Treasury forced to reduce sales 15% yesterday and to print more money to avoid higher Treasury rates.

Market forces June 10
The US government was forced to reduce the auction of treasuries by about 15% to stem the increase of the Treasury bond interest rate.

The US government knows all the bids in advance and it knows just how many people will accept the Treasuries at whatever highest rate bid the FED accepts. The FED can compute the cost of the treasury sales vs. the sales volume and compare it to the present value of the future cost of inflation to make a sales cutoff decision… or they can just decide what rate of increase in Treasury rates they can safely accept. Presently inflation is not a FED concern because they can still control the Treasury note rate.

http://www.martincapital.com/chart-pgs/Pg_infl.htm

But printing money will soon increase the inflation rate too much so the FED is devising better ways to reduce the perception of inflation starting in about a month. Socialists are by definition lying socialists and prefer to keep their electorate ignorant about the real world. Usually it is convenient for lying socialists to err on the high side when something like the inflation rate is low and then correct the rate downward as the rate increases. It keeps the average more in line with perception but makes the economy look more stable and under control. Socialists love to control everything. This kind of corruption of data is common among socialists because they rule by keeping their people ignorant of the real outside world and by manipulating data to always report successes until their system after 50 years collapses into a subsistent economy. Scroll down at the following web site.

http://www.forecasts.org/inflation.htm

Obama is taking us on the path of the great socialists of Africa, the Soviet Union and Red China.

It is the path of socialist; bullshit, extortion via taxation, annihilation of productive individuals (elephants), dissipation of former capitalist expropriated wealth, subsistence, dust bowls, deserts, and starvation.

Socialism equals mediocrity, starvation, and global warming because it is destructive and inefficient.

Capitalism equals excellence, productivity, and environmental restoration because it creates wealth so we can afford the higher quality of life that a clean environment provides. If you don't believe this, go visit Red China or Somalia. Compare Somalia or rich Nigeria with capitalistic South Africa before capitalism is destroyed in South Africa

If you read the droppings that great socialist environmentalist authors leave behind in their writings they literally recommend a worldwide epidemic of Ebola because that seems to work in Africa. You see they say the real problem is not the socialist proletariat dictatorship in starving socialist nations but rather the world just needs to get rid of the polluting human species.

Back to socialist proletariat's FED
Therefore if the FED decides to hold the interest rates on US Treasury Bonds they must gradually reduce their world supply to keep demand up relative to supply. But since socialists have a voracious appetite for other people's money the FED must then print more money each time. That eventually will gradually raise the inflation rate. It appears self evident that at some point the Treasury rate will have to be allowed to go up proportional to the inflation rate to maintain some ratio between borrowing now using Treasuries and borrowing from future generations by printing more money.

Inflation is a product of the money in circulation times the velocity at which it changes hands. Currently credit is not flowing fast and that is the cause of some deflation we have seen. So up until the next month or so printing money reduces deflation and is therefore stabilizing the economy. So the socialists are seeing no down side to printing money at this time and they can still control rates. The FED can only push on a string by dropping interest rates but can do better right now by printing money to compensate for the low velocity of money. Inflation has the effect of reducing effective real interest rates. So right now as the FED prints money to inflate the economy they are reducing effective real interest rates. Mortgage rates have gone up to maintain the attractive real rate of about 5%.

But this period of time that the FED has to freely print money is almost over. Real rates will soon be back in positive territory and the economy and stock market will shudder, as the reality of the enormous American printing spree is no longer concealed by deflation.

http://www.martincapital.com/chart-pgs/Pg_mmnry.htm




Market Outlook
Market volume is now at record lows as the market runs out of steam. The pig's ear is completely gilded now.

Today we go very far out on the limb to estimate that the current market rally has at most six business days of life remaining.

Very often a bear market ends with a spike down on high volume as the weak hold-out bulls capitulate and follow the conventional wisdom and sell out at a low price. But the reverse is also true especially in market rallies like we have right now. Bear market rallies and rallies that occur in flat trading ranges often end like we may very well see today with a spike up in all the markets as many weak hold-out bears capitulate and follow Jim Cramer's advice (and lose their shirts again by getting into the market at a sideways moving market's top).

On the positive side we believe the probability of a much deeper bear market breakdown is now relatively low and the bottom for the next years trading range probably is already set. From here on we believe the market will be flat in a + or - 20% trading range until the economy weathers the ravages of the FED printing press. Long term investors who buy and hold will be stressed out for possibly another year.

Last night most Asian markets were up. China’s was up 1%, Hong Kong up 4%, India up 2.3%, and Japan up 2.1%.

European markets are up today in a narrow range of 2% to 2.3% mid way through their day.

US futures indicate the American markets will be starting significantly higher today. We could see a spike upward as weak handed bears capitulate. But a quick subsequent sell-off of up to 20% is becoming more probable now as investors realize this economic bottom will last another year not just a month until Jim Cramer says the economy recovers. That means we are in a sideways moving market with a limited upward and downward trading range not a bull market. That is also sometimes initially interpreted as a bear market rally but later recognized as a trading range. It is not a great place for buy and hold type investors.

The stock market historically rallies six months before the economy takes off, not six months before the economy begins a flat bottom. In a flat economy the stock markets normally trade in limited price ranges.