Monday, January 10, 2011

Morning Update/ Market Thread 1/10

Good Morning,

Equity futures are lower this morning with the dollar flat, bonds higher, oil higher, and gold flat. Oil now has pressure on it due to the Trans Alaskan pipeline closure as well as problems with a Canadian oil sands processing facility – both evidently may take some time to repair.

There is no economic data today and it is light until the end of the week when we get a look at the government’s cooked PPI and CPI data.

Congresswoman Giffords shooting this weekend was certainly a tragedy – sad. But this is exactly the type of thing that I mean when I say that “other” events follow financial crisis. “Huh?” You say. Let me connect the dots…

The right blames the left, the left blames the right. Morons like Paul Krugman and many others blame the “rhetoric.” The rhetoric from Congress, the rhetoric from bloggers like me, the rhetoric from right wing radio… and thus, they claim, that if we only calm down the rhetoric and just stop talking about all our problems so passionately then surely things like this would never happen… right?

And thus once again we can’t discuss the real roots of the problem and why the rhetoric is so lively at this juncture in history to begin with! It’s lively because there is pressure on everyone and all levels of government. That pressure should have never happened and it is the result of greedy private banks who stole the people’s right to control the production of money. The people are thus distracted by petty politics as the pawns get manipulated by the chess masters who reside mainly at the top 5 too big to fail banks.

As Gerald Celente likes to say, “desperate people do desperate things.” Remember the guy who flew his plane into the IRS building?

And this shooting is just one link in a very long chain of events. Greed bubbles lead to financial crisis which place great pressure on the members of society – people lose their jobs, their homes, their sense of identity and purpose. Can’t talk about it, though, least someone do something radical. And I’m not saying this boy wasn’t completely screwed up in his mind… but what I’m saying is that the anti-rhetoric rhetoric is also delusional. We need to talk about the issues, but we need to talk about the ROOTS of the issue and not just the symptoms. If you treat only the symptoms without treating the root problems, then you will be forever treating symptoms.

And so financial crisis leads to pressures of all sorts both internal and external to a country. Externally we are seeing great pressures mounting as a result of DEBT, FRAUD, and manipulation. These pressures eventually turn into currency wars, trade wars, and then shooting wars. The currency wars are ongoing and we are beginning to see trade wars. Brazil just offered a warning:
Brazil Warns Trade War Looming

Brazil has warned that the world is on course for a full-blown “trade war” as it stepped up its rhetoric against exchange rate manipulation.

Guido Mantega, finance minister, told the Financial Times that Brazil was preparing new measures to prevent further appreciation of its currency, the real, and would raise the issue of exchange-rate manipulation at the World Trade Organisation and other global bodies. He said the US and China were among the worst offenders.

“This is a currency war that is turning into a trade war,” Mr Mantega said in his first exclusive interview since Dilma Rousseff, Brazil’s new president, took office on January 1. His comments follow interventions in currency markets by Brazil, Chile and Peru last week and recent sharp rises in the Australian dollar, the Swiss franc and other currencies amid an exodus of investment from the sluggish economies of the US and Europe.

Gee, isn’t that exactly what I’ve been saying would happen and is the chain of events? Sounds like Mr. Mantega is feeling those pressures and understands the chain of events that follow.

But when you remove the bankers and cleanse yourself of the debt and fraud they produce, then you have a chance at regaining prosperity… if you, however, cede to the mobster pressures to take on more DEBT, then you have troubles. Note that Iceland has now already returned back to economic expansion after they told the bankers to pound sand:
Iceland offers risky temptation for Ireland as recession ends

Iceland has finally emerged from deep recession after allowing its currency to plunge and washing its hands of private bank debt, prompting an intense the debate over whether Ireland might suffer less damage if adopted the same strategy.

Iceland's budget deficit will be 6.3pc this year, and soon in surplus: Ireland's will be 12pc (32pc with bank bail-outs) and not much better next year.

The pain has been distributed very differently. Irish unemployment has reached 14.1pc, and is still rising. Iceland's peaked at 9.7pc and has since fallen to 7.3pc.

Iceland's president, Olafur Grimsson, irritated EU officials last month when he said his country was recovering faster because it had refused to bail out creditors – mostly foreigners.

"The difference is that in Iceland we allowed the banks to fail. These were private banks and we didn't pump money into them in order to keep them going; the state should not shoulder the responsibility," he said.

And there you have it. Every nation in the world should do the same – tell the bankers to pound sand. That is the only way to fix the root of the problem.

There’s a lot of pressures mounting in the world today, the common denominator is that the bankers have created debt-backed money to the point of global saturation. Once saturated and interest rates at zero, the only course left is to flat out print money. That doesn’t do anything positive, it only makes the pressures worse in the long run. The U.S. is printing, Europe is printing, China is printing, Japan is printing, the entire debt saturated world is printing. And that means that “other” events are going to continue to gather steam and pace. The depth and pace of events will be directly correlated to how bad the underlying math is. It is the underlying math that places pressure on real people – their incomes are not enough to service their debts as the same people are responsible for their personal debts, corporate debts, and governmental debts across all levels of government (city, county, state, federal). The debt cannot possibly ever be repaid and thus major change and major events are coming. Want that change to come with the least amount of violence? Change WHO controls the production of money.

It is significant that this weekend states are pressuring banks regarding foreclosuregate and the effects of their fraud on state pension plans. Those plans are in BIG trouble, they are riddled with fraudulent investments and still carried at far more than real market value.
States press banks on foreclosures: update

Can we shame the biggest banks into finding a conscience?

It sounds like a long shot, but New York City Comptroller John Liu is willing to give it a try.

Liu leads a group of public pension fund managers in five states who released a letter Sunday demanding the banks investigate their mortgage and foreclosure practices.

The letters went to Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C). Liu's group includes state retirement funds in Connecticut, Illinois, North Carolina and Oregon and has $432 billion in assets.

The campaign is nothing if not well timed. On Friday, bank stocks tumbled after a Massachusetts court ruled two 2007 foreclosures invalid on the grounds the banks couldn't prove they owned the mortgages. One justice blasted Wells and U.S. Bancorp (USB) for their "utter carelessness" in handling homeownership documents.

"The banks' boards cannot continue to pretend the foreclosure mess is the result of technical glitches and paperwork errors," Liu said.

Mr. Liu has that last line exactly correct. However, the banks most certainly have no shame and thus cannot be shamed into compliance with the law. If you want compliance with the law, you must enforce the law or do business with someone else. Unfortunately, the banksters are subverting the rule of law and have completely bought off the political system. Again, we twist our way back around to those “other” events that history proves are necessary to bring about real and meaningful change.

Pressure? Try this:
California budget: $25 billion dilemma for Jerry Brown

NEW YORK (CNNMoney) -- After years of cutting billions and billions in spending, California has to do it again.

The Golden State and its new governor, Jerry Brown, are facing a $25 billion shortfall that must be addressed by June 30.

"The year ahead will demand courage and sacrifice," Brown said in his inaugural address on Jan. 3. "Choices have to be made and difficult decisions taken. It is a tough budget for tough times."

Brown, who also served as California's governor in the 1970s and 1980s, will lay out his plan to address the budget crisis on Monday. Few details have emerged, though the governor on Friday outlined $7 million in savings.

Among other cuts, Brown is slashing his own office's spending by 25% or $4.5 million. This includes getting rid of the Office of the First Lady, though he named his wife, Anne Gust Brown, as an unpaid adviser. He is also eliminating an education advisory office that cost $1.9 million a year.

But those are just a drop in the bucket.

Not only must the state close a $6 billion gap before the new fiscal year begins on July 1, the governor and lawmakers must wrestle with a $19 billion deficit for fiscal 2011-12. The larger shortfall was created by $10 billion in planned spending increases and a $9 billion drop in revenues due to expiring personal income tax, sales tax and vehicle licensing fee provisions. (Another blow to state budgets: Build America bonds end)

A decade of spending cuts
California has endured a decade of spending cuts, said Jean Ross, executive director of the California Budget Project, a fiscal and policy analysis group.

The state's fiscal troubles largely stem from its heavy reliance on personal income taxes. This revenue stream dries up when recessions hit and unemployment soars.

Now that’s pressure. It is caused by the math of debt which simply doesn’t work. It is impossible math, Gerry Brown stands NO CHANCE of balancing that budget, it will only get worse from this point on as they are far beyond the mathematical tipping point. And Bernanke has said that the “Fed” (private banks) have no intention of helping the states out. But yet the private banks who Bernanke represents will have no choice but to bail the states out least the chain of events strangle them. What will eventually happen is that the states will be under extreme pressure and will be forced to lash out without relief. There is only one thing Brown can do in the mean time, and that is to create a state bank, refinance the state’s debts and in so doing remove the private bank’s stranglehold on the state. That is only a partial solution, however, in the end the people of the United States will not prosper until the private banks and their debts are removed from government.

As far as the markets go, we are obviously in some sort of correction mode now, this morning the most recent uptrend line has finally broken as you can see on this 30 minute chart of the SPX:

The larger rising wedge bottom boundary is still very much in tact, currently the bottom of the wedge is in the 1236 area. A break of that line will signal a larger change of direction.