Rick “Scaremonger” Santelli

Last week on CNBC, Rick Santelli cited this tax-shortfall story in California while trying to debunk the recent improvement in federal withholding tax collections, and job-creation on the national level. But if you read the whole story, you will see that there is no agreement on what caused Sacramento’s shortfall. And the story also mentions how California “accelerated” its taxes collections last year.

Is it possible for federal withholding taxes to surge while California’s giant economy sheds jobs as Santelli implied? Not likely. And as Friday’s strong jobs report subsequently showed, Santelli’s analysis was comically incompetent.

Then on Friday, as the market was continuing its historic crash from the day before, Santelli came on CNBC frantically shouting about a run on German REITs, implying that it was an intensification of Europe’s sovereign debt crisis. But if you read the Bloomberg story, you will see that it was no such thing.

Last week, criticism focused on Cramer’s absurd notion that the crash was just a glitch. But what about that frantic man in Chicago shrieking ridiculous BS and acting as if he were reading from a script written by short-selling hedge funds?

87 or Aught Eight?

Will the aftermath of this crash look more like that of 1987 or 2008? Here is the 1987 chart (click to enlarge):

I trust you know what happened in 2008…

I am partial to the 1987 scenario because the US economy is expanding, whereas in 2008 it was contracting very sharply. And the economy has only just begun to create jobs, so we are likely still in the early part of the cycle.

But look at the red arrow on the chart. After the ’87 crash, there was a test of the low six weeks later. And the climb to a new high took almost two years, though buying dips worked extremely well.

Trichet Trading – 5/7/2010

The Trichet Crash
I nominate Thursday’s stock-market crash to be titled “The Trichet Crash” after European Central Bank president Jean-Claude Trichet. Yesterday morning, he announced that the ECB would fiddle while Europe burned. I predicted that this would happen a month ago when I wrote:

Is Greece Lehman All Over Again? This Greece situation is starting to remind me of the Lehman collapse. Remember that one weekend in 2008 when all the powers-that-be met in New York to fix the problem? Remember all those rich guys in limos coming to save the day? And instead they blew up the whole world? Who knew that the powers-that-be were in reality a Confederacy of Dunces, right? Well, these euro dunces aint got nothin’ on our dunces. I am entirely confident that I should have no confidence whatsoever in them, and I wouldn’t be the least bit surprised to see Greece default and blow up the EUD (European Union of Dunces).

And kudos to Ambrose Evans-Pritchard for getting the European situation exactly right. He is now must-reading and you can find a list of his columns on this page. Here is a quote from his latest column:

“Governor Trichet came very close to saying that the current mess is not the ECB’s problem,” said Lars Rasmussen from Danske Banke.

What Trichet did was appalling. When the US Congress voted down the TARP and crashed the market, it was merely due to petty infighting. But these Euros! They are insane! Look at German Chancellor Angela Merkal literally declaring war on the financial industry (also from AEP’s latest):

“First the banks failed, forcing states to carry out rescue operations. They plunged the global economy over the precipice and we had to launch recovery packages, which increased our debts, and now they are speculating against these debts. That is very treacherous,” she said. “Governments must regain supremacy. It is a fight against the markets and I am determined to win this fight”.

Can you imagine? Even if all of that were true, is now really a good time to issue the declaration of war?


All capital should immediately flee the EU and pour into the USA. We are so much less incompetent than the zeros that words can’t even describe it.

On a lighter note: Last week on his CNBC TV show, Larry Kudlow said many times: “Greece isn’t my problem” meaning that it was not material to the USA’s markets. That’s a small glimpse into the competency of the elite that rules this nation.

A/D Line Unscathed

Here is a daily chart of the NYSE advance/decline line since the March 2009 low (click to enlarge):

It still hasn’t even touched the uptrend line. Weird, right? The black arrow points to the low created by the first Greece panic in January.

Thursday’s Trading – 5/6/2010

Grecian Domino
Communists were protesting in Greece yesterday? What is this, the 1960s? Is there anybody manning the old “Exporting Dictatorship” office at the CIA? In 1967, the CIA installed a military junta which ruled Greece for 7 years. (Note to Greece: sorry about that.) Also, the Athens CIA station was where the CIA housed its stable of assassins and their families. That was home base for what President Lyndon Johnson called “A Damned Murder Inc.”

Stock Struggles
Around 2pm, Wednesday afternoon, the market was fighting hard for a green close. It couldn’t overcome the resistance, and rolled over. But it didn’t crack, and rallied a bit during the last hour. We also had a second day of extremely bad breadth, which is unusual, back-to-back days that is. The last time that happened was on January 20th and 21st. Over the next couple of days, the market stabilized a bit while breadth mean-reverted, but then took another leg down on January 28th. So, that’s a possible scenario going forward.

Tuesday’s Trading – 5/4/2010

Triangle Trouble
SPY, QQQQ, and XLF all have triangles on their charts, but IWM does not. It made a lower low on Friday afternoon, and its pattern looks more like a downtrend channel than a triangle. Is that a sign that the triangles will have a bearish resolution? Film at 11.

Peak Schmoil
Deep water drilling is too dangerous because the gushers are so powerful that they will blow up your rig and fill the Gulf of Mexico with an ocean of oil? That doesn’t exactly scream “Peak Oil” now does it?

Monday’s Trading – 5/3/2010

Just a few weeks after the President announces more off-shore drilling, an oil rig blows up? What a lucky break for Big Oil and OPEC. This incident will slow the President’s progress toward tapping the USA’s energy resources and help to keep oil prices nice and high. How fortuitous. Somebody needs to write a conspiracy theory about this ASAP.