting upbeat and to downplay the stock market crash last month as well as slumps earlier in the summer.
Detained Caijing reporter Wang Xiaolu confessed on CCTV to “causing panic and disorder” with a negative story, while almost 200 others have been taken into custody for “spreading rumors” about stories including the stock market turmoil. A directive from August 25 requires that Chinese websites delete specific essays about the crash, while in June the State Administration of Press, Publication, Radio, Film, and Television instructed TV and radio stations to “rationally lead market expectations to prevent inappropriate reports from causing the market to spike or crash.”
I warned you about this on July 9th ("China Arrests The Short Sellers -= All Is Well?") and we've stopped trusting Chinese data long ago but this is not just a Chinese problem. China has been the World's growth engine for the past decade and now it seems like it's ready to implode. How much of a bargain will your US equities be then? As I've noted recently, Corporate Carpet-Baggers in this country have happily destroyed the local middle class as they've chased profits overseas. Now that there are no profits to be had overseas -- who will be able to afford their wares?
More free money distributed by the Central Banksters to their Top 1 percent buddies won't fix anything but it can still goose the markets so being too bearish isn't wise but being too bullish isn't either. CASH!!! is what I like in the current investing environment. That's not to say we don't find plenty of short-term investing opportunities. Just this Tuesday, in our Live Trading Webinar (replay HERE), we had several good trade ideas we were happy to share and just two weeks ago, in our Option Opportunities Portfolio, we had a simple way to play gold bullishly using the following options spread:
- Buying 10 of the GLD Oct $104 calls for $3.58 ($3,580)
- Selling 10 of the GLD Oct $108 calls for $1.39 ($1,390)
As you can see, we timed it quite well and GLD is already over $108 and likely to go a bit higher and already the net on the spread is net $3,000 out of a possible $4,000 and that's already up $810 or 37% in 10 days. If that's what we can do with the cash we have on the sidelines -- why risk it in an uncertain market?
The gold call was simple (and our Futures play off $1,100 is already up $1,288 per contract at $1,140) because we KNEW China was collapsing so people panic into gold and we KNEW the likely response by the Central Banksters would be to print more money (no tightening) and that's good for gold -- very simple. What prompted that trade on that day was a record low supply of physical gold at the COMEX -- as noted in my article that accompanied the trade.
I noted yesterday that we have layers of disaster hedges protecting our long positions so we're bearish to neutral in our overall short-term stance. Long-term, we do think the US markets will weather the storm, but only back in the range we predicted back in 2013 for the end of 2015 (and we have no reason to change if for next year either):
3 of our Must Holds are broken and the NYSE is already down more than 10 percent so please -- be careful out there!