Thursday, January 27, 2011

Morning Update/ Market Thread 1/27

Good Morning,

Equity futures are down only slightly following a very large Weekly Unemployment number. The dollar is down, bonds are flat, oil and gold are lower, while food commodities continue to soar.

It takes a lot of nerve to stand up in front of a nation on one day and talk about how our economy is “growing” again and how we’re going to control our runaway deficits, only to have the “Fed” confirm on the next day that they are pressing on with their $600 billion money printing campaign, AND that the treasury says our deficit is going up by another $500 billion to nearly $2 Trillion, AND that tax revenues as a percent of GDP will be the lowest since 1950!

And that last part, “as a percent of GDP” tells you everything you need to know… GDP is only rising due to money printing, financial engineering, and accounting fraud (lobbyists just got FASB to back away from Mark-to-Market again). Meanwhile tax revenues are down because the economy sucks. The economy sucks because we are saturated with debt and being robbed in the biggest heist that has ever occurred in the history of mankind. It is completely laughable that pumping up the stock market will improve the REAL economy.

Meanwhile, back at the Office of Disinformation, the DOL couldn’t find its rear with both hands. Jobless Claims soared from 404,000 to 454,000 with the consensus only 405k! That’s a 12.6% jump! Now, does anyone really believe that large of a change really occurred in one week? I sure don’t, this type of reporting is proof that the DOL is BROKEN. Here’s Econoday:
The Labor Department is blaming snow storms in the South for a very disappointing and totally unexpected 51,000 rise in initial jobless claims to 454,000 for the January 22 week (prior week revised 1,000 lower to 403,000). But unfortunately the jump also reflects what the Labor Department calls "normal" volatility in the numbers at this time of year, which is the heaviest time for initial claims (Labor Department comments provided by Market News International).

The four-week average jumped 15,750 to 428,750 which is nearly 15,000 higher than a month ago and which suddenly points to trouble for the monthly employment report. Continuing claims also rose, up 94,000 to 3.991 million in data for the January 15 week. The unemployment rate for insured workers rose one tenth to 3.2 percent. In unadjusted data for the January 8 week, the department reports that 9.41 million people claimed unemployment benefits, down from 9.63 million in the prior week.

Heavy weather may be playing a major negative role in January economic data. Hopefully it will be just a one-time effect that will quickly reverse. Markets are showing limited reaction, at least initially, to today's report.

Riiight, it was the weather, lol! It has nothing to do with inane policy, inaccurate statistical methods, or anything like that.

In fact all of the rise as reported by the DOL is due to Seasonal Adjustments as “The advance number of actual initial claims under state programs, unadjusted, totaled 482,399 in the week ending Jan. 22, a decrease of 67,491 from the previous week.” Actual claims decreased, but due to their own adjustments the number is forced to shoot up. To much noise is being created by the DOL. My position is that allowing humans that much latitude is an invitation to manipulation. Again, we must keep these numbers in perspective; our population is growing 1% a year and we need to create many jobs just to stay even. That means that any number in this weekly report above 350k is a job losing proposition. Our economy is not creating jobs, it is losing massive numbers of them still. It is complete disinformation to claim job creation as President Obama does every time he talks.

Durable Goods Orders also put in a significant miss, falling 2.5% in December which follows a -1.5% print in November. This shows negative real growth and it is accelerating downwards. Consensus was looking for improvement to a positive 1.5% move. That didn’t happen, but again numbers like this expose the game for what it is. Durable Goods Orders are first a dollar amount… for this number to be negative in the face of a falling dollar and zooming commodities tells you that REAL Durable Goods Orders are significantly lower than even this horrid report. I know, let’s make excuses:
Durables orders are living up to their reputation as one of the most volatile monthly series in the U.S.-and the latest report was disappointing. Durables orders in December unexpectedly dropped 2.5 percent, following a revised 0.1 percent fall the month before. Weakness was primarily in nondefense aircraft orders. Excluding transportation, new orders for durable goods were more favorable, advancing 0.5 percent after a 4.5 percent surge in November. By industry, strength was mostly in machinery with others industries generally down but after healthy gains the prior month.

By major industries, transportation fell a monthly 12.8 percent in December after declining 13.1 percent the month before. The latest decline was mainly in nondefense aircraft which plunged a monthly 99.5 percent-again, essentially Boeing orders likely falling due to delays in its Dreamliner delivery dates. Also, within transportation, motor vehicles actually increased 1.7 percent while defense aircraft & parts fell back 10.9 percent.

Outside of transportation, strength was narrowly focused with machinery jumping 10.6 percent (November in parenthesis, up 0.3 percent). Other industries were down but generally after a notable gain the month before. Primary metals fell 4.7 percent (up 13.8 percent); fabricated metals down 1.0 percent (up 2.9 percent); computers & electronics down 1.2 percent (up 6.5 percent); electrical equipment down 0.1 percent (up 8.6 percent); and all others down 1.1 percent (up 0.8) percent.

Business investment in equipment continues to show strength outside of aircraft. Nondefense capital goods orders excluding aircraft in December rose 1.4 percent after gaining 3.1 percent the prior month. Shipments for this series rose 1.7 percent, following a 1.4 percent increase in November.

Overall, the report should be considered in light of ex-transportation showing the overall trend over two or three months. Essentially, manufacturing is still on an uptrend though one not as robust as believed last month.

Aircraft are a very important part of our manufacturing base, it and military hardware are all we have left of significance, and that has been slipping away.

The Chicago Fed Index came in barely positive, but with its 3 month moving average negative by .22%. It’s important to understand what this index is saying:
The Chicago Fed National Activity Index (CFNAI) is a monthly index designed to better gauge overall economic activity and inflationary pressure. The CFNAI is a weighted average of 85 existing monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend. (Federal Reserve Bank of Chicago)

Note first that this number comes from the “Fed.” Also note that it is predicated on “trend,” whatever that may be. Who says what the trend is and how it is measured? What inflation data is used to measure it? In other words, it’s a GARBAGE report, meaningless. And even with that it still is showing below trend “growth.” More disinformation and a worthless product brought to you by the people who create the money and benefit from it. In my world, economic statistics would not be allowed to be produced by those who have a direct interest in the outcomes.

Pending Home Sales are released at 10 Eastern and will be reported inside of the Daily Thread.

The market continues to show a very strong correlation to money printing. Yesterday commenter Steve posted a very pertinent chart showing the market activity since QE1 and QE2 were begun. It clearly shows that when a nation prints money and throws it at the market, the market will go up:

Investing in such a market is a huge risk. Traditional Technicals say its way overdone, and thus it is a dilemna. For me, it's not worth the risk as I am not privy to their inside information.

This effect is the same effect encountered in Zimbabwe when it had the best performing stock market on the planet… for a time. It is a looting effort. It allows the people WHO create the money to escape with what riches are left. As their looting continues, just as in Zimbabwe, real people starve. In this case our “Fed” is starving the entire world that is on the margins. And also just like Zimbabwe, when the direct money printing ends, the market will collapse. It is nothing but an empty shell being inflated by nothing real. Fraud on multiple levels, disinformation in our statistics, money printing, accounting and control fraud. It’s all FRAUD. The rule of law? Not even close.

Still, that’s just complaining, what’s an investor to do? Ask yourself, “What would a despot do?” Um, let’s see, load up the private jet with GOLD, and leave the country!? What, you don’t have a G20 sitting on the tarmac at the local airport? Well, you can at least own some gold… and that from someone who is most definitely not a gold bug, but did recommend owning gold ever since it was priced around $350 an ounce (same goes for silver).

The uptrend line on gold is currently around $1,300 an ounce, not too far from here, and yes, I think you buy the dips, but don’t go hog wild if it breaks that trendline. If it does, the first area of support on the chart will be around $1,250:

Will holding precious metals make you rich? No, but it’s really all you have, as even real estate is not safe and has large carrying expenses unless it produces a very good income. Always remember WHO owns the majority of the gold (the banks) and don’t be fooled by their rhetoric about use as a backing for a nation’s money system. What’s most important is WHO controls the quantity. It is a complete and total MYTH (Disinformation) that gold works to keep the quantity of money under control. It never has.

Watch this Alan Parson’s “Gold Bug” video in today's context with the advantage of hindsight (EU riddled with debt, nations bankrupt)… WHO wanted and created a European Union? Note the opening gala, and note who they hired to M.C. it. Interesting in light of today’s events, and an interesting choice of titles for that activity, no?