How Goldman Sachs Robbed You and Me of $3 Billions in 3 Months

After watching the videos below, and from months of observation of this latest global financial debacle, I am suddenly awashed with a feeling of hopelessly powerless to this gross unfairness. In which the average, hard working citizens are pouring money into the pockets of the filthy and uber rich. If you don’t know what I’m talking about here, watch the video attached below for the tip of the ice berg in this on-going problem.

While Goldman is arguably the best at “legalized stealing” from the moms and pops, they aren’t the only crook on the block. Governments around the world (not just the U.S.) were handing out money publicly left and right in the past few months. And many still are. The whole system is rigged as Bill Cara has opined countless times in the last few years.

Bill’s ingenious move to relocate his operation to the Bahamas is only starting to shine in these months (to me). In addition to voting with your ballot (which is useless if the whole system is rigged), we can vote with our tax money by relocating our financial operation.

However, for those of us that still rely on a day job, this is not an option. The best I can do right now is to become adequate with managing our own money instead of depending on the financial salesmen. This doesn’t seem enough for me as the balance of power appears to be getting worse by the day.

Our government grossly tax us on one hand and hand them out to the rich and well connected in the other. What have others done/plan to do with regard to this unfair trap us working bees are stuck in?

The first video is Ratigan explaining how Goldman Sachs made $3 billions in 3 months (tipped by Stop Investing blog). The second video is an interview with Michael Moore and Ratigan about where all these loots are going now.

Inter-market analysis after a new 2009 high in the equity market

The market made a new high for the year on Friday. There’s no doubt that the current trend is very bullish with the recent relentless climb since March. See Figure 1.

However, why was 1025 on the S&P500 (for example) so hard to break? Since the market doesn’t operate in a vacuum. Here’s a look at S&P500 ETF (SPY) v. the U.S. dollar (Figure 2) and v. Gold (Figure 3) for some insights.

To invest in the U.S. market is a bet on the U.S. market (well obviously) as well as the U.S. dollar. Because we’re trading with U.S. dollar in the U.S. market, its fluctuation will affect your return too. Figure 2 is a chart of SPY divided by the U.S. dollar index (an aggregate of the U.S. dollar v. other major currencies). In effect, it’s a normalized SPY chart with regards to the global currencies (and thus, more or less the economies). As you can see, we just broke through a long term resistance at 1.30 but is testing a Fibonacci level.

Similarly, the value of Gold is often used as a metric for currencies. i.e. how much money is actually worth. Figure 3 is a chart of SPY divided by the price of Gold. In effect, a normalized SPY chart with regards to the real value of the U.S. dollar (since price of Gold is in U.S. dollar).

Figure 3 is more telling. Although we’ve been moving higher and higher in the raw SPY, you can clearly see that SPY/$GOLD has been hitting a ceiling since July. In other words, the market is going up because the value of U.S. dollar is going down versus the companies these equities represent.

While there’s been much talk of economic recovery and a new bull market is already with us, I still am not convinced just yet. True, the bears might be MIA. But all signs say that this bull we’re seeing is standing on thin ice.

S&P 500 ETF

SPY (S&P500 ETF) / $USD (US Dollar Index)

SPY (S&P500 ETF) / Gold

A technical analysis of 80 years of S&P500

One of the earlier popular post on this site is my view on the pre-tech-bubble trendline from before year 2000. However, that trendline was broken in October 2008 as I’ve noted.

Since the recent actions in the market has often been compared with the Great Depression, I’ve decided to chart S&P500 all the way back to that era. See the monthly chart of Figure 1 below from 1928 to today for the S&P500.

S&P 500 Index

First of all, as evident in Figure 1, the market dropped a lot more in 1929-1932 than what we’ve been seeing in 2008-2009 so far.

Secondly, notice the channel bounded by the two outer white lines? The channel drawn have been bounding the market pretty well. Moreover, if we compare the list of recessions in the U.S. with Figure 1, you can see that as a rule of thumb, the economy is in boom if the market is in the upper half of the channel, and the economy is struggling if the market is in the lower half of the channel. The middle white line marks the middle of the channel for easier observation.

Based on the above, the follow years are in the upper range, with some rounding:

1. 1932-1940, 8 years
2. 1954-1973, 19 years
3. 1986-2008, 22 years

and the follow years are in the lower range:

1. 1940-1954, 14 years
2. 1973-1986, 13 years
3. 2008-????

Since my knowledge on modern history is abysmal, I can’t comment on what happened in these eras to verify this superficial categorization. This is certainly worth further researching.

Thirdly, and this one is a positive remark, is that the RSI has only gone below 25 three times in the last 80 years, and the two times that it occurred in the past (1932, 1974), it is when the market/economy has reached a major bottom.

Now, zooming to the current few years in Figure 2. You can see that we’ve managed to push above the 200 month moving average this month. That isn’t much on its own, the challenge now is to see if we can stay above it (1000 on the S&P500) by end of August.

S&P 500 Index

Weekly Market Review: July 24, 2009

After touching the neckline on the head & shoulder formation last week, the market has been steaming upward at an unstoppable pace. Retracements have been shallow throughout this upward climb.

We’re now testing 980 and the market just closed a hair beneath it on Friday. Today’s (Friday) volume has been intriguingly low. However, it bears remarkable resemblance to last Friday’s action wherein we were also testing a significant resistance (950) on both Thursday and Friday and then the Friday closed near the top but with very little volume.

With the lackluster retracements lately, one wonder what happened to all the bears out there. And where is the profit-taking?

I’m afraid I don’t have much to say in way of analysis now. This market is just beyond me as of late.

S&P 500 ETF

S&P 500 ETF

GICS Sectors Overview

6 months: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

1 month: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

5 days: XLE XLB XLI XLY XLP XLV XLF XLK IYZ XLU

Weekly Market Review: July 10, 2009

We finally broke below the well-known support of 880 for the S&P500 (Figure 1). However, I don’t think we should short aggressively just yet for the following reasons.

1. Lack of volume in the breakdown of support. As I said, we need some momentum to break our trading range. Even though the price has shown us the card of the market, the volume is simply lacking to show us any momentum. Figure 1.
2. Volatility is still below 30, Figure 3. Which means we’re experiencing a systematic move and not a dive just yet. So do expect some choppiness as we go downward to stop out the retail traders as usual.

In all, it’s obvious to everyone that the bears are in control now. However, we need to maintain nimble positions as with these past few months because this downward move is expected by everyone and it won’t be a free ride downward.

I’ll preferably ease in the shorts in a controlled fashion rather than betting the farm on it. However, don’t discount the scenario where we have a sudden and violent down move all of a sudden.

S&P 500 ETF

S&P 500 ETF

S&P 500 ETF