Thursday, December 31, 2009

Morning Update/ Market Thread 12/31

Good Morning and Happy New Year’s Eve!

Stocks continued their upward momentum after the bell yesterday and are higher this morning. Below is the overnight action in the DOW and S&P futures:

The dollar is down pretty significantly overnight obviously correcting a little from is recent rise. Meanwhile the long bond is falling rather dramatically taking it to new recent lows. This is an important theme, again, the Fed is talking like they are pulling support, but the truth is that rates have been rising pretty much all along. Even after Bernanke announced QE, the TNX recovered quickly and just kept climbing. Many market callers will look at this as a normalization of rates, and normally it would be except that there’s just one little multi-trillion dollar problem, and that’s called debt saturation.

Oil reached $80 a barrel overnight and gold is higher, recovering most of the past two day’s fall.

Weekly Jobless claims came in lower than forecast at 432,000, this is 20k less than last week’s 452k number. As I read the Department of Labor’s report, I find in the unadjusted data that there were 557,000 claims for the week, down from 717,000 in the same week a year earlier. While this sounds like dramatic yoy improvement, what they fail to mention are the tens of thousands on emergency unemployment and that the combined totals are much higher, even with thousands of people each week exhausting all benefits. Here’s Econoday’s spin, you won’t hear them talk about that either:
Jobless claims point convincingly at strength in the labor market. Initial claims fell a very sizable 22,000 in the Dec. 26 week to 432,000 (prior week revised slightly higher to 454,000). Market News International says the Labor Department is comfortable with the week's results and is not warning about holiday-adjustment factors. The four-week average helps smooth out any week-to-week bumps and is clearly pointing to improvement at 460,250 for a decrease of more than 20,000 from a month ago. The four-week average is down 30 percent from its cycle peak in April at 658,750. Continuing claims, at 4.981 million, are down 57,000 in the latest week and down 27 percent from their cycle peak in June at 6.774 million.

Claims data offer a reliable barometer for the labor market and a powerful indication for the monthly employment report. Secondary indications have also been positive this month including improvement in the consumer's assessment of the labor market in Tuesday's Conference Board report and month-to-month gains for the employment indexes of Wednesday's Chicago report and the Philadelphia report at mid-month. The bears will be warning everyone of a pending double dip, but anticipation will be strong that next week's employment report will mark an end to the labor recession. Today's report should be good for risk trades.

An end to the “labor recession?” LOL, that would be funny if it weren’t so sad. Hopefully Point can update us with his chart of the combined totals.

Yesterday the total state tax data was released for the third quarter. Do we find that sales tax data is matching the claimed increases in retail sales? NO. Instead what we find is that State, Local Tax Revenues Decline 7%, according to the headline revenue data provided in the Wall Street Journal. But sales taxes declined a whopping 9% while incomes fell 12%! They also provide a state by state table showing that total tax collections nationwide are down 11% year over year. You simply cannot spin that positive, yet they try! They claim that taxes are a “trailing indicator.” That is NOT true for sales tax collections, they are real time and they cannot be easily massaged.

I think this shows that the overall economy is still down much more than people are being led to believe. A lot of that can be blamed on substitution bias. As stores go out of business and people fall off the unemployment rolls, then they are simply no longer counted. So you need to stand back and look at the total size of the transactions within the economy, NOT the trumped up GDP data which is just plain old fashioned false.

I have an article coming out later on the fallacy of gold and debt backed money, Bill Still has done a video on the subject as well. I think that’s going to smash a lot of myths and half-truths about the subject. Then it’s time to celebrate the coming New Year! I hope everyone has a good time, responsibly of course, and can put all this stuff on the back burner for a day.

In celebrating the year of the Great Deception, I dedicate this song to Ben Bernanke, Little Timothy Geithner, our President and all the politicians who “must get credit flowing again,” and to all the central bankers and their fellow DEBT pushers of the world! May the New Year bring you exactly what you deserve, you best get busy as you have $2.5 TRILLION in new and old debt to roll! And to all my fellow responsible citizens who see their nonsense for what it is, I hope you have a very Happy New Year!

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