Friday, August 20, 2010

Damon Vrabel - Global Empire and the International Banking Cartel (part 2)

Damon continues with his version of the way the world works – pretty close from my perspective, and of emphasis is that “Both political parties serve the cartel…”

Global Empire and the International Banking Cartel (part 2)

By Damon Vrabel

Last week I wrote an article explaining what I mean by the international banking cartel that operationally rules the economy–the Federal Reserve primary dealers. Some astute readers wondered why I didn’t report on the global regulatory institutions that have power over that cartel. Good question. And others asked for more clarity on the cartel itself.

Regarding the first question, I purposely focused on the cartel because so many people still don’t believe it exists due to false free market propaganda. If people don’t realize that a cartel of predatory usury institutions operationally controls the US, then why would they care about the regulatory framework over those institutions?
But the point is well-taken. The article might have implied those 18 dealer banks have ultimate power. Not at all. The key word in the above paragraphs is “operationally.” The dealers operate within a larger framework. They do not strategically rule over the framework itself. The ultimate rulers are the most senior private capital pools in the world who use the dealers as capital laundering machines and who create their desired framework through the central banks, IMF, BIS, and political institutions like the European Union and G20.

Since WWII, their desired framework has been to fuel global empire by milking the US population through the debt-dollar system centered around the Fed. Now that the US has been milked dry, things are shifting to a new milking center for the 21st century–China. Behind the scenes will be the senior capital pools currently in London and New York and the banking establishment in Switzerland, but on the surface Asia will emerge with profound power as China becomes the operational center of a new global empire based on a new global currency. At that point, the key dealers will simply plug into that new system. The world will think this represents the end of the US empire. But a US empire never really existed. More accurately the US was simply the latest host of the parasitic international banking empire that leeches off countries and plays them against each other. The parasite will quietly slither into Asia while using its media to blame the US host for the damage it has done.

Now a few points of clarity for those who want to better understand the cartel dealers:

- They are not equal. Some play long-term strategic chess as they’re aligned with the senior capital pools mentioned above. Others play the short-term profit game as the chess players allow them. Of the US firms, JP Morgan Chase and Goldman Sachs are on top. While Goldman may appear to be #1 since its people have literally run key government agencies for about 20 years, I’d suggest that JPM Chase is preeminent. Not only does it have the most power due to its derivatives position, which gives it the highest claim on capital in the US, but also it’s the merger of the old aristocratic interests behind JP Morgan and the Rockefeller interests behind Chase Manhattan. So let’s just say it wouldn’t be in your financial interest to bet against this bank. Its power was demonstrated after the crash of 2008. The media suggested JPM emerged unscathed because it was the honest, good bank whereas bad, greedy banks failed. Yeah, and I live with Puff the Magic Dragon. Ask yourself, after the Corleone family killed the leaders of competitive families in The Godfather, did Congress investigate the losing families, or did they investigate Corleone? So why did Congress investigate the losing banks!? You don’t blame the firms that were driven out of business. You look to the firm that benefited most. The fact is, the crash of 2008 was the trigger for a restructuring M&A transaction of the US economy, and had there been a tombstone printed in the WSJ, just speculating here, the lead bank would have likely been JPM.

- Some members change over time. These are the short-term profit players. For example, Countrywide was a dealer while it helped inflate the real estate bubble and BT Alex Brown was a dealer while it helped inflate the first tech bubble. Both of them were leaders of their short-term niche markets because of their privileged risk/cost position as dealers, and both of them were acquired by senior dealers for a deep discount once senior capital was pulled, bursting their respective bubbles and leaving the losses in the hands of junior capital.

- The cartel is international, so we no longer live in a world of independent countries. It would be more appropriate to view countries as administrative districts of the banking system so the financial elite class can extract value from the lower and middle classes. One of the key insights from the movie Braveheart was how the royal elite from different countries cooperated with each other against the masses. Today it’s more sophisticated. The mathematical, formulaic banking system aligns the financial elite in different countries together against their populations by managing them as digits on a balance sheet. It’s a simple matter of math, accounting, and system management, not conspiracy.

- Both political parties serve the cartel. It controls and profits from the private sector corporate system (typically championed by the political right) and the government welfare system (typically championed by the political left). Choosing between Democrats and Republicans changes nothing.

- Finally, it means conventional wisdom about money is false. The problem isn’t that our money isn’t gold-backed. The problem isn’t fiat money. The problem is that all money is hierarchically controlled as an asset to private sector institutions and elite capital holders who have the ability to call-in their chips, i.e. your bank digits, whereas it’s an interest-bearing debt to governments and the people. This has immense ramifications I don’t have room to address here. Government neither prints money nor causes inflation in this system (if it would like the original colonies did to escape British banker austerity and usury, some of the current unemployed would have jobs and those losing their homes in foreclosure might find some relief). Rather, the cartel controls all money and drives inflation/deflation cycles. It has driven consistent inflation for 60+ years. So we are now facing painful deflation, or hyperinflation if the government makes a key mistake, as the senior capital pools attempt to bring about the new banking/currency framework. If the money system isn’t changed, the emergence of the 21st century global empire mentioned above is only a matter of time.

Morning Update/ Market Thread 8/20

Good Morning,

Equities are down, the dollar is up, Euro is down, bonds are higher, and both oil and gold are down.

Things are getting interesting… The SPX has fallen below the 1070 level overnight – if we trade below that level during the day today then we will have broken the low of wave 1 down as well as breaking the neckline of a small Head & Shoulder’s pattern. Below is a 60 minute chart showing this pattern, the neckline is the double blue lines, and can be drawn a couple of ways – with the neckline low like I have it, or with it higher. Where it is drawn on the left side is irrelevant as the right side does not change and that is what gives us our target. The pattern is worth about 60 points, so a break of 1070 will validate the pattern and target roughly 1010:

Here's the same pattern with the neckline drawn differently - take your pick:

This 1010 target is very important because it means that the much larger H&S pattern’s neckline at 1040 will also likely break, and that will mean we are on our way to 860ish – a very long way down from here. Below is a one year daily chart showing this pattern. The 1040 neckline has actually already been broken by the last excursion down to 1010 – I do not think it holds this time around. This smaller/ larger H&S setup occurring at the same time as we are receiving Hindenburg Omens is exactly the same set up and experience that was occurring during 2008 prior to the plunge that occurred later in the year:

Speaking of Hindenburg Omens, did we get one yesterday or not? By the strictest letter of the law, no. But using some common sense, yes. This is what I said last night, and that is exactly what McHugh said as well… here are the details:

We use Wall Street Journal data for consistency when looking at market statistics. Their data does not match other data. Why all the data watchers don’t agree, I don’t know – sometimes they are so different, it’s no wonder people are confused. This is INTENTIONAL, they want you to be confused. They keep statistics and data to themselves so that they can sell it to you or to trade upon knowledge that only they have. And I’m going to SLAM the WSJ for being a big part of the problem! They are too intertwined in the marketing of Wall Street – they are NOT a neutral party. Just take a look at the articles on their “MarketWatch,” here you will find marketing that passes as journalism.

Typically, the 52 week highs and lows do shake out after the close as they recalculate which issues actually made new annual highs and lows – that adjustment is most of the time higher. But yesterday we were sitting on 75 new lows, and the late adjustment pulled it down to 69! Hmmm… yes, I am a cynic, and this makes me question, but I’ll leave it at that. In the end, the WSJ reports 69 new 52 week lows on the NYSE, 137 new highs. Yahoo, on the other hand, reported 92 new lows, but 249 new highs. Using Yahoo’s numbers would not have produced the Omen because the highs are more than twice the lows – but that’s not the case with the WSJ data. And just look at how different that data is… and here’s where we apply some common sense and look at the spirit of what a Hindenburg Omen is and what it’s telling us. Simply put, it’s telling us that internally the market is severely divided, it is not uniform. Rising stocks require uniformity – what this is saying is that some issues are under severe distress, those are leading the market, the others are following, and follow they will.

Here’s the math… 69 is equal to 2.18% of the issues traded on the NYSE. Rounded, it’s 2.2%, which is the Hindenburg minimum and all other conditions were, in fact, met. However, if you calculate 2.2% of 3,163 issues traded, that equals 69.58 issues – round that and it equals 70. Thus we are technically short by half an issue using that math. McHugh is calling it a confirmed Hindenburg with an asterisk, and I would concur.

We had a near Hindenburg last week, and since the April High we now have 13 90%+ panic selling days and 11 90%+ panic buying days, yesterday being 91.4% down volume. Again, this shows severe distress and nonconformity.

With a confirmed Hindenburg* now on the clock, the odds of further market declines is very high. The odds of a decline that meets the definition of a crash (as the 860 H&S target would), is 30% within the next 4 months. The odds of a large H&S pattern reaching its target is much greater than 30%, so combine what the market is saying and you get the idea.

Below is a terrific example of a large and classic H&S pattern in a stock issue showing the underlying stress and reality – Wells Fargo. This pattern will be verified with a close under the neckline, and the target is nearly $10 lower:

Note that the VIX is back above the big moving averages, and that the upper Bollinger is now turning up and out of the way:

There is no economic data released today, but it is Options Expiration, and keep in mind that we have another Monday morning ramp probability coming, so be on the lookout for HFT front running! Yes, it’s ridiculous, a sick and twisted market to go along with sick and twisted oligarchs who puppeteer sick and twisted “leadership.” But not to worry, they have Roger Clemens and will make an example of him! Can you say “distraction?” I thought you could.

Remember, the real ball game is found in the debt markets. Keeping your eye on the ball means watching the DEBT, who produces it, who controls it, and who profits from it.

Yesterday, the supposed “Leading Indicators” came in as expected at positive .1%. I’m here to tell you that the LEI is not leading. It is an archaic compilation that TRAILS by about 6 to 8 months. If you want leading, you are forced to pay attention to things like credit levels, sales tax data, shipping quantities and prices (Baltic Dry crashing). But if you want a modern leading indicator, the closest is the ECRI which continues to show that the economy is contracting at the greatest rate since WWII, now nearly 5%:

And the Philly Fed Manufacturing Index was a disaster to go along with the 500K jobless claims. It tumbled to -7.7 when a gain to +7 was expected. Again, this is showing contraction as most indicators are. And just look at the number of economic data points that have come in much lower than “expectations.” Make no mistake, the emperor wears no cloths. The myth of not fighting the Fed is exactly that. In the long run, they are the problem.

Yet no one in the “mainstream” will acknowledge that, of course. And now that it’s perfectly clear that people like me have been fundamentally right all along, the politicians are left to fall back on old tried and true techniques… distractions and playing the blame game. That’s what happens when you are a puppet who sold out to the debt pushers. You, and everyone else, are forced to live inside of a debt backed money box in which there are no good solutions. Only solutions that feed people’s productive efforts up the chain to the very few at the very top. Nothing will change until we change WHO is in control of our money – and that does not just mean electing new puppets.

Aug. 20 (Bloomberg) -- President Barack Obama and fellow Democrats have run out of time and tools to generate growth as a historic government intervention to rescue the economy runs up against the limits of the November election calendar.

So the contest with Republicans for control of the U.S. Congress has reverted to arguments that have traditionally defined the parties: the role of spending and taxes.

Democrats are reminding voters that their economic problems started under President George W. Bush, while Republicans are taking aim at the Obama administration’s handling of record deficits and high unemployment. The Bush administration’s tax cuts, due to expire Dec. 31, will be among the points of contention.

Acknowledging that they have run out of time and tools? That’s interesting.

I thought this Bloomberg snippet was also very telling on the real state of the economy, I don’t know how they let these past their Bull filters (oh, that’s right, they’re already short):
Aug. 19 (Bloomberg) -- For signs of the flagging health of U.S. consumer spending, look no further than Taiwan.

At Taipei-based Acer Inc., the world’s second-largest maker of computers, sales plunged 38 percent in July from a year earlier. Micro-Star International Co., a maker of boards that connect computer components, recorded a 15 percent drop.

Sales at Asian computer makers, which account for more than 80 percent of computer and parts imports into the U.S. each year, indicate American shoppers aren’t likely to boost the spending that accounts for 70 percent of the world’s largest economy. Already, consumption is growing at the slowest pace of any recovery since 1945.

Weren’t we just hearing how good sales of computers and high tech gear was? Hmmm, what happened to that? Remember, earnings season is all about MARKETING, not about business. It’s a game of setting expectations and then creating a reaction. We, quite unfortunately, have become a society who is terrific at generating propaganda and financial fluff, while really producing little that’s real and meaningful.

Meanwhile, Greece continues to fester while the people suffer – 70% unemployment in some regions now. The rest of Europe is a basket case, and none of this is going to get better until we structurally change. A productive society cannot be based upon marketing, fluff, and debt. We need to get real, and the place to start is by focusing on the root of the problem, the pushers of debt.

Steppenwolf – The Pusher:

Thursday, August 19, 2010

Morning Update/ Market Thread 8/19

Good Morning,

Equity futures ramped higher overnight, but fell sharply following the weekly jobless claims report which reached the 500,000 mark once again, well above the 480k consensus. The dollar fell, bonds are higher, oil is flat, and gold is up.

The previous week’s Jobless Claims came in at 484,000, but were revised higher to 488,000. That was bad enough, but the jump to the 500k mark takes us back up into the negative psychological levels not seen since October of last year. Here’s Econoday:
Initial claims are piling up, indicating that businesses are continuing to cut costs. Initial claims came in at 500,000 in the August 14 week for the largest total since November. The four-week average of 482,500 is the largest since December. A month-to-month look shows significant deterioration of 25,000 for a percentage change of nearly six percent. The Labor Department said special factors are playing no part in the data.

But not all the news is negative. Continuing claims continue to come down, down 13,000 in data for the August 7 week. The four-week average of 4.527 million is the lowest of the recovery.

Today's report points to trouble but not catastrophic trouble for the monthly employment report. Note the rise in initial claims betrays a lack of business confidence in the economic outlook. Stock futures are moving lower following the report while money is moving into the safety of Treasuries.

There is nothing good in the report, the initial claims average is rising, and the number of people on EUC (Emergency Unemployment Compensation) benefits jumped to 4,753,456, an increase of 260,105 from the prior week. There were 2,961,457 claimants in the comparable week in 2009, a year over year increase of 1.8 million people (not including those who fell off the rolls). Unlike the continuing claims, the four-week average of initial claims rose 482,500, an increase of 8,000 from the previous week's revised average of 474,500. Overall this report is the opposite of “recovery.”

Leading Indicators and the Philly Fed are released at 10 Eastern this morning.

Yesterday’s action produced a “spinner” for a candlestick after failing to break above the 200dma and double topping at 1100:

On the 10 minute chart you can see the double top. It looks like, despite the horrific Jobless Claims, that we will open about even. Note the lower RSI peak on the second equity peak, a short term negative divergence:

Until the lower trendline breaks (it may on the open), we are still in what appears to be a wave 2 bounce. We are in a position where a significant decline will likely trigger a second Hindenburg Omen observation – that decline may not come before options expiration which is tomorrow. Of course that all depends on what positions GS and JPM are holding, doesn’t it?

Looking on the 30 minute SPX chart, there is a potential smaller H&S pattern that may be developing (blue double line is the neckline) – in fact the double top yesterday may be the high for the right shoulder. Should we fall below 1070, the target would be approximately 1010:

Supposedly the last of our “combat” brigades have left Iraq, leaving behind about 56,000 troops still there. While I think they are playing a game of semantics, I am certainly happy to some troops leave…

Styx – Suite Madame Blue (America Patriotic):

Wednesday, August 18, 2010

Morning Update/ Market Thread 8/18

Good Morning,

Equity futures are roughly flat to slightly higher this morning (but falling into the open) after being down yesterday evening. Bonds are diverging from the up move this morning in stocks with prices that are also higher, the dollar is down, oil is down, and gold is roughly even from yesterday’s close ($1,226).

This morning the near worthless MBA Purchase Applications Index showed a 3.8% decline last week. However, the refinance index supposedly jumped 17.1% in one week, if you can believe that (I don’t). Rates had already hit extreme low levels, that is exactly what Bernanke wants as it does allow people to refinance to lower their monthly payments and thus have more money to spend servicing other debts, LOL. Seriously, this action is like trying to eek out the very last drop of credit into the system possible, a desperate act occurring in the endgame of a Ponzi scheme. Here’s Econoday:
Low rates fed a burst of refinancing applications in the August 13 week. The refinancing index jumped 17.1 percent to its highest level since May last year. Rates actually edged higher in the week but remain near record lows with the 30-year at 4.60 percent. Purchase applications fell 3.4 percent to end a welcome run of improvement. The composite index, reflecting the 81 percent share of refinancing applications relative to purchase applications, rose 13.0 percent.

These lower rates are giving the illusion that homes are more affordable than they really are. The low rates keep prices artificially high, and who, exactly, does that help? It helps the banks, that’s why the Fed is willing to use YOUR MONEY to buy down rates like they are doing with the latest version of (visible) quantitative easing.

Just imagine what would happen if rates were to normalize - it would be a disaster in a debt saturated economy, and that's why they can't allow it to happen.

I’ve been keeping a close eye on the real estate market and can tell everyone that prices in this area are still over-inflated, especially in homes above the mean. Comparing potential rents against expenses shows that buying a home to rent is still a losing proposition by quite some margin. This signifies that housing prices still have to fall, even at these historic low interest rates.

Local realtors point to the fact that you can buy a used home now for less money than construction cost… and that is true in some cases, however, it is construction costs that will eventually also be forced lower (some areas are more balanced than others – I am talking about the Puget Sound area of Washington State).

Adding to the constant flow of horrid news surrounding real estate, yesterday it was released that Bankruptcy filings rose 20 percent in the 12-month period ending in June. There were over 1.5 million filings in the year, the highest amount since the central bankers finagled the bankruptcy laws to be even more in their favor in 2005.

From the perspective of someone who recognized the bubble and took action, I want to see lower prices to produce a clean entry point. We are getting closer, and there are occasional distressed sales that come close, but the majority of homes and land that are on the market are listed at far too high of a price to create a market bottom. That’s a conundrum for the economy, it means that housing will continue to be drag – as we already know.

Yesterday’s up action finished what appears to be 3 waves higher from the recent low. Was that it for wave 2? It may have been, as it retraced a perfect 50% and fell back to the 38.2% mark right at the close:

Looking at the daily candles by themselves gives a possibly false bullish indication as this type of daily candle is usually bullish. It's when we look at the wave count and at the fibonacci levels that we can conclude it's possible that the retrace may be over:

The alternative is that wave higher was wave (a), and that the decline into the close was all or part of wave (b), with wave (c) to come. You won’t know until we descend below the prior 1069 low, but if we get beneath about 1084, then the odds are that we are moving down in wave 3 of 3 of 1. That means that the next down stroke should be powerful – there's a train a coming, I sure hope you’re ready…

People Get Ready Jeff Beck Rod Stewart

Tuesday, August 17, 2010

Kyle Bass Interview – “ZIRP is a Trap”

What follows is the most coherent and honest assessment I have heard to date about the fundamental situation we are facing. Had he used the term “debt saturation,” it would have been perfect. Where he talks about “Keynesian Endpoint,” he is referring to the same thing that the “Chart of the Century” (Diminishing Productivity of Debt chart) shows:

Interview begins at about the 2.5 minute point…

Must point out that CNBS using 53% of debt to GDP is a LAUGH and a JOKE. Totally Pollyannaish and very unprofessional… Kyle didn't even have to talk about off book GSE debt or any other games being played besides Social Security.

Morning Update/ Market Thread 8/17

Good Morning,

Equity futures are higher this morning, breaking above the range that we’ve been in for the past few trading days after making a new low yesterday. This action does bring into play the possibility that we created a wave 5 bottom yesterday to finish wave 1 of 3 down, and are now setting off on a wave 2 bounce. If that is true, keep in mind that it should be a sharp retrace that is meant to draw in as much money as possible.

Below is a 10 minute chart taken right after the open showing Fibonacci levels for a possible retrace. The 38.2% is just above 1090, and the 50% retrace (the most common) is at 1100. Note that a rise up to the 1090 level fills a large gap of which there are many from the wave 1 decline in many indices and issues:

Meanwhile, the dollar is slightly lower, bonds are slightly lower, oil is higher ($76), and gold is flat.

Housing Starts for July FELL from June, despite media headlines suggesting otherwise, and despite Econoday’s proclamations below. July came in at a paltry 546,000, down from June’s 549,000 (sorry, revising prior months down does not mean that a lower report than the previous month is an improvement "higher"! If this report is worse than the prior report, it is still worse, lol). Consensus was looking for 565k, making this yet another miss. New Home permits were also down, falling from 586k to 565k:
Housing improved in July – but well short of expectations. Housing starts in July posted a modest comeback, rising 1.7 percent after an 8.7 percent decrease in June. The July annualized pace of 0.546 million units came in below the median forecast for 0.565 million units and is down 7.0 percent on a year-ago basis. The July improvement was led by a 32.6 percent bounce back in multifamily starts, following a 33.3 percent drop in June. The single-family component-weighed down by inventories-declined 4.2 percent after dipping 1.7 percent in June.

By region, the gain in starts was led by a 3.9 percent rebound in the South. Other regions declined-the Northeast, down 25.9 percent; the West, down 4.9 percent; and the Midwest, down 1.1 percent.

Looking ahead, permits fell back 3.1 percent, following a 1.6 percent rebound in June. Overall permits stood at an annualized rate of 0.565 million units and are down 3.7 percent on a year-ago basis.

The housing sector improved modestly in July at the headline level. But it largely was a technical rebound in the multifamily component. Single-family construction is slipping as indicated by both starts and permits. Equity futures eased modestly on the news.

Housing improved in July? They must have gotten an arm twisting memo from the Administration or something… I’ll have to start checking Provda for better information.

The PPI data did rise somewhat in July, the overall number meeting expectations for a .2% rise, and the “core” rate exceeding .1% prediction by rising .3%. Here we are seeing hot money GAMES in both oil and food that are keeping these numbers higher than they would be otherwise. Oil had been run up despite rising inventories and falling demand – now we have food going parabolic on the back of manipulation and hot money. These large swings ripple through the supply chain making these readings swing. Keep in mind that government inflation numbers do not track housing well… actually they don’t track much of anything well, but here they are:
Inflation at the producer level was mixed as higher food prices caused a rebound at the headline level. The overall PPI increased 0.2 percent in July, following a 0.5 percent fall in June. The July boost matched analysts' forecast. At the core level, the PPI gained 0.3 percent, following a 0.1 percent uptick in June. The market median expectation called for a 0.1 percent rise.

For the latest month, energy posted a 0.9 percent decrease while food prices jumped 0.7 percent. Bumping the core rate up were light trucks, up 1.5 percent; autos, up 0.3 percent, and pharmaceuticals, up 0.7 percent.

The surge in food prices was fresh and dried vegetables, up 9.8 percent; fresh fruits, up 3.8 percent; and fresh eggs, up 19.4 percent. Within energy, home heating oil dropped 3.5 percent while gasoline declined 2.2 percent. Residential gas and electricity rose 3.1 percent and 1.2 percent, respectively.

For the overall PPI, the year-on-year rate increased to 4.1 percent from 2.7 percent in June (seasonally adjusted). The core rate rose to 1.5 percent from 1.0 percent the prior month. On a not seasonally adjusted basis for July, the year-ago the headline PPI was up 4.2 percent while the core was up 1.5 percent.

Manufacturers managed to get through isolated price increases to retailers but based on the CPI, costs generally are not being passed on to the consumer. That could change for food in coming months as margins are slim for retailers.

Here is where I point out that total consumer credit is down and still falling for the first time in modern history. Again, any price appreciation is not occurring due to American demand, it is occurring due to American financial engineering backed by government hot money injections into our insolvent financial system. John Williams at shadow stats produces a nice looking total consumer credit chart, note the shadowed portion of the chart and how it has rolled over:

He also just updated M3 which is now contracting at 5.4%, the second largest contraction in modern history (since WWII), only behind the 5.9% contraction recorded this June:

Industrial Production figures for July did rise from June, rising from .1% to 1.0%, beating expectations that were looking for a .6% rise (note the revision downward from positive to negative in June). Here’s Econoday:
Manufacturing - which has been a key source of strength for the recovery but faltered in June – showed significant resurgence in the latest month. Overall industrial production in July jumped 1.0 percent, following a revised 0.1 percent down tick in June. The July surge topped the consensus forecast for a 0.6 percent spike.

By components, manufacturing posted a 1.1 percent comeback, following a 0.5 percent decline in June. The boost was broad-based as manufacturing excluding motor vehicles increased 0.6 percent, following a 0.3 percent dip the month before. Rounding out industry group components for July, utilities output was up 0.1 percent while mining advanced 0.9 percent.

By market group, business equipment jumped 1.8 percent and consumer goods posted a 1.1 percent gain. Nonindustrial supplies advanced 0.4 percent and materials were up 0.9 percent.

On a year-on-year basis, overall industrial production slipped to 7.7 percent from 8.2 percent in June.

Capacity utilization jumped to 74.8 percent in July from 74.1 percent the prior month. Analysts had projected a 74.5 percent figure for July.

Today's manufacturing numbers should help offset some disappointment with today's earlier release of housing starts. With favorable earnings, equity futures remain up notably.

The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.

Look for this number to be revised downward as well. Manufacturing has been decimated in America in general, it is now a way less important component than it once was. And when demand for goods is down, actually manufacturing goods can lead to rising inventories if the citizens of the country don’t have access to jobs or credit. I would look for any rise here to be temporary until the nation’s debt saturated condition is markedly improved.

Friday produced a small change in the McClelland Oscillator that may not have been satisfied with yesterday’s action. That means you should be on guard for a significant bounce today, continuing the wave 2 bounce that evidently began yesterday morning. I don’t know how long to expect it to last, my suspicion would be that it should possibly finish sometime this week, but with options expiration on Friday, we may have to suffer through more fun and frustrating HFT hot money, dark pool fueled, adultless games.

Monday, August 16, 2010

Morning Update/ Market Thread 8/16

Good Morning,

What, no Monday morning pump? That’s different… Equities are down mildly, bonds are higher, oil is roughly flat, gold is higher, and interestingly the dollar is down, but it’s down mostly against an appreciating Yen. Below is a daily chart of the Yen, down on this chart is a rising Yen, that reflects a deleveraging condition as their GDP came in significantly worse than expected, only rising .4% when 2.3% was expected:

That lower growth rate is signaling that the entire globe is slowing in concert with the United States. The media is touting China as overtaking Japan as the world’s number two economy – but I simply do not believe the statistics from China, and while they may be close, they are in bubble territory.

Economic data is fairly light this week, but today the Empire State Manufacturing report was released. Interestingly, it is one of those reports that could be read either way, bullish or bearish, but I note that the media is reading it bearishly – wave C mentality. It is bullish in that the headline index number rose from 5.08 to 7.10, but bearish in that it missed the 8.0 expectation and was in the low side of the range. So, you could trumpet the rise or despair about the miss, in this case I’m seeing Bloomberg at least focus the headline on the miss. Here’s Econoday, note the negative opening tone which is very unlike them:
The Empire State report poses bad news for the manufacturing outlook. Readings on new orders, unfilled orders, and shipments all show month-to-month deterioration in August. If these readings are repeated in Thursday's Philadelphia Fed report, expectations will look for a step lower in the monthly ISM manufacturing report.

The Empire State's headline index did show improvement, but this index is the sum of a single subjective question on general business activity. Again, questions on key specifics for orders and shipments are negative. Manufacturing has been a central positive for the nation's recovery and a loss of momentum for this sector would raise the odds of a double dip.
The TIC report (Treasury International Capital) for the month of June was released this morning showing a net negative outflow of $6.7 billion. This is not a good thing for our nation, it means that we are not externally financing our trade deficit. On this report Econoday likes to trumpet the demand for U.S. Treasuries (a game with the central banks) while usually ignoring the TOTAL NET which includes other bonds and instruments. However, in another noted change for them, at least they mention the negative net, something they have not been doing in the past:
Chinese disinvestment of U.S. Treasuries extended into June and at an aggressive rate. Chinese holdings of Treasuries fell 2.8 percent in June to $843.7 billion, only slightly less severe than the 3.6 percent month-to-month decline posted in May. Offsetting Chinese selling was aggressive buying by Japanese accounts which increased their Treasury holdings by 2.2 percent to $803.6 billion. Still, Chinese Treasury selling is a reminder of the political clout that nation has in setting its own currency policy in opposition to U.S. export interests.

Net inflow of long-term securities into the U.S. totaled a solid $44.4 billion, reflecting nearly $34 billion of net foreign purchases of U.S. securities and more than $10.4 billion of net selling of foreign securities by U.S. residents. Again apart from China, foreigners were big net buyers of long-term Treasuries and, once again, were also big net buyers of Federal agency paper. In a negative though, foreigners were sellers of U.S. equities and aggressive sellers of U.S. corporate & other bonds. Total flows, which include short-term securities, came in at negative $6.7 billion in June vs. a $17.1 billion inflow in May.

The lack of Chinese buying continues and is significant – there is a reason they don’t wish to add to their positions and we should not be at all surprised as we certainly have not maintained our own fiscal discipline. Frankly, looking at America from the outside, it would look like a bunch of gangster banker thugs have taken over power and control – I wouldn’t lend us money, that’s for certain. Yet, debt continues to do well with our central banker game – that will work until it doesn’t and the doesn’t part will come when confidence is broken. For those who are claiming that there is no bubble in U.S. debt, I fly my B.S. flag at full mast. Here is the entire TIC report below:

TIC June

I am seeing many advisors turn bearish on the markets, and for good reason. Last week broke the key support levels of 1100 and then 1090. SPX 1070 is now acting as support and the lower daily Bollinger band is just beneath that level. Importantly, prices closed the week beneath both the 200dma and the 50dma.

On the weekly charts, the major indices produced a bearish engulfing candle after clearly breaking down out of that rising wedge. The target on the wedge is the base of the wedge, which means that odds favor us testing that area in the near future:

When I look at the 5 minute chart, I see what appears to be a pretty clear new down channel. If the boundaries are correct, it appears set for further decline soon, and we did make a new lower low in the futures already that was followed by a lower high this morning. Being a Monday the odds favor at least some attempt to regain composure, but the obviously weakening global growth prospects are now pretty clear to everyone, and the mood is obviously changing as people begin to prepare for what they know is coming.

From a count perspective, we are either launching into a wave 3 of 3 lower, or we are producing wave 5 of 1 of 3 down. Either way, it could be painful, so hold on, and keep in mind that this week is options expiration week.

With one Hindenburg Omen now on the clock, the odds are high that we could receive a confirmatory Hindenburg today with further declines. Friday had both too few new 52 week lows, and the new highs were more than twice the lows number. Today and tomorrow will be interesting to watch.

It won’t be long before fall and the start of school. September is traditionally the worst month for stocks, you don’t want to be late to recognize that or it might be you who is doing the learning!

Supertramp – School (Crime of the Century)

Sunday, August 15, 2010

Bill Black – On Bank Solvency and Mark to Fantasy Accounting – “A Really Stupid Strategy”

Simple truth telling...
“…there are trillions of dollars of unrecognized losses...”

“…It also means we are following a Japanese type strategy of hiding the losses and we know what that produces - a lost decade, which is now two lost decades. Your listeners and viewers if they are stock types, look at the Nikkei. It lost 75% in nominal terms and has stayed that way for 20 years. I real terms it lost 85% of its value. This is a really stupid strategy. And it's ours.”

Tony Robbins – An Important Note of Caution

Normally I would use the words of a celebrity as a contrary indicator, but not in this instance. Many people know Tony Robbins as a motivational coach, he is certainly not a financial advisor or economist… but he is well connected, and he has a message that I think is very legitimate and very well said. This video is 24 minutes long, judge for yourself. (ht Mr. Guest)

Bill Still – The Secret of Oz

Bill has decided to publish the Secret of Oz movie in high resolution for free. He placed two “commercials” within this version, I certainly hope that everyone will please lend your support to him by watching the movie, sharing the movie with friends and family, and by buying the CD or providing a donation so that more work like this can be created – thank you.

Here are Bill’s own words on why he feels it’s important to get the movie out at this time:
We are taking a significant risk by releasing this FREE version of "The Secret of Oz". This film was very expensive to make and constantly update. However, it is critical to get maximum distribution for the film as the debt money system further impoverishes every nation.

Therefore, please support this project with a small donation or order the latest hi-resolution copy of this DVD from our website:

Again, please consider donating $1, $3, $5, or more. We know that if enough of you watch for FREE, some will buy an original DVD.

So please, please tell your friends to watch this film for FREE!

The false solution -- an international gold-backed money -- will soon be offered as the only fix for the deepening global depression.

We will post versions with subtitles in many languages soon. If you can help translate, please let us know.

Again, please consider a small donation at:

Robert Prechter – 1987 all over again?

Prechter draws parallels between the current action and that of 1987 just prior to the crash which occurred in October of that year. At that time the dollar was slipping in the background as has been the case for the dollar since June, however, he is calling for the dollar to rally from here.

Below is a daily dollar chart on the left showing the recent trend, with the longer term trend shown on a monthly chart on the right:

He notes that the dollar created 5 waves up before turning down, as have I, and believes that it is likely to rise from this point due to the fact that a 5 wave formation tends to show the primary direction. Keep in mind that waves are a matter of duration – you may have a medium term uptrend within the context of a larger term downtrend and visa versa (ht RRH, and apologies for the leading propaganda).