Friday, April 9, 2010

Coffee with Joe – Debt Saturation

Joe and Pete, from the site Economic Stability.org, discuss “The Chart of the Century” and debt saturation. Joe is also on top of the fact that our debt money system is not sustainable and that we are entering the end game in regards to this version of our money system.



The articles that Joe refers to can be found at the following links, presented in the order in which they were written:

Velocity Zero

The Impossible Math of Debt Backed Money

THE Most Important Chart of the Century

Guest Post and More on THE Most Important Chart of the Century

CATO Institute Discussion - Is Obama Bankrupting America?

What follows is an interesting discussion pointing out how special interests influence politics and work to direct government spending – right into bankruptcy…

This is a not just an Obama problem, it is a systemic problem. The system has entered a parabolic growth phase in regards to government spending. This growth now must continue exponentially or the economy will suffer. It is simply not sustainable, and thus much suffering, more than is already occurring, is on the way. (ht Kevin)

Market Thread 4/9

Good Morning,

Equity futures are higher again this morning, dollar down, Euro up. Gold is higher and running after the breakout I showed was occurring last week and is now straight up for more than a week. Bonds have been backfilling the past few days.

No economic reports today.

There was another small movement in the McClelland oscillator yesterday so look for a large movement today or Monday – gee, no surprise there.

The Transports closed at a new high yesterday with the other indices not, this produces yet another divergence. Keep an eye on the VIX, it is very near the bottom Bollinger, showing complacency and potentially setting up a market sell signal if it were to close below that band and then rise back above.

As I watch the events of the world, I can’t help but think that there are meaningful events that are very close to rising to the forefront – far too much occurring, you can see the underlying tension in those events, they are happening all over the world. That tension is produced by the inequity of debt backed money that works to richen a few while enslaving the majority.

A common theme among current events is the reduction of American dominance. The overthrow in Kyrgyzstan, for example, has driven out a government friendly to the U.S. and placed in power one backed by Russia. The U.S. is being forced to withdraw from a base there from which we were conducting Afghani operations. Meanwhile Obama is taking pictures with the Russian President, wearing a huge grin over the nuclear reduction treaty, while being chased out of territory surrounding Russia.

Thanks again to those who have been donating to the PAC via the Fire the Fed campaign!

Thursday, April 8, 2010

4/8 Market Comment Thread

Good Morning,

First a big thanks to those who stood up and donated to the “Fire the Fed” program at SwarmUSA.com, I appreciate it, thank you! Your leadership sets an example for others.

Weekly Jobless Claims jumped from 439,000 to 460,000. The consensus was for a drop to 436,000. Since it’s higher, they simply wouldn’t be doing their job if they didn’t try to explain it away…
Highlights
The Labor Department is citing special calendar factors for an unexpected jump in initial jobless claims to 460,000 in the April 3 week vs. the prior week's 442,000 (revised 3,000 higher). The Labor Department is not only citing Easter as a distortion but also the Cesar Chavez holiday in California, and it is further warning that seasonal volatility will shake up the numbers through the next several weeks. Otherwise, according to Market News International, the department reports "nothing unusual."

Special factors give special importance to the four-week average which is at 450,250, up 2,250 from the end of March but down more than 20,000 from the beginning of March. How this month-to-month comparison tracks in the weeks ahead will shape expectations for the April employment report.

Continuing claims, which are lagging data for the March 27 week, fell 131,000 to 4.550 million for the lowest level of the recovery. The four-week average, down 36,000 to 4.648 million, is also the best of the recovery. The unemployment rate for insured workers slipped 1 tenth to 3.5 percent. In unadjusted data for the March 20 week, claims for emergency compensation fell by just over 300,000. The picture on the continuing claims is favorable though there is noise as the improvement in part reflects discouraged workers falling out of the insured unemployment pool.



While initial claims are down from a year ago, the number of people moving onto the Emergency rolls jumped from 2.2 million one year ago, to 5.6 million near the end of March.

Yesterday the Petroleum report showed another large build in crude oil.
Highlights
A surge in imports helped drive oil stocks 2.0 million barrels higher in the April 2 week to 356.2 million. Oil imports averaged 9.6 million barrels per day for the highest reading of the year and the third 9-million-plus reading in a row. OPEC output has been increasing well beyond quotas.

In contrast to oil stocks, gasoline stocks fell 2.5 million barrels reflecting steady demand that is now, at plus 1.7 percent, showing its strongest year-on-year rate of 2010. But refineries interestingly weren't concentrating on gasoline production but on distillate production, which jumped to its highest level of the year at 4.0 million barrels per day and made for a 1.1-million-barrel build in distillate inventories. Distillate demand, like that for gasoline, is steady but is also showing its best year-on-year rate at minus 0.2 percent. The rise in distillate production raises the possibility that refineries are ramping up production in anticipation of stronger industrial demand, perhaps in line with strength in factory orders and other manufacturing data.

I think the following chart of inventories says a lot about the real economy. Note that inventories peaked at the trough in March of last year, fell, but are now obviously building again.



The city of Los Angeles announced they are closing down city government two days a week. Two countries, Thailand and Kyrgyzstan had people attempt to overthrow their respective governments in one day yesterday. None of this was mentioned in the national evening news I watched last night.

Consumer Credit took a huge plunge in February, much larger than expected. There was a $9.5 billion decrease in revolving credit, plus another $2 billion decrease in non-revolving credit.

Please use this thread for daily comments, we cover a lot more information there including current market action…

Wednesday, April 7, 2010

Open Your Eyes

The following is a video produced by Jeff, a SwarmUSA supporter, to help bring attention to the cause. Jeff is targeting younger folks with this video, appreaciate spreading it around. Thank you, Jeff, people like you keep me hopeful, great job!

Morning Update/ Market Thread 4/7

Good Morning,

Equity futures are down again this morning, below is a 60 minute chart of DOW futures on the left and a 5 minute chart of S&P futures on the right:



The dollar is up, the Euro is down again following a large decline yesterday, oil is down a little, and gold is up, rising above $1,140 per ounce.

This morning the (must preface with worthless) MBA Purchase Index rose .2 percent following last week’s completely bogus 6.8% supposed rise. Today we return to the even more wild & crazy gyrations with their refinancing index falling 16.9%.
Highlights
The Mortgage Bankers' purchase index, up 0.2 percent in the Easter week, added slightly to prior gains. But mortgage rates are the report's big headline, jumping 27 basis points in the week for 30-year loans to 5.31 percent in what the report blames on the end to Fed purchases of mortgage-backed securities. The jump in rates dried up demand for refinancing with the index down 16.9 percent.

The jump in rates will hurt more than refinancing and is certain to limit demand for home purchases at a critical time for the housing sector which is trying to recover from a deep drop following November's expiration of first-round stimulus.
Ridiculous. Go ahead and keep track of what’s occurring without knowing the base, good luck. And that is as heavy as the “economic reporting” for the week gets. Interest rates rising? Yes, watch the long end of the curve, rates have definitely broken out and are signaling higher. Below is a 5 minute chart of the long bond futures showing that it formed a triangle over the past couple of days. It was entered from above and thus we would expect it to break lower producing even higher rates:



The number of people using food stamps increased for the 14th consecutive month with the number of people receiving them at a record 39,430,000! That’s equal to 12.8% of our entire population! No pictures of people in soup lines that extend around the block? There they are.

Yet Lord Blankfein at Goldman Sachs continues to maintain that they are doing “God’s work” and that they are simply doing what’s in their client’s best interest:

Goldman Sachs: No apologies

NEW YORK (CNNMoney.com) -- Goldman Sachs defended its controversial employee bonuses and multi-billion dollar relationship with AIG in its annual report released Wednesday, while downplaying its short-selling in the mortgage market.

Much of the letter was devoted to describing Goldman's (GS, Fortune 500) role in the financial crisis and the recession, praising its own "strong performance" in 2009, which it referred to as a "year of resiliency.

The letter, co-signed by CEO Lloyd Blankfein and President Gary Cohn, also mentioned that Goldman repaid its $10 billion debt to the government in June 2009, as a U.S. Treasury recipient of the Troubled Asset Relief Program.

The letter came after Blankfein and other Wall Street chief executives were subjected to intense scrutiny in a hearing before the Financial Crisis Inquiry Commission in January, when they were blamed for contributing to the economic crisis.

Goldman's (GS, Fortune 500) letter is peppered with the word "client," as the Wall Street firm continuously reiterated its role in serving its investors amid troubling economic times.

"Our first priority is and always has been to serve our clients' interests," read the letter, in one of its opening lines.

Not to mention their own best interests. The question, of course, is who is looking out for everyone else’s best interest? This is exactly where the game went bad. Government is supposed to look after the people’s best interest and is supposed to keep rogues under control. Obviously they have allowed Goldman unprecedented access to run government and thus all representation for the people has been usurped. A story that’s getting old already, I know. Yet nothing has changed, and that is why we are going to pay dearly.

And in Europe it was reported that their overall growth for the fourth quarter was stagnant:
April 7 (Bloomberg) -- Europe’s economy unexpectedly stagnated in the fourth quarter as companies cut spending more than previously estimated.

Gross domestic product in the 16-nation euro region remained unchanged compared with the third quarter, when it rose 0.4 percent, the European Union’s statistics office in Luxembourg said today. It had previously reported a fourth- quarter expansion of 0.1 percent. Corporate investment dropped 1.3 percent instead of the 0.8 percent estimated earlier.
Obviously debt saturated, the union there will have difficulty generating real growth until the debts are cleared. What growth is occuring here in the U.S. is nothing more than accounting fraud, government stimulus, and the effects of destroying one’s own currency.

We are about to enter another earnings season. I’m sure that we’ll see numbers with terrific year over year comparisons. Keep in mind when you see those comparisons what was occurring in the first quarter of ’09. Since that time stocks have zoomed to the moon, and while trailing P/E’s are coming down, they are still at historic levels.

What’s priced into the market, however, might not be as important as the crush of dollars flowing out of debt instruments. We’re likely to see some wild things occurring. One thing’s for certain, the underlying problems were never taken care of, the levels of debt and leverage in the financial system are still at extremes. Proper accounting alone would still bring down the system, and so it festers.

Yesterday’s down then up action produced a small change in the McClelland oscillator, expect a large price move either today or tomorrow. Today is the best fit for a turn date, and the major indices are carving out another potential rising wedge. Obviously those who keep trying to front-run any decline keep getting run over, once again proof that patience is a virtue. Waiting for broken trend lines is always a smart idea.

The VIX set a new low and is just above the bottom Bollinger Band. Call buying is reaching levels that normally produce turns.

You have probably noticed that as I got more active with the SwarmUSA site that my postings have diminished here at Economic Edge. I have been attempting to get volunteers to pick that up more and more, and have had some success there, but it still requires a great deal of attention. Thank you to all who volunteer! On Monday I posted a link here for the first time and ask for people to please join the recurring donation program - $3.50 per month to “Fire the Fed!” No one from here did. The only people to sign up for it so far are the same people who already volunteer their time.

What I do here I do for free and I do it with pleasure, my satisfaction is knowing that I may be helping people understand reality a little better. No high pressure marketing here, I consider that to be a part of the problem. I am disappointed in the response to my subtle requests for help, and even though the size of the Swarms has grown rapidly, I am also disappointed in the number of people who were actually participating in the Swarms.

And so we’re going to talk a little bit about BE-DO-HAVE one more time.

As previously mentioned, in order to HAVE and to maintain wealth, you must first BE and DO. This is why the lotto winner seldom holds onto their winnings over time – they skipped right to have.

Everyone’s seen the movie of the spoiled rich kid, right? People who inherit large sums of money often are not good stewards of it, and again, it’s because they didn’t go through the process of BE and DO. Not all are that way, of course, there are self-starters and many had parents who wisely forced their children to build the BE and DO foundation so that their wealth is not squandered.

Freedom works the same way. When born into it, it’s difficult to appreciate the base of how it was obtained and why it is. Most people in the U.S. have not truly had to BE and DO when it comes to freedom, we have just assumed it was a right. We stopped talking about it. We stopped teaching our children about it. Most importantly, we stopped taking the necessary actions to maintain it, and thus we are losing it.

As any parent with teenagers can tell you, you can tell them repeatedly what’s going to happen, but inevitably they won’t really get what you say until they make the mistake for themselves. Perhaps that’s just human nature and perhaps that’s a part of the psychology of economic cycles – I’m sure it is.

The game of reading bloggers write about the problems in the economy has grown very old to me. They either simply report, or they complain. If we’re lucky, we get a new angle on what we already know. Few talk about the real roots of the problems and even fewer still get at workable solutions. We all play the blame game, left/right, union/corporate raider, it’s all their fault and thus the answer must lie over there.

Imagine the power we would have if we all could get together and work on common ground instead. It was Gandhi who said, "A small body of determined spirits fired by an unquenchable faith in their mission can alter the course of history.”

Those people do exist, they are growing in numbers all the time. However, for the majority with regard to freedom we have become a nation of spoiled teens. We fail to realize that freedom begins with us.

I have been working on a concept for what I think will be an important book. I have been contemplating how I devote the time I have been to SwarmUSA, continue to write for the blog, and spend the necessary long hours required to get that done? Something has to give. The lack of response from my blog has made that choice easy. I will be making fewer posts here, and when I do post they will be more meaningful articles, not just playing the role of daily reporter.

My best writing time is early in the morning. Therefore I am temporarily going to only produce the morning updates when there are special circumstances that warrant it. I will return to them on occasion and certainly once the work on the book is done. Again, I feel that this book is important and that I can be most effective concentrating on it for awhile.

Rolling Stones - Time Waits For No One:

Tuesday, April 6, 2010

Morning Update/ Market Thread 4/6

Good Morning,

Equity futures are down this morning. Below is a 60 minute chart of the DOW futures on the left and 5 minute chart of the S&P futures on the right that show the overnight action:



The dollar is up sharply, while the Euro is down sharply on concerns that Greece’s bailout may be falling apart. Of course it’s falling apart, that’s because it makes no sense and the math is impossible. You cannot save a drowning person by throwing water on them, and you cannot save a person unwilling to help save themselves – more on that concept later. Bonds are higher, both oil and gold were lower overnight but just turned positive again.

Yesterday’s advance to new highs was on the lowest volume of the year. The divergence between price and volume has been in place all year, it is historic in nature, as in there has never been such a large and sustained divergence in modern history. Then again, we are witnessing the collapse of the largest debt bubble in history too and we need to be cognizant of the flow of funds.

The move down in bond prices, up in yields was huge yesterday and left large gaps in the charts. Today’s action indicates that we may get some backfilling. The move did break the very large necklines and long term trendlines on the longer duration charts.

Below is a 2 year chart of TLT, the 20 year bond fund. You can see the smaller Head & Shoulders pattern and the larger H&S pattern, BOTH are now confirmed, doesn’t matter if prices rise back up above the neckline. The green trendline you see is a long term uptrend line that is now clearly broken as well:



Below is a 6 month version of TLT, you can see that prices closed below the lower Bollinger Band and that the move came on very heavy volume. Unlike equities, here volume is confirming price:



The chart of the TNX (10 year Treasuries) is telling the same story. Yields went over 4% yesterday and closed just below. The large inverted H&S pattern is now confirmed, the target is now 6%, but it may take anywhere from a few months to a year or even two to get there, this is a very large pattern, it will take a while to play out:



What will 6%, a 50% increase in interest rates do? It will make houses about 20% less affordable. It will mean that all the people who have Adjustable Rate Mortgages that are rolling over soon, and there is a giant wave of them coming, are facing the prospect of attempting roll-over into higher rates with homes that are likely underwater already. This wave will put them even deeper underwater.



Yesterday equities rose, the dollar rose, oil rose, and gold rose. Bonds (DEBT) lost. That is all about the asset wheel. The supply of debt is a tsunami that has already crested and is now landing on shore. The government is but a sponge placed upon the beach, they cannot stop it, they cannot buy up all the debt.



No word on the emergency meeting on rates yesterday. That’s a weird one, only Market Watch carried it, there has been no release or otherwise mention about the meeting that supposedly occurred yesterday. If anyone sees anything on it, please forward to me, thank you.

Here’s a report on Office Vacancy rates that came out yesterday, the highest in 16 years:
NEW YORK (CNNMoney.com) -- Office vacancy rates are now at their highest level in 16 years, according to a report published Monday, as elevated unemployment levels across the country continue to temper the demand for space.

Roughly 700 million square feet, or 17.2%, of the more than 4 billion of available office space nationwide was unoccupied as of the end of March, according to the real estate research firm Reis. The last time office vacancies were this high was in 1994.

And we are learning more about the stupendous Jobs Report that showed 162,000 jobs were created. More than 48,000 were temporary Census workers, there were 81,000 phantom jobs supposedly created by new businesses using their “birth/death” model (that doesn’t work), and there where another 40,000 temporary jobs, meaning that in reality no meaningful jobs were created at all. And we require 150,000 to 250,000 new jobs each month just to stay even with population growth (depending upon who you ask).

We are now marking the one year anniversary of the return of Mark-to-Fantasy accounting standards. Stock market’s been going up ever since. Imagine that, letting the bankers who own the quant computers, operate “dark pools,” and run the “Federal Reserve” mark their debt portfolios to their own models. And stocks have been going up the entire time. Just wait and see what happens next, it’s what happens when you turn over the money power to private interests. The fact that we allowed it, and the fact that the people have done nothing to stop it means that we deserve what’s coming to us.

Those who think that gold and silver are honest money are going to get what’s coming to them too. They in fact are the opposite of “honest” money, they are the most manipulated commodities on the planet. Today it is very likely that there has been many times the amount of gold and silver sold on paper than exist in reality. My caution to you is that there could easily be a run on the metal should that fact be fully realized. If you are “hedging” via the metals, we are at the stage of the game where taking physical possession is simply the smart thing to do.

Using only precious metals to back our money? Utter catastrophe. The central bankers are the ones who hold the vast majority of it now, the private bankers have stolen and swapped away a large portion of our reserves from us and from the entire world. The IMF, for example, is now the world’s third largest holder of gold. If you create a gold money system, you are simply giving control right back to the same people who already control it via debt. Debt, gold, they don’t really care, they own you either way. If you are tired of being owned and you seek true freedom, you will find it, it is there waiting for you to take it if you dare.

Jefferson Airplane – Volunteers:

Monday, April 5, 2010

Morning Update/ Market Thread 4/5

Good Morning,

Equity futures are higher than they were on Thursday’s close, but lower than the Friday morning employment situation ramp. Below is a 60 minute chart of the DOW futures on the left and a 5 minute chart of S&P futures on the right:



The dollar is higher, bonds plummeted on Friday and are sitting right on support once again, oil is now pushing $86 a barrel and gold is higher as well.

The Senate went on recess again without approving another extension to the Emergency Unemployment benefits:

(CNN) -- Extended unemployment benefits will temporarily expire for thousands of Americans on Monday because the Senate went on its spring recess without approving a one-month deadline extension.
The extension, which had bipartisan support, would have cost about $10 billion, but a lone Republican, Sen. Tom Coburn, said no until the costs are offset.

The Oklahoma senator objected to a commonly used unanimous-consent agreement to pass the bill under emergency conditions, even if it increases the federal deficit. Coburn wants to eliminate additional government spending to pay for the bill.

"The legitimate debate is whether we borrow and steal from our kids or we get out of town and send the bill to our kids for something that we're going to consume today," Coburn said on the Senate floor.

It's the second time a Republican has blocked a so-called "emergency extension" of jobless benefits.
Kentucky Sen. Jim Bunning objected to adding to the deficit back in February.
This, after reading even more horror stories over the weekend about the condition of real Americans. Matt Taibbi wrote another good piece, Looting Main Street, well worth a read.

On Saturday the “Federal” Reserve announced an emergency meeting of the Board of Governors to be held today at 11:30 Eastern. Here is their meeting notice: Advance Notice of a Meeting under Expedited Procedures

This meeting is to, “Review and determination by the Board of Governors of the advance and discount rates to be charged by Federal Reserve Banks.”

That is different. They are going to consider raising rates because the employment situation report was so “good?” LOL, I can feel a huge mistake coming on. Real unemployment is over 20% according to Gallop, it is 22% according to John Williams and it’s over 17% according to the U6 data from our own government. Taxes are going up in spades, oil is rising to new recovery highs, both of which are anchors to the velocity of debt, rising interest rates will be another anchor to debt. Of course they never should have lowered them in the first place, but now that we’re saturated and rates have hit zero, ending the interest rate support programs AND actually raising rates will produce results that I think are going to be very, very interesting indeed.

We’ll have to see what comes out of this meeting. I note that the general and even business media did not pick this up over the weekend. Holding emergency meetings and performing intermeeting rate hikes is a sure fire way to keep the market skittish, it is not a confidence builder. However, investors need to be careful in thinking that it will produce an instant downfall in equities. Rising rates will mean falling prices for bonds. Many of the insiders are already gone. As more people begin to flee debt, they are forced to evaluate other asset classes to put their capital to work. If you go back and look at times of rising interest rates you will find that in general stocks RISE or are flat during rate raising campaigns. Stocks are falling generally during rate lowering campaigns. Below is a 3 year chart of the 10 year Treasury, TNX, with the SPX the black line in the background:



The correlation is clear over the past three years, however, if you go back further in time you will find that the correlation is not always so clear. And remember, we hit ZERO after rates descending for the past 30 years. During those 30 years, we blew the biggest credit bubble in the history of mankind and saturated the globe with debt and derivatives. Meaningfully higher rates will eventually produce negative results. Since all money is debt, if people flee from debt, this can cause our supply of money to decrease and could force governments into taking measures that are even farther outside the rule of law.

There is a turn date on April 7th according to McHugh. He is rightfully cautious about timing here, however. Obviously the markets are still dramatically overbought. There are new divergences setting in on the daily charts with prices drifting higher while RSI drifts lower. All the prior divergences remain and are historic in nature.

The economic data will be light this week. At 10 Eastern today is Pending home sales and non manufacturing ISM, it only gets lighter from there.

Hey, the boys are back to supposedly consider interest rates, that’s going to be of interest that’s for sure. If you would like to end their Reign of Terror, we have set up a “Fire the Fed” recurring donation program over at SwarmUSA. Your donation of only $3.50 per month can help us continue to spread the word and create leverage for politicians who are willing to fight back. There is much power in small numbers, please donate to the American Party PAC if you can by clicking on the “subscribe” button at the following link to “Fire the Fed,” thank you!

Subscribe in order to Fire the Fed!

Thin Lizzy - The Boys Are Back In Town:

Sunday, April 4, 2010

Jeremy Rifkin: More Empathy in the Global Economy?

Jeremy Rifkin, from the Wharton School's Executive Education Program, believes that we are on the cusp of a third industrial revolution. He correctly believes that society must make an empathetic leap FIRST, and that then technology and communication will combine to move the human race forward. This is another way, probably much more eloquent than me, of laying out the foundation of economies - rule of law first, only he talks in larger societal terms. This is the same progression in history, again stated more eloquently, that I have been talking about.

Terrific food for thought, those who are into sustainability should appreciate what he has to say. Don't get hung up on the details of global warming, focus on the larger picture that he is saying and stand back and look at the progression of mankind. We are at a crossroads. Are we going to slip backwards, or are we going to march forward? I say forward is possible, but we need to get busy. There are solutions out there, Freedom's Vision is a very large part of progressing to those solutions.