The following is a brief look at the financial delusion…or as Larry Levin of Secrets of Traders calls it, The Financial Matrix.  Yesterday’s GDP number came in higher than expected the market loved it, but come on, we all know people are still hurting and out of work.  The massive bailouts which are still occurring may have given the illusion things are better for this economy but the bailouts have really made the problems bigger.  But of course you’re not going to see that on CNBC or read about it in your local papers.  Anyway, those are my thoughts, Here are Larry’s which I completely agree with by the way.

The Matrix

I fell for it. I fell for Goldman Sachs’ bait and switch: the lowering of its GDP estimate thus setting up a bear trap for today. It was either that or too many people were catching on to the sweetheart deal Goldman customers were receiving, or Tax-Cheatin-Timmy at the Treasury threw Hatzius a curve ball. Now that Hatzius was (finally) wrong – as in way off – with his revision, the Treasury/Goldman inside-information shuffling con game can continue.

I have not lived in The Matrix for many years now; however, I slipped into it yesterday. For those of you who haven’t seen the movie “The Matrix,” it was a film describing a future in which reality perceived by humans is actually the Matrix: a simulated reality created by sentient machines in order to pacify and subdue the human population while their bodies’ heat and electrical activity are used as an energy source.

Most Americans live deep inside The Financial Matrix: a simulated reality created by Fraud Street propaganda in order to pacify and subdue the human population while their bank accounts are drained due to their inability to think for themselves, which is used as an energy source to grow.

Today’s GDP data is a perfect case scenario. The American masses were told the GDP showed 3.5% annualized growth and all was well. In fact, it was better than well; it was Nirvana. The folks trapped inside the lies of The Financial Matrix were happy as they swallowed their blue pills en masse. Some of us prefer reality – the red pill.

Reality is much different. A huge portion of the so-called growth came from government’s charade known as “Cash for Clunkers.” I called this “Cash for Foreigners” at the time since 4 of the top 5 sellers in this tax heist were foreign brands. Moreover, the government earns nothing so it has NO money to give; it must be stolen from group A to give to group B. This swindle added 1.66% points to the third-quarter change in real GDP after adding just 0.19% point to the second-quarter change.

Which is real? Which is the Financial Matrix? The answer is clear to all who took the red pill!

Personal income decreased $15.5 billion (0.5%) in the third quarter, in contrast to an increase of $19.1 billion (0.6%) in the second. Current taxes increased $4.8 billion in the third quarter, in contrast to a decrease of $119.1 billion in the second. Umm, isn’t this backwards: taxes up and income down? How is this good for the economy?

What is left of ones income after paying his taxes is known as ones disposable personal income. This decreased $20.4 billion (0.7%) in the third quarter, in contrast to an increase of $138.2 billion (5.2%) in the second. In the Financial Matrix this doesn’t matter and is never discussed on the Matrix-run financial shows. However, this is really bad news.

The government gave away trillions of dollars yet disposable income is down? Jobs are still dreadfully weak? The only reason GDP rose is wasteful government spending, cash-for-foreigners and the current excessive housing tax credits whose effect will diminish soon even though the program was just extended.

In other news that was magically stifled today was the news of more bailouts. Yes, MORE BAILOUTS! GMAC, the financing arm of Government Motors, is tapping the Treasury for its third bailout. This time GMAC has its hat in hand for an additional $2 to $5 billion. AIG is also holding up the Treasury (read: taxpayer) for an additional $2 billion.

In my humble opinion, GM/GMAC and AIG have the equivalent chance of repaying this debt as a snowball’s chance in hell. The government and Fraud Street know this yet they ask for, and receive, more and more money.

If you didn’t know any of this it is because you live in The Financial Matrix. Do yourself a favor and unplug – take the red pill like Neo did in the film and see the financial market for the ugly reality that it truly is.

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So while I do want the economy to get better and for everyone to be happy and jolly about the future, I also feel there is a need to show that things are not as they appear.

Cory Mitchell, CMT