Tuesday, November 16, 2010

Morning Update/ Market Thread 11/16

Good Morning,

Equity futures are tumbling this morning, with the dollar roughly flat to rising, the Euro slightly higher, the long bond pushing rates significantly higher again, oil continuing to fall, and gold slightly higher.

There was a very small change in the McClellan Oscillator yesterday, that means odds are very high there will be a large directional price change today or tomorrow.

Note in the daily charts below that the dollar (left) and Euro (right) are about to reach the boundary of their respective channels. There may be a turn as that occurs, it will be very important to see how these currencies react as they near those borders:

Let’s recap the situation in Ireland… the country, encouraged by the big banks to borrow more than they could possibly hope to repay, falls under attack by those same banks and hedge funds thus spiking their bond borrowing costs. Yet Ireland claims it has enough money to operate through the end of their next fiscal year, what’s the hurry?

In comes the IMF and European banks – the very same banksters as above – DEMANDING that they BORROW MORE MONEY in order to “RESCUE” them! Yesterday the threat became real when Ireland was, “warned it has 24 hours to make decision as EU emergency talks loom amid fears Irish banks' contagion may spread to other eurozone countries.”

And here is the very same threat used by bankers time and time again throughout history!!! DO THIS OR ELSE WE CRASH THE MARKETS AND THE ECONOMY!

And that’s what you get and what you deserve for GIVING THE POWER OF MONEY CREATION to the banks in the first place! This is exactly why what’s MOST IMPORTANT IS WHO CONTROLS THAT POWER.

And yet it is being reported that Ireland is in talks again this morning:
Nov. 16 (Bloomberg) -- Ireland is in talks with European and International Monetary Fund officials about a bailout that would shore up the state’s finances as well as enable it to inject capital into the country’s banks, said a European official with direct knowledge of the talks.

The two-part funding package would mean Ireland wouldn’t have to tap the bond market for an extended period as it tries to cut the budget deficit, said the person, who spoke on condition of anonymity. It would also give the government capital to help banks if necessary. Ireland says it’s fully funded into mid-2011.

I can only hope that they resist this “two part funding package.” But that doesn’t sound so bad does it? LOL, their “funding package” is just a euphemism for DEBT. While it’s true that Ireland represents just 1% of the EU economy, it is requiring 15% of the bailout proceeds. But this is just like the subprime borrower – WHO is most responsible, those who borrowed more than can be repaid, or the debt pusher who knew when he was lending money from nothing, then selling it across the globe despite the fact that they KNEW it could never be repaid?! I say the bankers get what they deserve – bring the system down and start over! Change the equation of WHO is in control!

There is only one true escape for the people of Ireland, that is to tell the bankers to pound sand! They, and all countries should exit the Euro and be producing their own currency (with quantity controls of course)! They should DEFAULT on current debts and let the holders of their debts go broke as they deserve.

Rumors are flying that Portugal is threatening to leave the Euro, again, there is strength in numbers and they should do so.

Meanwhile, back in the states we learn its pump and dump as usual, the headline says that Uncle Warren Buffett (hopefully soon to be called prisoner #669) dumped all his shares in Home Depot. Gee, I just happened to catch the shills on CNBC advising people to buy HD. The people are being robbed, it is blatant.

And the biggest robbery of them all is now UNDERWAY IN THE BOND MARKET. Nearly two years ago I was warning that eventually even muni bonds would be hit, and now they are in spades. You had a tech bubble, turned into a housing bubble, turned into another stock bubble, that turned into yet another stock bubble, and all the while the mother of all bubbles in bonds was growing and growing. Of all those bubbles, the bond bubble is the biggest and it just now may be starting to unwind.

This will massively harm most retirement accounts – IF YOU HAVE BOND FUNDS UNDER YOUR CONTROL, YOU HAVE BEEN WARNED. The people have been herded like cattle from one bubble to the next, only to have the bubble pulled out from under them. House prices never go down, and bonds are the most safe investment there is. Okay, take a look at these “safe investments,” one year charts:

Make no mistake, this means that the cost of funding debt for municipalities just got more expensive, and that is not a good thing for the economy, nor is it a good thing for your retirement plan.

PCK… that is the PIMCO California Municipal Income Fund. All the gains of the past year, GONE in about 3 days. How many real people in the herd do you figure made an exit before this occurred to their accounts? Not many I’m willing to wager… the majority will figure it out and sell just as the carnage is concluding – bankers will be long gone, far away from the crap they generated.

And those inflation expectations that QE2 is going to “save us” all and produce massive hyperinflation? Well, not exactly yet.

The PPI just came in flat month to month at .4% which is half of expectations that were looking for a .8% rise. And, excluding food and energy, the PPI FELL .6% which is opposite the direction of expectations. Gee, could that mean that what we need is QE3??? LOL, here’s Econoday:
Inflation at the producer was more moderate than expected in September with the core tugged down by discounts in motor vehicle prices. The overall PPI inflation rate held steady at 0.4 percent in October, coming in significantly below the consensus forecast for a 0.8 percent increase. At the core level, the PPI surprisingly fell 0.1 percent, down from a 0.1 percent gain in September and coming in lower than the median forecast for a 0.1 percent uptick. The core was led down by a 3.0 percent drop in passenger car prices and a 4.3 percent decrease in light truck prices

For the latest month, food slipped 0.1 percent after jumping 1.2 percent in September. The energy component spiked 3.7 percent, following a 0.5 percent increase in September. Gasoline surged a monthly 9.8 percent in October, following a 1.8 percent dip the prior month. For the food component, a majority of this decrease is due to an 8.1 percent drop for fresh and dry vegetables.

For the overall PPI, the year-on-year rate increased to 4.3 percent from 4.0 percent in September (seasonally adjusted). The core rate softened to 1.4 percent from 1.5 the previous month. On a not seasonally adjusted basis for October, the year-ago the headline PPI was up 4.3 percent while the core was up 1.5 percent.

However, producer price inflation is strengthening in earlier stages of production. Intermediate goods prices rose 1.2 percent in October following a 0.5 percent increase in September. Crude goods surged 4.3 percent, following a 0.5 percent decline the month before. On a year-ago basis, intermediate is up 6.4 percent (not seasonally adjusted) while crude is up 17.0 percent.

So, what do you figure this reading would be had the hot money not run up the cost of energy so severely? The sad fact is that the people are being sold a bill of banker goods. Inflation is NOT good for the vast majority of people, in fact DEFLATION is exactly what is necessary and good for most people! Houses, cars, food, tuition, medical care, etc. should all cost less! In fact, if you really want future prosperity without having the guts to throw the bankers out on their asses, then deflation is what you want.

Of course I say throw the bankers out on their asses! Prison for the ones at the very top – start yesterday. In the mean time, enjoy the ride, it’s getting real interesting.