Dow Jones Greenanke Boom Bust Event

Since the game of converting real estate wealth into cash is over, the idea of stimulating prices of various assets so they might be able to be converted to cash is now in play. The announcement by the Fed yesterday of its intention to purchase treasuries along the yield curve to inject further stimulus into the economy is explained as another way to drive down rates but is really aimed at the only play the Fed has left, pumping asset prices. As stated before in posts here at BaseOp2, the Fed is using the Dow Jones Industrial Index as one of their key guides to gauge economic stability. The problem of course is that this particular strategy has its limitations as far as direct economic stimulus and has and will become more of a generator of a speculative play for assets. A sort of Greenanke boom bust event. Let the race begin.


The great thing about real estate and a housing market boom is that it employs so many people and the resulting growth creates a wonderful cycle of lending and transacting. This direct impact on economic growth is without peer, but without it, what possibly can have the same impact. Well, nothing. Certainly not speculating on gold. But the choices are limited to the Fed and now they are forced to stimulate assets such as equities which makeup a dramatically smaller portion of American household wealth.

When one looks back at the great inflation battles of the past, it is interesting to see just how nervous the Fed is about the black hole deflationary possibilities facing the US and world economies. This is an indirect job stimulus plan by the Fed since the recent election has all but ended any future stimulus by the elected ones. But asset plays being stimulated by the Fed also reflect the an odd balancing act by market players since they know that plays such as these are always a kind of musical chair pump and dump opportunity game where timing is everything.

There is an old saying on the trading floor. You get one good look at a bad trade. Meaning, the market gives you one chance to get out of a bad trade. The Fed may be giving asset players that chance.

Election Will Change Nothing

Election, Fed, and unemployment numbers on Friday will draw attention from all participants as to where the markets will land on Friday's close, especially as an indicator to market direction for balance of the year. While there may be some folks believing Tuesday's results will have some structural market significance, they will be disappointed and the market knows better. This bull phase is part of a uniquely bizarre economic re balancing process stemming from the great financial crisis. One thing for certain, the payments in bailouts, interventions, and other more exotic methodologies needed to pump the system will end up being paid for by leveraging against the financial interests of the middle. Despite claims by political factions to the contrary, this election will resolve nothing that has not already been decided because the biggest part of the economic pie will be left with bad real estate, no return on savings rate, and with an unfair save top and let the bottom rot re financing which cannot wait.

AAPL Run

Hard to argue with the upside success of AAPL, shown here vs S&P500, despite a rally with the same bubble profile as past tech wonders. Data from Wolfram.com

No Note, No Mortgage

Banks looking to foreclose running up against case law which states , assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity”); ... US Supreme Court 1872.

Article New York Times

No Risk

(New York Times) Watch an animated explanation of how banks use securities lending to make a profit at no risk to themselves, while their customers cover the losses.

By LOUISE STORY

Published: October 17, 2010

Money Mechanics, Intervention, and the World of Up

Price discovery and resulting values are now made up of an ethereal composite designed to resist poor economic conditions while absorbing the benefits of an unprecedented top down liquidity drive whose success is ultimately measure by Dow Jones Industrial Average. Daily grinds of true economic darkness oddly help provide rapid turn around times for all things connected to the Fed/Treasury intervention.

After the October 2007 highs, the violent move down into the March 2009 lows consisted of liquidation, re balancing, and the unknown. Now however, price action reflects the market's readjustments to the Fed's constructive re-liquefying and the use of various financial supports as a part of this evolving organic intervention period. Part of it has to do with the very nature of stock market action. Some things are designed to trade, and others are designed to trade up. Stocks have always had an upside bias as a buy side vehicle without much hedge function, unlike commodities and fixed income markets. What else could account for the performances of such great money managers over the years. They are not traders, they are just longs and up works.

It is natural to have a downside ear to the ground given all the economic difficulties of the largest financial institutions. There is no end to scary in these economic times. But for investors, traders, no matter how bearish, if the Fed has its way, up is going through you.

The Over/Under Value In Stocks

Daily	Bnch	Bch$Chg	Bnch YTD	O/U%
AAPL	300.20	89.20	42%	8.25%
BAC	13.39	-1.61	-11%	-12.38%
GOOG	545.01	-74.99	-12%	0.13%
GS	155.05	-13.95	-8%	0.06%
IBM	140.99	9.99	8%	-2.16%
MSFT	25.37	-4.63	-15%	-6.79%

As of this afternoon early trade, QRiskValue.com's Over/Under % value view of these six stocks.
I guess the trade is buy msft sell aapl, buy bac , sell gs.

Bull/Bear Status

A chart from QRiskValue.com showing the Bull/Bear status as of Friday's close.

Wonder Why AAPL IS Over Valued?

Ten Biggest ETF Holders Of Apple Stock

Posted by ETFChannel.com

According to ETFChannel.com’s Top ETF Components list, Apple (AAPL) is the single largest U.S. equity position of exchange-traded funds in the aggregate. ETFs hold approximately $9.7 billion of Apple stock, or about 3.7% of Apple’s market capitalization.

To put this in perspective, ETFs own about $4.5 billion of IBM (IBM), or only 2.6% of IBM’s market cap.

The PowerShares QQQ (QQQQ) is the largest ETF holder of Apple at about $4.3 billion, or nearly 20% of the total holdings of the ETF. The SPDR S&P 500 ETF (SPY) is next in line at about $2 billion of Apple.

Ten ETFs with the largest Apple holdings:

ETF	Ticker	AAPL Weight	AAPL Amount
PowerShares QQQ	QQQQ	19.86%	$4,434,713,483
S&P 500 SPDR ETF	SPY	2.51%	$2,035,363,452
iShares S&P 500 Index	IVV	2.51%	$579,985,161
Technology Select Sector SPDR	XLK	11.75%	$509,605,382
iShares Russell 1000 Growth Index	IWF	4.38%	$479,374,141
Vanguard Total Stock Market ETF	VTI	2.12%	$315,406,889
iShares S&P 500 Growth Index	IVW	5.01%	$257,232,748
Vanguard Growth ETF	VUG	4.58%	$200,791,091
iShares D.J. U.S. Technology Sector	IYW	13.09%	$161,920,325
Vanguard Information Technology	VGT	10.44%	$132,265,227

Last Week This Week

S&P index futures made a new weekly high since putting in July lows. April highs over 1200 still casting a shadow on current trade however as quiet trade prevails.

Commodities have had all the happy money, which is not necessarily a sign of anything important other than the art of buying what is rising is still the fundamental proof of great money managers. Gold, oil, and grains are the next death dive, but timing is everything.

Chinese Premier Wen still prone to hyperbole with last week crying about the ills of protectionism and over the weekend acknowledging inflation is just possibly a problem. He and the guys down the hall from his office that type up the positive economic data are running out of China Engine stories.

Range bound markets will continue to frustrate the directional players even with jobs numbers.