Thursday, October 28, 2010

Morning Update/ Market Thread 10/28

Good Morning,

Equity futures are higher this morning with the dollar plummeting, bonds flat, oil and gold higher.

The “shocking” news this morning for those who don’t understand the real power structure of the United States, is that the “Fed” is asking the Primary Dealers for input in regards to size and timing of QE2. This is no shock at all, of course, for those who understand that the Primary Dealers OWN the “Fed” quite literally. The only shock to me regarding this insight is that they are saying so publically. And here’s the Emperor is wearing no clothes part… this means that they have no idea how big it should be and yet the market already has $____??? priced in! Naturally, if you are a bank, how big and how often do you think you want QE to be? Does that worry you?
Fed Asks Dealers to Estimate Size of Debt Purchases

Oct. 28 (Bloomberg) -- The Federal Reserve asked bond dealers and investors for projections of central bank asset purchases over the next six months, along with the likely effect on yields, as it seeks to gauge the possible impact of new efforts to spur growth.

The New York Fed survey, obtained by Bloomberg News, asks about expectations for the initial size of any new program of debt purchases and the time over which it would be completed. It also asks firms how often they anticipate the Fed will re- evaluate the program, and to estimate its ultimate size.

With their benchmark interest rate near zero, policy makers meet Nov. 2-3 to consider steps to boost an economy that’s growing too slowly to reduce unemployment near a 26-year high. Financial-market participants are focusing on the size, timing and maturities of likely purchases aimed at lowering long-term rates, with estimates reaching $1 trillion or more.

“If they buy too much, I think there’s a real chance that rates are going to rise because people are worried about inflation,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “If they don’t buy much, they’re not going to have a market impact.”

THE FED IS THE PROBLEM! What’s most important is WHO is in control of your money – clearly it is not the people, nor is it Congress or anyone else who is actually an elected representative.

And you know what scares me far more than a crashing stock market? One that melts up directly into hyperinflation – that scares the hell out of me. It would very quickly lead to a loss of confidence and would make it extremely difficult for most people to live. You can live with low priced stock, but you cannot live without food.

But we certainly know who is not going to be living without… that would be Exxon Mobile who just announced profits increased 55% and that they earned only a pitiful $7.35 Billion in the 3rd quarter! LOL, might as well just start talking about profits in the trillions because at the rate our money is going it won’t be long. Yes, they pin this on the higher price of oil… dollar down, things priced in dollars up, thus “profits” go up for everything priced in dollars. In other words, it’s an illusion, and a quite nasty one at that as last time I checked my income was not increasing at anywhere near that type of pace, and I’ll wager my “vast fortune” that yours aren’t either.

And it’s time to put on the party hats, because the weekly Jobless Claims fell below 450k to “only” 434,000 wretched souls. Naturally the week prior was revised higher by the population of only a small town, and therefore I guess we should be thankful the revision wasn’t the size of a small city. Here’s Econospin:
Claims data offer rare good news on the labor market as initial claims fell steeply to 434,000 in an October 23 week that isn't skewed by special factors. The level is the lowest since July as is the four-week average of 453,250. Given that July's data were distorted by adjustment problems tied to auto retooling, the latest batch of data is perhaps the best so far of the recovery.

Continuing claims for the October 16 week fell 122,000 to a two-year low of 4.356 million. The four-week average of 4.447 million is down 39,000. The unemployment rate for insured workers slipped one tenth to 3.5 percent. Emergency claims and those on extended benefits are also down.

Once again take a look at the chart, this is still in the same sideways range we’ve been in for months and months. Anything over 350k is a complete disaster and indicates that we’re still losing jobs like crazy, we are not creating them, and we are certainly not keeping up with the growth rate of our population. And on an unadjusted bases, claims for the prior week actually INCREASED by 11,678 people. The other bad news that will be interpreted as good is that those drawing Emergency Unemployment dropped by a very large 258k, plunging the number who receive this compensation well below the 4 million mark. This is a double edged sword as it means tens of thousands of people are running out of benefits – what happens to them now? Get ready to spend more on prisons, as desperate people do desperate things… but then again, there’s nothing like a hungry citizenry to bring about CHANGE. The oligarchs had better get busy with their next population placation, they are starting to fall behind.

Did I mention that I'm moving out of "the hot zone" and into the small town where I grew up and consider to be more safe? Karma being what it is, I'll probably get mugged in the world class park just down the street. Should this occur, please send donations to Children's Hospital in lieu of flowers, thanks.

Yesterday produced yet another hammer in the markets – one topping candlestick after the other. What’s priced in? Who’s on first? It’s all B.S., yesterday afternoon prices did yet another HFT zoom to front-run today’s nitro fueled POMO. So what’s the POMO exit strategy? Is there one? Perhaps we should ask the Primary Dealers?

And Zero Hedge reports that the Japanese have announced they are going to monetize ETFs, REITs, as well as BBB and higher rated bonds. According to them:
In other words, the BOJ is now permitted to do what the Fed will have authority to do with a few months: buy virtually all risk assets, as buying ETFs is the same as buying the general market courtesy of the most traded security in the world, SPY, to push and pull the entire market in whatever direction it goes. There are two questions at this point: is the BOJ allowed to buy foreign (read US) assets that fall under the above buckets, and whether the FX currency swap line recently established with the BOJ will allow the Fed to use Japanese proxies to monetize various US assets. Or will the Fed first seek input from the BOJ on how to proceed with sending the Dow to 36k.

Yes, the central banks of the world buying ETFs out in the open, now it’s officially nuts! Again I ask, “What is their exit strategy?” Do they plan on owning them forever? And so it doesn’t take a genius imagination to project how this ends. Badly seems to sum it up in just one word. Again, we knew that wild stuff, unimagined stuff, was going to happen, yet it seems surreal to actually watch the disaster unfold. If I walked up to you 5 years ago and said that the central bank of Japan was going to be buying up ETF’s, you would have laughed… and here we are. Of course 5 years ago I was saying that our money system was going to end and that it was going to be a wild ride getting there. And so we know the destination is the destruction of our money system, but the way in which we get there is not under our control, it’s under the control of those who profit from the creation of inflation – they are quite literally insane, every decision they make has been for THEIR benefit at the often life threatening expense of others. And that’s the very definition of narcissism, the result of failing to maintain control of the production of money by the people. Here, would you like to see the path of your money? Here it is, just the past 20 hours or so… another 1.06% gone in less than a day.

So, on one hand every piece of data or news that can be interpreted as “improvement” is hailed, but at the same time the economy sucks so bad that the banks must do trillion dollar QEs and directly buy up risk assets. Does any of that add up? Again, what’s the exit strategy? And for the nuts of the world who think that the central banks are doing us a favor (there are many), I can only say that a fool and their money are soon parted.

I think I’ll go buy some gold…

The Rolling Stones : Sympathy For The Devil: