Soullfire's Mission: Financial Freedom!

The markets reaction last Friday to the employment numbers proves we are in a bipolar market.

As you may recall, I discussed market behavior when October employment numbers were released:

The unemployment numbers were higher than expected and the national unemployment rate rose to a high of 10.2%, to which the market responded by rallying and moving higher. The reason given by financial main stream media was higher unemployment means interest rates will likely be kept low for a longer period.

So in their Bizzaro universe, higher unemployment is reason to celebrate in the stock market.

Now there has to be two sides to every equation, which means that if the jobs number showed lower unemployment, the market move should be negative (higher interest rates), right? Well, my Bipolar Market Theory predicts that the market will move in a certain direction independent of any new information.

Now last Friday the jobs number was much lower than expected- only 11K jobs lost for the month and the national unemployment number dropped to 10%

How did the market respond? Well if you guessed it went down since this means interest rates will be going up, you'd be wrong. The market instead rallied to make another new high for the year and ended positive for the day. The financial media, as expected, linked the rally to positive signs of the recovery taking place, forgetting all about interest rates.

So in summing up we have the following:

1) Higher unemployment triggers a market rally.

2) Lower unemployment triggers a market rally.

3) The financial mainstream media will try to make both situations seem logical and expected.

From this we can conclude:

1) Bipolar market theory has been verified.

2) Financial main stream media are basically idiots and should never be looked at for insight.

3) The market isn't trading on fundamentals at this time, which makes it equivalent to Wyle E. Coyote running off of a cliff and not falling because he hasn't realized it yet. Technical analysis is best suited for use now and one needs to be alert to any signs of bipolar market sentiment shifting. Once the sentiment shifts negative, you will see the market continue to fall regardless of news in the same fashion as it did going up.

Fed Chairman Ben Bernanke is attending the Senate Hearings on whether he gets appointed to a second term. Kentucky Senator Jum Bunning had a few choice words to say on the matter.

Before I show the video, a little set up is needed...

Here's the low down on bailed out company AIG. When a company is in serious financial trouble, one of the first things they do is try to renegotiate the debt obligations to their lenders....as in pay them 60 or 70 cents on the dollar rather than the full value amount, known as "par value". The lenders may not like to take a loss, but they are motivated to negotiate because the losses could be far greater if the company goes bankrupt. Anyway, that's what normally happens- but it didn't with AIG. The Fed bailed out AIG and paid 100% of their debt (par value) to the lenders.....all with US taxpayer money and more debt. So basically AIG allowed other banks to engage in risky counter-party investments that went bust- and US citizens get stuck with the bill. So AIG and their lenders get the benefit of only gains and NO RISK of any losses. This, my friends, SUCKS and is NOT what capitalism is about.

This video starts in where Bunning is talking about the AIG bailout having no negotiated cuts to lenders:



Notice how Bernanke tries to weasel out by saying he was "powerless" to do anything and that the lenders had the upper hand. This is hogwash. If AIG went belly up, the lenders would have got squat, and had NO leverage. This is yet another example of Bernanke making excuses instead of taking accountability for his mistakes....that is, if you want to call this a "mistake". I think this was a deliberate move in favor of Wall Street cronies.

Here's the longer version of the video to see the full verbal smack down given to Bernanke:




Sen. Bunning (R-KY) to Fed Chair Bernanke: 'You Are the Definition of Moral Hazard'

With the dollar weakness, gold and the other commodities continue to trend higher.

This kind of dollar decline/gold appreciation can't be good for the economy in the long run and certainly threatens any hope of a timely recovery.

I wonder if the US Govt (Bernanke/Geithner) will continue to watch the dollar sink and do nothing while gold continues to make new record highs on an almost daily basis?