Monday, January 31, 2011

Morning Update/ Market Thread 1/31

Good Morning,

Equity futures are higher this morning as the dollar continues its journey down to it’s major support line at 76.70ish… only about one more point to go. Bonds are lower as they consolidate in a sideways range that looks like a wave 4 lower to me, but ultimately may not prove to be. Oil is roughly flat, gold is lower, and food commodities are higher, very near recent highs.

Events in Egypt, and the sniff of revolution in many other countries, is exactly the type of thing I have been expecting when I say that “other events” are coming. These “other” events are rooted in our flawed money system and WHO controls its production. Now that events are picking up steam, we must ask ourselves, “What’s next?”

If you recall, I wrote article after article explaining that the debt saturation condition has not gone away and that therefore the underlying bad math of debt would continue to express itself. So far I see no relief from that, only attempts to ram even more debt down the throats of debt saturated people throughout the world. Remember, it requires income to service debt, poor countries therefore, can carry much less debt than higher income nations. Their margins shrinking, when our “Fed” pours hot money into the global market, that money seeks return wherever it can, and it has leached into our food.

The mainstream blames the weather in _______ for rising _______ (grain) prices, but in fact it’s quite obvious that prices are zooming more in concert with POMO than with the weather as it is all grains that are rising, not just a crop or two. Yes, bad policies like subsidizing ethanol also add pressure to prices. There most certainly could be more than enough food to feed the world, were it not for WHO is profiting from the production of the world’s reserve currency.

So, the question is what happens in Egypt once Mubarak is gone? What happens in Tunisia, in Jordan, in Libya, in Saudi Arabia, in Syria, in India, etc.? Will revolution in those countries bring about lower food prices? The answer, of course, is no. Just as TARP didn’t solve our economic problems, revolution won’t help those who are starving on the margins. Well, maybe it will help them a little… to the extent that despots like Mubarak have been stealing from the people for decades.

Mubarak lived a lavish life while at the same time indebting the people of his nation to the bankers of the globe. In effect he was robbing their productive capacity for himself and leaving them with the debt.

What kills me is that people in America and in most of the “developed” world don’t understand that this same exact looting is taking place here! The only difference here is that you get to cast a phony ballot for Democrat/Republican… but at the same time the private bankers are living a lavish life off of your productive efforts while indebting you beyond any hope of ever being out of debt! Americans are living a in a dream all right, and I will reiterate that “other” events are going to continue to circle the globe until they smack Americans right upside their unaware heads.

Because we are so unable to collectively look through the disinformation and deceit, I don’t think Americans will be pouring out onto the streets Egyptian style anytime soon. That’s not the way modern America rolls. The way we roll is that events around the globe will pressure us and pressure us, backing us up against the wall. And because we have this hidden hierarchy of power in this nation, it takes stress upon them for us to take action – that or a profit opportunity for them. They are masters of deflection and thus I believe America is more likely to eventually get involved in/ create a global war before the American people rise up to truly fix the roots of the problem.

Karma being the bitch that it is, will likely find America, and the elite who run it, losing massively in the end. Eventually the people of the world will wise up, it is painful to watch however. In the meantime we have a figurehead teleprompter reading President whose speech writers need at least one week’s lead time, so if any events inside of than lead time occur, they put Hillary out front because at least she’s capable of putting up a semi-intelligent sounding facade on the fly. Embarrassing. And the world is not unaware that it was America who put the despots in power in the first place.

And so as the people take power in these countries, what will their new governments look like, and how will they act to their former captives here in America? Remember, they will still be hungry, and if QE continues they will be getting even more hungry in the future. Other events are still coming, these are only the opening act.

The disinformation media is touting the Personal Income and Outlays data this morning claiming that us “consumers” are really opening our wallets! LOL, it would be funny if weren’t so sad. Income stayed roughly the same, rising .4% month over month and supposedly 3.8% year over year. Do I believe that incomes are rising? NO. The population is rising and the quantity of money is temporarily rising, but any supposed growth here is not real. Wall Street bonuses are the only “wages” I see increasing, they are falling for everyone else. And “Consumer” spending supposedly is rising by .7% month over month, and by 4.1% year over year… again, a monetary necessity as food and energy prices leap. Low to no wage growth coupled with rising expenses does not make for an economic boom, it makes for a monetary boom, stress, and hunger. But let’s not talk about that, here’s Econospin:
Both income and spending continued to advance at the consumer level in December. Not surprisingly, headline inflation was hotter while the core rate remained subdued. Personal income in December rose 0.4 percent, following a 0.5 percent gain in November. Analysts projected a 0.4 percent increase. However, the wages & salaries component was soft, rising 0.1 percent after increasing 0.6 percent in November.

Consumer spending for the latest month was boosted by auto sales and higher gasoline prices. Personal consumption expenditures posted a sizeable 0.7 percent gain, following a 0.3 percent increase in November. For the latest month, strength was led by nondurables, up 1.5 percent (including gasoline), with durables gaining 0.7 percent. Services advanced 0.4 percent for the month. But spending was strong even after discounting price effects. Real spending jumped 0.4 percent in December after a 0.2 percent rise the month before.

Year on year, personal income for December came in at up 3.9 percent, compared to 3.8 percent in November. PCEs growth slipped to 3.8 percent from 4.1 percent in November.

On the inflation front, the PCE price index jumped 0.3 percent, following a 0.1 percent uptick in November. The core rate came in unchanged after edging up 0.1 percent in November. On a year-ago basis, headline PCE prices are up 1.2 percent, compared to 1.1 percent in November. Core inflation eased to 0.7 percent year-on-year versus 0.8 percent in November.

On average, consumers are seeing moderately healthy income gains support strong gains in spending. The latest report shows the consumer very much supporting recovery.

What nonsense, but that’s the party line, isn’t it? Again, spending far outstrips income, and in our basket-case media and nation that is trumpeted as a good thing. People starve, revolution happens at the margins, and we fail to see it coming or account for its cause. Yes, we are going to get smacked very hard, it’s coming very soon.

The Chicago PMI is released just before 10 Eastern this morning, and will be reported inside of the Daily Thread. This is a very busy week for economic data, culminating in Friday’s Employment report for January.

The VIX zoomed more than 24% on Friday and closed above the upper Bollinger band. This sets up a potential market buy signal once it closes back inside of those bands, which may happen today. Once it does, it doesn’t mean that the market will bounce right away, it may simply indicate that a corrective bounce is coming:

Emerging markets are breaking down. In fact, on a logarithmic chart it has broken a two year uptrend (but not yet on a non-logarithmic chart). This is a huge warning flag for all the markets. Additionally, Friday’s move deepened the DOW Theory non-confirmation as the Transports and Russell now appear to be in downtrends, making lower highs and lower lows. This very much is the action that you expect to see at major tops. Of course the question becomes can the selling pressure overcome the billions being thrown at the market? Indeed, it will occur at some point, is now the time, or do we continue with the Zimbabwe stock market and food commodity melt up? Just remember WHO it is that produces our money and what their interests are, and then get ready. Do not be caught by surprise, if/when food begins to skyrocket or become limited in supply, it’s best to be ahead of the rush, and the rush could very well be right around the corner.

How does America run into food supply problems? Because a vicious spiral in food prices has been created (by guess who). As food prices rise, countries on the margin get affected. The people demand action, and their politicians do what they can which is nothing real. What they can do, however, is attempt to control prices. So, let’s say that India invokes a price control on say wheat – “no person may sell wheat for more than $100 a bushel (or whatever)!” Farmers of wheat, whose cost of operating (fuel), living, and eating for themselves is still spiraling upwards, however, when they can no longer grow wheat for a profit at that price, they will simply stop growing wheat. And what happens to the price of wheat? The spiral continues, but now there are shortages. This spiral is in motion, watch it.

Again, the spiral won’t stop until all the money pumping stops. But the money pumping won’t stop because that means that Wall Street bonuses must fall and the elites will suffer. Who controls the production of money? Get ready if you are not.