Tuesday, January 18, 2011

Morning Update/ Market Thread 1/18

Good Morning,

Equity futures are slightly lower in general with the NDX lower due to AAPL being down 5% this morning. The dollar is lower and is flirting with a support level in the 78.8 area, bonds are down sharply just prior to the open, while oil is lower, and gold is higher.

The Empire State Manufacturing Index rose from a relatively low 10.6 to 11.92, this is well below the 14.0 that was the consensus, but is slightly higher than December’s report. Note that December was revised lower to an even weaker 9.89 – here’s Econoday:
Manufacturing activity is accelerating in the New York region this month according to the Empire State general business conditions index which rose more than two points to 11.92, a reading well over the breakeven zero level and slightly above December's revised growth of 9.89. New orders show significant acceleration to 12.39 vs December's 2.03 and vs November's steep contraction of minus 23.80. Shipments, which follow new orders, accelerated to 25.39 from 7.16 in December and from minus 5.27 in November.

The gains however are far from straining the supply chain, a factor that points to limited gains ahead for employment. Unfilled orders extended their long run of contraction while deliveries continue to speed up, not slow down. Inventories, at plus 4.21, show a build this month but follow a run of draws.

Employment did rise in the month, to 8.42, but the slack in unfilled orders and lack of pressure in deliveries suggest that existing capacity is sufficient to meet production needs. Still this report, especially the new orders index, is positive for the outlook hinting at an incremental gain for the nation's manufacturing sector during January. The Philly Fed will release its manufacturing report for the Mid-Atlantic region on Thursday.

Yawn… very slow “growth” here, and remember that many of the index values are first measured in dollars that are not adjusted correctly due to errors in measuring real inflation.

Treasury International Capital (TIC) data for November from the Treasury shows a supposed (no, I don’t believe their data) $39.0 billion net inflow of funds. The Treasury no longer produces this report in .pdf, otherwise I would show the entire report. Diving deeper we find that China was a net seller, while the U.K. was the supposed big buyer. With no international audit trail whatsoever, these numbers are simply not believable and should not be taken at face value from my perspective.

The Housing Market Index is released at 10 Eastern this morning.

The most important and telling economic data this morning comes from the UK where inflation was just reported as climbing steeply to 3.7%, with prices rising 1.0% on a month to month basis (12% annualized). Their “Retail Prices Index” jumped even more, climbing to 4.8%. This from a central bank whose official target is 2.0%. This from a country who is imposing austerity measures and who just imposed a higher VAT on its people – riots to commence in the near future.

Speaking of riots, pay attention to events in Sudan and in the Ivory Coast, two despot lead nations that are likely next in the Tunisia like revolution department. By the way, riots in Tunisia continue as the people are not happy with the new coalition government that includes some of the old politicians – they want a completely clean slate.

Citigroup released earnings that failed to meet expectations on both the top and bottom lines. They are claiming profits are up from last year, but in fact Citi’s revenue fell by 6% from a year ago and profits would not have been there without Citi taking smaller write down provisions for it bad debts. In other words, the only way Citi can claim a profit is via accounting fraud, and that is just the tip of the iceberg as they are running shell companies and still marking their “assets” to their own fantasy model.

As I’ve been typing I watched bonds shoot lower just prior to the open, and on the opening bell prices shot higher – the market is completely HFT driven and controlled, completely unnatural. As I’ve been saying, at some point the bankers (who own the HFT machines, own the exchanges, own the “Fed,” and produce false money to fuel their HFTs) will fail to get their way. We have stupidly given a very small minority complete control of our money system, of our economy, and by extension our political system.