Employment Situation in Chart Form – Damn, I knew I should have moved to New York and found a job on Wall Street!

Since a picture is worth one hundred million words from the BLS, I decided to let the Fed’s own charts once again do the talking.

After reviewing the employment charts at the St. Louis Fed (Fred), that were updated just today, I have come to the conclusion that ultimately we are all going to wind up being government employees who do nothing but cut each other’s hair! Oh, and those who don’t do that will work in the “financial” industry.

And just so you can see clearly how GOOD TODAY’S NEWS really is, here is a generic chart of what the sheeple are shown from the BLS, U3 unemployment. I very subtlely pointed out the green shoot in today’s employment situation update – it’s there on the chart, you can see it clearly:



Clearly the equity market's reaction today was commensurate. Oh, and the numbers were completely legit, just ignore this little chart made by Chris Martenson showing the highest “birth/death model” adjustments ever in the month of July:



Of course, as ugly as that unemployment chart is, I hope everyone who visits my site realizes that the current U3 number is NOT comparable to the way Unemployment used to be tracked. Oh no. For that, we turn to John Williams at Shadowstat.com where he presents U6 as well as his “SGS Alternative:”


*Note: the little turn down in U6 (over 16%) is only there because of seasonal adjustments.

But you know what? Even John William’s 20%+ unemployment calculation didn’t really grab my attention. Oh no. What really caught my eye this time was this chart:



Look at that chart. The United States TODAY employs FEWER people to manufacture Non Durable Goods than we did during WWII! And that’s with a population that has grown from 130 million to over 306 million!



Or if you really want to compare the employment numbers with a figure, why not use the “Civilian Noninstitutional Population?” What’s that?

In the United States, the civilian noninstitutional population refers to people 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (penal, mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

Of course Non Durable Goods Manufacturing would be things that aren’t built to last! Where on earth do you suppose you would go to build those? China of course!

Sure, we are now a “service economy.” We don’t build things, we let others do that while we all cut each other’s hair, do manicures, “engineer” financial products (rob people), and blog for a living. It’s a terrific economy really, much better than Zimbabwe. After all, China’s still sending us their nondurable goods!

Least you think that jobs have only been lost in the nondurable goods jobs category, please take a look at the Durable Goods Manufacturing employment. Much better there, we have only given up every single bit of employment growth there since about 1947:



Stunning.

Yes, when it comes to manufacturing in the United States, welcome back to 1940 my employment seeking friend:



But you know how bad the financial industry has taken it on the chin. Let’s take a look at employment in that field, they must be hurting as bad…



Oh. Maybe not as much. I’m sure the geniuses at Goldman deserve that $700,000 average bonus for figuring out how to keep themselves employed while laying off the rest of working America which is exactly what has happened over the past 30 years.

And since we don’t manufacture much of anything, we don’t need as many employees to mine stuff, either. Again, whatever we need we can get from overseas.



Good thing we can all flip burgers at McDonald’s because the service industry employment is hanging tough:



Would you like fries with that?

But if you work in information services, you know, the high tech field of computers and the internet, it’s a good thing you work in a stable and growing career field:



Oops. Sorry. Don’t worry, just write if you’d like me to talk you through that short sale – it’ll only affect your credit for a year or three.

It’s a good thing that governments, like the State of California, are so fiscally healthy, I mean just look at all the employment growth there!



No slow down there! YET. But you can quote me on this, IT’S COMING.

Of course we know that construction is also hurting... just not as much as I would expect. I think this is one area of employment that is still overdone. Only back to the year 1998? Not good enough! We still have way too many houses, way too many strip malls, and way too many office buildings:



And, as to the myth that Americans work a 40 hour work week… NOT ANY MORE. Now 33 hours per week is average – yet another form of underemployment:



Look real hard, there’s a green shoot at the end of that chart too.

No wonder stocks are priced at a P/E of 120+!



As far as the percent of the population that’s working? Never seen a better example of a head and shoulder’s pattern! I think Point showed us that one earlier, but here we are back to about 1978:



The problem with this is that back in the '50s, '60s, and '70s most families only had one working person supporting the entire family. Today it takes at least 10 just to support the necessary 8 computers, 4.5 cars, 18 cell phones, and $4 a gallon gasoline. Not to mention all the other cheap nondurable goods made in China. Yet, my point is that with that type of employment ratio we are back to the same raw numbers of workers as in the way back past. That means that for every household today that has two fully employed workers, there is at least one houshold with NONE.

When it comes to the length of time spent on the unemployment payrolls, here we can finally see what the rally today was all about. Just look at the chart showing civilians who were unemployed for 5 to 14 weeks. A big drop, no doubt:



But you’re going to have no luck seeing ANY decline in the number of people unemployed for longer than 15 weeks:



Nearly 8 million people! Now look at this chart showing the number of civilians unemployed for 27 weeks or longer! Yes, that's 5 million people drawing benefits for that long or longer...



And here's the mean length of time of all those on unemployment:



Anyone else see a rising trend there? Maybe it's just me, obviously all the other market participants are seeing something vastly different.

Don’t worry about those who are in danger of running out of benefits after exhausting their 79 weeks worth though. I understand that little Timmy Geithner is looking into extending those benefits even further... Of course the benefit to Timmy and the Bankers is that by giving 34 million Americans free food, and millions more pay for not working, is that they can still sit on the couch and watch the NFL which is coming back on television real soon!



I believe that is method number 3,366 in the central banker playbook, “How to Placate an Entire Population so that they don’t Hang You from the Nearest Tree.” I hear it’s a best seller, and fortunately there are still plenty of employed financial engineers to keep the book sales up!

And this is why someday soon we will all be government employees who do nothing but cut each other’s hair, “engineer” financial products, and blog. Damn, I knew I should have moved to New York and found a job on Wall Street.

The Eagles – Life in the Fast Lane:


Oh boy, Don Henley is looking like he needs a haircut real soon! Better sharpen the scissors!

California Won't Accept Its Own IOUs...

California Won't Accept Its Own IOUs

By MARIA DINZEO

SAN FRANCISCO (CN) - Small businesses that received $682 million in IOUs from the state say California expects them to pay taxes on the worthless scraps of paper, but refuses to accept its own IOUs to pay debts or taxes. The vendors' federal class action claims the state is trying to balance its budget on their backs.

Lead plaintiff Nancy Baird filled her contract with California to provide embroidered polo shirts to a youth camp run by the National Guard, but never was paid the $27,000 she was owed. She says California "paid" her with an IOU that two banks refused to accept - yet she had to pay California sales tax on the so-called "sale" of the uniforms.

The class consists mostly of small business owners, many of whom rely on income from government contracts to keep afloat. They say California has used them as "suckers" as it looks for a way to bankroll its operations while avoiding its own financial obligations.

"Instead of seeking funds through proper channels, the State has created a nightmare," the class says. "Many of these businesses will not survive if they are required to wait until October 2009 to have these forced IOUs redeemed by the State."

The class claims the state is violating the Fifth and Fourteenth Amendments. It demands that California be ordered to honor its own IOUs, plus interest. They are represented by William Audet.

And the forests will echo with laughter…

Led Zeppelin-Stairway to Heaven


Related article: Russia Beats California as Default Swaps Favor BRICs

11% of Americans Living on Foodstamps…

There are 306 million Americans living in the United States, shockingly, 34.4 million of them are now on Foodstamps…

US food stamp list tops 34 million for first time

08.06.09, 11:26 AM EDT

US food stamp list tops 34 million for first time

WASHINGTON (Reuters) - For the first time, more than 34 million Americans received food stamps, which help poor people buy groceries, government figures said on Thursday, a sign of the longest and one of the deepest recessions since the Great Depression.

Enrollment surged by 2 percent to reach a record 34.4 million people, or one in nine Americans, in May, the latest month for which figures are available.

It was the sixth month in a row that enrollment set a record. Every state recorded a gain in participation from April. Florida had the largest increase at 4.2 percent.

Food stamp enrollment is highest during times of economic stress. The U.S. unemployment rate of 9.5 percent is the highest in 26 years.

Average benefit was $133.65 in May per person. The economic stimulus package enacted earlier this year included a temporary increase in food stamp benefits of $80 a month for a family of four.

Food stamp enrollment

Month Total

May 34.409 million

April 33.758 million

March 33.157 million

February 32.556 million

January 32.205 million

December 2008 31.784 million

November 2008 31.097 million

October 2008 31.050 million

September 2008 31.586 million

Notice the relentless climb in the numbers? Guess what… those numbers are not “seasonally adjusted.” There is no “birth/death” model used. It simply is what it is and it is shocking – 11.24% of the entire population.

Please compare and contrast that reality with the bonuses on Wall Street or with the money printing games being played by the Fed, Treasury, and central banks.

In Zimbabwe, they printed easy money too and the people starve as the cost of a loaf of bread becomes unaffordable. They have no food stamps in Zimbabwe, but for a while they had the best performing stock market in the world. For a while.

And I think to myself...

Morning Update/ Market Thread 8/7

Good Morning,

Today is all about the employment report which came in with a headline of “only” 247,000 for the month of July while the rate dropped from 9.5 to 9.4%. Here’s how the equity futures reacted:



The dollar was up and bonds were down sharply on the release.



In a nutshell, keep in mind that this current economic crisis has been going on for so long that there are now many people dropping off the back side of being counted. The consumer is still burdened with debt and more and more people are losing their incomes. Talk of employment growth is simply premature. The higher stocks go without real earnings and without clearing the debts from consumers, the higher price to earnings ratios will go. It is ultimately earnings that underpin the equity markets and the price of stocks has NEVER been so high compared to earnings.



It would take one heck of a lot of growth to pull P/E’s back into a normal historic range, and the only reason they look as “good” as they do is because the financial industry was allowed to go back and mark their assets to fantasy – otherwise the large banks are still insolvent and would not have earned a nickel.

Then there’s the money printing/laundering game. If you haven’t read Monetizing Via Lies and Deceit… I suggest you do so.

Back to the jobs report, here’s Econoday’s report:

Highlights
Job losses came in much lower than expected and point to being at or near the end of recession. Nonfarm payroll employment in July shrank 247,000, following a revised decline of 443,000 in June and a revised drop of 303,000 in May. The July drop in jobs was not as severe as the consensus forecast for a 300,000 decrease. June and May revisions were up a net 43,000. The easing in job losses was seen in both goods-producing and service-providing sectors.

From the household survey, the civilian unemployment rate unexpectedly slipped to 9.4 percent from 9.5 percent in June and was below than the consensus projection for 9.7 percent. The decline was due to a sizeable drop in the labor force.

Wage inflation returned more to normal in July as average hourly earnings rose 0.2 percent after no change June. The latest gain matched the consensus forecast for a 0.2 percent rise. The average workweek edged up to 33.1 hours from 33.0 hours in June.

Today's report is very good news for equity markets. Job losses are getting smaller and the unemployment rate actually slipped. Without a doubt, the July numbers should be a big psychological boost for equities. Meanwhile, bond prices are down.

Here’s the report directly from the BLS (Bureau of Labor Statistics) - BLS July Employment Situation.

Keep in mind where the BLS’s data falls within the spectrum of reliability – here’s how Chris Martenson put it:

Into the final bucket goes the utterly unreliable 'data,' so bad that I need to use quotes around it. This 'data' is modeled or otherwise manufactured out of thin air with no accountability, does not square up (at all) with good sources of data, has massive errors in methodology that have never been explained, consists of survey data for reasons covered in an earlier Martenson Report (Survey Says...), is self-referential (e.g. LEI or 'leading indicator' data), and/or has been proven repeatedly in the past to be consistently biased for political or self-serving gain.

Unreliable Data
• New home sales data
• Employment data (due to the Birth-Death model)
• All survey data
• Leading indicator data
• GDP (just added to list)

Okay, now that we know we’re talking about massaged numbers that are derived from sampling and processed in a myriad of ways to arrive at a guess. And if that were done consistently, at least we could derive a trend, but that’s not the case either, especially over the long run.

Now, let’s look at the breakout of categories within this report to see where the jobs are being lost and created:



Areas in red are areas that lost jobs while the green are areas that gained jobs. What you’ll notice is that almost all the job gains are still in the government sector while all the losses are in the private sector. This is the trend and has been for quite some time. Of course it requires private sector money to pay for those in the government and you can see that our economy is getting stilted further and further out of balance with BIG government being the understatement of the century.

In deriving the reported numbers, the BLS does provide some of the raw numbers in each step of the “cooking” process. The number from the table that most closely resembles how data was presented in the past is the U6 number:



The numbers presented to the public are the U3 numbers. You can see that it was only with seasonal adjustments that both the U3 and U6 rate improved and that without seasonal adjustments the rate was steady.

The numbers, as presented by the BLS, are trending to a slower rate of job loss. Again, the people who are not tracked, like part time employees who would work full time, those “discouraged workers” who have just given up. And then there are those who the BLS just creates out of thin air using their “birth/death” model (Mish does a good job of covering that aspect and I’m sure he’ll have the breakout later).

So, has employment turned an actual corner or is it just a statistical blip combined with distortion? For me it’s too difficult to tell, the other more reliable data, like tax revenue and shipping numbers, do not support this report and thus we need to see if the trend of falling numbers can be maintained.

From a technical perspective, probably the most bearish thing that could happen is that the markets spike this morning and then close down later today or even on Monday. Rallies often END on “Good” news, and we are now up against heavy resistance, extremely overbought, and McHugh’s wave count suggests we are finishing wave 1 up of c up.

Another technical possibility is that we are forming a big rising bearish wedge. Everyone is focused on the “V” or the inverse H&S pattern, but check out the rising wedge. On the SPX we may be overthrowing the top of the wedge now, but it’s even better formed on some of the other indices like the Transports:

SPX:


Transports:


Have a great day,

Nate

The money and the numbers – Living a life of illusion…

Joe Walsh - Life Of Illusion:

Making Headway… Economic Edge Cracks the Top 20

Warning - Shameless Self-Promotion!

While I’ve been writing on the economy for a number of years, I did not start Economic Edge until the end of November of last year. My goal? To reach 500 page views a day within a year. That was a well read economic blog and that was my goal. Today I average about 4,400 views per day, nearly nine times my goal!

While still not a tremendous amount of viewers compared to the popular sites that have been around awhile, that’s a nice comfortable level that allows me to interact more with my readers. That's my personality, I'd rather share in a deep discussion with a few than a shallow one buried in a crowd.

My newsletter and newspaper writing just never generated enough circulation to make it worth my time. The newspapers would gladly run rosy "buy, buy" articles but would simply not run any article that was even remotely negative on the economy – the deal breaker for me was when an editor changed my headline to the exact opposite meaning because he was not familiar with the terminology and did not consult with me first. Of course his terminology made the economy sound better than I intended and I’m sure that’s why he did it. I never wrote for a paper again and see clearly why their readership is dying. Those who do not tell the truth are destined for the dust bin of history.

Gongol is a site that gathers traffic count information and ranks economic blogs. On their current list they track 168 economic blogs - Economic Edge is ranked 19th in terms of daily visits and 20th in terms of page views:





There are a lot of sites that do not qualify to be tracked, and there are a few that if on the list would push us back, sites like the Ticker Forum or Zero Hedge. That’s okay, breaking into the top 20 inside of a year is way beyond my expectations and it could not have happened without all the regulars who contribute their knowledge and put up with JS-Kit! Thanks for coming by and sticking with!

Nate

By the way, at the current rate of traffic, this site will have more than 1.6 million views in the next year! Looking forward to it, it’s going to be exciting, that’s for sure.

Charles Biderman – One eyed man in the land of the blind!

Blatent market pumpers square off with someone who looks beyond the headline BLS numbers. The same bozos who never saw the crisis coming still don’t know what’s happening. Biderman is exactly correct.

I have news for all of them… The REAL LEADING INDICATOR is DEBT to INCOME. This ratio is getting FAR worse on all levels because the DEBT has not been cleared from the system and money printing does NOT eliminate debt when incomes are not going up – they are going down. In regards to the TIPS comment by Biderman, again he is correct about the rampant, and now exposed, printing of the Fed and Treasury. Manipulated data and money printing do not a recovery make.

Please follow this link to view... VIDEO LINK

Max Keiser - On Criminal Banking Syndicates, Moral Hazard, The Gold Standard & Dog Poop Futures…

Picking up perfectly on the REALITY so clearly pointed out in the last post, Max continues to simply tell the truth while others deny reality (ht Glass).

Max Keiser on Face Off - Criminal Banking Syndicates - 06 August 2009:


Max Keiser on Face Off - Criminal Banking Syndicate - 06 Aug 2009:

Monetizing Via Lies and Deceit…

I told you the numbers didn’t add up and hopefully my suggestion pointed Chris Martenson in the right direction as he has uncovered the game the Fed and Treasury are using to hide their blatant manipulation and money printing.

On 7/30/09 I said, “But here’s the real deal… the money to purchase all those Treasuries DOES NOT EXIST. It particularly does not exist if we are simultaneously going to push equities higher. It is my contention that we are on the edge and that there is a game being played by the Fed, the Treasury, and by the Primary Dealers to mask over reality.”

Now we are learning exactly how they are masking over reality… They are using the Primary Dealers (the largest of which are GS and JPM) to bid on and buy Treasury debt and then purchase it back not but five days later in a money creation/laundering scheme designed for what can only be one purpose – to HIDE the fact that they are printing FAR MORE money than the $300 quantitative easing announced by Ben Bernanke.

The bid to cover numbers we've seen lately are just preposterous. As Point has been pointing out, when the Primary Dealer bids are removed, the bid to cover ratios are disastrous. There is DEFINITELY COLLUSION occurring here between the Fed, the Treasury, and the Primary Dealers.

Frankly, I HOPE the Chinese and other holders of our debt immediately end all buying activities from the Treasury. No, I’m not anti-American, I’m PRO-American and want the ruinous activities of the rogue central banks to stop destroying and bankrupting our country. I want the lies and manipulation to end, and I want a return to fiscal sanity!

Here’s the meat of Chris’s important article – great detective work Chris!

The Fed Buys Last Week's Treasury Notes

Here's a recent example illustrating that the Fed's actions are more consistent with financial desperation than economic health.

In concert with the claims I made in the prior Martenson Insider post, The Fed bought $7 billion in Treasuries today and even more yesterday.

This is at the upper end of their recent range of already exceptional purchasing activity.
If things are so rosy that every single dip is being bought in the stock market with a vengeance, I wonder why these printing operations are really necessary?

This $14 billion plus buying activity by the Fed represents fresh money created out of this air that was exchanged for the sovereign debt of the US. However, since the Fed has, for all practical purposes, never undone its permanent operations (hey, that's why they are called "POMOs") we can consider these additions of money as good as permanent themselves.




Looking at the maturity range we can see that these are all long-dated bonds with the one today specifically offering us a tantalizing clue as to how the shell game is being played.

Here's the Treasury announcement for the 7-year auction that came out on July 30 (last Thursday). Please note the specific CUSIP number circled. Every bond in this auction carries this specific identifying number.



And now let's look at the detail for this most recent POMO:



Good grief! Just last week, when the auction results were announced it was trumpeted to great fanfare that there was "more than sufficient" bid-to-cover, "strong demand" and all the rest.

And now it turns out that 47% (!) of the bonds that were taken by the primary dealers in that auction have been quietly bought by the Fed and permanently secreted to its balance sheet.

They didn't even wait a full week! A more honest and open approach would have been for the Fed to simply buy them outright at the auction but this way, using "primary dealers" and "POMOs" and all these other extra steps the basic fact that the Fed is openly monetizing US government debt is effectively hidden from a not-too-terribly inquisitive US press and public.

The speed of the shell game is accelerating.

This immediate repurchase of newly auction bonds by the Fed tells us that demand for these bonds is not nearly as high as advertised, and that things are not quite as strong as represented.

And oh, by the way, don't expect any stock market weakness while so many billions are being shoveled out the Fed and into the pockets of the primary dealers. They'll have to do something with all that freshly minted cash...

“The speed of the shell game is accelerating” is exactly correct. These people belong in PRISON not running the most powerful country on the planet.

Remember the RULE OF LAW? When the rule of law is not adhered to capital will flee. While it’s fleeing already, I suggest that everyone get ready because once this little operation becomes perfectly clear, the green shoots rally will be exposed for exactly what it is – a money printing/laundering cover up of a desperate bankrupt nation looking to keep their debt game alive.

Paul Mylchreest – Thunder Road Report…

I always learn something by reading Paul’s Thunder Road Report. Great comparison of the basic cycles of Armstrong and Puetz. I find myself liking the fact that Paul acknowledges and presents bullish arguments but then weighs the bearish reality and comes down on the side of sanity, which, of course, will eventually prevail.

When reading, please keep in mind that Paul is not located in the United States and that any recommendation made by him in his newsletter is not necessarily endorsed by Economic Edge. A lengthier edition but a pleasant read, enjoy. Thanks Paul!



Here’s Paul’s theme music, LOL…

Thunder Road 1976 - Bruce Springsteen:

Morning Update/ Market Thread 8/6

Good Morning,

Equity futures are higher this morning, here’s the overnight action:



The Dollar is up and bonds are down.

In England, the Bank of England decided that deflation is not dead and increased the amount of bonds it is auctioning in their attempt to print their way out of recession and into prosperity. Oh yeah, that’ll work – not!

It appears that weekly initial jobless claims were massaged down to a better than expected 550,000… is all! As if that horrific number weren’t bad enough, it is completely not reliable and we’ll have to spend our time parsing through the numbers to glean a glimpse of reality. Here’s Econday’s report:

Highlights
Initial jobless claims fell 38,000 to a much better-than-expected level of 550,000 (prior week revised 4,000 higher to 588,000). Very importantly, there were no special factors in the week. The current level is right at the four-week average of 555,250, more than 50,000 lower than the average at June's end. These results will lock expectations for month-to-month improvement in tomorrow's jobs report.

Continuing claims are harder to read, up 69,000 in data for the July 25 week to 6.310 million. The four-week average is nearly 500,000 lower than the comparable period in June, but there's a risk that much of this improvement reflects expiration of benefits, not new hiring.

There was very little initial reaction to the results, in part because of caution awaiting an ECB news conference. Still, results for initial claims are a positive, pointing to slowing losses for payrolls.

Expiration of benefits? No kidding, it’s not a “risk,” its reality.

Of course the real show regarding employment will be the monthly employment report that comes out tomorrow and we’ll all have to waste our time trying to parse out real data from that report to figure out what’s happening in reality. Hey, their spinning of numbers deceives the public and most investors, the way to make money, unfortunately, is to understand the difference between the hype and reality. The markets will always return to reality – eventually.

From a technical perspective, there are divergences still in place and we are nearing the next pivot at 1,018 which should represent very heavy resistance – we reached 1,007 overnight. I note that there have now been six morning pullbacks in a row, all met with a late day rally. The markets are now under someone’s control, gee, I wonder who it could be? If I were looking to find out who controls the markets, of course I would be suspicious if a large investment bank was able to turn a profit from their trading on every single day but two in the past six months! Oh, and I would be particularly suspicious if that firm’s ex-managers all went to work in the Treasury Department and took jobs in the current administration. But the SEC, of course, is blind to all of this because they, too, are also owned lock, stock, and barrel by the same company. Need I mention their name?

The fall, when it occurs (and it will), is going to be EPIC.

For those who can talk Elliott Wave, McHugh believes that yesterday’s pullback was wave 4 and that we need one more leg up, wave 5, to complete wave 1 up of c up of B up. Me, I’m not so sure that we’re not closer to being entirely done with wave B as we are at heavy resistance areas and historically are at the point (50% recovery) that recoveries during credit contractions stall. Of course I’m well aware that the money pumping and manipulation is historic as well, I’m certain that makes the movements and dislocations that much larger.

The 30 minute stochastics is overbought and the 60 has room to go a little higher but if so will be overbought pretty soon.

We got a new commenting system today, come try it out, I hope it works better for everyone. It’s designed to be interactive with Twitter and all the information feeding services to mobile devises. It sends information out and then pulls all the replies back from wherever they are made to collate all the comments in one place. There are other features as well that we can discuss on this thread.

Have a great day,

Nate

I’m thinking I’ll just make this Goldman’s theme song:

Santana – Evil Ways:

There's Smoke at GS, and there's Smoke at JPM…

Get the marshmallows and weenies ready, the fire’s coming soon. Karl Denninger is seeing smoke coming from the Goldman offices. Guess what… Karl knows simple math!

Is This Statisitically Reasonable? (GS)

Remember what was said about Madoff when people started looking at his operation?

There were only two possible explanations for the firm's apparently never-losing trading: They were either front-running or cheating in some other fashion, or the entire thing was a gigantic ponzi scheme.

We later learned that #2 was the case.

But is there an example of #1 somewhere? Hmmmm....

Aug. 5 (Bloomberg) -- Goldman Sachs Group Inc. made more than $100 million in trading revenue on a record 46 separate days during the second quarter, or 71 percent of the time, breaking the previous high of 34 days in the prior three months.

Trading losses occurred on two days during the months of April, May and June, down from eight in the first quarter, the New York-based bank said today in a filing with the U.S. Securities and Exchange Commission. The company made at least $50 million on 58 of the 65 trading days during the quarter, or 89 percent of the time.

Just two days of losses in the entire quarter?

There are a lot of very good traders in the world, but nobody has that sort of record on any sort of consistent basis unless they've managed to rig the game.

Rigged game? Absolutely.

And then there’s the smoke over at the house of Morgan – JPMorgan. Actually, it’s already on fire, the public just doesn’t see the flames yet. The fire will eventually eat through the walls of their “house,” and then you are going to see the flames – it’s just a matter of time. There are charts and table breakouts from the OCC reports like I’ve been showing you at the following link - below is just an excerpt:

Derivatives Interest Rate Swaps, The Elephant In the Room

I’d like to delve into the numbers, or math, showing how J.P. Morgan’s derivatives book cannot be ‘hedged’.

As per their call reports filed with the Comptroller of the Currency’s Office, we know J.P. Morgan’s derivatives book grew by a cancerous 12 Trillion from June 07 to Sept. 07. The OCC’s Quarterly Derivatives Report serves as the public’s only peek into the opaque and murky world of derivatives-flim-flammery.

…If you’re wondering why J.P. Morgan never seems to get caught up in any sort of hideous mark-to-market losses concerning their derivatives or hedge book – consider that back in the spring of 2006, Business Week’s Dawn Kopecki reported,

“President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye.”

So do any of you think that J.P. Morgan gets a pass? I would suggest to you that if they had not – our whole financial system would already have collapsed in a heap.

You see folks; hubris has been cast upon us in an attempt to have us believe that wealth is really created on a printing press and on trading desks in N.Y. at J.P. Morgan or Goldman Sachs

Well said, I’ve got my marshmallows ready because the jungle is burning around these financial “lions.” Hmmm, I’m thinking s’mores, how ‘bout you?

Tight Fit - The Lion Sleeps Tonight (1982):

Ron Paul – Clunker Program Hurts the Poor, End the Fed Already!

With more distortions than a carnival’s hall of mirrors, Ron Paul points out a few more distortions created by the worse than worthless Cash for Clunkers/ Debt Junkie program.

Ron Paul: Clunker Government Targets the Poor:


Here’s a sweet little detail on exactly how they kill the clunkers, very interesting and highlights a very destructful and wasteful society our bubble blowing Central/Federal Banking masters have created – sick and perverted actually.

WSJ - The Killer App for Clunkers Breathes Fresh Life Into 'Liquid Glass' (ht CWB)


End the FED? Heck yes! Unfortunately it won’t happen until the damage is complete.

End the Fed? A not-so-crazy idea.

Congressman Ron Paul's bill may never pass, but history suggests the US economy would be better off without the Federal Reserve.

By George Selgin

Athens, Ga. - Since it was introduced in February, Representative Ron Paul's "Audit the Fed" bill (H.R. 1207) has gained 282 congressional cosponsors. If adopted, the bill would allow the Government Accountability Office to review, not only the Federal Reserve's balance sheet, but its recent monetary policy deliberations and transactions.

Fed Chairman Ben Bernanke opposes the plan, saying it would undermine the Fed's hallowed independence.

But Mr. Paul, a noted libertarian who ran for president last year, also wants to keep the Fed out of Congress's clutches – by scrapping it altogether. That's the goal of his follow-up Federal Reserve Board Abolition Act (H.R. 833). Although that measure has yet to gain a single cosponsor, it has plenty of grass-roots support, and Paul hopes that members of Congress will jump on the bandwagon once their eyes are opened by a no-holds-barred audit.

Wacky stuff? Well, if not having a ghost of a chance is enough to make a bill bonkers, Paul's measure probably qualifies. But that doesn't mean you've got to be crazy to believe that the US economy would be better off without the Fed.

The Fed's apologists suggest otherwise, of course. They note that the US spent nearly half the years between 1854 to 1913 in recession, as opposed to just 21 percent of the time since the Fed's establishment in 1913. Who would want to go back to those bad old days?

But consider: the US economy has actually grown less rapidly since 1914 than it did before. And inflation has been much worse, despite both the Civil War, which featured the nation's worst inflation, and the Great Depression, which featured its severest deflation!

What's more, the frequent downturns before 1914 were due, not to the lack of a central bank, but to foolish government regulations. Topping the list were bans on branch banking, initiated by state governments and then incorporated into federal banking law. The bans propped up thousands of undercapitalized and under-diversified banks – banks unfit to survive major local shocks, let alone macroeconomics ones. They also caused bank notes – competitively supplied counterparts of today's Federal Reserve notes – to trade at discounts whenever they traveled far from the solitary offices of banks that issued them.

During the Civil War, state bank notes were taxed out of existence to make way for those of new national banks. Because national banks had to accept one another's notes at full value, their currency was uniform. But national bank notes had to be backed by government bonds.

That requirement, designed to bolster the Union's finances while the war raged on, proved disastrous afterward, when government surpluses led to a halving of the federal debt, and to a corresponding shortage of bonds for securing bank notes. The resulting currency panics – in 1873, 1884, 1893, and 1907 – prompted the Fed's establishment.

But they didn't have to. Until 1907, prominent reformers favored simply abolishing Civil War-era restrictions on banks' freedom to issue notes and allowing all banks to branch nationwide to ease the mopping-up of unwanted paper money.

They drew inspiration from Canada, where a similar "asset currency" arrangement had been working smoothly for decades. Between the panic of 1893 and that of 1907, Congress considered more than a dozen "asset currency" measures but none got anywhere, thanks to local bankers' determination to block any proposal for branch banking that would threaten their cozy monopolies.

It was only once these deregulatory efforts failed that reformers fell back on the plan of establishing a "central reserve bank." The resulting Federal Reserve Act was, in essence, merely a plan to allow 12 new banks to do what other banks were prevented from doing themselves, namely, establish branch networks and issue currency backed by commercial assets.

But the Federal Reserve plan proved to be a poor substitute for deregulation. By granting monopoly privileges to the Federal Reserve banks, it allowed them to inflate recklessly: By 1919, the US inflation rate, which had cleaved close to zero ever since the Civil War, was close to 20 percent! Yet the Fed was also capable of failing to supply enough money to avert crises. The first downturn over which it presided – that of 1921 – was among the sharpest in US history. Still it was nothing compared to the unprecedented monetary contraction of 1929-1933.

Would asset currency have been any better? Canada's was: Between 1929 and 1933, for instance, 6,000 US banks failed, and a third of the US money stock was wiped out. In contrast, and despite a fixed Canadian-US dollar exchange rate, Canada's money stock shrank by just 13 percent, and no Canadian bank failed.

Notwithstanding this superior outcome, the Canadian government itself abandoned asset currency in favor of central banking in 1935, to placate a growing Canadian movement for easy money.

So a call to end the Fed would have been anything but crazy in 1934. Three-quarters of a century and a dozen crises later, there are plenty of grounds for insisting that it hasn't gotten any crazier.

Is this stuff adding up yet?

Three Dog Night - Black and White


And now a child can understand
That this is the law of all the land, all the land

The world is black, the world is white
It turns by day and then by night
A child is black, a child is white
Together they grow to see the light, to see the light

And now at last we plainly see
We'll have a dance of Liberty, Liberty!

Jim Kunstler - "Hunky Dory"

Here’s Jim Kunstler with another good weekly installment. While he sounds negative, I believe he will ultimately be proven mostly correct. His “mass delusion” is an exact observation of what I’ve been calling “Economic Mass Psychosis.” Sardonic humor galore, I enjoyed reading this, and you will too, as long as you can handle the truth and smile. You will if you are prepared... you will laugh nervously if you are not!

Hunky Dory

By James Howard Kunstler
on August 3, 2009 7:36 AM

Whenever the herd mentality lines up along a compass point leading to "permanent prosperity," or a yellow brick road lined with green shoots, or something like that, I tend to see the edge of a cliff up ahead. We are now completely in the grips of the deadly diminishing returns of information technology. The more information comes to us about How Things Are, especially from TV, the more confused or wrong the conventional view gets it.

A broad consensus has formed in the news media and among government mouthpieces and even some "bearish" investors on the street that "the worst is behind us" in this tortured economy. This view is completely crazy. It will only lead to massive disappointment a few weeks or months from now, and that disappointment might easily transmute to political trouble. One even might call the situation tragic, except a closer look at the sordid spectacle of what American culture has become -- a non-stop circus of the seven deadly sins -- suggests that we deserve to be punished by history.

The reason behind this mass delusion is not hard to find: it's based on wishing, especially the wish to retain all the comforts, conveniences, luxuries, and leisure that had become normal in American life. These are now ebbing away in big gobs for most of the population -- while a tiny fraction of the well-connected pile on ever larger heaps of swag, enjoying ever more privilege. Those in the broad bottom 95 percent were content as long as there was a chance that they, too, could become members of the top 5 percent -- by dint of car-dealing, or house-building, or mortgage-selling, or some other venture enabled by easy credit and a smile. Those days and those ways are now gone. The bottom 95 percent are now left with de-laminating houses they can't make payments on, no prospects for gainful work, re-po men hiding in the bushes to snatch the PT Cruiser, cut-off cable service, Kraft mac-and-cheese (if they're lucky), and Larry Summers telling them their troubles are over. (If I were Larry, I'd start thinking about a move to some place like the Canary Islands.)

Too many disastrous things are lined up in the months ahead to insure that we're entering a new phase of history: The Long Emergency.

Government at every level is worse than broke.

Our currency, the US dollar, is hemorrhaging legitimacy.

Inability to service old debt at all levels or incur new debt.

Bad (toxic) debt lurking off balance sheets everywhere.

The housing bubble fiasco is far from over.

Commercial real estate fiasco just getting started.

Unemployment rising implacably.

So-called "consumers" unable to consume consumables.

Crucial energy import supply lines fragile.

Food supply subject to energy problems and climate abnormalities.

A world full of other societies who would enjoy watching us fail and suffer.

When The Long Emergency was published in 2005, I said then that the greatest danger this society faced would be its inclination to gear up a campaign to sustain the unsustainable at all costs -- rather than face the need to make new arrangements for daily life. That appears to be exactly what has happened, and it didn't happen under the rule of some backward-facing, right-wing, Jesus-haunted crypto-fascist, but rather a "progressive" party led by a dynamically affable young man unburdened by deep cultural allegiance to Wall Street. Barack Obama has been sucked in and suckered. "Change you can believe in" has morphed into "a status quo you will bend heaven and earth to hold onto."

Whatever else you might think or feel about Mr. Obama's performance so far, this strategy on the broader question of where we go as a nation pulses with tragedy. What's remarkable to me, to go a step further, is the absence of comprehensive vision -- not just in the president, but in all the supposedly able and intelligent people around him, and even those leaders not in government but in business and education and science and the professions.

History is clearly presenting us with a new set of mandates: get local, get finer, downscale, and get going on it right away. Prepare for it now or nature will whack you upside the head with it not too long from now. Attempting to maintain anything on the gigantic scale will turn out to be a losing proposition, whether it is military control of people in Central Asia, or colossal bureaucracies run in the USA, or huge factory farms, or national chain store retail, or hypertrophied state universities, or global energy supply networks.

These imperatives are so outside-the-box of ordinary experience right now, that to drag them into the arena of politics can only evoke blank stares or nervous giggling. But whether we like it or not, these are the things that will really matter in the years ahead -- not whether General Motors can ever make a profit again, or what Target Store's sales figures are next quarter, or whether the latest high-rise condo-and-gambling complex in Las Vegas will be successfully marketed.

Here, in the dog days of summer, it seems to me that the situation in the USA is so fundamentally bad, so unpromising, so booby-trapped for failure, that I wonder if there has ever been a society so badly deluded as ours. We're prisoners of our wishes, living in a strange dream-time, oblivious to the forces gathering at the margins of our vision, lost in a wilderness of our own making.

Anything can happen now. I certainly wouldn't rule out international mischief as we arc around into fall. The air is so full of black swans that the white swan now seems like the exceptional thing. Whatever else happens, it sure will be interesting to see the public's reaction to Wall Street's announcement of Christmas bonuses. The folks at Rockefeller Center better be thinking about getting a fireproof tree.

Morning Update/ Market Thread 8/5

Good Morning,

Futures are mostly flat this morning, here’s they are for the DOW and for the S&P overnight:



What is going on? I have never seen anything like what’s been occurring lately with the data! From Econoday:

Highlights
The purchase index rose 0.9 percent in the July 31 week to an undisclosed level with MBA saying only that it's been little changed over the last three weeks between 260 and 265. Likewise, MBA did not post a level for the refinance index, saying it increased 7.2 percent in the week and is about 35 percent higher than the low in June. Mortgage rates were mostly lower in the week with 30-year loans down 19 basis points to an average 5.17 percent.

Welcome to Wonderland!

And both ADP and Challenger Job reports are out this morning. I normally do not give much weight to either as their track record has been spotty and inconsistent especially when compared to the fanciful data from the BLS which, of course, is one of the government data sets that falls into the suspect data category. Anyway, here’s Econoday with the latest from Challenger:

Highlights
In a reminder that employment lags economic recovery, Challenger's July count of layoff announcements jumped to 97,373 vs. 74,393 in June. Trouble is centered squarely in transportation where factory shutdowns and reopenings in the auto sector have been skewing jobless claims badly for the last month. Announcements don't correlate immediately to actual layoffs but today's report is not a plus for Friday's monthly jobs report.

And from ADP:

ADP's private payroll count shows substantial improvement as expected, at -371,000 for July vs. a revised -463,000 in June. The result, the best since October last year, confirms expectations for improvement in Friday's jobs report.

Again, I personally don’t give much credence to either, but they do set market expectations for the BLS Jobs report that is released this Friday.

Yesterday’s price action produced a few hammers… the late day rally produced yet another small movement in the McClelland, setting up a large price move for today or tomorrow. This type of action looks contrived as this entire rally and attempt to reinflate the economy has been. It’s looking very toppy in here with RSI divergences as well as Advance/Decline and other divergences as well.

There is no substance to this “recovery,” it is all fluff. A printed money “empty suit.” Of course it is going to end in pain and agony for those who buy into it. Real production and real capital is fleeing the United States and going overseas – still. Remember, 50% rallies only happen in the worst of bear markets as prices are whipped by extremes in sentiment and government/central banker manipulation.

The central bankers and brokers are all singing a song of hope… “come sail away with me,” but it’s a cruise that’s looking more and more destined to land on the rocks like the SS Minnow!

Federal Tax Revenues – Cliff Diving and Data Hiding…

Remember what Chris Martensen called good economic data? You know, data that “is not statistically massaged before release, it is not 'sampled' but rather tallied up in its entirety, and it squares up nicely with other good sources of data.”

Good Data
• Sales tax data
• Income tax data
• Truck tonnage moved
• Port shipping container traffic
• Air transport
• UPS, FedEx, and other major shippers' volume
• Corporate Revenues (just added to list)

Well, here’s the data from the top of the list, the only data the government releases that meets Chris’s “good” criteria.

And how’s it looking? Is it down the .7 or even 5% that comes out of the massaged and adjusted data? NO! It’s down, wait for it, 22% year over year for Federal individual tax receipts and it’s down a horrific 57% for Corporate Income Taxes!

Now that’s a crash of revenue, just when our government is RAMPING spending all while simultaneously spending trillions of your dollars to bail out the central banks and pay bonuses on Wall Street!

What will that mean for our deficits? GAME OVER! The math is simply so far from working that there is NO WAY to keep the game going very much longer. You can ignore it, call it looney Tunes, whatever, the math simply tells the truth and cannot lie.

Federal tax revenues plummeting

AP ENTERPRISE: Plummeting tax revenues starve government just as Obama embarks on big plans

By Stephen Ohlemacher, Associated Press Writer
On Monday August 3, 2009, 8:51 pm EDT

WASHINGTON (AP) -- The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation's plate and struggling to find money to pay the tab.

The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.

Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.

The last time the government's revenues were this bleak, the year was 1932 in the midst of the Depression.

"Our tax system is already inadequate to support the promises our government has made," said Eugene Steuerle, a former Treasury Department official in the Reagan administration who is now vice president of the Peter G. Peterson Foundation.

"This just adds to the problem."

While much of Washington is focused on how to pay for new programs such as overhauling health care -- at a cost of $1 trillion over the next decade -- existing programs are feeling the pinch, too.

Social Security is in danger of running out of money earlier than the government projected just a few month ago. Highway, mass transit and airport projects are at risk because fuel and industry taxes are declining.

The national debt already exceeds $11 trillion. And bills just completed by the House would boost domestic agencies' spending by 11 percent in 2010 and military spending by 4 percent.

For this report, the AP analyzed annual tax receipts dating back to the inception of the federal income tax in 1913. Tax receipts for the 2009 budget year were available through June. They were compared to the same period last year. The budget year runs from October to September, meaning there will be three more months of receipts this year.

Is there a way out of the financial mess?

A key factor is the economy's health. The future of current programs -- not to mention the new ones Obama is proposing -- will depend largely on how fast the economy recovers from the recession, said William Gale, co-director of the Tax Policy Center.

"The numbers for 2009 are striking, head-snapping. But what really matters is what happens next," said Gale, who previously taught economics at UCLA and was an adviser to President George H. W. Bush's Council of Economic Advisers.

"If it's just one year, then it's a remarkable thing, but it's totally manageable. If the economy doesn't recover soon, it doesn't matter what your social, economic and political agenda is. There's not going to be any revenue to pay for it."

A small part of the drop in tax receipts can be attributed to new tax credits for individuals and corporations enacted in February as part of the $787 billion economic stimulus package. The sheer magnitude of the tax decline, however, points to the deep recession that is reducing incomes, wiping out corporate profits and straining government programs.

Social Security tax receipts are down less than a percentage point from last year, but in May the government had been projecting a slight increase. At the time, the government's best estimate was that Social Security would start to pay out more money than it receives in taxes in 2016, and that the fund would be depleted in 2037 unless changes are enacted.

Some experts think the sour economy has made those numbers outdated.

"You could easily move that number up three or four years, then you're talking about 2013, and that's not very far off," said Kent Smetters, associate professor of insurance and risk management at the University of Pennsylvania.

The government's projections included best- and worst-case scenarios. Under the worst, Social Security would start to pay out more money than it received in taxes in 2013, and the fund would be depleted in 2029.

The fund's trustees are still confident the solvency dates are within the range of the worst-case scenario, said Jason Fichtner, the Social Security Administration's acting deputy commissioner.

"We're not outside our boundaries yet," Fichtner said. "As the recovery comes, we'll see how that plays out."

The recession's toll on Social Security makes it even more urgent for Congress to address the fund's long-term solvency, said Sen. Herb Kohl, D-Wis., chairman of the Senate Aging Committee.

"Over the past year, millions of older Americans have watched their retirement savings crumble, making the guaranteed income of Social Security more important than ever," Kohl said.

President Barack Obama has said he wants to tackle Social Security next year, after he clears an already crowded agenda that includes overhauling health care, addressing climate change and imposing new regulations on financial companies.

Medicare tax receipts are also down less than a percentage point for the year, pretty close to government projections. Medicare started paying out more money than it received last year.

Meanwhile, the recession is taking a toll on fuel and industry excise taxes that pay for highway, mass transit and airport projects. Fuel taxes that support road construction and mass transit projects are on pace to fall for the second straight year. Receipts from taxes on jet fuel and airline tickets are also dropping, meaning Congress will have to borrow more money to fund airport projects and the Federal Aviation Administration.

Last week, Congress voted to spend $7 billion to replenish the highway fund, which would otherwise run out of money in August. Congress spent $8 billion to replenish the fund last year.

Rep. Richard Neal, D-Mass., chairman of the House subcommittee that oversees fuel taxes, is working on a package to make the fund more self-sufficient. The U.S. Chamber of Commerce, which doesn't back many tax increases, supports increasing the federal gasoline tax, currently 18.4 cents per gallon.

Neal said he hasn't endorsed a specific plan. But, he added, "You can't keep going back to the general fund."

BUT WAIT! That’s actually an improvement in Corporate tax receipts… then a funny thing happened on the way to look at the St. Louis Fed’s charts. It seems that this chart series, (FCTAX), the only one that presents federal tax data on the Fed’s site, has stopped reporting data! Below is the same series chart that I posted on April 10th of this year:



That’s right, you can see that corporate tax receipts were down well over 70% at that time!

Now, when that same data series is pulled up, you will find that the data begins in 1996 and ENDS in 2008!



In fact, do a search at the Fed’s site and you will find that all aggregate tax receipt information is suddenly only reported to the beginning of 2008!

Fred Search, Gov't Receipts, Expenditures & Investment

Why would they do that? Oh, go ahead and ask. I can already guess their response… “That data is no longer relevant.” Or, “It was an error and will be corrected [when the recession is over].” LOL, seriously, when they were playing games with the “excess reserves” charts, they came up with all types of excuses and now it’s impossible to know exactly how it’s calculated.

One more time:

The BEA, the BLS, in fact ALL government reports are suspect. All reporting of government statistics should be scrapped. The Fed should be abolished, The central banks and bankers should be removed – as in gone, a new money system should be put in place, there should be a Constitutional Amendment dictating the SEPARATION OF CORPORATIONS AND THEIR MONEY FROM STATE, and finally, there should be a new government agency responsible for collecting and reporting economic statistics and that agency should have a mandate to develop data collection methods that cannot be changed over time and there should also be a mandate to release RAW DATA with every report, there should be absolute transparency in that all the calculations and all collection methods should be easily viewable by anyone. Oh, and NO ONE, not even the President should have access to the information before the public!

Dylan Ratigan – “Playing a parlor game at America's expense…”

Dylan telling it like it is, at least to the extent the look good, Starbucks sipping crowd, can stand. BTW, I personally can’t stand listening to Donny Deutsch – he personifies the slick marketing Enronization of America. (ht Glass)

Visit msnbc.com for Breaking News, World News, and News about the Economy

Morning Update/ Market Thread 8/4

Good Morning,

Futures are down this morning with the /ES back beneath the 1,000 level, currently hanging around 995ish.

Goldman’s ICSC (suspect data) Same Stores Sales data showed a decrease in sales on a week over week basis of -.2% (prior +1.0%), and on a year over year basis fell .7%, which I believe to be completely disconnected from reality. Of course Econoday and the rest of the media have no choice but to go with it, it’s how they earn their living – welcome to Enron USA:

Overall sales for the week ending August 1 declined by 0.2 percent according to the International Council of Shopping Centers, Inc. (ICSC) and Goldman Sachs. On the year sales were down 0.7 percent. The decline was attributed to the later back to school state sales tax holiday dates which put downward pressure on the yearly comparison. However, sales should be lifted for the current week. According to ICSC, July retail sales will probably be weak due to several factors including sharp price markdowns on clearance items, more limited inventories to clear and cooler than normal temperature for the month.

Got it? It was cooler in July (where?) and thus we are making an excuse that is just completely out of left field and probably nobody will say anything about and, oh, just shop, shop, shop, and charge it, it’s the American way to be.

Of course the Redbook, which is somewhat more realistic, showed a 5.4% drop year over year. This is all Econoday could muster on that one, no excuses as evidently blaming consistent falls month after month on the weather is a little too obvious here and besides, Goldman’s analysts weren’t involved to tell the media what to think… “Redbook continues to show weak retail spending, down a year-on-year 5.4 percent for a 1.6 percent August 1 week-to-June drop.”

And we learn that personal income only dropped 3.4% on a year over year basis in June. The media is touting a .4% increase in consumer spending on a month over month basis, but they simply neglect to point out that it’s down 2.2% year over year. Lot’s of excuses flying around for this one. Of course falling income and increasing expenditures means that the savings rate fell substantially, coming back from 6.2% to 4.6%.
Econoday:

Highlights
Personal income in June fell back heavily due mostly to an end to a specific fiscal stimulus program. Meanwhile, spending and inflation were up. Personal income fell a sharp 1.3 percent after jumping a revised 1.3 percent in May. The drop was worse than the consensus forecast for a 1.1 percent decrease. June's fall was primarily due to a 5.9 percent fall in transfer payments which had spiked 8.0 percent in May from one-time payments under the American Recovery and Reinvestment Act of 2009. In the latest month, the wages and salaries component dropped 0.4 percent after dipping 0.1 percent in May. Consumer spending jumped 0.4 percent after edging up 0.1 percent in May. However, June's gain was price related from higher gasoline prices.

The boost in consumer spending was led by a 1.7 percent surge in nondurables which includes gasoline. Durables slipped 0.2 percent while services edged up a meager 0.1 percent. Inflation was behind the latest rise in consumer spending as real PCEs slipped 0.1 percent in June, following no change the month before.

PCE inflation made a strong comeback on energy costs. The headline PCE price index spiked 0.5 percent, following a 0.1 percent uptick in May. Meanwhile, the core PCE price index firmed to a 0.2 percent increase in June after edging up 0.1 percent in May. The markets had expected a 0.2 percent rise in core inflation for the latest month.

Year on year, personal income growth decreased to minus 3.4 percent from minus 2.2 percent in May. Headline PCE inflation eased to down 0.4 percent from down 0.3 percent the prior month. Year-ago core PCE inflation eased--to 1.5 percent from 1.6 percent in May.

Today's report shows the consumer sector getting hit hard in the wallet as income fell and prices rose. However, all of the numbers were very close to market expectations and should be already baked into the mix.

Not to worry, it’s “baked into the mix.”

Pending Home Sales come out at 10 Eastern.

Technically we’re at a very important spot. The 999 level represents a 50% advance of 666, and that level is very close to a 38.2% retrace of the entire bear market. I’m sticking with my call that the economy is in much worse shape than reported, there are many, many shoes still being juggled, the markets are EXTREMELY OVERVALUED and they will eventually gravitate to reality.

Yesterday’s move up was probably enough to satisfy the large move called for by Friday’s small move in the McClelland.

Watch the XLF today. Yesterday it produced a gap up in the chart and a clear air hammer. It is going to gap down this morning, and if that holds will produce a shooting star.



I’ll be taking care of my father and running errands most of the day today, but will check in when I can.

Have a good day,

Nate

Morning Update/ Market Thread 8/3

Good Morning,

Futures are up this morning with ISM Manufacturing data and Construction Spending set to be released at 10 Eastern.

The big economic data out this week will be the Employment Situation that comes out this Friday. Also, Factory Orders, Non-Manufacturing ISM on Wednesday, and the Treasury Refunding Announcement… PLUS the usual plethora of Treasury Auctions.

There was another small change in the McClelland Oscillator on Friday which is telling us that today or tomorrow’s move is likely to be a large one.

The 990 pivot area was an area of resistance, if prices remain above that level, it may turn into support and the next pivot point is up at 1,018. Of course the prior high at 997 and the Sethonian 999 must also be overcome if that next higher pivot is going to be reached.

That’s about all I have that’s worthy this morning, unless you believe that the U.K. looking into high frequency trading will actually have any real impact on those who are involved in doing it – you know, the ones with all the money who get the politicians elected… Oh and here’s a little clip that almost makes me feel bad for picking on Goldman, “NEW YORK (Reuters) - Investment bank Goldman Sachs' reputation among both the general public and financially sophisticated Americans has been damaged by the events of the past year, the Financial Times reported Sunday, citing research conducted for the paper.” I’m thinking this survey result will make them feel proud.

I’ll be taking my 86 year old father to the hospital early this morning as he’s scheduled for day surgery, so I’ll try to get more market information up by this evening.

Have a Great Day, and pleas keep each other updated at the data comes out, I appreciate it!

Nate

Uncle Jay Explains the News!

It's time once again, Boys & Girls, for Uncle Jay to explain the news!

As Failed Corporations are Kept Alive, the Social Safety Net Must Grow…

Funny, but since Chrysler was bailed out, how many new and competitive auto makers have you seen sprout up in America? None? Could it be that giving capital to companies with failed business models isn’t such a good idea (unless you are a banker who holds their debts)?

And in the end, the company with too much debt and a failed business model dies anyway sending more and more Americans into the safety net that is unemployment. The current crisis is now so large that even 79 weeks of benefits is not enough:

Prolonged Aid to Unemployed Is Running Out

Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution.

Because of emergency extensions already enacted by Congress, laid-off workers in nearly half the states can collect benefits for up to 79 weeks, the longest period since the unemployment insurance program was created in the 1930s. But unemployment in this recession has proved to be especially tenacious, and a wave of job-seekers is using up even this prolonged aid.

Tens of thousands of workers have already used up their benefits, and the numbers are expected to soar in the months to come, reaching half a million by the end of September and 1.5 million by the end of the year, according to new projections by the National Employment Law Project, a private research group.

Unemployment insurance is now a lifeline for nine million Americans, with payments averaging just over $300 per week, varying by state and work history. While many recipients find new jobs before exhausting their benefits, large numbers in the current recession have been unable to find work for a year or more.

Calls are rising for Congress to pass yet another extension this fall, possibly adding 13 more weeks of coverage in states with especially high unemployment. As of June, the national unemployment rate was 9.5 percent, reaching 15.2 percent in Michigan. Even if the recession begins to ease, economists say, jobs will remain scarce for some time to come…

So, we prop up businesses who fail and now we indefinitely prop up the people who worked for them:

Transcript: Treasury Secretary Timothy Geithner

STEPHANOPOULOS: And that means unemployment will remain high for the rest of this year. At the same time we're seeing reports that up to 1 and a half million people could be losing their unemployment benefits by the end of this year. Does that mean that the Administration is going to have to look at extending unemployment benefits again?

GEITHNER: I think that is something that the Administration and Congress are going to look very carefully at as we get closer to the end of this year . And that's going to be one important thing to look at.

All I can say is that people who don’t work and get paid have no incentive to overthrow their government, that’s for sure. Think about it.