Wednesday, November 17, 2010

Morning Update/ Market Thread 11/17

Good Morning,

Equity futures are roughly flat this morning following yesterday’s very powerful 93% volume down day. The dollar and bonds are also roughly flat, while oil and gold are up just a little. It’s typical to pause after such a powerful move and it appears that we are moving sideways, possibly creating a flag, just above support at DOW 11,000.

The still worthless Purchase Applications report from the hypocritical Mortgage Banker’s Association showed a dramatic falloff in both purchase (-5.5%) and refinance (-16.5%) activity, for a composite loss of 14.4%. Here’s Econoday:
Purchase activity, after two prior weeks of strength, slowed in the November 12 week, down 5.0 percent according to the Mortgage Bankers Association. Refinance activity fell 16.5 percent. MBA blamed the drops, especially for refinancing, to a surge in rates including an 18 basis point jump for 30-year loans to an average 4.46 percent.

And there you have it. The surge in rates followed the QE2 announcement which means that the Fed’s actions are causing direct harm.

Housing Starts for October just released came in as a complete disaster. September was reported at 610,000, the consensus was looking for 590,000, but the actual came in at only 519,000! This number is only a fraction of peak, yet another depression era print:
Homebuilders appear to be more pessimistic about the housing sector as housing starts dropped significantly in October. Housing starts in October fell 11.7 percent, following a downwardly revised 4.2 percent decline the month before (previously up 0.3 percent). The October annualized pace of 0.519 million units was notably lower than analysts' forecast for 0.590 million units and is down 1.9 percent on a year-ago basis. The dip in October was led by a monthly 43.5 percent plunge in multifamily starts, following a 19.2 percent decrease in September. The single-family component slipped 1.1 percent after edging up 2.1 percent the prior month.

But looking ahead, the outlook is not so negative but is still soft. Permits edged up in October, rising 0.2 percent after declining 4.2 percent in September. Overall permits came in at an annualized rate of 0.550 million units and are down 4.5 percent on a year-ago basis. The rebound was led by the single family component which was up 0.5 percent while multifamily permits eased 0.7 percent.

Due to continued concern over excessive supply and potential additions from pending foreclosures, homebuilders remain extremely cautious about new construction with starts remaining new record lows.

Note how all of the sudden all the reports have turned negative with big negative revisions? Contrast that with how they magically levitated just prior to the elections. Nothing is real anymore in the economy and markets, it’s all a central banker led circus. In fact, I’m beginning to view the markets less in the technical sense and more in the banker sense – not political, BANKER. By this I mean that all one has to do is to look at whether the bankers are getting their way at robbing, hiding, and committing FRAUD. If they are getting their way, then the markets go up… when they want something (like Ireland to take on more debt) then markets begin to sink as a threat of imminent implosion if they don’t get their way, and markets do actually implode if they don’t get their way like in ’08 when mark-to-fantasy accounting was temporarily halted. This new market view sees politicians as simply an obscuring interface between the banks and the public who are being manipulated and robbed.

Meanwhile the latest holographic economic report comes with the CPI following the PPI in being both flat month over month, and in being lower than expected at the core level. The month to month consensus was looking for a .4% rise, and the actual came in at .2%. Less food & energy it was flat. Of course these numbers are contrived. Here’s Econoday:
Headline inflation worsened but only marginally and less than forecast. The overall CPI in October posted a 0.2 percent boost, following a 0.1 percent rise in September. The market consensus had expected a 0.4 percent boost for the latest month. Excluding food and energy, CPI inflation was unchanged for the third month in a row. Analysts had projected a 0.1 percent rise for October.

By major components, energy increased a strong 2.6 percent, following a 0.7 percent boost in September. Most of the latest gain was from a 4.6 percent surge in gasoline prices. According to the Bureau of Labor Statistics, 90 percent of the CPI increase came from the increase in gasoline. Food slowed to a 0.1 percent rise after gaining 0.3 percent the month before.

Weakness in the core was led by declines in indexes for new vehicles, used cars and trucks, apparel, recreation, and tobacco. Also, shelter rose only 0.1 percent.

Year-on-year, overall CPI inflation firmed to 1.2 (seasonally adjusted) from 1.1 percent September. The core rate in September slipped to 0.6 percent from 0.8 percent the prior month. On an unadjusted year-ago basis, the headline number was up 1.2 percent in October while the core was up 0.6 percent.

On the news, Treasury yields eased marginally. Today's report corroborates the view by many at the Fed that inflation is too low as the core has been flat for three months. Nonetheless, consumers are noticing higher gasoline prices and not noticing weak shelter costs. But other components in the core showing declines support the Fed's concern about price weakness in the economy. With lower than expected housing starts also out this morning, the odds of continued QE2 went up.

Food only rose .1%? Wow, they must be measuring price on planet Morgan.

And the problem with QE is obvious. They can’t control where the flood of money goes – where it’s not going is your wages or to pay down your debt – the two places it’s needed. Where it is going is straight out of the country, and into oil and other commodities where it works against the people who need those things to live. Businesses also use those things as inputs, and thus margin compression is occurring.

And so, the latest gimmick to manipulate and control the price of everything is to tamper with the margin requirement! The latest margin adjustment this morning comes to, get this, Irish debt! That’s right, for the second time in two weeks, Clearnet is increasing margin requirement for Irish government bonds (Clearnet Announces Management of Sovereign Credit Risk for RepoClear Service).

What effect will this have? Well, it will make it harder to buy Irish debt on margin, which could spike borrowing costs higher! This also happened just prior to the last surge. Is it intentional? You bet – it forces Ireland’s hand – remember, take the DEBT (“rescue”) or else!

Who is LCH.Clearnet?

“LCH.Clearnet is the leading independent clearing house group, serving major international exchanges and platforms, as well as a range of OTC markets. It clears a broad range of asset classes including: securities, exchange traded derivatives, commodities, energy, freight, interest rate swaps, credit default swaps and euro and sterling denominated bonds and repos; and works closely with market participants and exchanges to identify and develop clearing services for new asset classes.

LCH.Clearnet Group Ltd is owned 83% by users and 17% by exchanges.”

And who are those users and who owns the exchanges? Well, with a little bit deeper research we find that in 1980 “Ownership of LCH passes to a consortium of six British Banks.”

And there you have it. Take our DEBT OR ELSE (we crash the entire planet).

Note how completely obscure they show the ownership trail, and yet it comes right back around to the same bankers – it always does.

For now Ireland is holding out strong, as they should – GO PEOPLE OF IRELAND, TELL THE BANKERS TO PISS OFF! And let’s remember that one of the main reasons Ireland is so in debt is that the country came to the rescue of the BANKS! The people of Ireland didn’t get a say in that – they simply did it, indebting them without permission and without representation. Now the banks want the people to commit to paying new debt forever and ever. FORGET IT.

And if that’s not clearly happening here, then I don’t know what is. Yet we are so blinded we can’t even see it much less act on it like the people of Iceland and Ireland.

But our day will come – you see now we’re talking massive austerity as the money for more unemployment benefits and food stamps runs out. And if you haven’t read Mish’s latest on how more than 6 million jobs disappeared in the past year, then you should follow this link and see for yourself just how whack our job situation is and how underreported the statistics are: 6 Million Benefit Paying Jobs Vanish in One Year!

And disgustingly, yesterday late afternoon we learned that today the House is going to attempt a VETO override vote in order to implement HR-3808. This would create a stealth bailout of the banks who committed FRAUD by allowing interstate electronic signature. This must be stopped AGAIN, so please call your representative ASAP this morning if you can, and let them know in no uncertain terms that you will remember this treasonous act in 2012, just as you remember those who voted for TARP: Find Your Representative

This is just one of many attempts to sweep foreclosuregate under the rug… hold your state representatives feet to the fire as well, tell them to prosecute the banks for their FRAUD! Do not let them get away with it, we will NOT have a thriving economy again until the FRAUD is prosecuted!

And as sickening as that is, I almost couldn’t contain the puke this morning when I read the following:
Buffett to Uncle Sam: Thanks

NEW YORK ( -- Financial titan Warren Buffett praised the U.S. government's response to the financial crisis Wednesday, writing in an open letter addressed to "Uncle Sam" that Washington responded well to a "destructive economic force unlike any seen for generations."

"People will second-guess your specific decisions; you can always count on that. But just as there is a fog of war, there is a fog of panic -- and, overall, your actions were remarkably effective," Buffett said in an op-ed published in the New York Times.

After describing corporate America in September 2008 as a series of dominoes "ready to topple at lightning speed," Buffett paints the U.S. government as the backstop preventing collapse.

"Only one counterforce was available, and that was you, Uncle Sam," Buffett wrote. "Yes, you are often clumsy, even inept. But when businesses and people worldwide race to get liquid, you are the only party with the resources to take the other side of the transaction."

Members of both the Obama and Bush administrations earn specific praise from Buffett.

"In the darkest of days, Ben Bernanke, Hank Paulson, Tim Geithner and Sheila Bair grasped the gravity of the situation and acted with courage and dispatch," Buffett writes. "And though I never voted for George W. Bush, I give him great credit for leading, even as Congress postured and squabbled."

HURL! This from a man with no spine, a TRAITOR to his country – he took BILLIONS from U.S. taxpayers by getting in bed with Goldman Sachs and then lobbying for taxpayer backed bailouts. Buffett belongs in PRISON with the rest of the criminals, this type of public pandering is simply sickening. It is brainwashing, plain and simple, and it is the reason that the people of the United States are blinded by the bullshit instead of rising up to do what is RIGHT. Disgusting.

So, what is the market doing? Is it a wave 4 before higher, or is it going down in earnest? Too soon to tell, but wave 4’s usually don’t contain 90%+ down days coupled with sovereign debt problems and imploding municipal bond markets!

Yesterday’s selling came on good volume and was powerful. It stopped just short of DOW 11,000 and its 50dma. In the SPX weekly chart the double-top looks ominous. Remember, the wider they are, the deeper the coming decline:

The DOW triggered a new sell signal on the Point & Figure diagram targeting 10,500:

Yesterday the VIX broke out higher and closed above the upper Bollinger band. This sets up a market buy signal that will be triggered once the VIX returns back inside the Bollinger’s range:

This breakout in the VIX yesterday produced an initial bullish VIX P&F target of 33.5:

So, for now we just have to watch key levels, realizing that the markets are manipulated beyond words by the bankers. I see it as our DUTY to remove the bankers from power – we owe that to future generations.