Thursday, October 21, 2010

Morning Update/ Market Thread 10/21

Good Morning,

Equity futures are higher this morning, the dollar is lower but regaining strength after some wild gyrations overnight in most of the currencies. Bonds are slightly higher, oil and gold are lower.

While I’m mentioning oil and gold, I want to point out that yesterday’s rally in stocks was entirely on the back of a large drop in the dollar. What was peculiar about that drop in the dollar is that this time particularly gold did not respond as it had been, nor did it respond as strongly as equities. This is further evidence that the quality of the rally was not near the quality of the prior day’s decline. The lack of volume on up days is another tell.

That rally seemed to me to say that it’s okay to PRETEND that there are no problems, the “market” is happy with that. We had Sheila Bair pronounce that foreclosuregate was a “paperwork” problem that we can get through, and we had banks like Wells Fargo saying that they are confident everything is in order. This is complete BS, they cannot react any other way because they know that this problem kills their businesses and agencies dead. The entire securitization process was nothing but FRAUD put upon Americans.

And what disgusts me is reading analysts who talk about homeowners as if they are trying to scam the system because they would prefer to have their loan balance reduced over having interest rates reduced. No kidding, perhaps that’s because they are victims of FRAUD perpetrated by the banks? People need to wake up and simply refuse to play the game if they were caught in the bank’s web. That’s exactly what any one of them would do if caught in the same situation. The rule of law has already broken down on many levels and over the course of many years, and our government is refusing to enforce it – therefore you are compelled to act on your own and on behalf of your country.

And while I’m pointing out the inherent conflict with the “Fed” being owned by Bank of America, this is the conflict pointed out by the mainstream:
Oct. 21 (Bloomberg) -- The Federal Reserve Bank of New York’s effort to recover taxpayer money used in bailouts during the crisis may be at odds with its mission to ensure the stability of the financial system.

The New York Fed, which acquired mortgage debt in the 2008 rescues of Bear Stearns Cos. and American International Group Inc., joined a bondholder group including Pacific Investment Management Co. that aims to force Bank of America Corp. to buy back some bad home loans packaged into $47 billion of securities, people familiar with the matter said this week.

Concern that Bank of America may be forced to buy back soured mortgages helped send its stock down almost 5 percent in the last two days, wiping out $5.92 billion of its market value. The decline runs counter to the Fed’s goal of strengthening the banking system after the worst crisis since the Great Depression.

“This is an inherent conflict,” said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. “They’re transferring the loss from what would have been Bear Stearns through the Fed to the originators of the mortgages. That’s an odd chain, and I don’t know how you manage that.”

…The Fed has no choice except to shield the assets it acquired as it stepped in to prevent a collapse of the financial system, said Joseph Mason, a finance professor at Louisiana State University in Baton Rouge.
“The New York Fed is, acting along with other institutional holders, trying to preserve the value of their securities holdings,” Mason said. “To act otherwise would be inappropriate and would be viewed as a waste of the government’s money that was invested in this bailout.”

What bull. The Fed could care less about the crap they have exchanged with the banks. What they care about are the banks – period. The banks ARE the "Fed" and visa versa. The “Fed," and by extension the banks that comprise the "Fed" are DEAD, they just won’t admit it yet.

And so we pretend. We pretend that it’s just “paperwork,” we pretend that we still have “markets” when in fact what we have are contrived banker owned and controlled machines designed to further pluck the pockets of the same saps who are already victims of the bank’s fraud, most of whom don’t even know they’ve been had.

But hey, jobless claims are down to “only” 452,000 in the past week if you can believe that. What’s that, you don’t believe it? That’s good, because revisions from the week prior added on another 13,000 from what was previously reported. How many more do you figure they’ll add onto this week, and why are all their errors in the same direction week after week? And let’s make this clear, any number above 350k is a complete and total disaster. Here we are years into structural declines in employment and people still haven’t figured out the structural nature of debt saturation – saturation that was put on the people via way of the bank’s fraud. Here’s Econoday:
A big 13,000 upward revision to the prior week more than cuts in half the 23,000 decline in initial jobless claims for the October 16 week. Still, the results are positive with the four-week average down 4,250 to 458,000, more than 6,000 below the month-ago comparison for its lowest level since July.

Continuing claims are at their lowest level of the recovery, down 9,000 in data for the October 9 week for a four-week average of 4.478 million. Improvement here reflects new hiring and, unfortunately, the expiration of benefits as workers fall out of the insured pool. The unemployment rate for insured workers is unchanged at 3.5 percent.

Today's data are free of distortions and point to incremental improvement in the labor market. There was no initial reaction to the results.

Same old range. So let’s pretend that there are not millions of people of people who are not even counted anymore. Let’s ignore the 4 million+ people who are drawing Emergency Unemployment, up 152,112 in the last week.

So called “Leading Indicators” and the Philly Fed Index are released at 10 Eastern this morning.

Those who exert the effort to track each and every wave in the market deserve a medal from my perspective. It’s no easy task, the wave counting tends to go back and forth from easy to count (something I can follow) to more complex. Obviously we are in a complex time, but there are some who see us in a wave 4 and so there may be a wave 5 higher to come. McHugh is discussing the possibility of forming a triangle before possibly pushing higher. All I know is that I see huge technical divergences and a market far over extended and in the process of topping. I also see intervention galore – they don’t even hide it anymore, much less deny it. The intervention is occurring directly in the debt markets and in the currency markets, the stock market isn’t even a market, it’s a simulation. If you want to know where we are, that’s it in a nutshell. The game continues for now, the technical picture is the same from my perspective.