Friday, October 15, 2010

Morning Update/ Market Thread 10/15

Good Morning,

Equity futures ramped higher this morning on more gum flapping from the Grand Puba High Priest Puppet Pumper Bernanke (no animals were sacrificed in the writing of this report).
Oct. 15 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said additional monetary stimulus may be warranted because inflation is too low and unemployment is too high.

“There would appear -- all else being equal -- to be a case for further action,” Bernanke said today in the text of remarks given at a Boston Fed conference. He said the central bank could expand asset purchases or change the language in its statement, while saying “nonconventional policies have costs and limitations that must be taken into account in judging whether and how aggressively they should be used.”

He didn’t offer new details on how the Fed would undertake those strategies or give assurances the central bank will act at its Nov. 2-3 meeting.

Of course that sent the dollar straight down then bouncing off support I’ve been showing just above 76, bonds are down, while oil, and gold both rose on his chanting. Today is options expiration, and it was certainly generous of Bernanke to give this money pumping speech 15 minutes in front of the time that’s used to calculate the price of many options. Gee, you would almost think it was planned to help out the largest options holders who just happen to be the Primary Dealers who just happen to be Bernanke’s true boss as they in fact OWN the “Fed.” And surely they must like the current administration for their willingness to go along, why else would they POMO Billions upon Billions in front of the election? Today is also a POMO day by the way. When will the people of America learn that WHO controls the money is FAR and AWAY more important than what backs it. If you want a money system that works for the people and retains its value over time, you cannot have private narcissists in control of creating it.

It was just yesterday that we learned the PPI has risen 4.0% year over year… that’s not enough? Even though we all know their inflation measures are far from accurate, four percent is enough to kill a currency in a very short number of years. This morning the CPI (consumer prices lag input prices) did come in less than consensus at .1% for the month of September when they were looking for .2%. Year over year the CPI is up 1.1%. Here’s Econoday:
Headline inflation at the consumer level eased and the core rate remains extremely soft. Although this morning's positive retail sales report should have the Fed happy, the CPI numbers will have the Fed still worried about inflation being too low. The overall CPI in September slowed to a 0.1 percent gain from 0.3 percent in August. Analysts had projected a 0.2 percent increase for September. Excluding food and energy, CPI inflation was unchanged for the second month in a row and came in below the median market forecast was for a 0.1 percent uptick.

The strongest component was for energy, up 0.7 percent in September, following a 2.3 percent jump the prior month. Food also was on the warm side, gaining 0.3 percent after a 0.2 percent rise in August.

By major expenditure components, upward pressure in September was seen in medical care, up 0.6 percent, and in transportation (up 0.5 percent and including a 1.6 percent hike in gasoline). Weakness was in a number of categories: housing, down 0.1 percent; apparel, down 0.6 percent; recreation, down 0.3 percent; education & communication, down 0.1 percent; and "other," down 0.1 percent.

The bottom line is that core inflation is anemic. The Fed will likely want to take out some sort of insurance policy at the next FOMC meeting to ensure that no inflation does not turn into deflation.

Less food and energy the CPI was flat which is perfect in my book. But that’s not enough for the money pumpers, they don’t profit unless everything’s price is going up. Note that price growth does NOT equal REAL growth. They do not care about real growth, they don’t care about employment, and they could care less how many people are on food stamps or are tossed out of their homes. All they care about is JPMorgan’s $4.4 Billion quarterly fraud profit and that the money supply keeps growing. That’s it. And they’ll hook and crook the supply of money higher as long as they are getting their way politically. When they don’t, or when they need something fixed real bad (fraudulent mortgage paper trail), then they will bring the markets down and threaten Armageddon until they get their way.

Is what I’m describing not completely accurate? You know it is, and yet we act as if we’re powerless to take back what belongs to us. We’re not, all we have to do is demand it, but collectively we must at least be aware enough to know what’s happening and to understand what it is that needs to be done. The people must take back the power to create money, it’s that simple. You will not have any form of true Democracy until that occurs.

Retail Sales for September came in better than expected at .6% when the consensus was looking for .4%. This is absolutely one of the poorest measurements in terms of reading the economy. This report should be called “Same Store Retail Sales” as it suffers from substitution bias because it fails to adjust for stores that have gone out of business. Let’s say there’s a strip mall with five stores in it. Four of the five completely fail and go bye-bye… that leaves one store whose business actually picks up because there’s no competition. Since that store’s sales picked up, it would be reported as an increase in sales even though the total amount of sales may have fallen of a cliff and 4 out of 5 workers lost their jobs. This is exactly what is happening and it is why this is such a misleading report. You won’t hear that from Econospin, but here they are:
The consumer is opening his wallet wider as the pace of retail sales has picked up. Although auto sales led a September gain, strength is broad based. Overall retail sales in September advanced 0.6 percent, following a 0.7 percent gain in August (revised up from 0.4 percent) and a 0.5 percent increase in July (previously 0.3 percent). The September figure came in above the market expectation for a 0.5 percent increase. Excluding autos, sales rose 0.4 percent, following a 1.0 percent boost in August (previously 0.4 percent) and matching analysts' median forecast. Sales excluding autos and gasoline rose 0.4 percent, following a 0.9 percent surge in August.

Today's report shows the consumer sector apparently in better shape than almost anyone believed-especially after taking into account upward revisions for July and August. The impact on the markets could be tricky today. Although the economy is in better shape than believed prior to this morning's release, there could be negative impact if the report is seen as significantly reducing the odds of further quantitative easing by the Fed.

See how they draw FALSE CONCLUSIONS because they don’t understand what this report is telling them.

The New York Fed’s Survey of Manufacturers did jump this month from 4.14 to 15.73. That is above consensus, here’s the spin:
Manufacturing activity is picking up steam in the New York region. The Empire State index jumped to 15.73 in October vs. 4.14 in September. The larger the reading over zero, the greater the rate of month-to-month growth.

And growth is strong in the two key areas of new orders and employment. New orders rose to 12.90 vs. 4.33 while employment rose to a very strong 21.67 vs. 14.93 and 14.29 in the two prior months which were already strong. Shipments jumped to 19.39 vs. September's minus 0.27. A negative is backlog which, at minus 1.67, continues to contract though at a slowing rate.

Strength is confirmed by the six-month outlook where the index jumped nearly nine points to 40.0. This report, which points to a new rise in the manufacturing recovery, has been much stronger than the sister report from the Philadelphia Fed. Yet the indications from this report suggest that wide negatives in the Philadelphia report will at least move to neutral. The Philadelphia manufacturing report will be posted next Thursday.

Last month the New York numbers were better than all the other regions, not just the Philadelphia region. Why do you suppose the NY region would be doing relatively better? Could it be related to that minor little detail of WHO controls the money? Hmmm… where does Jamie Dimon and the rest of the debt pushers live?

Consumer Sentiment and Business Inventory data is released at 10 Eastern.

Below is a chart of the dollar, you can see that with Bernanke’s jaw flapping it pushed the dollar right to the bottom of the channel and it perfectly then bounced of the rising pennant uptrend line I’ve been showing:

I think that the move down in the dollar and up in the Euro and Yen may be just about over for now. If the dollar does break the 76 area, then it will spell trouble for the world, and if it were to drop below 71 it would be a disaster for America. The sentiment is too negative on the dollar right now, so I think we at least get a short term bounce.

Bonds are troubling here. Yesterday there was an undersubscribed long term auction and the Primary Dealers were forced to step in and buy. It is a law that they MUST buy when there is not enough demand for our debt (they created the law). When they do this, they do not use depositor’s money or any such thing, no, they create the money for those purchases from thin air and you and I are thus indebted to pay it back, plus interest. Again, what’s important is WHO. Why would rational people pay private individuals interest for the use of a money system that is supposed to belong to them? Economic mass psychosis I guess.

Here’s a chart of the long bond futures, you can see that it has created a topping pattern and is breaking the uptrend line. Lower on this chart means higher interest rates:

Yesterday we saw what appeared to be capital flight. Stocks were down, the dollar was down, and bonds were down with an undersubscribed auction. Where is the money going when that occurs? Well, much of it can simply vaporize in the same manner in which it came into being, but those who actually sold were likely sending their money overseas. That’s not good as it means all the indebtedness that’s being created for Americans isn’t going to help America, it will be used to create jobs overseas. Hey, as the late George Carlin said, “They call it the American dream because you have to be asleep to believe it.” For those who are awake, WHO controls the production of our money is what is most important.

The VIX sell signal is now confirmed. POMOs aside, the signals in the market say that we are topping. The XLF and the banks were down hard. The overall market cannot rise for long without them, and they are truly zombie institutions, forclosuregate is exposing the rot. It's going to shock a lot of people when the market finally rolls...