Tuesday, November 23, 2010

Morning Update/ Market Thread 11/23 – “Other” Events…

Good Morning,

Equity futures are down significantly overnight following North Korea’s attack on the South and the ensuing return fire. Bonds are higher, oil is significantly lower, and gold is also down. The dollar has broken upwards out of its down channel and the Euro has broken down from its channel in what appears to be the beginning of a wave 3 movement. A daily chart of the dollar is left, euro is right:

Yesterday there was a small movement on the McClelland Oscillator, thus we can expect today’s movement to be large.

The attack from North Korea killed two South Korean soldiers and wounded more. It was an attack on a civilian populated island. I won’t try to report the details, but what concerns me most here is that North Korea is really a puppet of China – therefore China’s reaction to this will be key to watch. In some respects I read this as China letting their dog bite one of our dogs. Was it a signal to knock it off in regards to what we’re doing in the currency wars?

I don’t know and I sincerely hope that this does not escalate, however, we have a completely empty suit for a President. He is weak, he has proven to the world already that he will let just about anyone with more than a nickel in their possession run him over. He let our own generals run him over in regards to doing the opposite of what he said he was going to do, which is to bring our troops home from overseas - and the most dangerous thing is when politicians run out of their own tools and turn things over to their generals. The right combination is a leader who is tough – one that you KNOW is going to take you out should you prod him, but who is cool enough to know how to step in and prevent situations from escalating. Our current administration worries me in this regard – I view him as a banker puppet, they are in charge of what transpires and that’s the most scary part of all because they are narcissists and do not care about escalation as it is a profit center to them.

Economic events, as I’ve repeatedly said, turn into “other” events where the money problems are not generally recognized as the cause, yet real shooting wars consistently follow economic turmoil. Shame on us for not taking action sooner against the central banks – if we want to prevent wars, we need to put the people back in charge of the production of their own money the world over. Here we have an insolvent banking system the world over, we have a bankrupt United States, a bankrupt European Union, and an economically sunk Japan. We have weakened ourselves in the name of “security.” We have sacrificed our freedom, and we have done this to ourselves.

Hell, we can’t even be honest with ourselves! Quarter 3 GDP was revised UPWARDS (LOL X 14 trillion) from 2.0% growth to 2.5% growth on an annualized basis. What a sham, GDP is probably 40% overstated or more, most of it the result of financial engineering. But let’s not talk about it, let’s just kick the can down the road some more and let those “other” events fester. Here’s Econoday’s unconscious reporting:
The recovery is not quite as sluggish as previously believed. Third quarter GDP growth was revised up to 2.5 percent annualized growth from the advance estimate of 2.0 percent. The revision came in higher than analysts' expectation for 2.4 percent. The upward revision was primarily due higher estimates for personal consumption, producers' durable equipment & software, exports, and federal government spending. Partial offsets were seen in a lower estimate for residential investment, nonresidential structures, inventories, and a higher figure for imports.

Importantly, demand numbers were revised up. Final sales of domestic product were boosted to 1.2 percent from the initial estimate of 0.6 percent. Final sales to domestic purchasers were bumped up to 2.9 percent from the original figure of 2.5 percent for the third quarter. Importantly, PCEs growth is a stronger 2.8 percent, compared to the advance estimate of 2.6 percent.

Year-on-year, real GDP in the second quarter is up 3.2 percent, compared 3.0 percent in the second quarter.

On the inflation front, the GDP price index was unchanged from the initial estimate of 2.3 percent. The consensus forecast was for 2.3 percent.

The bottom line is that the recovery has regained some momentum with the consumer sector taking on a little more of the growth burden. Final sales to domestic purchasers are moderately strong and overall sales of domestic product should pick up if the weaker dollar boosts exports-a decent probability. But growth is still sluggish relative to what is needed for improvement in the labor market.

On the news, equities were little changed. Futures remained notably negative due to saber rattling on the Korean peninsula.

The only thing that grew in the 3rd quarter was the amount of money pumped into the system, that is it, the rest is pure bullshit.

Corporate Profits for Q3 came in showing a growth of 28.2% on a year over year basis, this is down significantly from Q2’s 38.7% yoy growth. While up significantly yoy, the pace of growth fell by nearly a third – and keep in mind that a year prior to Q2 of 2010, earnings were close to zero! Thus they could rise very little and the percentage rise looks impressive. Are these corporate earnings real? HELL NO! They are completely FALSE! A large percentage of these profits come from the financial sector who is marking their assets to their own models. This is accounting FRAUD, that is stacked upon various other frauds. And it’s not just in the financials, the FRAUD is rampant, the “profits” are false. Simply return to mark to market accounting and those “profits” would vanish. They are going to regardless, even if it takes a major war to do it.

Existing Home Sales are released at 10 Eastern.

The markets are still within the range of a wave 4. As long as prices stay above the SPX 1129 level, then the odds favor that there will be a 5th wave higher. McHugh’s read is that there would be one more leg lower to finish wave 4. But the notion of a 5th wave higher is hard to imagine with all the events in Europe and now in the Koreas. Should 1129 break, then we will know that a larger correction is in play – there’s still a lot of support between here and there, but we know that the entire run up in stocks has been false – easy come, easy go.

And so, that dollar move is very significant. Within that down channel there is only 3 waves – that means that it was the down move that was corrective and that the primary direction of the dollar in the intermediate timeframe is HIGHER (the dollar is already dead mathematically, that is the long term). That is the OPPOSITE of what the masses believe in the short run, and that makes this channel break significant.

The mass media is reporting that the “Economy is Picking up Steam” due to the false GDP report. The only thing that’s picking up steam are the tremendous piles of manure created by the printing press – now a computer. The people know this. They know that printing money will not get them jobs. China is fully aware that with each POMO infusion the value of their U.S. debt is diminished – they are being robbed by the gangsters who run America. Those gangsters are indiscriminate, they will rob everyone, they do not care as long as their fortunes or their safety are not threatened.

Tomorrow is “Opt Out” day for the TSA – I support that movement wholeheartedly.

Freedom and Security… They are directly connected, and yet the relationship between the two is widely misunderstood. You CANNOT have FREEDOM while pursuing security. You WILL GAIN TRUE SECURITY when you pursue FREEDOM.