Thursday, September 2, 2010

Morning Update/ Market Thread 9/2

Good Morning,

Equity futures are flat to slightly higher this morning. Bonds are lower, the dollar is flat, oil is down, while gold is up and looking to take out the prior highs.

Weekly Jobless Claims were roughly the same as last week, coming in at 472,000 versus last week’s 473,000. Of course last week’s figure was revised upwards to 478K, so the headline monkeys type that it fell 6,000 during the week! No, it fell 1,000, one cannot compare apples to oranges, yet the media does that all the time if it makes any report sound better than it is – which is exactly the theme as everyone is ultimately trying to take your money and your life’s productivity. Yes, professionals of all kinds are CONSPIRING to take your money, that’s become the American way, and if you have ever sat down at a company’s marketing meeting you are witnessing that conspiracy out in the open. Unfortunately, it has become the norm for absolutely everything. Here’s Econoday’s spin:

Initial jobless claims may be edging down, at least they have the past couple of weeks. Initial claims for the August 28 week came in at 472,000 compared with a revised 478,000 in the prior week and the 2010 peak of 504,000 the week before that. The four-week average fell 2,500 to 485,500 yet is still about 25,000 higher than a month ago, which is not a positive indication for tomorrow's employment report.

Continuing claims fell 23,000 to 4.456 million in data for the August 21 week. Here the four-week average, at 4.485 and down more than 100,000 from a month ago, probably offers a positive indication for tomorrow's report. Note that a decline in continuing claims reflects both hiring but unfortunately also reflects the expiration of benefits. The unemployment rate for insured employees is unchanged at 3.5 percent.

There are no special factors in today's report, a report that probably won't affect expectations for tomorrow's data. The job sector is flat at best, a description that likewise fits consumer spirits and consumer spending.

Although numbers are down from a year ago, the current trend is stubborn. It has been a long, long time with numbers this high and without the economy producing jobs. We need to produce many jobs just to stay even with population growth, so every week that we fail to create jobs, more people go without – a disaster that is dramatically underreported by the government and by the media.

By the way, the DOL releases these numbers to the public (yours truly) 15 minutes after companies like Bloomberg are granted access. I want to know who else is granted early access and why - it is absolutely ridiculous to create "insiders" who have the data prior to the public, especially when that data comes from a government agency who is paid for by the public! Disgusting.

The Monster Employment Index fell roughly 1.5% in August, their Index falling from 138 in July to 136.

The Monster Employment index fell two points in August to 136. The report said the decline reflects caution among employers. Manufacturing and warehousing, the latter group often focused on as a leading indication for job demand, both showed weakness in August.
Productivity and Costs for Quarter 2 were released this morning with nonfarm productivity falling 1.8%. This is down from Q1’s drop of .9%, but slightly better than the forecast drop of 1.9%. The trend is clearly negative in this regard. This data is also very skewed from my perspective as it is based on “productivity” calculated in the same manner as GDP (including financial engineering, if you call that productive). That said, to have productivity falling means that businesses have hit the wall in terms of simply throwing people out the door and maintaining prior levels of “production.” Labor costs were expected to rise 1.2%, but rose 1.1% which is up significantly from Q1’s .2% annualized rise. Here’s Econoday:

Due to the slowdown in output and businesses already having cut labor costs to the bone, productivity fell notably in the second quarter. Nonfarm business productivity declined an annualized 1.8 percent in the second quarter after a 3.9 percent advance in the prior quarter. The market had forecast a 1.9 percent dip in productivity. Unit labor costs rebounded an annualized 1.1 percent in the second quarter, following a drop of 4.6 percent in the first quarter. The median forecast was for a 1.2 percent boost in labor costs.

The drop in productivity reflected in part a slower 1.6 gain in nonfarm business output after a 5.0 percent jump in the first quarter. Also, hours worked jumped to a 3.5 percent pace from 1.1 percent in the first quarter.

Year-on-year, productivity was up 3.7 percent in the second quarter-down from 6.3 percent in the previous quarter. Year-ago unit labor slipped to an annualized minus 2.8 percent from minus 2.9 percent in the first quarter.

While the latest productivity report is not as favorable for profits as the recent string of gains, the good news is that companies may have pressure to start hiring. Any notable and apparently sustainable boost in company demand should result in additions to payrolls. Economic uncertainty, of course, will dampen hiring enthusiasm.

Today's numbers are close to expectations. At the same time, initial jobless claims barely missed analysts' median forecast. Markets are little changed on the release.
The market is taking these as "disaster avoided for now." If I hear the term “new normal” one more time, I’m very likely to become violently ill, I must have read or heard that term more than a dozen times in the past week alone. No, it’s not a “new normal,” it’s called DEBT SATURATION, the point at which more credit cannot be forced onto “consumers,” as incomes cannot support more.

Yesterday, Sales of domestic cars and light trucks were also reported down. Take a look at the grey bars on the accompanying chart, unit sales are down roughly 33% from August of ’07, three years ago. That is a huge percentage:

Unit sales of new domestic-made cars and light trucks slipped about four percent in August compared with July, offering a mildly negative indication for the August retail sales report. Domestic cars and light trucks sold at an 8.4 million annual rate vs. July's 8.7 rate. Yet less aggressive incentives in August are likely to narrow the gap in dollar terms. Note that fleet sales to non-consumers, which vehicle manufacturers do not break out, adds noise to the comparison. Sales of domestics make up about three quarters of new car and light truck sales. New car and light truck sales make up two thirds of the motor vehicle category which in turn makes up about one sixth of total retail sales.

Speaking of conspiracies, what do you suppose is Mr. Harris’s motivation for speaking the following line of drivel? “The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.”

You have got to be kidding me. This is so inane, so totally lame, that you absolutely have no choice but to see the conspiracy that I mention, it is blatant. And yet Bloomberg, a supposedly respected business news service, chooses to print this crap:

U.S. Avoids Recession as Data Can’t Get Much Worse

Sept. 2 (Bloomberg) -- The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.

The sectors of the economy that traditionally drive it into recession are already so depressed it’s difficult to see them getting a lot worse, said Ethan Harris, head of developed markets economics research at BofA Merrill Lynch Global Research in New York. Inventories are near record lows in proportion to sales, residential construction is less than half the level of the housing boom and vehicle sales are more than 30 percent below five years ago.

“It doesn’t rule out a recession,” Harris said. “It just makes it less likely than otherwise.”

The possibility of the economy lapsing into another contraction during the next year is 25 percent, he said in a Sept. 1 report. Harris cut his forecast for growth this year by 0.1 percentage point to 2.6 percent and lowered his 2011 estimate by a half point to 1.8 percent, according to the report.

There are simply no sources left, besides select bloggers on the internet, to get any semblance of reality. And here’s the reality – there is no recession, it’s called a depression. There is no growth, the GDP numbers are false, our “productivity” is false, and our employment numbers are nothing but an outright lie. I am ashamed of what I see. Embarrassed for my country and for the portions of the world that play along.

It’s tough to even call our stock market a “market.” It’s nothing but a playground for those wealthy enough to use High Frequency Trading machines to rob the citizens who are fooled into thinking that they are “investing” for their futures. This theft is allowed, backed, and sponsored by our own government. Talk about a dysfunctional relationship.

The proof of dysfunction was on clear display yesterday. Data that is piss poor, even in its trumped up form, gives the thieves a reason to ramp their HFT machines that all get on the same page within nanoseconds, even before orders are executed. Of course they are using YOUR MONEY to steal your money from you. The money is given to them by the FED, who works for them, yet leads you to believe they are a part of the government. They are not. The FED, through POMOs, is feeding the very companies who run the HFTs BILLIONS. That money is not used to do anything productive in the economy, it is used to ramp up the markets, enlarging the disconnect between reality and price.

Yesterday was a 96% up day – PANIC buying. Panic buying for what? For the sake of making a short term trade and for drawing in stupid money. If you don’t own an HFT, you are stupid money, and that includes me – I am blind in the market relatively speaking. My only advantage is in knowing reality and that eventually the games will work against them. Make no mistake, its coming. Not maybe, it’s a done deal – get ready.

This is my strongest warning ever that the markets are shouting crash potential. One in three days is a 90%+ day, Hindenburg Omens, Head & Shoulders patterns, wave 3 of 3 next in the rotation, it’s going to come undone, and yes, it can do it in a flash. The similarities between now and ’08 are stunning. There are also similarities between now and 1987. Volatility is a precursor, it is another clue, just as the Hindenburg Omen is a clue. Hello… Friday is a 90%+ up day, Monday is a 90%+ down day, Wednesday is a 90% up day. These types of large moves in both directions are exactly what presage a market meltdown. Another similarity is the action of the Yen – the trend is clearly with a stronger Yen (down on the following chart), just as it was in 1987:

Yesterday’s move stopped just under the 50dma. It is possible that wave 2 of 3 is nearly complete, but my best guess at this point is that it’s probably just wave a of 2 that is nearing completion. Either way, we are not far from what I believe is going to be a serious correction of the imbalances that exist. To echo Richard Russell, it won’t be over until the cleansing is complete.