The Bank of America / Merrill Lynch merger smelled of corruption even when the “deal” was just a rumor.

Now, a house committee has subpoenaed the FED. Not surprisingly, the FED has not been forthcoming with documents related to the merger.

When the merger was announced, I suggested the deal resembled Enron’s attempt to be rescued by Dynegy.

Now that the government is issuing subpoenas, the stories will share another ominous device—paper shredders.

Peace

As documented here at The Beat, the bank stress tests were rigged. Now, a congressional oversight report reveals that more rigorous tests are needed.

Before any new stress tests are conducted, banks and Real Estate Investment Trusts (REITs) will continue to deceive the public with corrupt, shady, dilutive stock offerings.

Before long—at the expense of the public—banks and REITs will be diluted to the point of saturation. At that point, all of the manipulative powers will be shifted to the most vital task—moving interest rates lower.

To move rates lower, the bond (Treasuries) must be moved higher. There are a myriad of ways which this can be accomplished. To date, the Quantitative Easing has not done the trick. If QE cannot move rates lower, an even more extreme strategy will be enacted. The most extreme strategy of all is to create a panic.

In a panic, volatility increases. When volatility increases, a flight to safety ensues, which increases demand for Treasuries.

When the crash of 2009 transpires, the Volatility Index (VIX) and Treasuries will soar. As Treasuries soar, my net worth will increase. As my net worth increases, my voice will grow louder. Are you listening? Do you hear me?

Peace

Nobel Prize winner Professor Robert Mundell, whose research laid the groundwork for the introduction of the euro, is on the wire in an interview with the Frankfurt General Newspaper (Frankfurter Allgemeine Zeitung).

According to Mundell:
-The Euro will “go back down substantially.”
-The Euro’s steady appreciation against the dollar in the last several years threatens to devastate the European economy.
-The higher Euro will tend to tip the euro area into mild deflation, worsening the difficulties of debtors and the solvency of the banks.

On the subject of the Euro, Professor Mundell is not merely a contributor—he is the moderator. Listen well.

———————————————————————————————————-
Keep an eye on Treasuries (FT)

“But concern about the bond market is more meaningful. It is vital to keep US rates down, to revive both the housing market and the health of the banks. That is why the Fed is buying bonds. If even this drastic action is not enough to keep rates low, then these policy aims are in jeopardy.”

As the stress in the system intensifies, the case for being long treasuries solidifies.

———————————————————————————————————-

Gold and silver garnered attention last week as both took noticeable jumps. As I have written, the asset class to own for the big move over the next few years is precious metals.

Gold

Peace

In my May 6th edition of Trader Art, I painted the index and spoke of a key inflection point.

The inflection point proved correct. The market will now fall to it’s next inevitability, the 800 level.

SPX Futures Weekly

Peace

The Volatility Index (VIX) has continued its perilous plunge from the heights of its October summit. Why hasn’t it caught an outcropping yet? Perhaps it is because the Index is not reflecting the underlying stress in the market. The core reasons for this are tri-fold:

First, quant funds are selling index volatility and buying volatility in individual names, which has a masking effect.

• pink panther 2 movie download

Second, the season of quazi-investors reaching for returns by selling huge call positions is upon us.

australia movie download

Third, The FED and it’s media have been so successful in augmenting bank sentiment that they have procured a huge boost in their common equities. This has allowed billions upon billions of dollars to be raised in common stocks of banks. Consequently, the equity offerings that have been raised of late will need to be further diluted. The stress tests were rigged, and the adverse case scenarios were far too optimistic.

Where does this all lead? For my money, I continue to own size in Ten Year calls. I am also finding safe footing in select miners and precious metal names.

The crash of 2009 is mounting, but so too is my strategy. The Ten Year goes far, far higher. In spite of all government efforts and their media machine, I veer not from my position. There is a wild outlier push coming in Treasuries, and rates will go below 2%. The FED has skillfully driven the market higher, but their trade will unwind; and as it does, the (VIX) and Treasuries will soar. Very few will be prepared. Peak earnings require a slow, methodical trek—and patience is one of my gifts.

When the climb of this year is over and my gains reach their crest—multiplying exponentially—my musings will see a larger audience. It’s a little known fact of the market that one’s net worth equals one’s net voice. Do you hear me yet?

Peace

The VIX