Wednesday, April 7, 2010

Morning Update/ Market Thread 4/7

Good Morning,

Equity futures are down again this morning, below is a 60 minute chart of DOW futures on the left and a 5 minute chart of S&P futures on the right:

The dollar is up, the Euro is down again following a large decline yesterday, oil is down a little, and gold is up, rising above $1,140 per ounce.

This morning the (must preface with worthless) MBA Purchase Index rose .2 percent following last week’s completely bogus 6.8% supposed rise. Today we return to the even more wild & crazy gyrations with their refinancing index falling 16.9%.
The Mortgage Bankers' purchase index, up 0.2 percent in the Easter week, added slightly to prior gains. But mortgage rates are the report's big headline, jumping 27 basis points in the week for 30-year loans to 5.31 percent in what the report blames on the end to Fed purchases of mortgage-backed securities. The jump in rates dried up demand for refinancing with the index down 16.9 percent.

The jump in rates will hurt more than refinancing and is certain to limit demand for home purchases at a critical time for the housing sector which is trying to recover from a deep drop following November's expiration of first-round stimulus.
Ridiculous. Go ahead and keep track of what’s occurring without knowing the base, good luck. And that is as heavy as the “economic reporting” for the week gets. Interest rates rising? Yes, watch the long end of the curve, rates have definitely broken out and are signaling higher. Below is a 5 minute chart of the long bond futures showing that it formed a triangle over the past couple of days. It was entered from above and thus we would expect it to break lower producing even higher rates:

The number of people using food stamps increased for the 14th consecutive month with the number of people receiving them at a record 39,430,000! That’s equal to 12.8% of our entire population! No pictures of people in soup lines that extend around the block? There they are.

Yet Lord Blankfein at Goldman Sachs continues to maintain that they are doing “God’s work” and that they are simply doing what’s in their client’s best interest:

Goldman Sachs: No apologies

NEW YORK ( -- Goldman Sachs defended its controversial employee bonuses and multi-billion dollar relationship with AIG in its annual report released Wednesday, while downplaying its short-selling in the mortgage market.

Much of the letter was devoted to describing Goldman's (GS, Fortune 500) role in the financial crisis and the recession, praising its own "strong performance" in 2009, which it referred to as a "year of resiliency.

The letter, co-signed by CEO Lloyd Blankfein and President Gary Cohn, also mentioned that Goldman repaid its $10 billion debt to the government in June 2009, as a U.S. Treasury recipient of the Troubled Asset Relief Program.

The letter came after Blankfein and other Wall Street chief executives were subjected to intense scrutiny in a hearing before the Financial Crisis Inquiry Commission in January, when they were blamed for contributing to the economic crisis.

Goldman's (GS, Fortune 500) letter is peppered with the word "client," as the Wall Street firm continuously reiterated its role in serving its investors amid troubling economic times.

"Our first priority is and always has been to serve our clients' interests," read the letter, in one of its opening lines.

Not to mention their own best interests. The question, of course, is who is looking out for everyone else’s best interest? This is exactly where the game went bad. Government is supposed to look after the people’s best interest and is supposed to keep rogues under control. Obviously they have allowed Goldman unprecedented access to run government and thus all representation for the people has been usurped. A story that’s getting old already, I know. Yet nothing has changed, and that is why we are going to pay dearly.

And in Europe it was reported that their overall growth for the fourth quarter was stagnant:
April 7 (Bloomberg) -- Europe’s economy unexpectedly stagnated in the fourth quarter as companies cut spending more than previously estimated.

Gross domestic product in the 16-nation euro region remained unchanged compared with the third quarter, when it rose 0.4 percent, the European Union’s statistics office in Luxembourg said today. It had previously reported a fourth- quarter expansion of 0.1 percent. Corporate investment dropped 1.3 percent instead of the 0.8 percent estimated earlier.
Obviously debt saturated, the union there will have difficulty generating real growth until the debts are cleared. What growth is occuring here in the U.S. is nothing more than accounting fraud, government stimulus, and the effects of destroying one’s own currency.

We are about to enter another earnings season. I’m sure that we’ll see numbers with terrific year over year comparisons. Keep in mind when you see those comparisons what was occurring in the first quarter of ’09. Since that time stocks have zoomed to the moon, and while trailing P/E’s are coming down, they are still at historic levels.

What’s priced into the market, however, might not be as important as the crush of dollars flowing out of debt instruments. We’re likely to see some wild things occurring. One thing’s for certain, the underlying problems were never taken care of, the levels of debt and leverage in the financial system are still at extremes. Proper accounting alone would still bring down the system, and so it festers.

Yesterday’s down then up action produced a small change in the McClelland oscillator, expect a large price move either today or tomorrow. Today is the best fit for a turn date, and the major indices are carving out another potential rising wedge. Obviously those who keep trying to front-run any decline keep getting run over, once again proof that patience is a virtue. Waiting for broken trend lines is always a smart idea.

The VIX set a new low and is just above the bottom Bollinger Band. Call buying is reaching levels that normally produce turns.

You have probably noticed that as I got more active with the SwarmUSA site that my postings have diminished here at Economic Edge. I have been attempting to get volunteers to pick that up more and more, and have had some success there, but it still requires a great deal of attention. Thank you to all who volunteer! On Monday I posted a link here for the first time and ask for people to please join the recurring donation program - $3.50 per month to “Fire the Fed!” No one from here did. The only people to sign up for it so far are the same people who already volunteer their time.

What I do here I do for free and I do it with pleasure, my satisfaction is knowing that I may be helping people understand reality a little better. No high pressure marketing here, I consider that to be a part of the problem. I am disappointed in the response to my subtle requests for help, and even though the size of the Swarms has grown rapidly, I am also disappointed in the number of people who were actually participating in the Swarms.

And so we’re going to talk a little bit about BE-DO-HAVE one more time.

As previously mentioned, in order to HAVE and to maintain wealth, you must first BE and DO. This is why the lotto winner seldom holds onto their winnings over time – they skipped right to have.

Everyone’s seen the movie of the spoiled rich kid, right? People who inherit large sums of money often are not good stewards of it, and again, it’s because they didn’t go through the process of BE and DO. Not all are that way, of course, there are self-starters and many had parents who wisely forced their children to build the BE and DO foundation so that their wealth is not squandered.

Freedom works the same way. When born into it, it’s difficult to appreciate the base of how it was obtained and why it is. Most people in the U.S. have not truly had to BE and DO when it comes to freedom, we have just assumed it was a right. We stopped talking about it. We stopped teaching our children about it. Most importantly, we stopped taking the necessary actions to maintain it, and thus we are losing it.

As any parent with teenagers can tell you, you can tell them repeatedly what’s going to happen, but inevitably they won’t really get what you say until they make the mistake for themselves. Perhaps that’s just human nature and perhaps that’s a part of the psychology of economic cycles – I’m sure it is.

The game of reading bloggers write about the problems in the economy has grown very old to me. They either simply report, or they complain. If we’re lucky, we get a new angle on what we already know. Few talk about the real roots of the problems and even fewer still get at workable solutions. We all play the blame game, left/right, union/corporate raider, it’s all their fault and thus the answer must lie over there.

Imagine the power we would have if we all could get together and work on common ground instead. It was Gandhi who said, "A small body of determined spirits fired by an unquenchable faith in their mission can alter the course of history.”

Those people do exist, they are growing in numbers all the time. However, for the majority with regard to freedom we have become a nation of spoiled teens. We fail to realize that freedom begins with us.

I have been working on a concept for what I think will be an important book. I have been contemplating how I devote the time I have been to SwarmUSA, continue to write for the blog, and spend the necessary long hours required to get that done? Something has to give. The lack of response from my blog has made that choice easy. I will be making fewer posts here, and when I do post they will be more meaningful articles, not just playing the role of daily reporter.

My best writing time is early in the morning. Therefore I am temporarily going to only produce the morning updates when there are special circumstances that warrant it. I will return to them on occasion and certainly once the work on the book is done. Again, I feel that this book is important and that I can be most effective concentrating on it for awhile.

Rolling Stones - Time Waits For No One: