Saturday, January 16, 2010

Marc Faber’s Latest Interviews…

Marc thinks that the consensus for higher in the near term and over the course of this year is probably incorrect. He sees a marked correction and the possibility of finishing the year in negative territory. Of course I would concur with that sentiment and note yesterday’s breakdown from the current rising wedge formations together with last week’s VIX market sell signal could signal that such a correction has either started or may be on the way soon.

His long range outlook has not changed – he sees the eventual demise of our current dollar system. Of course anyone who owns a pocket calculator can figure that out, if only they are brave enough to face the mathematical truth. (ht Keith Hoops)

Friday, January 15, 2010

Martin Armstrong - Creating the Floating Exchange Rate System; the Fate of the Dollar 2010 and Beyond…

Another interesting paper and good lesson in history in which Martin clearly points out the shortcomings of a gold monetary system and describes the checks and balances created within a floating exchange rate system. He sees serious consequences for our currency and offers that the year 2015 would fit in his cycle analysis as a potential year that a transition to a new currency system might transpire – hmmm, that’s very interesting. He also provides market analysis for the world’s major currencies.

Please take a minute to read his acknowledgement as well. First he thanks everyone for their support, then he goes onto say, “I believe we are at a crossroads where we are in serious danger of creating an economic disaster beyond belief.” Serious words not to be taken lightly. His comments add to the number of thinkers who are seeing real danger ahead.

Morning Update/ Market Thread 1/15

Good Morning,

Equity futures are down this morning, below is a 5 minute chart of the DOW on the left and a 30 minute chart of the S&P on the right:

The reason I’m showing the 30 minute chart is that there is either a double top in play or yet another inverted H&S pattern there. We’ll know if we break above 1,147 on the /ES, in which case we would target roughly 1,167 which is coincidentally our next higher pivot point.

Both the dollar and bonds are up strongly overnight, a combination that is usually not kind to equities. Both oil and gold are down.

CPI came in as forecast showing a .1% month over month growth. The year over year numbers are picking up steam, though, as we are now making comparisons against last year’s nearing bottom. The year over year CPI is now 2.8%, and with oil not coming down I would expect this figure to remain somewhat elevated for the next few months:
The Fed got its wish with the December CPI-inflation is subdued. Headline consumer price inflation eased to 0.1 percent from 0.4 percent in November and matched the market forecast. Core CPI inflation also was soft at 0.1 percent although higher than November's flat reading. The consensus had expected a 0.1 percent rise for the core CPI. Weakness in the CPI was largely in the housing component and especially the shelter subcomponent which was flat and reflected the weak housing market and high vacancy rates in apartments.

Food and energy components were up in the latest month but at a relatively moderate pace for both. Energy rose only 0.2 percent after a 4.1 percent surge in November. Food inflation firmed to 0.2 percent from a 0.1 percent rise in November.

Within the core, housing inflation was flat as was the shelter subcomponent. New vehicle prices fell 0.3 percent but used car & truck prices increased 2.5 percent as the cash for clunkers program took a sizeable segment off the used market. Recreation was down a sharp 0.4 percent in December while a modest 0.1 percent gain in medical care also helped keep the core sluggish. However, apparel rebounded 0.4 percent but followed two months of declines.

Year-on-year, headline inflation jumped to 2.8 percent (seasonally adjusted) from 1.9 percent in November. The core rate was edged up in December to 1.8 percent from 1.7 percent the month before. On an unadjusted year-ago basis, the headline number was up 2.7 percent in December while the core was up 1.8 percent.

Overall, lingering effects of the recession (including a sluggish consumer sector and very weak housing sector) are keeping inflation subdued. Outside of possible gains in food (freeze related) and energy costs (higher crude oil prices), this is likely to continue in coming months.

The Empire State Manufacturing Index rose more than expected to a reading of 15.92, while the consensus expected 13 and last month was only 2.55. Again with Econoday:
The New York Federal Reserve's Empire State report shows solid, accelerating January-to-December growth in the New York manufacturing region. The general business conditions index rose to 15.92 from December's 4.50 (any reading above zero indicates month-to-month growth; the larger the number, the faster the growth). The new orders index really shows improvement, jumping to 20.48 vs. December's 2.77. Shipments, which follow new orders, rose more than 12-1/2 points to 21.07.

Unfilled orders rose in the month, at 2.67 which doesn't sound like much but compares with steep month-to-month contraction in prior months including November's -21.05. With unfilled orders no longer contracting, manufacturers in the region will be drawing on their available capacity and will be less likely to cut workers. In the case of January, the report's sample actually added employees with the index at 4.00 vs. December's -5.26. Evidence that manufacturers are drawing on capacity is offered by the workweek index which rose to 5.33 vs. -5.26 in December. With greater activity, the supply chain will be tested and delivery times will slow as they did in the current report with a reading of 6.67 vs. -2.63 in the prior two months. Inventories are one factor unfortunately that has yet to respond in the region, at -17.33 to extend the cycle's long run of destocking. Employment really won't be improving until manufacturers begin to restock.

This report adds to wide evidence of rising prices for raw materials (especially energy products) as the prices paid index shows the most significant month-to-month change of any reading at 32.00. But manufacturers are absorbing these costs, lacking the pricing power to pass them through to their customers as the prices received index shows little month-to-month change at 2.67.

This report will raise expectations for solid gains in next week's regional report from the Philadelphia Fed, which if it also proves strong will raise expectations for a strong reading in the ISM national manufacturing survey. At 9:15 ET today, the Federal Reserve in Washington will post industrial production data, which includes a key manufacturing component, for the month of December.

The Industrial Production figures for December came in on consensus at .6%, this is down from November’s .8%.

Consumer Sentiment is released at 9:55 Eastern.

There were two significant earnings releases, Intel last night and JPMorgan this morning. Intel beat with much better earnings than forecast, their stock rose further, but had already been run up and has since given back all the gains on the report. Their profit margins were huge, which is great. This was accomplished largely on good prices for chips sold, but the number of chips sold was not that spectacular which may not help the rest of the industry as far as demand.

JPM “earned” $3.3 BILLION for the 4th quarter, that’s $1.1 billion per month! They claim that $1.9 B of it came from investment banking operations. I will only say this – were they to mark their “assets” to market they would have lost enough money that they would not survive. Truly a house of cards, their activities make Enron look like daycare. Yet, their average investment banker will earn roughly $400k this year. Well deserved? Well, I think the ones who deserve that pay are their lobbyists and their accountants.

Let’s talk about the technicals… Keep in mind that today is options expiration and that strange things can happen. Yesterday saw a small move on the McClelland Oscillator which means we can expect a large move today or tomorrow unless we get another small move.

Below is a 60 minute chart of the S&P 500. There is a clear small rising wedge forming that has perfectly contained prices over the past couple of weeks. Rising wedges are bearish and they are usually terminal formations. Sometimes they can overthrow the top boundary, but this pattern does look to be nearly out of time:

Next is a 60 minute chart of the DOW. Same rising wedge. Everything is overbought to the extreme. Volumes are still very low, again this is a historic divergence against price.

Next I want to quote Dr. Robert McHugh from his email update last night, I think he has some very interesting things to say. What he is saying is shocking relative to what the masses are being spooned. I respect his work immensely, he bases his findings on fact and sound logic:
I find it astonishing that ten years later, to the day, the Dow Industrials sit precisely 1,000 points under that closing top level from 2000. That closing top was 11,722.98. The intraday high today, Thursday, January 14th, 2010, and the high for the rally from March 9th, 2009, was 10,723.77. This is astonishing for the obvious reason that they sit an even 1,000 points apart. But, also astonishing is that after ten years, and after the quadrupling of the money supply, the Industrials are down 8.5 percent. Add to that, investment advisor bullish sentiment is currently at an extreme high. Why? Makes no sense. Because a propaganda machine called Wall Street has absolutely snookered the masses, has convinced, maybe even controlled, the Treasury and Fed into policies that the economy is Wall Street, not Main Street.

We believe the third major top of the past decade is imminent. Maybe it happened today. Maybe it comes in two weeks, maybe at our next phi mate turn date in February. The key here is not to pick the exact top. This top will lead to a stock market decline that could be far worse than the past two of the 2000 millenium. The first major decline started on January 14th, 2000, and bottomed October 9th, 2002, a 38 percent plunge. The second major top started on October 9th, 2007 at 14,164.53 (closing basis) and plunged to the March 9th, 2009 bottom at 6,547.05, a 54 percent plunge. The next plunge should start soon and lead to a decline over the next 2 to 4 years, possibly all the way to zero, in stair step fashion, not all at once. The massive Bearish Head & Shoulders tops forming all over the world suggest this downside target, and relentless decline, will accompany world-wide calamity.

Major tops usually are slow, rounded affairs. Prices move slowly into tops, and roll slowly out of them initially. Then prices start to accelerate lower, bounce back a significant portion of the initial loss, then fall hard.

For the year 2009, Commerce reported that Retail Sales fell 6.2 percent versus 2008. This was the largest annual decline in Revenue since government records were started back in 1992, by a mile. The only other year a decline occurred was 2008, down 0.5 percent. This is not evidence of a recovering economy, but rather of a faltering one.

I would not ignore this man’s work. His technicals underscore what I’ve been saying about debt saturation and how we are running out of places to force more debt into the system. In the beginning, the numbers compound slowly, but as you are nearing the end they compound faster and faster. We are seeing that now rocketing from the billions into the trillions. What should you do? Perhaps consider a little silver, gun blue, and gold? That or just try to run with the pack, LOL… Seriously, it’s time to be careful.

Bad Company – Silver Blue & Gold PLUS Run with the Pack:

Thursday, January 14, 2010

Bill Moyer’s Journal with Kevin Drum & David Corn…

This is a terrific interview with two people who understand how the financial industry is influencing politics. Their perspective is mostly correct and is exactly why political reform needs to happen along with economic reform.

This is a two part interview:

Part I:
Bill Moyer’s Journal with Kevin Drum & David Corn…

Part II:
Bill Moyer’s Journal with Kevin Drum & David Corn…

Small Business Economic Trends…

Another pretty sobering report on the state of small businesses. Take a look through the pages and I think you will find a big disconnect between what you see here and what is being trumpeted elsewhere. There is also a large disconnect from expectations and what actually transpires. I think that as long as our economy is at the point of debt saturation that disappointment will be the name of the game until the system is cleansed:

Three charts in this report stood out to me… This one shows a dramatic plunge in prices and that wages are being pressured:

This next chart shows the dramatic difference in planned versus actual prices. That’s tough if you own and run a small business:

Next is a chart showing aggregate small business earnings, now down well over 40%. I took the liberty of drawing in a red zero line on this chart:

Plenty of other good charts and tables are clearly presented inside the report, a good study.

Morning Update/ Market Thread 1/14

Good Morning,

Equity futures are down a little this morning, here’s the action on a 5 minute chart of the DOW and S&P:

The dollar is just about even after being higher overnight. Have you noticed that since the dollar began to rise from its recent low that the correlation between the dollar and equities has changed? The trade had been dollar down, equities up, but then became dollar up, equities up (they can only go up by order of the King). And now what little movement down in the markets has come has followed the dollar coming down. This is just a point of observation, the relationship sometimes changes and I’m sure will change again.

Bonds are rising, correcting their large downward move and the bounce is coming off support. Again, money flowing into bonds is not flowing into equities. Oil is down slightly, now back below $80 a barrel, and gold is up slightly at $1,141 an ounce.

The Retail Sales Report for December came in with a pretty large miss at -.3% when +.4% was expected for the month. Here’s Econoday:
Retail sales were unexpectedly down in December but somewhat offsetting were upward revisions for November. Overall retail sales in December fell 0.3 percent after a 1.8 percent surge in November. The December gain was far below the market estimate for a 0.4 percent rise. Excluding autos, sales decreased 0.2 percent after jumping 1.9 percent in November. The November numbers, however, were revised up from original estimates of up 1.3 percent for total and 1.2 percent for excluding autos. Excluding both autos and gasoline, the December number still was disappointing, declining 0.3 percent, following a 1.0 percent boost in November.

The December drop in overall sales was led by a 0.8 percent fall in motor vehicle sales (a relatively large component) and electronics & appliance stores, down 2.6 percent. Declines in December were broad based. However, gasoline station sales were up 1.0 percent after a huge 9.6 percent surge in November.

The December retail sales report should weigh on equities. Treasury yields were down on the release. Adding to market weakness was an unexpected rise in initial jobless claims.

Of course I don’t really care much for month over month data, however a decrease in the month of December should frighten the heck out of most businesses. The yearly change figures in the chart above are just NONSENSE and this Retail Sales report should be taken with a huge grain of salt. Again, the retail sales figures do not reflect sales at stores that have gone out of business and thus is inflicted with substitution/ survivor bias. Again, the only real measurement we have is sales tax receipts. So, even with substitution bias December was a down month… ouch.

The Weekly jobless claims report is yet another bomb shell. The experts were expecting initial claims of 437,000 and it came in at 444,000:
Weekly unemployment claims are mixed for the Jan. 9 week. Initial claims rose 11,000 to 444,000 in what is unfortunate news but news offset by yet another decline in the four-week average, down 9,000 to 440,750. The four-week average has declined for 19 straight weeks in what is an extremely powerful indication of improvement in the labor market. (Note claims for the Jan. 2 week are revised 1,000 lower to 433,000).

Another indication of improvement, though a less powerful one skewed by workers dropping out of the workforce, is a steep 211,000 drop in continuing claims to 4.596 million. The unemployment rate for insured workers slipped another notch to 3.5 percent. Data on emergency benefits show a decline while extended benefits show a rise.

Last week's employment report is a stumbling block for the economic outlook and greater improvement will be needed in coming claims reports to raise confidence for January's employment report. Today's report together with a weak headline for retail sales are sending equities and commodities lower.

The real story is that there are thousands of people exiting the workforce altogether as well as additional thousands who are running out of both regular and extended benefits. The December data is heavily adjusted for seasonality, of course, but just so you see the raw numbers from the DOL, here they are:
The advance number of actual initial claims under state programs, unadjusted, totaled 801,086 in the week ending Jan. 9, an increase of 156,165 from the previous week. There were 956,791 initial claims in the comparable week in 2009.

The advance unadjusted insured unemployment rate was 4.6 percent during the week ending Jan. 2, an increase of 0.4 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 5,988,940, an increase of 503,924 from the preceding week. A year earlier, the rate was 4.4 percent and the volume was 5,855,855.

Catch that? Real initial claims are over 800K, down some from a year earlier, but the total people in state programs receiving benefits ROSE, even with the thousands falling off the rolls. The participation rate is plummeting and without that, the unemployment rate would be MUCH higher:

And yet, the children in the White House put out these infuriating LIES:
2 million jobs from stimulus - White House

NEW YORK ( -- The economic stimulus program has boosted employment by 1.5 million to 2 million jobs, the president's chief economic adviser said Wednesday.

The Obama administration estimate includes both jobs directly funded by stimulus money, as well as those created indirectly by companies buying supplies for stimulus projects, people spending their stimulus tax cuts and the like.

The report, by the Council of Economic Advisers, is likely to spark sharp reactions from the Obama administration's critics who argue that the $787 billion package has failed to deliver on its promises.

To be sure, the economy has continued to lose jobs despite stimulus - shedding 85,000 in December. The administration, however, maintains that things would have been much worse without the American Recovery and Reinvestment Act.

SAVED 2 million jobs? Well, there are liars and then there are children who when they talk say nonsensical things. Which is occurring in this Administration? Both. Here’s your 2 million job gain… try a nearly 6 million job loss in the past year alone, and that’s with all their bad data:

Oh, but it “WOULD HAVE BEEN WORSE” had it not been for the stimulus, LOL! NO, it is this ugly BECAUSE OF the stimulus! Here’s a lesson in economics for the children: Once debt saturation occurs, adding more debt into the system only leads to future defaults and to higher unemployment. There is a phase transition that occurs as saturation levels are reached. Debt based stimulus that used to work to add jobs reverses and does the opposite once incomes can no longer support debt beyond that which it already carries. Proof? The chart below shows that for each new dollar of debt added to the economy, 15 cents is SUBTRACTED from GDP:

Citizens became saturated with debt first, then corporations and local governments. The Federal government has actually been saturated for quite some time, yet they are pretending that they still can carry more. They cannot, and thus they have begun piecemeal default via “Quantitative Easing.” Still, they continue to add more and more debt:
December deficit nearly doubles

NEW YORK ( -- The U.S. government posted a deficit of $91.9 billion in December, nearly double the shortfall of a year earlier and marking the government's 15th straight month in the red, the Treasury Department reported Wednesday.

The shortfall brings the total deficit for the first quarter of fiscal year 2010 to $388.5 billion, up from $332 billion during the same period last year.

It was the second consecutive December the government spent more than it took in. In December 2008, the deficit was $51.8 billion.

While December's deficit was less than the $120.3 billion in November, that's no reason to celebrate. The government typically rings up a surplus in December as year-end bonuses boost high individual withholding and as companies make quarterly income tax payments.

The deficit remained high in the first three months of the fiscal year because while spending was down by $3.6 billion from the same period last year, tax revenue fell even more, dropping by $59.7 billion as individual income and payroll taxes declined.

Interest paid on the debt in December was $104.6 billion -- 34% of federal outlays for the month.

"No surprises, the government obviously continues to run a very large deficit," said Gus Faucher, director of macro economics at Moody's "But that's necessary as a response to the recession and the financial crisis."

The Treasury estimates the annual deficit will climb to $1.502 trillion for the full fiscal year 2010, up from $1.42 trillion in 2009.

And these are their funny numbers that don’t count future obligations or wars! But did you catch that we are now beyond the point where our interest payments on the current debt take more than ONE THIRD of our income? Hello? And that’s with funding our debts with short term extreme manipulated low interest rates. Just imagine once interest rates rise. They can’t allow it, and thus they must pour/print even more to prevent that and the monetary death spiral is in full motion.

And the worse than worthless credit agencies – no, wait, they are worse than worse than worthless, they are damaging and destructive to our economy as they wait for failure to occur before even mentioning anything. Fitch came out and warns that the U.S. AAA rating is in jeopardy… no, really? Nice timing. I have a news flash for Fitch, it is already FAR beyond mathematical recovery:
US must cut spending to save AAA rating, warns Fitch

Fitch Ratings has issued the starkest warning to date that the US will lose its AAA credit rating unless acts to bring the budget deficit under control, citing a spiral in debt service costs and dependence on foreign lenders.

Brian Coulton, the agency's head of sovereign ratings, said the US is shielded for now by its pivotal role in global finance and the dollar's status as the key reserve currency, but the picture is deteriorating fast enough to ring alarm bells.

"Difficult decisions will have to be made regarding spending and tax to underpin market confidence in the long-run sustainability of public finances. In the absence of measures to reduce the budget deficit over the next three to five years, government indebtedness will approach levels by the latter half of the decade that will bring pressure to bear on the US's 'AAA' status", he said.

Fitch expects the combined state and federal debt to reach 94pc of GDP next year, up from 57pc at the end of 2007. Federal interest costs will reach 13pc of revenues, meaning that an eighth of all taxes will go to service debt. Most fiscal experts view this level as dangerously close to the point of no return for debt dynamics.
No, current debt is FAR beyond 94% of GDP, even with our trumped up and way overinflated GDP numbers. And, we’re not just close to the point of no return, we are so far from it, we can’t even look back to see it.

Import and Export prices came out basically flat month over month, but indeed we are now seeing large gains year over year, especially in import prices as the cost of oil is now far above where it was one year ago. This produced a year over year increase of 8.6%!
Headline import prices were unchanged in December masking yet another significant rise in non-petroleum import prices, which rose 0.5 percent following a 0.6 percent gain in November and a 0.5 percent gain in October. Pressure appears in the industrial supplies ex-petroleum component which surged 2.2 percent vs. plus 2.8 percent and plus 2.2 percent in the prior two months. Foods, feeds & beverages also show pressure, up 0.9 percent for a second month in a row. But the pressure -- and this is key -- is yet to show up in final goods where import prices for consumer goods were unchanged and capital goods were up only 0.1 percent.

On the export side, prices rose 0.6 percent on top of a 0.9 percent jump in November. Here the pressure is centered in agricultural prices which jumped 2.0 percent following November's 4.0 percent surge. Note though that two days of extreme price erosion for agricultural commodities, due to Tuesday's quarterly USDA report that shows much greater than expected output, points to a big easing in agricultural export prices for January. Export prices of finished goods, like on the import side, show no pressure, unchanged for both consumer and capital goods.

Imported inflation, largely the result of the weak dollar, is a significant but still latent risk for economic policy. Until this pressure begins to emerge in finished prices, the outlook for a long spell of zero interest rates for Fed policy will remain intact. Consumer prices will be posted tomorrow with producer prices to be posted on Wednesday.

Yes, pouring billions of hot dollars directly from the banks into oil and equities sure is working well to help the economy and those who are debt saturated with wages stuck in neutral and rolling down hill.

Yesterday the 1,133 pivot acted as support, 1,168 is the next higher pivot. Divergences continue to increase, the DOW is outperforming now and made a new high while the other indices did not. There is also a new divergence present on the hourly RSI. The DOW continues to rise within the confines of its smaller rising wedge, bouncing perfectly off the bottom of it yesterday - an overthrow would not be unexpected:

Don’t worry though, the children in the Administration, as reported on the Cartoon News Network, say they are creating millions of jobs, everything is going to be alright now…

Bad Company – Alright Now:

Wednesday, January 13, 2010

Gerald Celente on King World News…

Always uplifting, unfortunately it’s hard to argue with a lot he says… (ht Jeff)

King World News – Gerald Celente

Morning Update/ Market Thread 1/13

Good Morning,

Equity futures are up a little this morning following yesterday’s fairly sizeable decline that was somewhat stealth as the Industrials held up far better than the overall market. The chart I’m presenting up top is a little different today, it doesn’t just show the overnight action, it is a 15 minute chart that clearly shows the divergence between the DOW on the left and the S&P on the right. The NDX and RUT were weaker than both, losing about 1.3% each:

The dollar is down substantially this morning, bonds are also down, oil and gold are both up slightly after being routed yesterday. Commodities were hit very hard across the board, with all agricultural commodities big losers. Wheat was a huge loser and corn futures actually went lock-limit down, losing more than 7% on the day yesterday and are down ANOTHER 4.3% this morning.

About 84% of the volume was on the downside yesterday, a pretty negative day that saw a ton of money flow into bonds and saw the defensive large caps fare better. It was a very important day technically because of the market sell signal given by the VIX. This is a rare event, there have only been three in the past four years and all have resulted in some type of sell-off that began within a few days of receiving it. Below is a 3 month chart of the VIX, you can see that we closed a daily bar entirely outside of the lower Bollinger Band which is a 2 standard deviation indicator. The act of returning back inside is the market sell signal, that happened yesterday:

Again, this does not necessarily mean that descent will happen right away, and there are instances further back in time that did not lead to a significant decline, but the odds are pretty good and certainly should not be ignored.

Here’s a snapshot of the RUT in a 15 minute view. Does that look like a Head & Shoulders pattern? Why yes it does, and it is fairly sizeable:

The S&P and NDX also sport the same type of pattern, although not as clean as the Russell. It’s worth keeping an eye on for sure.

Today the very worthless MBA Purchase Applications Index came out with their usual nonsensical report. Get this, even Econoday is left scratching their heads:
The Mortgage Bankers Association's purchase index rose 0.8 percent in the Jan. 8 week while the refinance index jumped 21.8 percent. MBA's data have been choppy in recent weeks and have not offered a clear take on mortgage demand. Interest rates have backed up slightly in recent weeks but remain very low with 30-year loans averaging 5.13 percent.

So, the overall “index” is up .8%, but the refi index jumped a stunning 21.8% in one week. Realllly? Okay, whatever. Econoday doesn’t bother to produce a chart for this anymore, because they CAN’T. An index reported only in percentage change on a weekly basis with no raw numbers to base anything upon? WORTHLESS, and the NAR should be ashamed of themselves for their attempts to manipulate and spin the public. This type of data “reporting” and manipulation should be illegal if it’s not already.

The petroleum report is released at 10:30 Eastern, and there’s a 10 year bond auction today that could have interesting, if not also entirely manipulated, results. Manipulated how? Oh, nothing special, just Primary Dealers and their shell companies placing false bids in order to show false demand and fool people into believing that everyone in the world wants to buy more of our debt, thus not scaring away those who really do. Gee, Nate, is all the data manipulated in your mind? YES. The above statements are fact, not supposition. There are very few data sets anymore that are reflective of reality, tax data is probably the best.

Own California bonds? Were you counting on Schwarzenegger to secure Federal money to help the state out of its ever-growing black hole of a budget? If you were, you just got burned as California is being rebuffed:
Jan. 13 (Bloomberg) -- California’s hopes are fading for federal help in closing a projected $19.9 billion deficit that has caused the lowest-rated state’s borrowing costs to rise 26 percent in three months.

“We recognize they have enormous problems,” David Axelrod, senior adviser to President Barack Obama, said in an interview. “But we can’t solve all of those problems from Washington.”

Investors are growing more concerned that California, the world’s eighth-largest economy, will repeat last year’s fiscal crisis that forced it to use IOUs to pay bills. With Governor Arnold Schwarzenegger seeking $6.9 billion in federal assistance to narrow the deficit, the extra interest paid on the state’s 10-year bonds over AAA-rated municipal securities has risen to 1.34 percentage points from 1.06 points in three months.

Think holding municipal debt will be as rewarding in the future as it has been in the past? Think again.

But what amazes me here, and is becoming ever more apparent to the states and to the public, is how much money can and is readily produced to bail out banks and financial businesses, but how NO MONEY can be found to help out the states or the citizens who comprise this nation. It is almost as if they are trying to incite revolt, isn’t it?

Not that I favor bailing out the States by just handing them money! I don’t. Governments are simply far too big, their budgets are out of control. That said, there is really no way out for states whose economy and citizens are all saturated with debt. There is simply no escape until we get serious about cleansing out the debt along with those who push it. That time is coming, I’m doing my best to give it a push.

But boy, does Obama ever have tough love for some unknown 20 banks:
Jan. 13 (Bloomberg) -- President Barack Obama will announce his intention to impose a fee on more than 20 of the country’s largest banks and financial institutions to help recoup taxpayer bailout money and trim the federal budget deficit, an administration official said.

The fees, expected to be spread over as many as 10 years, will be based on the leverage or amount of liability each firm has, the official said, who spoke on the condition of anonymity.

The administration is still working out the final details of the levy, which will be part of the fiscal 2011 budget submitted to Congress in early February. The bank levy has been part of discussions since August among Obama and his advisers about ways to recoup taxpayer bailout money and reduce the deficit, advisers said.

The financial industry has been a frequent administration target. Obama has leaned on banks to boost lending to small businesses and homeowners facing foreclosure, support his plans for revamping financial regulations and discourage bonuses that encourage excess risk taking.

“They’ve had a year to figure out how they wanted to participate in the nation’s recovery and they don’t somehow seem to have gotten that message,” said Anita Dunn, former White House communications director.

Who is it that hasn't gotten the message? Are your words fooling the people into believing that your ACTIONS have any real meaning?

How about people who don't understand that you can't force more debt onto people and entities whose incomes cannot support the debt they currently have?

Of course the banks would never dream of passing any of those fees onto the American people, or just creating more credit dollars to pay for it, would they? No, didn’t think so. But hey, Obama got to stand at the podium once again and badmouth the very industry that supports him and all the politicians, his Administration having more former central bankers in it than any Administration in history. Can’t you just hear him singing, “Bad, bad company…”

Bad Company – Bad Company:

Tuesday, January 12, 2010

Morning Update/ Market Thread 1/12

Good Morning,

Equity futures are down sharply this morning following two big misses in earnings reports to kick off earnings season. Below is a chart of the overnight action in DOW and S&P futures:

The Dollar is up slightly, bonds are breaking upwards showing the flow of money back away from stocks, both oil and gold are down.

Below is a chart showing the results of two bad misses, Alcoa on the left and Electronic Arts on the right. Alcoa was expecting 6 cents per share profit and lost 28 cents, claiming that the loss was only due to one time write-offs and that otherwise they had an “operating” profit. This is the game they all play, and one of the reasons that P/E based on “operating” profits looks healthier. Funny, but those one time write offs seem to occur every time, and again, when total losses are accounted valuations are at all time historic highs for the entire market. ERTS just plain old fashioned missed offering no excuses really, they simply did not sell the games they were expecting over the holiday season. Below is a chart with AA on the left and ERTS on the right showing how their reports were received:

Both the worthless Goldman ICSC and Redbook showed declines in store sales in the past week over the week prior. ICSC was down 3% wow, but they claim up 1.7% yoy. Remember, their statistics are FALSE. They do not capture substitution bias, that is stores who go out of business are not captured and they do not measure overall sales. If you want to know what’s happening in the overall real market, then you need only look at this chart from the Rockefeller Institute showing the compilation of sales, income, and property tax data for all 50 states through quarter 3:

The International Trade data came out with a wider than expected trade deficit of $36.4 Billion, -$35 Billion was consensus. Here’s econoday’s report:
The international trade deficit ballooned in November due to sharply higher petroleum imports and to a lesser degree nonpetroleum imports. But U.S. manufacturers will be happy that exports continued their uptrend. The overall U.S. trade gap widened to $36.4 billion from a revised $33.2 billion shortfall in October. The deficit was larger than the consensus projection for a $35.0 billion shortfall. Exports gained another 0.9 percent while imports surged 2.6 percent. The worsening in the trade deficit was largely due to an expansion of the petroleum deficit, which came in at $19.9 billion compared to a differential of $17.8 billion the previous month. The nonpetroleum gap grew to $27.1 billion from $25.6 billion in October.

Exports were led by foods, feeds & beverages which jumped $1.2 billion in November, followed by automotive and capital goods excluding autos. Consumer goods and industrial supplies exports declined.

Imports were up mainly on a $2.1 billion jump in industrial supplies of which just over half was crude oil. Imports of consumer goods and capital equipment also were strong. Imports of autos and foods, feeds & beverages edged down.

The widening in the petroleum deficit was due to sharply higher prices as the number of barrels imported declined. Physical barrels imported fell 5.2 percent, following a 9.6 drop in October. The price of imported oil jumped to $72.54 per barrel from $67.39 in October.

Year-on-year, overall exports in November improved to minus 5.5 percent from minus 18.6 percent in October while imports increased to down 2.3 percent from down 8.5 percent the prior month.

Today's trade report technically cuts into fourth quarter GDP growth. But looking further out, other than the higher oil prices, the news may actually be good. Exports are boosting U.S. manufacturing. And higher imports indicate some improved optimism on the part of businesses that domestic demand is picking up. The report should be favorable for equities based on this apparent optimism but some may focus on lower fourth quarter GDP growth and higher oil prices. Also, earnings season is a key concern and Alcoa disappointed after yesterday's close. Bond traders should be concerned about the spike in oil prices and its implication for near-term, if not long-term, inflation. The wider trade will be weighing on the dollar.

Just over half of the jump in imports was oil. Keep in mind that this is NOT because we imported more oil, but instead it is because oil is measured in dollars and the cost went up. Thus, this means that the import and export statistics do not really track trade of stuff as much as they report changes in currencies! If they measured and reported changes in actual units you would have a far more meaningful report. Note that the chart above is a Year over Year chart… it would appear that recovery is well underway, but that is not true! The numbers are still negative year over year, this means that imports and exports are still FALLING compared to the disastrous 2008, and that’s measuring with a falling dollar. Again, count the number of idle ships.

Chinese imports up 46%? Riiight. Here’s the latest Baltic Dry Shipping Index, wake me up when it has made a new high:

Tomorrow the worthless MBA Purchase Index is the only economic report, if one can even elevate it to “report” status. I call it selfish children playing with statistics.

There was yet another small movement in the McClelland Oscillator yesterday. That was the 5th one in a row, something that I have never seen before. There were a couple of instances in the past few years with 4 and most of those were followed with large down days. There is another rare occurrence that just transpired… the VIX fell dramatically yesterday, well below the bottom Bollinger Band. Once it returns back above the line, it is a RELIABLE market sell signal, and as of right now, it is well above the line. Do not ignore this signal! In the past 4 years it has only been triggered 3 other times, and all of them led to significant sell offs in the market, the last one worth more than 1,000 DOW points. I’m going to go out on a limb here and state that should we not see a noteworthy decline start within the next few days, that the markets are being tampered with – a very dangerous thing, they need to relieve their far out of balance pressure.

The divergence in the advance decline lines is growing stronger, you may remember the charts I showed a couple weeks ago. This is also telling us that fewer and fewer stocks are rising compared to the market, something else we have seen at all major tops.

Below is a 60 minute chart of the DOW. You can see the very clean rising wedge pattern. This is the small one, it is climbing the lower boundary of the much larger one:

There are several charts that simply do not look healthy. The XLF jumped up in parabolic fashion to fill a gap in the $15.40 area, produced a hammer yesterday and is down today.

Here’s yesterday’s chart of Alcoa. Gap higher into a black hung man. When you see these, they are shouting “SHORT ME!”

Here’s the chart today, that is a CLASSIC shooting star:

Don’t look now, but many charts are getting way ahead of themselves. Alcoa, this song is dedicated to you:

Bad Company – Shooting Star:

Monday, January 11, 2010

Morning Update/ Market Thread 1/11/10

Good Morning, boy, that’s a lot of ones!

And is it any surprise at all that yet another Monday finds equity futures higher? Usually when a pattern that is so obvious that everyone sees it occurs, it ends at that very moment of recognition. This is a sign of health! It means that the game is not rigged. Guess what… our game is rigged. Here’s what McHugh said about this phenomena last Tuesday after last Monday’s gain:
Since the March 9th, 2009 closing low at 6,547.05, the Dow Industrials have had 30 "up" Mondays (or Tuesdays after a Monday holiday) out of a possible 43, in other words, have been up 70 percent of the time the day after a weekend. Further, 16 of the past 18 Mondays were "up" days, or 89 percent "up" days. 80 percent of all the dollar gains from March 9th, 2009 came on those 30 Monday up days. There were 212 trading days since March 9th, 2009, and 30 Mondays accounted for 80 percent of price gains. I don't know about you, but I find that bizarre. Why? Because only 58 percent of all trading days (Monday through Friday) since March 2009 were "up" days. We should not have seen this many "up" Mondays, and further, we should not have seen 80 percent of all dollar gains for the rally from March 2009 on just 30 "up" Mondays. Think about how much money you could've made buying DIA calls late Friday, and selling them late Monday, since last March. Wouldn't you love to see an investigation of which large Money Center banks made extraordinary profits doing this, or other similar trades including futures?

Why yes I would love to see an investigation, but it’ll never happen. That’s because the government itself is behind it. They are the ones creating money and directly underpinning the bond market. Any child who has ever watched water flowing knows that when you put enough of it into one section then it soon begins to leak out into others. Of course that is their intent. So, forget about the investigation, let’s just go right after it and end the Fed, throwing them out on their asses for destroying what was the greatest free market on Earth. Oh, and now it appears that we are 31 of 44 up Mondays since the Great Deception began back in March of last year, and are up 17 of the past 19 Mondays, just a whisker under 90%!

Here’s a look at the action beginning on Friday afternoon and into this morning on the DOW and S&P. Note that the ramp began about 20 minutes before the close on Friday as people were front-running this now blatantly obvious trend that we have been aware of now for literally months:

The Dollar is back down to the 77 area, bonds are up slightly, oil is up although coming off its highs, and gold gapped higher.

There are no economic reports today. Later in the week we’ll get retail sales, CPI, Consumer Sentiment, to go along with the standard bag of weekly misreports.

But WOW! The U.S. has clearly been outdone as the world’s leading producer of false statistics and worthless paper. Yes, China reported over the weekend that their exports are soaring 17%! And if that’s not impressive, then try on their 56% gain in imports!!! Or how about their 46% gain in auto sales during 2009, a year following the collapse of their stock markets! "December sales of passenger cars, trucks and buses rose 92 percent to 1.4 million." Ninety-two percent in one month? I can't stop laughing! Statistics that are so patently false, that those who have bought into the “miracle” would be advised to RUN, not walk, from this investment miracle. I know, I know, everyone and their brother thinks you should cast your money into that miracle and I say let them knock themselves out.

Oh, did I mention that productivity in the Martin household sector is up 126% in the past week! It’s true, heck, our domestic imports are up a whopping 186%, while our exports are up a tremendous 333%!! Go ahead and one up that, Comrade Enron!

And the politicians back in America are talking about playing shameful and disgraceful games with your retirement accounts. People still don’t realize that the ERISA laws that made 401k’s possible were actually never designed to be a primary means of saving for one’s retirement. They morphed into that as companies realized that they could use them to dump their fixed retirement plans, and the people were snowed into believing this was some miracle that would allow them to get rich at the mythical and magical never ending stock market compounding of 8% per annum, exactly what your stock unprofessional told you has happened over the past hundred years. What he failed to tell you was that only the indexes with substitution bias actually perform that well, and that individual stocks in time actually go DOWN. That’s right, stocks have a life cycle and they die – or at least they are supposed to be allowed to die. This is why there is only one stock remaining of the original DOW Industrials, GE. And GE would have died had the government not bailed out their reckless financial unit. Your advisor also didn’t tell you that you began investing in your now 200.5k after the peak in the Baby Boom Generation, and well after the math of debt had begun to go exponential, exactly the wrong time to be buying in - but hey, you can't possibly "time" the markets, right, just like Greenspan or Bernanke can't see a real estate bubble. So, corporations ditched their fixed retirement plans, reduced their expenses and pushed the management of money onto individuals. This is like telling a 5 year old to go make their own soap, mill their own wheat, and then go balance the check book, because most people simply are not prepared to handle that money management task.

Now that the game of Quantitative Easing is supposedly nearing an end (yeah, right), the criminals running the Obama Administration want to annuitize 401k’s and IRA’s by creating MANDATORY “R Bonds.” Oooo, R Bonds! That sounds exciting and cool, got to have that! The average American, though, and they know this, doesn’t even have a clue that the word BOND actually is just another word for DEBT. And why do you suppose that the Administration would like to force your retirement savings into DEBT? Why that would be to finance their wild and out-of-control deficit spending, of course. Is this going to be a good thing for Americans at this time, while interest rates are at ZERO? NO, there is no worse time to invest in bonds than when interest rates are artificially at zero. As rates snap back higher, bonds will fall in value. This is yet another fleecing and yet another reason why Americans should support our plan for Freedom’s Vision. It would absolutely put an end to all such nonsense.

Want to hear another good one? Financial stocks are clearly too cheap! That’s right, get ‘em while they’re hot! Hey, if you can’t trust Bloomberg, who can you trust? Am I right? Huh, well am I?
Jan. 11 (Bloomberg) -- No U.S. industry has faster profit growth than banks and brokers, and no group is more hated by investors.

Analysts say earnings at financial companies rose 120 percent in the fourth quarter, accounting for all of the income increase in the Standard & Poor’s 500 Index, and will triple by 2011, climbing four times as fast as the market. Should the estimates prove correct, the shares are trading at a 15 percent discount to the index, data compiled by Bloomberg show.

That’s not enough for money managers burned by the 84 percent drop in the stocks from February 2007 through March and more than 160 U.S. bank failures in the past two years. Financial companies are the least-favored equities, according to a Bank of America Corp. survey of investors with $617 billion in assets that showed 38 percent of 123 money managers are holding fewer shares than are in benchmark indexes.

“The stocks are clearly too cheap,” said Mark Giambrone, a fund manager who bought PNC Financial Services Group Inc. and Bank of America stock for USAA Investment Management Co., which oversees about $74 billion in San Antonio. “There may be some bumps in the road ahead, but for the most part those are reflected in the valuations.”

Did you catch that?

"...accounting for all of the income increase in the Standard & Poor’s 500 Index."

That's what I thought. In other words, mark-to-fantasy accounting accounts for ALL of the income increase in the broad market.

Oh yeah, their “profits” will triple all right. In the same way that Enron’s profits were growing exponentially despite no real business initiatives. They conveniently forget to mention the reason for the aforementioned 84% plunge – the very same reason that financial “profits” are back. Namely mark to fantasy accounting. Again, buy into that at your risk. Isn’t doing the same thing but expecting different results the very definition of insanity? Thought so.

As I’m typing the market is falling after the open. Are the big players taking advantage now that everyone’s finally suckered into the Monday up game? We’ll find out by the close.

There’s really not a lot to say about the technicals that you haven’t already heard. Right now we still have two rising wedges in play, one smaller and shorter term and the much larger one that encompasses the entire “B” wave rally since last March. Markets still way overbought and historically divergent. Support remains at 1,133 on the SPX, with overhead at 1,168.

For those who believe all the Chinese and financial market "miracles," false statistics and outright lies, I say go take a gander at the miles of parked cargo ships, at the plummeting price of ship lease rates, at plummeting credit statistics, at plummeting sales tax receipts, and then I say...

Aerosmith - Dream On:

Sunday, January 10, 2010

Uncle Jay Explains the News...

Yes it's time once again, boys & girls, for your Uncle Jay to explain the news. Just be careful not to take his money knowledge to seriously... okay?


It is a rare prospect throughout history that in one person’s lifetime they see the progression of their money; from thousands, to millions, then billions, and finally trillions. There is no currency in the history of mankind that has ever successfully made the transition to quadrillions. The U.S. Dollar will not be the first. The math of debt to income will not allow it and will produce “events” that interrupt the current parabolic growth. Supporters of Freedom’s Vision would prefer not to allow such “events” to unfold. We are getting close. Should we fail to take action and affect real change soon, then we will undoubtedly be living through such historical events. Truly, this fight could be the last fight.

In the video that follows, money expert, Bill Still, producer of The Money Masters and The Secret of Oz, explains how the British successfully used “Tally Sticks” as their currency for 726 years, more than seven times longer than our current debt backed system! This system of debt free, government-issued money gave rise to the greatest empire in history:

Bill Still – The History of Non Debt-Backed British Tally Sticks…

The following paper explains our reasoning for implementing political reform together with monetary reform. It is not the last word, there is time to influence the wording and conditions upon which we are formulating our brand of political reform. We believe it strikes at the heart of the issue, special interests and their money influencing politicians:

Freedom's Vision Political Reform - This May Be the Last Fight

Click here to download a printer friendly copy: FREEDOM’S VISION POLITICAL REFORM - This May be the Last Fight…

Below is a terrific Bill Moyer's Journal interview with two people who understand how the financial industry is influencing politics. Their perspective is mostly correct and is exactly why political reform needs to happen along with economic reform.

This is a two part interview:

Part I:
Bill Moyer’s Journal with Kevin Drum & David Corn…

Part II:
Bill Moyer’s Journal with Kevin Drum & David Corn…

Velvet Revolver – The Last Fight: