Saturday, September 5, 2009

Davos on the Edge - Meet the New Boss…

T – minus 8 days and counting until launch…

I am now in final preparations for my motorcycle trip through Central and South America. Mixed emotions for sure as it’s going to be an exciting trip, yet I am leaving behind my family and my blog for an extended time – four months. From this point until I return I will be concentrating less on this blog and more on my Twisted Edge Adventure blog (latest article I wrote on tire selection for the trip). Please bookmark this blog and you can follow along the trip with me.

I have considered delaying this trip as I see what could be a very turbulent time this fall. I have, however, postponed trips in the past with such thinking and have always regretted it later - I do tend to be early in my thinking after all! This particular trip must be done this time of year so that I arrive in the southern part of South America in their summer, our winter.

I will be traveling with my riding friend, Arno. He and I both enjoy taking pictures and reporting on our adventures, so it’s going to be fun in that regard. When I have time (and internet connection) I will be checking in and posting to this blog occasionally. I will also be writing economic articles along the way as I have time and inspiration (it will be difficult doing this after traveling long days). My focus will be on the formation of capital and economic development within the countries I’m traveling. If anyone reading this along my route of travel has an economic story they would like to share or investigate, please email me at, thank you. I’m also open to invites from my readers in Central and South America who wouldn’t mind simply sharing their culture!

This blog is far too important to me to just abandon it for so long. It’s important because people need someone to cut through all the B.S. that is propagating from the mainstream media and our own government. Thankfully there are people who are tough skinned enough to stand in the heat of the fire and call it for what it is. Sherman (screen name Davos) from Chris Martenson’s site has graciously agreed to help keep you informed. THANK YOU DAVOS!

I can think of no finer site that Chris Martenson’s. Chris writes very meticulously in a manner that is understandable by most, and more importantly he is just correct when he speaks. You will remember that Chris is the author of The Crash Course so I’m going to encourage you to bookmark and view Chris’s blog on a regular basis. His latest article, Unemployment and Government Jobs, is a terrific example of the fine work that Chris does.

Davos has written the “Daily Digest” for quite some time, performing nobly for both Chris and for the people who visit his blog. In my absence, he will be performing basically the same service for you here that he does there. I have given him full reign to post articles as he sees fit and to editorialize at his discretion. His posts, “Davos on the Edge” will provide a thread that I encourage everyone to comment on, and to keep the running market commentary going.

He is the boss while I’m gone and I appreciate everyone jumping in and providing the same good observations that you do while I’m here. Don’t ride him too hard for his inflationist viewpoint, he will be right eventually, just not now, LOL! Okay, forget that, give him a hard time, he is a pilot like me after all! Seriously, be sure to thank him for stepping up and filling in, he does it because he cares and is a proud and true American.

Pete Townsend - Won't Get Fooled Again (Meet the New Boss - Acoustic version):

Peter Schiff, September 2, 2009

Peter Schiff commentary on the divergence of gold and equities. He sees people fearing inflation, I see a lack of confidence in our government. They are two different things but may look similar in the beginning. TOTAL credit, leverage, and money is SHRINKING, thus deflation is occurring now, despite what you see in the money supply charts and is why so many have gotten the economy and markets wrong. Inflation may come later, but my take is that will happen only if our currency survives in its present form for that long.

Marc Faber Comments, September 1, 2009

HT Davos...

Friday, September 4, 2009

Unemployment Trust Fund Nearly Broke…

Point found an interesting link on the unemployment system that has an interactive map and a table of trust fund balance by state along with the amount each state has now borrowed to keep paying unemployment benefits – LINK HERE . Below is a static picture of the chart:

And here is a table I made from the table on that page. I simply dropped their data (that comes from the Treasury) into an Excel spreadsheet, summarized the columns and highlighted the high and low for each column:

Note the interaction between the monthly benefit paid and the unemployment rate for the state versus the account balance of each state. For example, Mississippi has 9% unemployment but they pay the least per month and they have over a half billion net in the fund. California and Michigan are by far the largest fund debtors. Note that Washington D.C. has 10.9% unemployment, but only 22% of their unemployed are actually receiving benefits, the lowest in the nation!

So, this table provided a state by state total in the trust fund for August and I simply hit the sum key and it all added up to a total of $16.96 Billion. That’s nice, but now I need to know how much it was in the past so that I can calculate a burn rate to determine how fast this fund is falling.

For that we need some historical references… I could go farther back in time, but the burn rate would be too little because unemployment was not as great, so I found a report that was updated fairly recently. Please look at the table on page 4 of this report, that table was updated in February of this year…

Compare the states in the table from February (page 4 above) who had borrowed funds with the August table above! WOW.

Note that in February, the total trust fund balance was roughly $29.5 billion. At that time, there was only $3.5 billion in loans to the states (August = $13.6 billion). In the six months from February to August, that fund’s balance has dropped by $12.5 billion, a burn rate of approximately $2.1 billion per month ($12.5B/6 months). With a net balance of only $16.9 billion, the math of this calculation says that the unemployment trust fund held by the U.S. Treasury would hit ZERO by the end of April, next year at the current burn rate and WITHOUT any further increase in the rate of borrowing by the states.

Now, let’s look directly at the Treasury’s own website. There we cannot find a direct listing of the TOTAL amount of their trust fund, but we can find and validate the numbers for each state. We can also find a Quarterly Trust Fund Portfolio listing to find out how much money the Treasury has invested on behalf of the Unemployment Trust Fund. Let’s look at each quarter through the first half of this year, keep an eye on the incredible shrinking balance:

June 2008:

September 2008:

December 2008:

March 2009:

June 2009:

So, from June of 2008 to June of 2009 the trust fund’s portfolio listing fell by $49 Billion. Over a 12 month period that’s a burn rate of $4.08 Billion per month over the entire year!

Note that these instruments are NOT marketable securities, they are “special obligations” of the Federal Government to the Trust Fund. In other words, the government “owes” money to the trust fund, but the trust fund has been drawing it down. The difference in what the Treasury owes the fund and what the states have borrowed from the fund is roughly $16.5 billion, or approximately the same amount as the trust fund is currently worth.

$16.9 Billion divided by a burn rate of $4.08 billion per month means that the fund has only 4.14 months to live at the current rate, or it will dry approximately the first week of January of next year.

That puts the go broke range between January and April of next year, IF the rate does not accelerate.

We’re now hearing talk from the economic geniuses at the White House, and elsewhere, that they are considering an emergency extension of benefits. Of course that would have to include money that must come from somewhere, any bets on where?

Not to worry, in the knuckleheaded world of fantasy land politicians and economists, deficits on the national level don’t matter. Just give a listen to today’s interview by Vice President Biden’s Chief Economic Advisor, Jared Bernstein:

Excuse me, I have to wipe up my shoes.

Of course they’ll find the money, all they have to do is lock the politicians behind closed doors and threaten them with an insolvent fund if they don’t cough up more fiat. They will. It’s all a Ponzi finance scheme that has reached the end of the line so they must pretend as long as they can. The most they can do is stall the inevitable, it’s too late, the damage is done.

But I can’t find that song and besides, that was yesterday, today life goes on…

Fed Charts of the Week… “Would you like an apple pie with that?”

A lot of charts have been updated this week, but I just want to point out a few in particular as the rest have not really changed that much since I last presented them.

Regarding credit and money, keep in mind that CREDIT far exceeds MONEY. Here’s what’s happening to the yoy percent change in nonfinancial commercial paper:

Here is what’s happening to the monetary base:

Which one is winning, and what does winning look like (keep in mind that's only one type of credit)? Remember, we can't directly see the effects on the Shadow banking world of derivatives and leverage.

Regarding employment, below is a chart of the Civilian Employment–Population Ratio:

Below is the raw number of employees engaged in manufacturing. The number of employees in manufacturing has not been this low since 1942:

Below is a chart of those unemployed for 27 weeks or longer:

Below is the chart of those unemployed for only 5 weeks or longer:

While the numbers on the short term chart are dropping from the peak, they are still at a very high range historically and short term chars are much noisier than longer term ones.

While the jobs are obviously no longer in the manufacturing sector, most of the other sectors are back to employment levels of the late 1990s. I am left wondering what happens when the monetary stimulus is pulled? Where are the jobs in America going to come from? “DING…” And finally I’m wondering, “Would you like an apple pie with that?”

Understanding Why Most “Economists” Simply Get it WRONG…

Are you a highly educated “economist” like Congressman Pete Stark?

If you’ve been “highly trained” then the odds are that your mind has been simply programmed full of misconceptions, half truths, bad math, lies, and marketing manipulations.

Perusing the latest reports at the St. Louis Fed I came up with this just released and very fine tax payer funded work titled, “What Happened to the U.S. Stock Market? Accounting for the Last 50 Years." Please take the time to read and fully comprehend the revolutionary understanding of the markets the authors have created:

I unofficially title this paper, “Huh?” or perhaps it should simply be titled, “Send in the Clowns?”

Let’s look at their hypothesis:

They go on to talk about market valuation in comparison to GDP and dividends, searching in vein to try to find some reason why, oh why, they cannot find any indicator that fits what they call “PERFECT FORESIGHT.” LOL, you could not make this stuff up if you were paid $85,000 or more per year of taxpayer dollars to make economic forecasts for the government! Ooops.

Poor Michele Boldrin and Adrian Peralta-Alva. They have been led astray by their “high” education, why just look at what their minds are forced to comprehend:

You did catch all that, right? Work of pure genius. I find that their very last run-on sentence of their last summary paragraph pretty much sums up their sterling paper (it’s safe to assume their work is pretty typical of the “economist’s” forecasts that have been so “accurate” in the past):
“Apart from the obvious question of what, other than wisdom after the fact, may justify or explain the particular choice of forecasting rule made by market participants, our analysis leaves open an important puzzle: the value of corporations should equal the value of their tangible and intangible assets, while in the data the two series seem to be negatively correlated and persistently apart from each other.

Ah, ha! “…our analysis leaves open an important puzzle,” is, I think, really all you can get out this government sponsored work.

Not once did their thesis mention the word “DEBT.” Not once did they try to correlate the expansion of credit with the expansion of stock prices. Not once did they mention that of the original DOW Industrials, only one stock is still listed today and that had you bought those stocks and held “for the long term” that you would not only NOT be a millionaire, but you would actually be flat broke and busted because businesses have a life cycle too and they DIE (or are supposed to naturally). Nowhere do they mention the underlying currency and what is occurring with the INSOLVENT central banks. Nor do they mention the fact that the politicians have been bought and paid for by those same central bankers who also control the military industrial complex and the media.

No, this report shows clearly that most economists are focused on one little FICTITIOUS tree. Then they try to describe the tree with math, yet they fail to ever take out their calculator add up all the debts - personal, corporate, and government on all levels - and THEN SIMPLY COMPARE ALL THAT DEBT TO INCOME.

But Mr. Stark will ask, “How many years did you spend studying economics?” And, “What graduate school did you attend?”

No where did this report talk about the purpose of markets, the advent and the role of high frequency trading or “dark pools,” the rule of law, the flow of capital, the velocity of money, DEBT saturation… and yet they believe they are going to find “perfect foresight” in regards to the market.

It would be really funny if it weren’t so sad. But that paper, and nearly every one like it, should answer the question for you of why so many economists simply get it all wrong – garbage in = garbage out.

Morning Update/ Market Thread 9/4

Good Morning,

Futures plunged, spiked and then settled back down following the employment report (lack there of), and the equity futures look to be settling on up just a little:

The dollar is up quite a bit, bonds spiked down but came back substantially, gold drifted into the $999 mark yesterday and is now hovering around $993, and oil is down.

The big news, of course, is the unemployment rate which rose to 9.7% (nice call Joe!). According to the BLS, 216,000 jobs were lost in August. Here’s Econoday’s report, then we’ll look at the data a little bit deeper:
It's still ugly but not as ugly. Job losses eased in August while the unemployment rate rose on a reversal of July's questionable decline. Nonfarm payroll employment in August fell 216,000, following a revised decrease of 276,000 in July and a revised decline of 463,000 in June. The August contraction in jobs was close to the market forecast for a 200,000 dip. July and June revisions were down a net 49,000.

From the household survey, the civilian unemployment rate rebounded to 9.7 percent from 9.4 percent in July and compared to the consensus estimate 9.6 percent. As expected, the labor force increased after an unexpectedly large drop in July. The July number is the one that should be discounted-August is more realistic.

Wage inflation has warmed up a bit-likely due to a jump in the minimum wage. Average hourly earnings in August rose 0.3 percent, matching July's gain and topping the market forecast for a 0.2 percent increase. The average workweek held steady at 33.1 hours, matching the consensus expectation.

Today's report was mixed relative to expectations but close for all components. The bottom line is that labor market conditions are very slowly coming out of recession. A key point is "slowly." Going forward, the consumer sector almost certainly is going to be constrained for some time by high unemployment, job uncertainty, and sluggish income growth (increases in the minimum wage not withstanding).

Love that quote, “It’s still ugly but not as ugly.” LOL, were it not for the usual government statistical manipulation, oh yeah, it would be just as ugly. Keep in mind that we are now deep into the time frame with no job growth. It takes us manufacturing about 200,000 jobs per month just to stay even and we have had well over a year now of negative job production, that means that people are falling off the back end of the government system.

Since it’s been over a year now, the year over year comparisons are going to start looking not as bad because of the cliff dive that occurred last year. Just remember with all the economic reports that it would take very substantive growth just to get anywhere close to even. Any loss after a cliff dive is simply painful.

From the BLS:

Note their little chart showing the rate. It has broken upwards out of a small period of consolidation.

According to the BLS report, the number of “discouraged workers” has DOUBLED in the past year. Manufacturing lost 63,000 jobs in August, and the number of job losses in June were upped by 20,000 and in July by nearly 30,000!

Below are the alternate measures, U6 being the closest historical comparison, the seasonally adjusted rate jumped from 16.3 to 16.8%, while the not seasonally adjusted U6 actually fell slightly from 16.8 to 16.5%.

Below is John Williams chart of Unemployment, it will update itself automatically to reflect the latest data once he inputs it:

Chart of U.S. Unemployment

While I’m at John’s Shadow Stats site, let’s take a quick look at the other economic indicators he measures. It’s quite a site, and definitely not the picture your media, the government, or supposed “economists” are painting:

Chart of Growth in U.S.Gross Domestic Product (GDP)

Chart of U.S. Consumer Inflation (CPI)

Chart of U.S. Consumer Inflation (CPI)

Chart of U.S.Dollar Indices

I want to mention that McHugh is still looking at the possibility of higher to complete wave c up. He mentioned that he sees a bullish wedge on the Canadian exchange and the target if that breaks up is about 15% higher from here. He does not see the same wedge on the U.S. markets, and I see a BEARISH wedge with targets lower. He also has another turn date with a best fit on 9/9/09, next week. I still think the market looks very heavy and there are strong undercurrents in many markets including gold, bonds, the dollar, and oil. The financials are still zombified but could do a meltdown at any time. Very dangerous time, and now we have China declaring certain derivatives null and void, we have Hong Kong recalling physical gold from London… things are heating up and the mainstream, of course, is failing to discuss much of it.

Yesterday did produce some hammer candlesticks in many of the indices, those could represent a short term bottom. Definitely still a time to be prepared for anything in here… This morning the /ES spiked to the 1,010 region and then pulled back. That area is pretty strong resistance as is the 1,018 pivot. 1,000 is acting as support right now and the 990 pivot underpins it.

Regardless of the market action for the day, the picture being painted by most is still just a grand illusion...

Styx – The Grand Illusion:

Thursday, September 3, 2009

Congressman Pete Stark – Highly Educated Idiot Extraordinaire…

Talk about an example of all that’s wrong with politics, politicians, current economic “beliefs,” business schools, oh, and morals & ethics. Congressman Stark, in office since 1973 just made himself a target of the next revolution:

There is so much wrong with what Stark is trying to say, I just don’t know where to begin. Okay, let’s start with his “the more debt we owe, the wealthier we are” line. He is delusional beyond belief to even attempt to paint national debt as a sign of wealth much less distinguish it as different from personal debt. Yes, a wealthy country can borrow more, but a wise country borrows less – a country that can no longer pay its debts is bankrupt, and that’s what this country is, that’s why we are now resorting to “quantitative easing” in the terms of the geniuses who graduated from business schools like Stark.

Stark should resign for this behavior, and if he does not should be impeached for both his behavior AND for his delusional beliefs.

Morning Update/ Market Thread 9/3

Good Morning,

Equity futures are higher this morning, here’s the overnight action in the /YM and /ES:

The dollar is down slightly, bonds are down slightly, gold is up a little, and oil was higher but is now about flat.

Of course the Shanghai market rose 4.8% overnight on fundamentals, right? Not!
Sept. 3 (Bloomberg) -- Stocks in China rose the most in six months, driving the yen and Treasuries lower, on speculation the government will adopt measures to boost equities after the Shanghai Composite Index fell into a bear market.

The Shanghai gauge gained for a third straight day, closing 4.8 percent higher, while the MSCI World Index of 23 developed countries advanced 0.4 percent at 12:50 p.m. in London.

Ha, ha, love that. They grow a bubble, pop a bubble, grow another bubble, pop the bubble, now they want to grow it again. Pilot induced oscillation at its finest. The hand is not so invisible anymore is it? Neither here nor there.

Jobless claims came in at 570,000 for the past week, the same as the week prior:
There has been very little change in initial jobless claims over the past seven weeks, pointing to little change in payroll losses for tomorrow's monthly employment report. Initial claims fell 4,000 to 570,000 in the Aug. 29 week (prior week revised 4,000 higher to 574,000). The four-week average is right at the current week, at 571,250. Continuing claims have been generally moving lower since early July, unfortunately reflecting the expiration of benefits and not necessarily new hiring. But in a bad sign, continuing claims rose in data for the Aug. 22 week, up 92,000 to 6.234 million. The unemployment rate for insured workers rose 1 tenth to 4.7 percent. There was no significant reaction to the report.

Hate to tell ‘em this, but that’s a horrid, horrid number, and this tregedy has been going on for quite some time with no REAL or meaningful help. Millions of unemployed are dropping off the unemployment roles soon.

The non-manufacturing ISM (service) comes out at 10 Eastern.

Below is a close in daily shot of GLD. Yesterday’s breakout was HUGE, and it was on huge volume. Note how it closed far above the upper Bollinger. That’s a condition that will usually correct at sometime to let the Bollinger catch up:

The strange part about what’s happening is at the same time that gold is going up, the TNX (10 year bond fund) is breaking down:

These two charts conflict one another as you would normally expect gold to rise as interest rates rise, not as they fall. The TNX is saying “deflation” and gold is saying something else. So, two choices present us for what’s happening. One is that one of these triangle breakouts is wrong. The other is a loss of confidence. If it’s a loss of confidence, then I would expect that eventually the TNX will reverse and gold will continue higher. Interesting times, that’s for sure.

The markets are oversold in the short term, but there’s room still on the downside with the daily charts. The /ES just snuck back under 1,000, so that area is still resistance and 990 is the support pivot, then there’s support all the way through about 975 or so with 961 being the next lower pivot.

Yesterday’s breakout on gold was very strong. Normally I would expect to see a retest, but with that strength I wouldn’t count on it. The miners also took off. I was looking at some historic silver and gold charts again yesterday and note that the miners tend to do VERY, VERY well following times of credit collapse. They did tremendously well in the mid 1930’s.

Gold and bonds, that’s some kind of strange magic…

ELO – Strange Magic:

Wednesday, September 2, 2009

Lack of Confidence, Meet Capital Flight… Farewell America

“This will be painful, for the USA was once the most vital market economy in the world. But for now, it’s time to say goodbye.”

Must read document, read it all and think about the ramifications. Then read the prior article on gold, then read Armstrong’s latest article on Gold… (Props to Zerohedge and CWB).

The Golden Triangle – Breaking Out…

Gold is breaking out of a months long consolidation triangle today. Beware of a headfake, I will stop out on short term positions on a pullback inside the triangle, but otherwise see this triangle as bullish with an upside target slightly over $1,300 an ounce. Below is a chart of the gold futures /YG:

Below is a chart of the dollar futures /DX. It too has been making a triangular pattern, but it is more of a declining wedge, a pattern that could easily break up, but could also break down:

Keep in mind that the dollar is simply compared to a basket of other currencies… if CONFIDENCE is lost in fiat in general, then gold and other precious metals will increase in relative value - that may be the message we’re getting now.

Here’s a chart showing about the last year in GLD, the gold ETF. Note the low of 66 and the high of 99, there are those numbers again, and the difference is 33, a 50% increase of 66 and a one third proportion of 99. Isn’t math fascinating? Why do those ratios and numbers appear so often? At any rate, you can see that we are clearly breaking above this triangle today – watch that breakout carefully if you go long on this signal:

Something to keep an eye on is the volume pattern. Note from the charts above that volume has been tapering off during this consolidation. To confirm the break higher I want to see volume come up. Also watch the oscillators, the daily stochastics are overbought, but of course they can stay that way for quite some time.

Here is a close up view of GLD daily, note the gap up (not present in the futures), the gap makes me a little nervous, but this is an ETF, so the gap doesn’t necessarily have to be filled, although most are eventually:

Below is a chart of the HUI, the Gold Bug’s Index. It has not broken out of its triangle as of yet, but also should be watched closely to see if the miners are following:

Below is a longer term chart of Gold. Note the very clear inverse Head & Shoulders pattern. The target on that pattern is the same as the pennant/triangle, just above $1,300:

The Gold P&F now has a bullish price target of $1,000 an ounce. I would consider that a short term target at this point

Check the chart above again… note that I included the SPX behind the price of gold. There is a disconnect occurring here between the two. Gold bottomed BEFORE the SPX did in March and has been leading it ever since, a relationship that is not always present. Also, gold possibly making new highs while equities are still down 40%+ is very telling about CONFIDENCE.

If you look at a chart of gold during the Great depression, it did NOT do the same thing – that makes this crisis different – more severe I would contend. The greenshoot tokers will be yelling “inflation” but what I’m seeing is NOT inflation, it is a loss of confidence, the type of thing that changes nations.

Demographics - Self Reported Spending Collapses...

By my math, the self-reported spending of Baby Boomers is down nearly 35% in 2009 from 2008. Personally, I think that number is probably way closer to reality than most of the government reported statistics. It is reflective of a collapse in credit and is not reflective of inflation… loss of confidence perhaps, but not inflation.

A very interesting article, demographic trends are important to keep in mind. The Baby Boom generation is a huge influence, for the most part they pulled their future incomes forward in time and now it’s time to pay the Piper (ht Bud).
Boomers’ Spending, Like Other Generations’, Down Sharply

Most generations’ reported spending down $30 per day from last year

by Jeffrey M. Jon

PRINCETON, NJ -- Baby boomers' self-reported average daily spending of $64 in 2009 is down sharply from an average of $98 in 2008. But baby boomers -- the largest generational group of Americans -- are not alone in pulling back on their consumption, as all generations show significant declines from last year. Generation X has reported the greatest spending on average in both years, and is averaging $71 per day so far in 2009, down from $110 in 2008.

According to Gallup's estimates, 36% of U.S. adults are part of the baby boom generation (born between 1946 and 1964), making it easily the largest of the five most commonly defined generations. At 24%, Generation X is the next largest.

With baby boomers constituting the largest bloc of U.S. consumers, their spending habits have a proportionately greater effect on the economy, given that consumer spending accounts for about two-thirds of the total gross domestic product.

Some experts attribute the sustained economic growth of the 1980s and 1990s to the fact that baby boomers reached their peak earning (and spending) years during this time. As they now near retirement age, the concern is that baby boomers will pull back on spending to make up for the losses suffered in their retirement savings over the past year, hindering an economic recovery.

Data from Gallup's Daily tracking survey -- which asks U.S. consumers to report how much they spent "yesterday," excluding normal household bills and major purchases such as homes and cars -- suggest boomers have already pulled back significantly this year from their reported average spending levels in 2008 (the Gallup Daily survey began in 2008, so data from prior years are not available).

But the fact that all American generations seem to be pulling back sharply on spending -- even as optimism about the future of the U.S. economy has increased -- does not bode well for a strong economic recovery in the near term.

While baby boomers' sheer numbers make their influence on the national economy greater than that of any other generation, their average reported spending is actually lower than that of Generation X. In 2009, average reported daily spending among Gen X'ers is $71, while it is $64 among baby boomers. Last year, the figures were $110 and $98, respectively. Higher spending among Generation X is not a function of greater income, as the two groups have similar income distributions.

The most likely reason for the difference is that 71% of Gen X'ers have children under 18, according to Gallup estimates. Gallup has found the presence of young children in the household to be a major predictor of reported spending (in 2008 and 2009, the difference in reported average spending between parents with children under age 18 and non-parents was about $20). By comparison, only about one in four baby boomers have children under age 18.

Also notable in the data is the fact that reported spending by Millennials thus far in 2009 ($61) is roughly on par with that of baby boomers ($64). This is the case even though Millennials' reported income is quite a bit lower on average than baby boomers'.

Bottom Line

Baby boomers have pulled back considerably on their spending this year, but they are not alone in doing so. Gallup finds significant declines among all generations in average reported daily spending in 2009 compared to 2008. Given that consumer spending is the primary engine of the U.S. economy, it's not clear how much the economy can grow unless spending increases from its current low levels. But spending may not necessarily be the best course of action for baby boomers as they approach retirement age and prepare to rely on Social Security and their retirement savings as primary sources of income. Indeed, the two generations consisting largely of retirement-age Americans consistently show the lowest levels of reported spending.

* note that Survey Methods can be found by following the above link at the end of the article.

Morning Update/ Market Thread 9/2

Good Morning,

Futures are down this morning with the /ES sitting right on the 990 pivot area:

The dollar is flat, gold is doing a rocket launch and is now sitting right on the top of that large triangle, threatening to break higher. Gold actually pinned through the top and pulled back. It is quite bullish if it breaks higher and stays above that top. Oil, on the other hand, is breaking down hard. Bonds are higher on the flight to safety. This is a pretty scary combination as you would expect the dollar to rise and gold to sink under an ordinary flight to safety type of trade. If it weren’t for bonds moving up, this looks more like a capital flight trade, a BIG difference.

The MBA purchase application, which no longer gives us meaningful data, fell 1.0%. Here’s Econoday:
MBA's purchase index slipped 1.0 percent in the Aug. 28 week while the refinance index fell 3.1 percent. The government purchase index rose 0.5 percent for a seventh straight gain. The government-insured share of purchase applications was 40.4 percent in August, the highest since 1991 and compared with 38.3 percent in July and 31.7 percent a year ago. Rates were down in the week with the average 30-year mortgage averaging 5.15 percent, down 9 basis points.

In a sign that government layoffs will be playing a role in the future, Challenger’s job layoff announcements came in like this:
Challenger's layoff announcement count fell sizably in August, to 76,456 vs. July's 97,373. The government component, swollen by post office cuts, made up half of all cuts. Non-government categories are showing easing levels of layoffs in what is good news for Friday's employment report. ADP's more closely watched count is up at 8:15 a.m. ET.

And the ADP report is estimating a job loss of 298,000, indeed, the markets did move further down on that release:
ADP is looking for a decline of 298,000 in private payrolls, a result that would be on the low end of expectations. This report has not been getting favorable reviews for accuracy, but markets did react with stocks and commodities moving slightly lower in immediate reaction.

“…not been getting favorable reviews for accuracy,” lol, no kidding. None of the Challenger,ADP, OR BLS reports are accurate, the most accurate of them all is probably the BLS U6.
Factory orders come out at 10 Eastern.

Yesterday was a pretty serious breakdown. We’re coming up on some support and 50 day moving averages, the bottom Bollinger bands aren’t that far away either. Be careful right here as the /ES is sitting right on the 990 pivot area and the short term stochastics are oversold, the percent of stocks above the 5 day moving average is ZERO, a condition that’s very oversold, although the farther out in time you go, the condition quickly reverses to being way overbought still.

The next lower pivot is at 961. For more, please scroll down a couple posts as I did a short market recap yesterday.

Is this the start of the big wave C? McHugh still does not believe so, but he is guarded as yesterday’s 93.4% volume move down was a little too powerful to be sticking to a bullish case. It’s still possible though… a breakdown below 975 would put a nail in bull’s hopes for more rally, it’s a nail biter, keep your eye on the VIX, on Gold, on bonds, on the dollar, heck, this is a time to be paying attention.

Me? I’m spending so much time on my computer I’m seeing double…

Foreigner – Double Vision:

Tuesday, September 1, 2009

Retail Theft Skyrockets – Greenshoots, Meet Reality…

This is one of those “events” that tends to follow economic events such as collapses of credit. I have been predicting this as a symptom for several years.

We’ve now created a vicious cycle, do you see it? Bigger government spending money they don’t have becomes a bankrupt government... yet, they take from the people to give to the central bankers. Then those who fall by the wayside turn to crime to make ends meet, not to mention that they now have lawless role models. More crime means more government spending on police, prisons, and “national defense.” That again leads to more government debt and the cycle has begun…
Survey: Retail theft skyrockets

Puget Sound Business Journal (Seattle)

Twenty-two major retailers lost more than $6 billion to shoplifters and dishonest employees in 2008, according to a new survey.

On the upside, a record 904,226 thieves were apprehended, up 7.26 percent from 2007. Of them, 832,106 were shoplifters and 72,120 were dishonest employees, according to the 21st Annual Retail Theft Survey conducted by Jack L. Hayes International, a loss prevention and inventory shrinkage control consulting firm based in Wesley Chapel, Fla.

That breaks down to one in every 30 employees being apprehended for theft from their employer in 2008, based on more than 2.1 million employees.

The survey found more than $182 million was recovered, up 21.64 percent from the previous year. More than $113 million was recovered from shoplifters, while $69.8 million was recovered from employees.

“With the downturn in the economy, we have seen an increase in theft, which is having a detrimental impact on retailers’ bottom-line profits,” said Mark R. Doyle, president of Jack L. Hayes International, in a news release. “These theft losses drive consumer prices higher and can force unprofitable stores to close.”

The average theft in 2008 was $202.28, up from $178.37 a year earlier.

The 22 retail companies participating in the survey had 19,151 stores and more than $570 billion in retail sales as of 2008.

Oh yeah, the “upside” is that more thieves were apprehended, and I presume, more were jailed (except in the states like California where they are being forced to release prisoners because they can’t afford to keep them jailed anymore).

The amount of recovered money was up nearly 22%, that’s quite a jump. We are slowly (quickly?) degenerating into the wild west again. No rule of law, end of empire sky high conviction rates by the government, it’s a one way circle of decaying morals, more debt, decaying morals, and still more debt. The circle will go unbroken until the rule of law at the top is restored.

Paul Mylchreest – Thunder Road Report…

Another worthy report by Paul, I lean something from a different perspective every time I read his read report, enjoy:

Quick Market Recap…

On the day, the DOW finished down 185 points (1.96%), the S&P lost 2.21%, the NDX was off 1.81%, and the RUT gave back 2.45%. The XLF lost a whopping and well deserved 5.37%, IYR lost 5.1% - again well deserved, oil lost 2.52% closing at $68.20, gold closed down only a little and is still inside its large triangle. The dollar closed up significantly and bonds lost a little.

The selling started in Britain and the rumors flew that a bank was in trouble over there. Then Credit Swiss downgraded the U.S. markets saying that they are over valued - which is an unusually true statement. Then we have Goldman playing games with Wells Fargo, and it looks very much like Central Banker infighting to me, LOL. Who knows, but whatever it was, this type of action goes to show you how precarious the markets are at these levels. Not a great place to be risking your wealth if you ask me. Again, this is what happens when the rule of law is not followed and there are no adults in the room; the children start to get into trouble.

This was the first time in 3 months that we strung together 3 down days. Today was McHugh’s best fit for a turn date, the top was in on the 27th and could have been it, but for now he is sticking with his upside story. It sure looks shaky to me, at best though, following today’s action, a 93.8% down day by volume.

Below is the daily chart of the SPX. Note that we closed back under the 1,000 level. 990 is the pivot below, 1,018 is the pivot above. Fresh sell signal on the daily stochastic, price is below the mid point of the daily Bollinger and is thus likely to make it at least to the bottom Bollinger which is currently located at about 980ish:

Looking at the DOW daily the same technicals are true plus you can clearly see the bearish volume pattern of higher prices equaling lower volume and lower prices equaling higher volume. The long term trend of this bear market rally also shows the same bearish volume pattern. This move has already retraced slightly more than 61.8% of the last wave up:

The VIX broke out above it’s recent downtrend line. This is BEARISH for the market as a whole:

Several of the Point & Figure charts reversed today and produced bearish market targets, or in the case of the VIX, a bullish target for the VIX of 40:


Oil tripped a bearish target of $62 on the P&F chart:


And the NDX is the first major index to trip a bearish target in quite some time. The rest have not as of yet.


Overall a pretty bearish day, but we finished oversold on all the short term stochastics up to the 60 minute timeframe and would thus expect some sort of pause as nothing ever moves in a straight line. That said, it could be that people figure out that’s their queue and decide to exit sooner than later, we’ll find out, but it’ll be interesting no matter which direction Goldman tries to play it! Again, rising volume is confirmation and the volume of reality will always overcome low volume manipulation.

Anyone figure out my not-so-subtle theme music for the past couple days?

The Alan Parson’s Project – Games People Play: