Friday, March 27, 2009

Morning Update 3/27

Good Morning,

Futures are down about 11 points on the S&P or a little more than 100 on the DOW this morning:

While it is possible that the uptrend is ending, keep in mind that there could be one last rally inside this triangle, or it could be complete. This is a 5 day chart, I would normally expect a larger pattern to end such a large uptrend, but those hammers I pointed out yesterday may be in play with the gap down this morning confirming so far:

Obama does more talking today and wooing of the central bankers in public. That’s a joke as it them who originate and benefit from all the bailouts, do not be fooled into thinking that we are begging them to make this latest program work.

It's no surprise to regular readers here that the consumer is being squeezed. All bailout efforts to date rob the consumer and pass their earnings and future earnings onto the banks. The Fed prints money intentionally devaluing consumer’s purchasing power while more and more of them become unemployed or semi-employed as their jobs continue to move overseas.

It’s funny watching the media spin the data. The following article could be spun positive, yet it was spun negatively. Why? Are you noticing a shift in sentiment all of a sudden? Not so much optimism? Is that organic, or is it controlled? I do not fully know, but it’s interesting...
U.S. Consumer Spending Increases for Second Month

By Shobhana Chandra

March 27 (Bloomberg) -- Spending by U.S. consumers in February rose for a second month, mainly reflecting an increase in prices that eroded buying power.

The 0.2 percent gain in purchases followed a 1 percent increase in January that was larger than previously estimated, the Commerce Department said today in Washington. Incomes decreased more than forecast, the report also showed.

Mounting unemployment is taking a toll on confidence and paychecks, indicating spending has yet to rebound vigorously after plunging at the end of 2008. The figures make it that much more critical that the Obama administration’s initiatives to create jobs and Federal Reserve measures to revive credit take hold quickly to prevent the recession from deepening.

“Just because consumers eke out a small gain doesn’t mean we’re out of the woods,” Michael Feroli, an economist at JPMorgan Chase & Co. in New York, said before the report. “There are a whole lot of reasons to be concerned about the health of the consumer.”

Economists forecast spending would rise 0.2 percent, after an originally reported 0.6 percent gain the prior month, according to the median of 68 estimates in a Bloomberg News survey. Projections ranged from a decline of 0.5 percent to a 0.5 percent increase.

Incomes Drop
Incomes fell 0.2 percent, after a 0.2 percent increase in January. The survey median projected a 0.1 percent decrease.

Today’s report also showed inflation accelerated. The price gauge tied to spending patterns rose 1 percent from February 2008, up from a 0.8 percent 12-month gain in January. The Fed’s preferred gauge of prices, which excludes food and fuel, climbed 1.8 percent, more than forecast.

Adjusted for inflation, spending dropped 0.2 percent, following a 0.7 percent gain the prior month.

Disposable income, or the money left over after taxes, decreased 0.1 percent, after rising 1.6 percent the previous month. Adjusted for inflation, disposable income dropped 0.4 percent.

So, real disposable income is falling. That’s the Achilles’ heal of any recovery and why all the bailouts have been all focused on the wrong people. Of course one just has to keep in mind who the Fed really works for to understand their motivation – same with Congress.

Mish just did a good article showing that wage deflation has set in. That will be very bad for our economy if it continues.

The dollar is up today, gold and oil down, bonds up.

Have a good day,