September 2, 2010

Last night on my radio program, I covered a story from Reuters which was released shortly after the weekly Mortgage Bankers Association report on mortgage applications.  The story was titled in a very cleaver fashion:

Home loan demand rises as rates hit new low

The story began with this bolded sentence:

U.S. mortgage applications for home purchasing and refinancing increased last week as interest rates hit a new low, a glimmer of hope for a housing market that has failed to find footing in the absence of government support.

Wow. Everything in the media is good news, right? It’s the summer of recovery and everything is cooking right along so that house on your street corner that has been on the market for 21 months must be a mirage because more people are wanting loans and thus more homes must be selling. As you read the entire article, you’ll find that there is one key omission from the story. The closest thing to mentioning the big missing detail was in this sentence:

Demand for home purchase loans has been tepid, but it nevertheless rose for a second straight week. The MBA’s seasonally adjusted purchase index, a tentative early indicator of home sales, increased 1.8 percent.

Unfortunately for the news media, there are people like myself who look at the raw numbers (unadjusted) when the MBA reports the data (or any other economic data release for that matter) and in their press releases, they are polite enough to inform those who wish to read the hard truth. The information that housing sales fell off a cliff in the past two months came as an “unexpected” shock to many in the media but if they would remove their bias to make the administration and its economic policies look like they are working instead of creating wishful headlines of hope, they might find the truth staring them in the face.

The following links are to each week’s MBA Press Releases with the key sentence and data that tells the truth about housing in the portions I have put in bold and italics. Read some facts and understand why I am so skeptical about almost any economic news story presented by our beloved MSM and how they manage to indulge in creative truth telling to avoid reporting the nasty reality which is really occurring.

From the September 1, 2010 MBA Release:

The unadjusted Purchase Index decreased 0.4 percent compared with the previous week and was 37.0 percent lower than the same week one year ago.

From the August 25, 2010 MBA Release:

The unadjusted Purchase Index decreased 1.1 percent compared with the previous week and was 38.8 percent lower than the same week one year ago.

From the August 18, 2010 MBA Release:

The unadjusted Purchase Index decreased 4.6 percent compared with the previous week and was 38.6 percent lower than the same week one year ago.

From the August 11, 2010 MBA Release:

The unadjusted Purchase Index decreased 0.3 percent compared with the previous week and was 34.1 percent lower than the same week one year ago.

From the August 4, 2010 MBA Release:

The unadjusted Purchase Index increased 1.5 percent compared with the previous week, was up 7.1 percent relative to four weeks ago, but was 33.7 percent lower than the same week one year ago.

From the July 28, 2010 MBA Release:

The unadjusted Purchase Index increased 2.4 percent compared with the previous week and was 34.3 percent lower than the same week one year ago.

From the July 21, 2010 MBA Release:

The unadjusted Purchase Index increased 15.3 percent compared with the previous week and was 35.7 percent lower than the same week one year ago.

That is just a sample of the news you will not hear on the mainstream media (MSM) yet this has been an ongoing theme to highlight which ever variation of the press release or statistic which makes it seem that happy times are here again. This was happening in June also as you can see from the June 30, 2010 MBA Release:

The unadjusted Purchase Index decreased 3.8 percent compared with the previous week and was 36.0 percent lower than the same week one year ago.

It is my sincere hope that you use this information to empower  yourself when you consider what you hear in the media and take every headline, every piece of news with a huge grain of salt. There is always more data, more factual information behind every headline and that is why the word “unexpected” usually occurs when even their propaganda writers can not put lipstick on any particular pig of a data point released to the public.

To be fair, the weeks where the unadjusted Purchase Index saw week over week  increases were attributed by some members of the media  to the tax credit fiasco which is now proving to be an utter and complete failure as it drew demand forward but did nothing but trap people in the equivalent of the new car purchase syndrome. What is the new car purchase syndrome you might ask? The average car buyer does not pay attention to the value of the vehicles they purchase as the majority of  buyers fail to understand that the minute they take possession of the vehicle and drive it off the lot, the value of that car drops anywhere from ten to twenty percent. This same principle can be applied to any home purchased in the past twelve months. While the media promotes flowery statistical information about how home prices have increased in markets across the country, the reality is displayed in the reports I have highlighted above and the nasty little secret that of those new home purchase applications, depending on which source you use, forty-five to fifty-three percent of applications are declined, thus the same home buyer could be applying every thirty to forty days for a new mortgage application in an attempt to close on a home sale before the extended tax credit deadline expires. It also means that if the new or existing home buyer were to attempt to sell that house right after they purchased it within say thirty to ninety days, they would be upside down almost immediately in the majority of markets in the United States.

This  dark secret your real estate agent will not tell you is nothing new but must be taken under consideration if you are in a profession which requires the ability to relocate to remain viable in your chosen field.  Odds are that by December of this year, that home you purchased will lose in value that $8,000 you received as a “tax credit”  in many markets across the land. You’re buying a car, not a home, and it is not going to retain any valuation nor help you build equity until the economy truly bottoms out and the long term deleveraging process has been completed. Keep this fact in mind as your Realtor bangs on the hood and promises you that the home you are interested in has only had one owner and it was a little old lady from Pasadena.

So tonight, I’ll read the news, kill bananas because of one reason and one reason only:

General Principle

And of course, news, news, news, news, news with a serious dash of sarcastic, sadistic, DOOM mixed in.

The Hurricane Update on Earl:

1. You can call the show now starting tonight when prompted 3 ways:

Direct number: (541)787-4028

Toll Free: (888)YJFK911 (953-5911)

or Direct via Skype (free Skype to Skype call) by contacting: THEWATCHMEN.FM

2. The archiving software is tested and ready to go. You can go www.thewatchmen.fm or www.thewatchmen.biz and click on the link for the archives on the lower right hand side of the “Listen Live” page or just click on the links provided in this sentence.

3. You can still join the group in chat every night as well over 100 folks do and make new friends via the Chatango chat tool embedded in the links in #2.

4. You can also email me at johngaltfla@yahoo.com

And if you’re schedule will not allow it, the archives are available by clicking on the link on the right hand side of the page or by going to www.thewatchmen.fm and clicking on the archives link.

ALSO AVAILABLE: Please sign up and stay in touch with programming information for the network at Yahoo Groups for THEWATCHMENFM by clicking on this link.

Thank you again to all of my listeners and God Bless you,

-John Galt

August 31, 2010

Totally Unhinged – The War Against God, Righteousness & Christians

(excerpted)

In solidarity with the Secular Christian-hating Leftists, many self-described Christian “patriots” also went beserk with as much vomitous vitriol as their Ruling Class media counterparts. They decided they would not stand with the Lord if it entailed standing with a man whose politics and doctrinal positions they did not agree with.

Instead they decried those who organized the rally as being in league with the Devil, and those who went with being deceived and blinded sheep. So they undertook the same efforts as those on the Secular and Marxist Left – and ardently warned America to stay away from; to ridicule; demean; smear; and even boldly attack Beck’s denominational faith. To plead with America that Beck’s call and assembly was not to be followed, listened to or acknowledged, even if his call was for the nation to repent and turn back to God.

It is a sad day when “patriots” align themselves with Marxists to achieve what will become a hollow victory. Too bad they are ignorant of history and what happened in Europe in nations like Italy when the “Catholic Patriots” aligned themselves with the Mussolini regime which resulted in twenty years of brutality and war, leaving that nation bankrupt both morally and economically for a full generation.

September 1, 2010

There are few issues in my life that stir up more emotion than American patriotism, hypocrisy, and history as it relates to our nation and the events happening during my lifetime. Because of one man, who I and many others  can attribute all of the problems we are debating in this brief blog entry, I can offer only one statement somewhat modified from it’s original form which summarizes  the ensuing discussion:

G*D Damn you Glenn Beck

While this might appear to be a similar rant apparently parodying the good Reverend Wright of President Obama’s “past” and the commentary he offered about America, the truth is not far from how I am sure the good Reverend felt after his words and actions were revealed and rebroadcast on Mr. Beck’s program repeatedly.  Why do I dare say G.D. old Glenn? Well, let’s talk about hypocrisy for starters.

For years he preached about the ultimate “Progressive” that Senator John McCain was and still to this day is.  What does he do in November of 2008? Old Glenn proclaims:  “I voted for Sarah Palin, not John McCain.” Bunk. That’s the ultimate in hypocrisy and to this day I continue to call him out on that.   Then Sarah Palin “returns the favor” by helping Senator McCain in his re-election bid by campaigning for him in Arizona and Glenn dares to act incredulous. Is this the only incidence of Glenn’s hypocrisy? Of course not.

Glenn has become a spokesperson and friend of the National Rifle Association and its President Wayne LaPierre. While engaging in support for this organization, Glenn has refused to address the issues of their contributions in the past to Senator Harry Reid’s campaigns and another liberal, Senator John Dingell (D-MI). In fact while Sarah Palin was with the Tea Party Express protesting in front of Senator Reid’s home in Searchlight, Nevada, Glenn was oddly silent about the event occurring at the same time, Slick LaPierre’s lunch time meeting with Senator Reid in Las Vegas. And to this date, the lack of commentary on the N.R.A.’s endorsement of the progressive Senator McCain speaks volumes, at least to myself. I am not sure if this is hypocrisy on these issues in they eyes of some, but if it walks like a duck, and quacks like a duck, well you get the idea.

Fast forward to August 28, 2010 and the hoopla surrounding the gathering in Washington, D.C. The American people are spoon fed information from various mainstream media outlets leading people to believe the gathering is a political recruitment device concocted by a gathering of conspiratorial conservatives and those evil Tea Party types who actually sit in their Mom’s basements screaming “Wolverines!” every chance they get. That would be the somewhat “left” perspective of the event before and after it happened. On the flip side the real conspiratorial loons of the alleged right accused Mr. Beck of using this “gathering” as an opportunity for several goals. One group is accusing Glenn of attempting to usurp all faiths and create a universalism movement where the lines between various denominations within Christianity is deliberately blurred so those evil Mormons can take over the religious leadership in our country. Another group from the woo-woo patrol is accusing Mr. Beck of  conniving to deceive “true Christians” by conning them into believing that working with other Christian sects and those evil Joos and Muzzies will diminish and destroy the “real God” and cause America to be damned to Satanic rule.

Thus the attack goes after the modern day version of the persecution of 1930′s German Jews of our society, the Church of Latter Day Saints. For some strange reason there are people within our society that view the Mormon faith as dangerous. Perhaps I am ignorant of recent American history, if so then someone can correct me then if I am wrong but:

- Last I checked, there were no Mormon hijackers on 9/11, nor pilots of any of the planes that killed thousands of Americans that fateful day.

- I’ve never heard of Mormon Suicide Bombers putting on vests and running into crowds of people, including U.S. soldiers, and detonating themselves.

- It wasn’t a Mormon who committed an act of terrorism and slaughtered all of those soldiers at Ft. Hood, TX.

- I’ve never heard, read, or born witness to any aspect of the Mormon faith demanding the U.S. Constitution accommodate “their” legal system, nor modify the document to assimilate the American people to their faith.

- Mormons are not setting up churches nationwide while calling us “infidels” or beheading our citizens overseas.

I’m just sayin’.

The scariest aspect of what I have witnessed in the past week has not been the hucksters like the welfare poverty pimp, Al Sharpton’s protest and typically fictional accounts of reality and the events which happened in Washington, D.C. this past weekend.  The most horrifying aspect of the entire time period was the apparent willingness of American citizens who proclaim to be people of faith aligning themselves with Marxist ideologues to attack an event based solely on a harmless religious doctrine which just happens to be the faith of the 8/28 organizer.  Based on this it is safe enough to presume then that Christmas should be canceled because those dastardly  Mormons celebrate it also and that means those evil trees are actually antennas designed to receive mind control instructional videos from Salt Lake City, Utah.

What I would like to know is where were all these Christian hypocrites when another Mormon, Senator Harry Reid (D-UT) proposed and ushered through act after act which expanded the integration of Marxism into the American economy and codifying activities which in the future could possibly endanger their ability to engage in activities unique to their versions of Christian belief? Why were they silent about Dirty Harry’s religious beliefs when he was engaged in the praise of our enemies, support of the dilution of the Constitution, and engagement with the President to expand the ability of the Federal government to dilute their freedoms? Is it perhaps the hypocrisy I accuse Mr. Beck of pales compared to the sinful act of Envy these alleged religious leaders have apparently engaged in over the past ninety-six  hours?

The reader may wish to take his or her time to search for articles relating to Senator Reid’s religious beliefs  or how it pertains to the legislation of  Socialized Medicine, Cass Sunstein’s Financial Reform Act, and the Stimulus Slush Fund but you will find nothing from any of the preachers, reverends, philosopher’s, or commentators who are attacking Mr. Beck or the Mormon faith recently.

Those who believe that this is an evil Mormon plot to seize control or some other such silly conspiracy, I have but one thing to say to you:

You suckers, you dupes, you useful idiots are doing nothing more than succumbing to the devils of history we already know….

Hegel, Engels, and Marx.

You launch your “holier than thou” attacks on Glenn Beck’s Mormon beliefs but not once did he demand conversion of faith, or you attend a LDS service, nor travel to Salt Lake City to beg for forgiveness. When people applauded his generous and charitable actions to open the American public’s heart and soul to the ideals of restoring Faith and Honor in our society to save our nation, you dared scoff and accused him of proselytizing to convert the souls of your families and those of your followers. Masking your commentary with unrelated Bible passages to justify your attacks, you hypocrites of sin assumed that the sheep of your flock will expand by attempting to engage in the art of deception to expand your audience and promote your careers. I shall not nor will I dare expand upon that by mentioning your filthy tripe on these pages nor engaging in the religious bigotry so ignorantly displayed by your spite so as to publicize you any further.

In the mean time, your efforts do nothing but allow you to surrender and serve as the willing whore, a dupe for the powers of darkness who dance you around like a puppet, with the Obama administration’s Marxist idealists  on one string and the Islamofacists on the other. They laugh at your actions as their plans succeed because you fear a man and a religion more than you fear the Lord, thus allowing the strategy of “divide and conquer” the opening it needs to destroy the ideals of liberty and freedom you claim to profess. Your efforts, your lack of foresight, and your deceitful ways shall have no impact, because the “true believers” in our nation will not entangle themselves in your puppet strings and will not remain in the darkness of ignorance, a fear that our Founding Fathers had which caused them great trepidation as they demonstrated a willingness to sacrifice their lives for your very existence.

So many have written on their blogs of the evil of Mormonism and its impact on “Christian” society yet these same authors and commentators of the faith stay silent as they pump Saudi petroleum products into their vehicles as that nation enslaves, rapes, tortures, and murders Christian families and children; as they have for over twelve hundred years. According to the information that I have available as of tonight, there were no slaves in the state of Utah, nor a policy of persecution by the Mormon faith.

Keep it up you clowns as you suckle to a narrow-minded belief system which accommodates the twisted desires of the left all in the name of your “true God” and the beliefs you wish to share with the multitudes. Sadly your efforts to profit, to engage in acts of personal jealousy to make a name for yourselves on the coat tails of a man who did nothing more than work hard to achieve success and to share those blessings will yield you no fruit and only a bitter ending for your attacks upon the 8/28 events. While you attempt to divide the believers of Liberty and Freedom in an attempt to protect and expand your flock, these very actions and words are handing a victory to your future masters; the Marxists who ultimately will eradicate your religion, your freedoms, and the ideals of protecting the one and only “true God” of yours, which ceases to exist, after you assist them in attaining success.

NOTE: The * in the title is not  the letter “o” nor am I cursing Mr. Beck in any way shape or fashion as I am not as shallow of the President’s former religious adviser. Let the false prophets and misguided souls do their works of propaganda and evil for the left, as I shall not. For the good that Glenn does in our society, our nation, and for our Constitution, I say a hearty “GOD BLESS YOU GLENN” and not the narrow minded persecution being engaged in by many at this time. My personal fear is that the Mormon faith shall be selected as the “Jews” for a future holocaust, not much unlike that of the 1930′s in Germany, but similar to the practices of persecution and prosecution for the convenience of the powerful, to cover for their errors in judgment and mismanagement of our nation’s affairs. I have nothing but praise for the LDS, their suffering and successes, and their belief system. For the record, I have not nor ever have been a member of the Mormon church nor participated in their faith, it’s practices, or services.

If you like them, I’ll keep doing them. Remember, I am not offering “financial advice” only a perspective from a historian’s point of view with some amateur analysis.

The more you ask for, the more I’ll try to provide.

-John

During the “Survival Hour” at 7 P.M. ET, I have the pleasure of welcoming a special guest to the program who prefers to go by his online handle of “US Kiwi”. This is a man who took the idea of bugging out literally by seeing the crisis in the United States ahead of the curve and departed our fair lands to hunker down in New Zealand. For those who wish to criticize and call this cowardly, I simply reply that a wise man who can return and rebuild is better than a dead man being fed to the pigs of Marxist history.

We are not going to discuss the “how to” of this matter but the philosophical and practical side of the sometimes inflammatory issue where we focus on saving some of the people for the future, to rebuild what appears to be an inevitably destructive end to this great experiment our Founding Fathers began over 200 years ago.

1. You can call the show now starting tonight when prompted 3 ways:

Direct number: (541)787-4028

Toll Free: (888)YJFK911 (953-5911)

or Direct via Skype (free Skype to Skype call) by contacting: THEWATCHMEN.FM

2. The archiving software is tested and ready to go. You can go www.thewatchmen.fm or www.thewatchmen.biz and click on the link for the archives on the lower right hand side of the “Listen Live” page or just click on the links provided in this sentence.

3. You can still join the group in chat every night as well over 100 folks do and make new friends via the Chatango chat tool embedded in the links in #2.

4. You can also email me at johngaltfla@yahoo.com

And if you’re schedule will not allow it, the archives are available by clicking on the link on the right hand side of the page or by going to www.thewatchmen.fm and clicking on the archives link.

ALSO AVAILABLE: Please sign up and stay in touch with programming information for the network at Yahoo Groups for THEWATCHMENFM by clicking on this link.

Thank you again to all of my listeners and God Bless you,

-John Galt

Edit to add this one stock chart for everyone to play along with in the first hour:

August 27, 2010

Today will be another glorious day where the hype doesn’t quite meet reality and if we’re lucky Bubblevision will capture one more infamous Cramer meltdown live on the air so we can all bust a gut at someone who said “buy the home builders” just about three months before the worst housing sales reports in history were issued. I’m still holding on to my Bear Stearns stock because I just know he was right and the recovery will save all the banks eventually so the information that he provided yesterday about Q2 GDP being revised to a paltry 0.5% seems just as extreme.

Whatever the revision, it does not matter.

The traders are focused on one thing and it is not Jackson Hole, WY and whatever edicts the Fed and the other banksters come up with to proclaim that us serfs really don’t understand the economic situation and that Main Street should just grow up and start borrowing like insane people again instead of going bankrupt and mailing the keys to our homes in. The markets are looking to the Hamptons and that first cocktail party as next week is the final week of summer for most and any excuse to head out today and begin the punishment of their evil livers. Thus whatever comes out of this report and the market action are really irrelevant because the adults return in about ten days and when they do, they are going to leave a path of destruction in the portfolios of those who believe that there has been any recovery at all and for those in the political class who think that managed economies are the only way to go.

My take on today’s GDP report?

Rarely do we see massive revisions by bureaucrats as the various “experts” are calling for today as that is an admission of incompetence or irrelevance, either of which diminishes their levels of self-importance and thus the destruction of what little faith people have in their monthly and weekly data reports (don’t laugh too hard on that; I had a hard time saying that one with a straight face). With that being established, here are my three scenarios which should cover everything potentially possible and if it doesn’t then blame that black swan that swooped and pooped on my head causing me to be confused:

1. Most Likely: Revision will not be as dramatic, 1.8 to 2.1%, well within the normal one-third range we have seen since the revisions to GDP began during the ‘Great Recession’ and in this commentator’s opinion the highest probability. This should trigger a mild rally on Wall Street and massive relief in the bartender’s and hooker’s hearts as they realize they get one more high dollar weekend in the Hampton’s as the Quants and other under thirty trading crowds blow their cash before calling their wives or real girlfriends out to the summer house and proclaim “come on in, the water’s fine.”

2. Low Probability: The Cramer Scenario of a revision to 0.5% to 1.0% in GDP and all hell breaking loose. It would be seen as highly negative and yes even more panic would be possible yet I think the month end portfolio dressing will prevent the damage from being as severe as he outlined on yesterday’s Bubblevision broadcast. It is possible but that would require the B.E.A. to admit they don’t have a clue about how to estimate anything in the economy which would put every piece of economic data under suspicion as it is reported. A dangerous possibility and the the least likely outcome as far as a negative revision is concerned.

3. The Flying Purple Unicorn Pooping Rainbows and Skittles Scenario: The B.E.A. receives marching orders from above and Q2 GDP is revised to flat or only down to 2.3% or even up to 2.5%.  If that happens everyone will be skeptical but the market will experience a huge rally on no volume and the world will proclaim the administration and the Fed are genius for how they are managing the economy of the U.S.

Regardless of what happens in a few hours, it does not matter. The damning reality on Main Street and the probability of another decade of equity market gyrations and grinding economic deterioration inside the U.S. and much of the Euro zone are the probably outcome as long as the belief in John Maynard Keynes continues. Thus my fellow serfs, you need to do more, sacrifice more, and just accept those 401K and IRA statements at face value for what they are:

As long as you are staying invested and believing the Wall Street myth, you are keeping bartenders and hookers employed in the Hamptons and that’s not all that bad when you consider they could relocate to your town and start panhandling on your street corners with your former “financial adviser” if they lose their jobs.

August 25, 2010

If Illinois is doing it…

CALPERS is probably doing it….

If California is doing it….

Florida is probably doing it….

If we’re doing it, everyone will be selling as price levels trip liquidation panic.

This single story from Crain’s Chicago Business speaks volumes as to what will probably happen in Q3 and Q4 from this point forward:

Illinois Teachers’ Retirement System selling off $3B to cover benefits

Read the article. Understand that 46 other states and thousands of communities and counties are having the same problem. Then think about what happens when they all see price levels tripped and they all attempt to hit the “sell” button a the same time.

Instead of just leaving you hanging…so what does this really mean?

Let’s play a not so far fetched game of “what if”……

What if the Obama supporters and power brokers understand that their is not one single thing they can do to hold on to their majority in the House and possibly the Senate….

and

What if this pension crisis is the key they need to finish the goal of total control of the financial system within a centralized group of regulators under the Executive Branch in cooperation with the Federal Reserve….

and

What if they just stopped all market intervention from now until after the elections. The market corrects and despite reflex rallies is proceeds to a 40-50% correction after the Republican victory and the media plus administration convince enough idiots that the Republican victory is to blame.

and

What if they assembled a new law in the Lame Duck session which created a specific GSE which insured and backstopped all retirement plans, pensions (public or private), 401K’s, IRA’s, etc. and promised to reset the values of all of them to July 1, 2010 levels.

and

What if they took all of that money and invested it only the Primary Dealers of the Federal Reserve and into U.S. Treasury issues.

Sound far fetched? Think about who is in charge, read the various legislative acts that have been passed into law thus far, and consider that these people are playing for keeps. The winners? Bondholders of U.S. Treasury issues able to sell out at a profit, the Federal Reserve who can deleverage their balance sheet at taxpayer expense, and the Congress who will get credit for “reducing” the dependency on foreign purchasers of our crappy bonds and bills.

God help us, this is too logical and too obvious, thus I think it is a legitimate concern. Dow 4217 anyone?

August 23, 2010

Will it hold or will we see a break below the 600 price level and a retest of the July lows? If we do see it before Labor Day and the bond market continues its behavior pattern, I may call for a 20% crash for sure if the deterioration continues and the Bubblevsion Bull Network can not rally the troops and throw the dead cat hard enough on the floor to prevent a September Congressional induced market bloodbath…..

August 23, 2010

This is the first of a series of  postings I call the S.O.R.E.A.S.S. report and by golly, if we could just vote this bozo out or at least restore the Constitution just a wee bit, I may not have to do another one. Of course if Vice-President Biden opens his pie hole next summer about the “summer of recovery” again next year, we will have another report like this one. Thus I introduce to you the one, the only:

S ummer

O f

R ecovery

E conomic

A nd

S tatistical

S tatus

report for 2010. Enjoy the graphs and understand, I’m not saying we are not recovering from the so-called “Great Recession”; I am saying we are about to dive further down into the Greatest Depression since 1836-1841, a period where people ate sawdust (literally) on their bread to fill their stomachs. After reviewing the data,  you will tend to agree on one undeniable fact:

The “Summer of Recovery” has left all of the taxpayers of this nation with a SORE ASS.

I. The Summer of Equities Warning Signs

Despite the fanatical ravings of the bull loons on Bubblevision that this is an opportunity of a life time, I simply remind everyone of what happened last time the major financial players all experienced prolonged periods of trading after a “Death Cross” technical formation. This summer of recovery demonstrated a validation after the technical formation first appeared and further warning signs as many other institutions are now rolling over and sending a message that the markets could and likely are in for a period of sustained turmoil.

The “Big 4″ of the financial institutions are  a great indicator of the problems the economy will encounter in the next six to nine months as they started to break down just before the famous “Flash Crash” of May 6th.

First, Bank of America, the GSE that did not have to be except for the fact that the Bush administration basically forced them to buy Merrill Lynch to prevent an outright collapse of the U.S. financial system then of course allowed the “oopsie” oversight that the financials reported to the shareholders just might have been a little bit more fictional than a ‘Thor’ comic book.

Even with declining volume, that is one ugly female dog of a chart. The only high volume days were the ugliest of days and since everyone hit the exits, the government stock traders left to play HFT with each other are using it as an arbitrage proxy until recently. The breakdown below the 50 DMA and declining 200 DMA are indicative of a stock destined to retest lows.

As in March 2009 lows.

So how is the stock and company also known as the “Spawn of Satan” doing? Let’s take a look at their chart:

I guess the news from April may have been big but the “recovery” in their stock priced just did not happen. What this means for the markets is that as long as GS volume remains pathetic and the economy follows suit, the equity markets will not recovery and the declines we saw in the financials and semiconductors will continue to bleed out first through the small caps and financials, then, unfortunately, throughout the broader market as American political instability rules the news cycle. Watch GS in September and October for a clue as to the next move in the markets along with these other major financial indices.

Morgan Stanley is in bad shape also, and appears to be positioning itself for a major breakdown to retest the 2009 lows:

That is just one gruesome chart and the spike in volume after the hilarious quarterly report which got it back above the 50 DMA does not appear to have the momo to last. Watch for this stock to break decisively below the 50DMA after Labor Day.

This leaves us the great great grandson of the deviant soul who concocted and purchased the U.S. Government to create the Federal Reserve system, J.P. Morgan Chase and their wonderful chart:

The key characteristic that each of these stocks have, besides repeating the “Death Cross” formation,  is the pattern similarities to 2008 where the cross happened, the 200 DMA sloped downwards, and shortly after that all hell broke loose until the bottom was touched when the S&P 500 kissed the 666 level. There are numerous economic and fundamental reasons we could look at these big boys and say “uh-oh” but the virus of a lack of business and facing the prospects of “gasp” actually having to put crap back on their books that they have been hiding since the FASB 157 hide the sausage trick in 2009 is setting up a nightmare earnings season for Q1 2010 not to mention a total and complete reversal of their good fortunes regarding the reserves and other assets that are nothing more than mirages for some of these banksters.

If you think it is any better with the regional banks, think again:

Odds are these technical events, while not 100% conclusive, are trying to tell the world something. It is my opinion that we are simply going through the process of restarting what was not allowed to be completed in 2008-2009:

The complete deleveraging of the system was not completed and in fact the efforts by the Federal Reserve and U.S. Government under two Presidents may have just extended the fiction of the recovery just long enough to make matters worse. From the chart of the previous S&P 500 Death Cross, you can see a series of lower highs and lower lows culminating the in the desperation action of  “modifying” the accounting rules for FASB 157 so the banks could hide the garbage and quit writing off losses on securities and loans which were amazingly enough worth less than they claimed. Fast forward to the recent Death Cross in the 2010 market:

This time the series of lower highs preceded the cross but the pattern, if it continues, means we should see a shattering of the 1010 level some time this fall and a new intermediate term low established. Based on the fundamental economic news we have seen since April, it is not a reach to presume that earnings will start to deteriorate and the markets will follow suit with a proper designation of valuations to match the overall performance of the economy and political uncertainty.  Even if we see a new low for the year and another dead cat bounce or snap back rally from the lows because the Republicans win a majority in either house of Congress, that celebration in the markets will be short lived as the lack of clarity in tax policy becomes apparent during  the lame duck session plus a plethora of ill-advised policies and appointments being rammed through will shatter what little hope the “markets” had for 2011.

In Part II of the S.O.R.E.A.S.S. report Tuesday morning, the focus will be on Main Street and the reality being missed by the macro-Bubblevision economists and commentators are the Balkanization of our economic system accelerates after this summer of recovery.