Wednesday, March 31, 2010

Morning Update/ Market Thread 3/31

Good Morning,

Equity futures are down this morning following a negative jobs outlook by ADP. Below is a 30 minute chart of DOW futures on the left and 5 minute overnight view of S&P futures on the right:

The dollar is plummeting overnight while the Euro soars as Greece announces they are going to indebt themselves more by issuing dollar denominated bonds this go around. Long bonds are higher, breaking bullishly out of that bearish flag that was sitting right on support. Oil is breaking higher, now pushing $84 a barrel, despite Obama announcing that he’s opening up the Gulf to more oil drilling, completely necessary because, well, there’s a glut of oil in storage and because obviously oil must be the energy of future. Good thing we have a president who isn’t beholden to special interests and uses his clear future vision to get things done. Watch gold, it is higher and on the verge of breaking upwards.

Below is the same chart of the dollar and long bonds I showed yesterday. You can see the long bond on the right breaking wrong direction higher. Resting on support like it was, it either breaks down through it or some event occurs to send money back into bonds:

The totally worthless MBA report produced yet another wild weekly figure. Totally not real, none of this so called report should be given any credence whatsoever. In fact, as far as I’m concerned they are producing their best attempt at a marketing product designed to obscure any real data they may possess. In the old days they called it fraud. Today we call it spin and just chalk it up to marketing – of course the citizens are left to filter this information for themselves. Just another break down of the rule of law:
Housing demand may be thankfully emerging from winter hibernation. The Mortgage Bankers Association's purchase index is showing significant life, up a very sharp 6.8 percent for the fourth gain in the last five weeks. Buyers are appearing to take advantage of the government's second round of housing tax credits that expire at April's end. As the report says the pattern is similar to the rush ahead of the expiration of the first round of tax credits in November: "We may be seeing a similar pattern now, as the extended version of the tax credit ends next month."

Refinancing is showing less life, the result of heavy refinancing activity over the past year and also the result of rising rates. The average 30-year mortgage rose 3 basis points to 5.04 percent. Note that talk of an emerging bear market for Treasuries points to the risk of higher rates in the coming rates.

Remember, it was just five weeks ago that the MBA admitted their “index” was at the lowest point in history although they never tell us what their index is, what it is based upon, and then they revise it at will all without allowing us to see the data. Worthless spin and completely not real.

You know, where is the neutral party to generate statistics? Where is the oversight to prevent special interests from taking over economic statistics to prevent them from being “spun?” This should be one of the core and basic jobs of your government, they have failed miserably in this respect exactly because they too are co-opted by special interests. The root of this problem is the Federal Reserve Act, and the solution is Freedom’s Vision.

The ADP jobs report has not been the best indicator of what the B.L.S. produces for their Unemployment Report, but because it always comes out first, it is used to set expectations. In this case, expectations were rising for a positive number come this Friday. I think there’s big disappointment coming down the road as I think the insurance industry bailout Act and other forms of higher taxes are going to produce even more pressure on hiring in the near future. Here’s Econoday:
ADP is calling for a disappointing 23,000 decline in private payrolls for March. A gain was expected. Stocks are falling and money is moving into Treasuries following the results. Commodities first declined but quickly recovered as the dollar moves lower.

I thought the following article was amusing. It reminded me of the family who, deep in debt and paying their credit card bills with other credit cards, finally gets caught and must begin selling their possessions and looking for loose change under their sofa cushions. This article shows the ripple effect and how families going through crises causes governments to subsequently go through the same crisis. This is why real and functioning economies are built from the bottom up, not from the top down.
Cities look to debt collectors for help

NEW YORK ( -- In the northeastern Pennsylvania town of Pittston, the seemingly manageable issue of garbage became a much bigger problem than anyone could have ever anticipated.

While the streets were hardly strewn with litter, the city of 8,100 is now saddled with roughly $250,000 worth of unpaid garbage fees owed by city residents.

Hoping to stamp out the problem, the city council recently contracted with an outside collection agency, hoping to recoup some of the outstanding debt.

"They are going to go after them with whatever means they can," said Greg Gulick, a city spokesman.

Pittston, which dubs itself the "The Tomato Capital," is hardly alone. School boards, county courts, local libraries and even prison systems across the country are increasingly looking to private collection agencies for help.

"Given all the budget constraints at the state level and the problems with the economy, we are seeing quite a bit of outsourced activity," said Bruce Cummings, the CEO of Municipal Services Bureau, an Austin, Texas-based firm which assists more than 500 state and local governments across the country collect unpaid bills.

It remains unclear precisely how much in unpaid court fees and parking tickets has been farmed out to collection agencies by state and local governments since the recession began. But experts say this is one of the faster-growing segments of the multi-billion dollar debt collection industry.
That’s it, go after the deadbeats who can’t pay their garbage bill because big government sucks the life blood out of the economy. That will solve the problem. Better keep the food stamps and unemployment money flowing, civil unrest won’t be too far behind otherwise.

But hey, not to worry because the stock market is up 76% in just a little over a year. That’s a sign of health, right? I mean isn’t that what healthy economies and markets do? No?

I can’t even watch CNBC for more than 5 seconds anymore. I made the mistake of turning it on and there stood the “analyst” (marketing spokesman) stating that he thought 15% returns were completely possible over the next few years like that was on the low range and a completely normal type of number. Fifteen percent? Are you kidding me? That is such a huge number that not sustainable instantly jumps into my mind and all I can think is how people who buy into that BS are going to get burned. Yet it pales in comparison to 76% which evidently is the new benchmark for health. I say stupidity and folly. Yeah, those guys deserve what’s coming for them, and in many respects Americans, all of us, deserve what’s coming too for not putting an end to it sooner.

But hey, 25% of the market volume comes on just Bank of America, or on Citi Bank. That’s normal. That’s healthy.

And yet another small movement in the McClelland Oscillator yesterday, expect any directional move to be large.

As I type, the March Chicago PMI was released, 58.8 was the number, consensus was looking for 61, and the prior was 62.6. Must have been the weather in February.

Yesterday a comment was made about our economy and bond market walking a tight rope. Absolutely a high wire act. Exciting to watch, but given enough exposure, sooner or later somebody’s going to fall.

Leon Russell – Tight Rope: