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Mark's Market Blog

8-24-14: Central Banks.

By Mark Lawrence

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We broke through S&P 1950 on the second try but didn't shoot up from there. The market's primary job is thought by many to be to confuse and surprise as many people as possible. This market is doing a great job: the bears can't catch a break, the market simply won't substantially correct. And the bulls haven't really had anything to cheer about all summer. But I predicted we'd make our way to S&P 2150 or so, and I see no reason to change that prediction. We'll crash through 2000 sooner or later, the central banks will see to that.

S&P 500 February 20 2014 to August 22 2014

Europe is making no progress on unemployment and falling towards deflation. Japan is failing to produce growth stop their two decade long deflation problem. Just as we and the UK are ramping down our QE, ours due to end next month, you may expect Europe and Japan to start their own QE programs and keep the party punch bowl topped off. I really don't see the point to this - interest rates in Europe and Japan are at record lows, there is no one to whom the banks are willing to lend, the money will just be churned by the bankers in financial markets. This new liquidity will leak all over the world and most likely fuel a continued bull market in Europe, Japan, the UK and the US.

Yellen gave a speech at Jackson Hole and made clear she's not impressed with the US labor market - employment is not where she would like it, and worker mobility (move for a better job) is down by 30%. Don't look for rates to raise anytime soon - to the contrary, I think it likely we'll have QE 5 before we get around to finally raising rates.

Yellen also testified before congress. Much pressure was put on her to be more transparent, to submit to an audit, to announce a formula for interest rates like the Taylor Rule. It's widely believed that had Greenspan followed the Taylor Rule there would have been no sub prime mortgage crash and if Bernanke had there would be no stock market and used car loan bubble now. It's less widely believed that instead we might currently be in a major depression. Yellon was having none of it - she is in unquestionable control of the nation's money supply and intends to keep it that was. Basically she's steering the ship, we're off all the charts, and her intuition is better than any compass heading.

Fukushima three years on. All fixed, right? Not exactly. . . Tokyo Electric Power Company (TEPCO) is running out of space to store contaminated water. There appear to be leaks in the existing tanks as the groundwater is becoming radioactive. Lots of stuff getting dumped into the ocean and we're obviously being lied to about how much radioactivity it contains. TEPCO promised the Japanese government the water would be cleaned by March 31 2015; it's now clear they're going to miss that deadline. And now they want to dig a big trench around the reactors, fill it with pipes flowing liquid at -30 degrees and freeze the ground, forcing the groundwater to flow around the reactors. We were initially told one reactor maybe had a melt down; now it looks like it was three of the four. In reactor 1 the fuel rods melted through the pressure chamber and fell into the containment vessel, then burned at least 27" into the concrete. No one has looked in there so this is a guess, and I promise you it's not a worst case guess. In any case TEPCO isn't keeping up and they want permission to dump treated water into the ocean rather than storing it. And meanwhile the reactors are still producing brand new nasty stuff like radio iodine and strontium. The long term plan is to decommission the four reactors which will finally contain the problem. That's projected to take 40 years and require robots that haven't been invented yet. And dying fish keep washing up on the shores of Alaska and Canada - starfish are melting, fish bleeding out of their eyes and gills, 45 percent of California sea lion pups died this spring, Alaskan polar bears seals and walruses are losing their fur ad have open sores. The Vancouver Sun tested local fish for Cesium-137: positives include 100% of monkfish, carp, seaweed and shark; 94% of cod and anchovies; 93% of tuna and eels; 92% of sardines; 91% of halibut; 73% of mackerel. Is Fukushima killing off the entire Pacific? Anecdotes say yes, governments say no, evidence is completely unavailable.

The Post Office continue to hemorrhage money. The post office says its current assets are $23 billion and its current liabilities are $67 billion - they've lost $44 billion somewhere. I personally checked under my matress and none of it is there. Why doesn't Congress approve one of their plans to close some post offices? Why don't they just privatize it? 489,727 career employees. 137,037 non-career employees. Amtrak is a money losing joke left over from the 1970 bankruptcy of Penn Central. Amtrak was spun off in bankruptcy to the government who said they would fix it up, make money, and privatize it in a couple of years. It's still with us today, it hasn't made a dime in its entire life. On the plus side lots of other railroads then spun off their money losing passenger service and handed them over to Amtrak, making all the private railroads in this country profitable pretty much overnight. When will the post office privatize? They will still be delivering letters after the sun burns out, and still paying out pensions to democratic voters who have been dead for billions of years.

Former Colombo crime family mob boss Michael Franzese told CNBC, "there's a [stock market] bubble there that's going to burst at some point and when it does it's not going to be good. I did a lot of things at times with people on Wall Street... a lot of guys are shady and they did shady things with me and I don't trust them. And I don't like other people that I don't know really well taking care of my money." His advice is to hold physical gold because "there will always be something there," unlike stocks "where in our country, you go to sleep, everyone tells you everything is wonderful, you wake up and everything is gone." The crooks think Wall Street is full of crooks. So do I.

Ohio police departments have received 4,900 assault rifles and 36 mine-resistant vehicles under a Department of Defense program that provides surplus military equipment to local police. In the last four years, DHS has given $5 billion worth of military equipment to police forces. What are they getting ready for? I'd love to hear the answer to that, but I won't until it's too late.

The war on men: How are those all-female households doing? Ten years ago the number of women in the US that had jobs outnumbered the women in the U.S. on food stamps by more than a 2 to 1 margin. But now the number of women in the US on food stamps exceeds the number of women that have jobs.

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