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Monday Misgivings – CASH!!! Is King as We Start Q3

Posted on the 30 June 2014 by Phil's Stock World @philstockworld

SPY 5 MINUTEI'm NOT going to depress you.

If you want to be depressed about the market, check out my Twitter Account, where I posted our Morning Alert to Philstockworld Members (and you can become one of those HERE) in which I aired my concerns with the Global Macros.  

As you can see from Dave Fry's SPY chart, the volume on Friday was very low – incredibly so as it was a Russell re-balancing day, when we can usually expect very HEAVY volume.  Today is, in fact, the very last day of Q2, so we expect "window-dressing" to hold us up for at least another day but then there's only 2 and 1/2 days until the 3-day weekend, so perhaps the charade can continue all week.  

Last week we discussed the various forms of market manipulation that are keeping us at record highs and, on Friday, I asked "How Many Countries are Faking Economic Data?"  

Monday Misgivings – CASH!!! Is King as we Start Q3
I didn't mention the US because we've already had extensive discussion of how the US changed the rules on GDP calculations last year to add 3% to our GDP but NOW I need to mention the US's contribution to data manipulation because it turns out that a revision to the way Pensions are being accounted for has goosed Corporate profits by 6%, adding another $500Bn (3%) to our GDP!  

Even worse, it's retroactive (see chart above) and improves HISTORICAL EARNINGS as well!  This smooths out the GDP charts and doesn't make it look like we did something in 2014 to pump it up – isn't that clever?  Not only does it pretty up the GDP and boost Corporate Earnings (so the S&P's p/e looks like 18.5 when it's well over 20), but it also fools investors into thinking that pension obligations at blue-chip companies are not as bad as they really are.  

Monday Misgivings – CASH!!! Is King as we Start Q3
No wonder the volume in the market is approaching zero – who can play in a game where they change the rules every few months (and serreptitiously, at that!)?  Even with the record amount of buybacks by US Corporations in 2013, GAAP (Generally Accepted Accounting Principles) show earnings DROPPING 2.3% but, using the magic accounting allowed by our Government, earnings LOOKED up 4.5%.

IN PROGRESS

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