This was an impressive week for the New Age day trading market, false break-outs in both directions, trading done for the day in less than an hour off the opening bell, the rest of it just for show. It’s strange to be pondering events that seem so manipulated on this day, of all days, Independence Day in the USA.
What I think is happening here is that Humungous Bank & Broker (HB&B) is trying to stay in control of market trends and cycles, at least until they fill their coffers with new funds and where they have the time to see how the new securities industry rules and regs are going to play out.
But, the bottom line, I sense, is that HB&B has lost its trading edge, and now has to pump and dump daily to screw over the Great Unwashed. Now that the public realizes the importance of technical analysis and has killed the myth that was buy-and-hold (so-called) ‘investing’, what’s a banker to do?
I’ll tell you what I think is going to happen - just my observations from watching and reading the mainstream media, which is controlled by HB&B - and it’s not good for independent traders.
Ha, and you thought America was independent and free. Well, had you read my book Lessons from the Trader Wizard, you would have noted the People are really spenders first and thinkers second, only realizing later that spending more than after-tax income makes them dependent on banks, and also chattels of governments (federal, state and local) that spend more than they can tax and have to make up that deficit by borrowing, also from banks and the fortunate few who can afford to live on fixed income even at ridiculously low yields.
Now that we know our place in the world order - slaves mostly - just when we start to get ahead by beating the trading pants off HB&B in the capital markets, we are, I fear, about to get burdened with a trader tax. If you want to day trade, ie, battle hand to hand in the trenches against these banks, you will soon have to pay a price in the form of a transaction tax that for all intents and purposes will be an eradicator of competition from the independent trader.
You see, when banks day trade, and they do and will continue to do that forever, regardless of taxation, because that’s how they make their profits, trading against the client, they will also pay that tax; but who really pays any tax on bankers? That, my friends, will be the customers, in the form of higher costs, and the shareholders, due to lower profits, who shell out. In other words, you will pay for the bank. The bankers will still compensate their staff the same personal bonuses regardless. In fact, now that the public is on to that bonus charade, the banks are doubling the salary components of their employees. Nothing, it seems, will keep those bankers down.
Now, as for you independent traders, you may soon find yourself paying transaction value fees, like a half percent in and a half percent out. If you are lucky enough to make say two percent on a short-term trade, if the added transaction tax is one percent and the income tax is much of the rest, you can see the uphill fight ahead. Moreover, that’s only if you are a good trader. If you happen to be one of the many - in fact probably the majority as studies showed about ten years ago that maybe 80 percent of day traders actually lose money - then you will still be hit with that asset-based transaction tax. The bankers’ lobbyists will not want a transaction income tax legislated because that would mean the majority of traders would have tax loss credits against other income, and so they might stay in the game.
Ultimately, the banks want to have this capital market to themselves and that’s the plan. It’s no different than the monopoly they have on banking and the use of the word ‘bank’; how they intend to treat you as an Asset Under Management (AUM) is with a number, just like an ATM number or credit card number. Yes, the only independence permitted will be your PIN number.
Now, all this is not happening just this week, and this is supposed to be a Week In Review, but it is happening and it’s on my mind. I haven’t a clue as to the legislation being drafted, but I can feel it in my bones. I know my enemy, and I know they are bullies who refuse to fight fair and square. It’s going to be up to us in this dark hour to pull together to fight the good fight.
Yes, we’ll have to look our elected representatives in the eye and tell them they are crooks who are taking money under the table from HB&B to give them legislation and securities industry rules and regulations that put us at a disadvantage. They won’t like that, but just like Barney Frank when accurately accused by Fox TV’s Bill O’Reilly of being bought off by Fannie and Freddie, it will be water off the duck’s back. These people are, after all, politicians and they know the public polls already show them as having less credibility than a used car salesman (not that selling anything these days is bad). So, they don’t care what you call them, including to their face. They will still lie through their teeth as we saw with South Carolina Governor Mark Sanford, who apparently thinks he has done nothing wrong. Isn’t his case all too common in politics?
http://www.miamiherald.com/news/politics/AP/story/1126722.html
Well, same for bankers. After changing their status from SEC-regulated investment bank to Fed-regulated bank holding company so they could take down tens of billions of taxpayer monies from the US taxpayer, these banks are now stating, quite clearly, they never really needed those funds, but Treasury Secretary Paulson made them take billions. Why? They refuse to honor the deal with the warrants sold to the government along with the stock they now, profits in hand from trading those billions in capital markets, intend to repay to Treasury. You see, no longer is a transaction a transaction once a banker is involved. It’s a maybe transaction. It’s either they win or else you lose. Bankers don’t lose unless they are incredibly stupid, and stupid people don’t get to head these banks. And, with their people ensconced in the White House and in many of the central banks of the world, these bankers do not intend to play fair and, with the help of legislators in Washington, they don’t have to.
HB&B caused the global financial crisis, along with their lackeys in the government, the regulators and the media who conveniently looked the other way as they greased the skids, and now they are busy re-writing the history books and creating PR campaigns, hoping the public soon forgets. But, je me souviens, I remember, and I hope you do too the next time you see legislation intended to shore up the defenses of HB&B.
On this historic day in America, we must understand that fighting for freedom is a continuous struggle. Yes, it’s important to celebrate freedom today because of the great people in history that won it for you - none of whom, to my knowledge, were bankers — but freedom to be self-reliant is a precious notion that can also be taken from you unless you continue the good fight.
Now, let’s get focused on the events and price action of this week, the first one of the second half, one that is starting out with a lot of question marks.
At the end of the day, while I could be wrong, I think we’ll discover, despite Thursday’s rather large sell-off, there is still ample power in the US equity market to boost the S&P from 896 to 950, and perhaps even 1000, but beyond that there are still numerous negative economic and corporate issues that need to be addressed and resolved. After the shocks of 2008 and February-March 2009, market stabilization may take time. It’s a process. So I continue to look for sector rotation as the S&P tests 880, and briefly lower possibly as short sellers get set up to be squeezed.
Yes, I see 880 ahead. After all, that’s only 16 S&P points (-2%) away. Whether this test is a legitimate break-through to the cyclical Bear phase that many believe is somewhere ahead nobody knows. If I see $GOLD spike to 1000 and then crash, along with $WTIC (Crude Oil), and a higher $USD, then, yes, I believe it will be game over for the Bulls and the lights will be turned out in the old ball park for a couple months.
But, you know me; I like to stay until the end of the game, to finish what I start.
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