Wednesday, December 16, 2009

Morning Update/ Market Thread 12/16

Imagine the HORROR, if you will, of turning on the computer, checking the news, and seeing the following huge picture at the top with the following headline: “Ben Bernanke is Time’s Person of the Year!”

AHHHHHHH! (background sounds of hair being maliciously ripped from head, dog yipping when kicked, etc.)

But I’m over it now, thankfully. For I realized that Time is owned by Time Warner, one of the largest media companies on the planet. What would be their interest in naming Bernanke, LOL x10, “Man of the Year?” Well, please follow this link, and just look at all the companies that are owned by Time Warner. That’s right, keep scrolling, you’ll eventually get to the bottom of that mile long list. We’re not talking small entities here either, we’re talking CNN, AOL, Warner Brothers, HBO, Money, Fortune, and the list goes on and on. Of course now it’s becoming AOL Time Warner Comcast! Where does it end? Do you think they like the current too big too fail money pumping mantra? I would think. And that list is only one list, check out the “related” companies. So, the next question to ask yourself about this selection for “Man of the Year” is who finances all these companies and who benefits? There is where you will find the answer to why Ben Bernanke was selected, and WHY WE MUST UNDO THIS SYSTEM that places the destroyer of our middle class, the pusher and purveyor of debt backed money, on their cover. Mind controlllll, you are a zombieeee, you don’t know or care why he is chosennnnn, pay no attention to the man behind that curtainnnnn…

Other than that, I really have no strong reaction one way or the other, lol. But, I will also note that maybe, just maybe, this tremendously bad act of karma will come back to haunt them. I think I hear the hive getting ready to swarm, but I wouldn’t want to waste it on such trivia.

Meanwhile, equities naturally ramped ahead of the FOMC announcement that Bernanke heads (unbelievable head shake). The /ES ran right into overhead, double topped and fell back to the top of the channel it just broke up and out of. Here’s the overnight:

The dollar is down slightly, bonds are up slightly, oil and gold are up as well.

Abu Dhabi is now suing Citigroup in an attempt to get out from behind their prior deal to buy future quantities of Citi stock. Gee, it would seem that they would rather keep their cash? Can’t imagine why they don’t want to put their capital to work under the current conditions, can you?

Here, let’s let our Friend Dylan Ratigan explain a little about what’s going on with the banks – this was the piece he did prior to introducing Mr. Perlmutter:

Dylan Ratigan – Big Banks paying off tarp, but still living on tax payer money:

Visit for breaking news, world news, and news about the economy

As far as today’s economic data, the worthless MBA Purchase Applications Index supposedly (who knows?) fell .1% versus the prior week’s gain of 4%. Whatever, show us some raw data or stop manipulating us altogether, will ya?

And now the CPI is rising at 1.9% as measured by them? But that’s okay according to Econoday:
The consumer price report for November was calming on most financial markets despite the rise in the headline number. Both the headline and core numbers were much less inflationary than yesterday's scary PPI numbers. Headline consumer price inflation jumped 0.4 percent in November after gaining 0.3 percent the month before. The November headline matched the consensus forecast. Core CPI inflation-in contrast with yesterday's core PPI run up-eased to 0.0 percent (no change) after a 0.2 percent increase in October. The consensus had called for a 0.1 percent rise.

The headline number was boosted mainly by a 4.1 percent surge in energy costs after a 1.5 percent gain in October. Gasoline was up 6.4 percent, following a 1.6 percent gain the month before. Food price inflation was soft in November with a 0.1 percent rise-the same as in October.

Within the core, declines in shelter indexes offset increases in costs for new and used motor vehicles, medical care, airline fares, and tobacco. Shelter costs declined 0.2 percent in the latest month, led by a 1.5 percent drop in lodging away from home. Owners' equivalent rent dipped 0.1 percent. Hotels-including resorts-continued to engage in heavy discounting. High unemployment is keeping rent soft in general.

Year-on-year, headline inflation increased to plus 1.9 percent (seasonally adjusted) from minus 0.2 percent in October. The core rate was unchanged in November at up 1.7 percent. On an unadjusted year-ago basis, the headline number was up 1.8 percent in November while the core was up 1.7 percent.

Inflation is still high at the headline level but it is not as severe as earlier indicated by the PPI for November. A flat reading for the CPI core suggests that a sluggish economy is keeping underlying inflation tame for now.

Remember that the PPI is where you’re going to see inflation FIRST, what happens there will be seen later in the CPI. Of course the largest underlying contributor is the cost of energy, so keep an eye on oil.

The Housing Starts data came in slightly less than expected, but higher than the previous month:
Housing starts looked good for November but most of the gain was largely a comeback and then some in multifamily starts-a volatile component. The single-family component posted only a partial rebound. Construction companies picked up the pace of groundbreaking for new homes as housing starts in November rebounded 8.9 percent, following a revised 10.1 percent plummet in October. The November pace of 0.574 million units annualized came in right at the market forecast for 0.575 million units and was down 12.4 percent on a year-ago basis. The latest comeback was led by a 67.3 percent rebound in multifamily starts, following a sharp 29.5 percent plunge in October. Meanwhile the single-family component edged up 2.1 percent after a 7.1 percent fall the month before.

Today's housing starts report is good but should be seen in the context of October's weak numbers. The two months together indicate that housing is in a slow recovery. The bad news is that the recovery is slow. But the good news is that the housing construction recovery is slow-anything more robust at this point would not be sustainable.

The current account deficit widened in the third quarter, duh.
The nation's current account deficit, hit by a deeper trade deficit, widened to $108.0 billion in the third quarter vs. a second-quarter deficit of $98.0 billion (revised from $98.8 billion). The third-quarter gap is 3.0 percent of GDP, the highest rate since 4.3 percent in the fourth quarter last year and vs. 2.8 percent in the second quarter.

Those numbers are a VAST understatement of reality.

The petroleum report comes out at 10:30 eastern, and the always exciting market action will follow the FOMC announcement at 2:15. No, you won’t see me playing in their reindeer casino games. Have fun. My guess would be that they will try to get up battering speed to try to break down 1,120. I doubt it, but you never know – and I think there is downside risk if they give inflation its proper caution. If they don’t, then everyone will be screaming inflation – but Bernanke, remember, is hell bent on not allowing deflation. Just remember what the bond market and the dollar are doing. Ben is not really in control, it’s only the big special intersts who want you to believe that.

The technicals are the same since we’re still in the same trading range. We’re above the 1,107 pivot, but 1,120 is the key here. That channel was likely a flag and we broke out, then tested it. I would expect more attempts at ramming it higher, but expect large volatility following the FOMC.

This whole Bernanke Man of the Year thing has my skin crawling. There’s something dirty about it, like a group of snakes slithering through the dirt…

Velvet Revolver – Slither: