Friday, February 18, 2011

Morning Update/ Market Thread 2/18

Good Morning,

Stock futures are close to even this morning with the dollar down sharply, bonds lower, oil is sharply higher, gold is rising, and most food commodities are slightly lower. Note how there always seem to be some commodity that is being ratcheted up, even if others are correcting. A Forbes article this morning is again warning of $4 gasoline coming soon.

Stocks in Europe are lower with the financials under pressure as it appears that the flow of interbank funds could be drying up again. Hard to trust one another when you know how insolvent each really is. Stress tests my rear – might as well let the marketing professionals run the world. Oh wait, they do.

There is no economic data today, just Bernanke telling more lies as he flaps his destructive lips:
Bernanke worries about cash bubble

NEW YORK (CNNMoney) -- Federal Reserve Chairman Ben Bernanke said Friday that unbalanced flows of money between nations is again posing a risk to the global economy and financial stability.

Speaking in Paris to a Bank of France conference, the Fed chairman said the uneven flow of funds into the United States from 2003 to 2007 was one of the key factors that led to the meltdown in financial markets in 2008.

He did not say the current flow of capital poses a threat of that magnitude. But he warned that while the global financial crisis is receding, "capital flows are once again posing some notable challenges for international macroeconomic and financial stability."

Bernanke did defend the Fed's controversial program to buy $600 billion in U.S. bonds, known as quantitative easing. Some argue that the purchases, dubbed QE2 since it is the second round since the onset of the financial crisis, is feeding rising global inflation.

Bernanke argued that the U.S. economy still needed more support and that the inflation pressure was coming from countries that are keeping their currencies undervalued rather than from the Fed's efforts.

"Resurgent demand in the emerging markets has contributed significantly to the sharp recent run-up in global commodity prices," he said. "More generally, the maintenance of undervalued currencies by some countries has contributed to a pattern of global spending that is unbalanced and unsustainable."

Oh please. Now he sees trouble? But of course none of it is his fault. And rising dollar quantity around the world equals “growth” in his warped mind.

And speaking of warped, that is exactly what his policies do to economic data. A good example of that can be found in yesterday’s late morning report of “Leading Indicators:”
A month-to-month swing in building permits made for sharp volatility in the index of leading economic indicators where growth slowed to 0.1 percent in January vs 0.8 percent in December (revised down from 1.0 percent). Building permits were the leading contributor to December's index but subtracted the most in January. Permit volume was affected by changes in laws in some localities. In a more telling sign of trouble, the second most negative component was initial jobless claims which, based on the weekly report posted earlier this morning, don't look to be of much help for the February LEI.

January's biggest contributor is the yield spread reflecting low front rates and what have been rising long rates. A slowing in deliveries was the second biggest indication of future economic strength followed by the stock market and by consumer expectations, the latter having shown tangible improvement so far this year.

Other data include a marginal 0.1 percent gain for the coincident index which unfortunately points to a slow start for the first quarter. Likewise, the leading index also points to a slowing, not contraction just to slower growth which would not be a positive for the still modest outlook on the jobs market.

So, the LEI (which is not really leading at all) fell all the way to barely positive. And note the “biggest contributor is the yield spread reflecting low front rates and what have been rising long rates.”

This is a great example of how the actions of the “Fed” distorts economic data. While the “Fed” bankrupts our country with debt that is completely unnecessary, they are now forced to buy up bonds to keep their game going. They are buying the short end most heavily, thus artificially driving down short term rates. Meanwhile their reckless actions are causing rates to rise on the long end. And the LEI sees this differential as a positive to the economy as banks can arbitrage the difference. But in fact, it is a most unhealthy condition and bogus indicators like the LEI is leading dumb investors right over the proverbial cliff.

Central bankers will do anything to keep their game afloat – that game, by the way, is all about robbing the people’s productive efforts for their gains. This is the root of ALL the current global malaise. Boxed in by skyrocketing commodity prices, desperate central bankers talk like this:
Feb. 18 (Bloomberg) -- European Central Bank Executive Board member Lorenzo Bini Smaghi said the bank may need to raise interest rates as global inflation pressures mount.

“As the economy gradually recovers and global inflationary pressures arise, the degree of accommodation of monetary policy has to be monitored and, if needed, corrected,” Bini Smaghi said in an interview with daily newsletter Bloomberg Brief: Economics. Commodity-price increases will “have an unavoidable impact” and “it is a key challenge for monetary policy to avoid spillovers and maintain inflation expectations in check,” he said. “This requires the ability to take pre-emptive actions if needed.”

Bini Smaghi’s comments suggest officials are becoming more concerned about inflation, which has already breached the ECB’s 2 percent limit and is running at the fastest pace in more than two years. Companies are facing stronger input-price pressures, and forecasters in an ECB survey this month raised their longer- term inflation expectations to 2 percent.

“The continued firm anchoring of inflation expectations is essential,” Bini Smaghi said in the interview, which was conducted by e-mail on Feb. 16.

Uh huh. And yet countries around the world continue to print money like it can be created on a computer printer. Oh yeah, that’s exactly how it’s done. Berspankme blames China and “Emerging Markets.” China blames America. Europe blames global inflation pressures. Yet no one will stop printing. And thus the outcome is pretty much settled.

Meanwhile “other events” continue to get nasty. Bahrain is a potential disaster in the making. The power between the Shiites and the Sunnis hangs in the balance, as does America’s position in the Middle East.

The world will be overcome with “other events.”

Like Mexico turning into a bad scene from the movie “Mad Max,” thirteen more were killed in separate shootings in Juarez. Violence in Guadalajara has become so bad that Alaska Airlines will no longer overnight an airplane and crew there – they will “turn” instead. They have also been shifting flights out of Mexico. Is Mexican violence the doing of central bankers? You bet it is – they continue to support the drug trade, launder their money and sell weapons to them. Their inflationary policies create havoc on the poor and leave them little alternatives but to participate in the drug trade. The government is powerless in the face of such pressures, these are the same pressures leading to revolution in the Middle East and in Africa.

And they are the same pressures that is causing states to be bankrupt and forcing Governors into boxes in which they very inappropriately blame teacher unions and attempt to pass legislation banning collective bargaining. In Wisconsin, Governor Scott Walker is getting a lesson in NATURE. You see, “collective bargaining” is a natural trait of intelligent and social animals. You can no more ban it than you can hold the people down in repression forever. Look at Egypt, collective bargaining at its finest.

Not once have I heard Governor Walker or Governor Christie talk about how much money their states spend on interest each year by using PRIVATE BANKER BONDS to finance the state’s needs – debt? The interest expense enriches the private bankers, but yet the states could absolutely eliminate this expense by creating their own state chartered banks. Crickets. This is because politicians on that level or higher can only be elected by taking money from the banks. Thus they are entangled in huge conflicts of interest. That goes for nearly all politicians on the federal level.

No, such efforts to place blame on unions is completely misguided – just as blaming the union for GM or Chrysler’s woes was completely misleading. The blame lies squarely on the inflationary money system foisted on the people. The bankers have saturated the globe with debt and now that debt is leaching out into all sorts of places, especially food and energy.

The “other events” occurring throughout the globe, and here in the United States are simply a part of the cascade of failures that will continue to plague the globe until the people change WHO controls the production of money. That change just occurred in Egypt, didn’t it? The people in Egypt didn’t shout out “change control of WHO controls the production of our money!” But yet that’s exactly what they did and are in the process of doing. While we’ll have to wait to see how it shakes out, 30,000 teachers taking to the streets in Wisconsin is a good start. Yes, it would be nice to see them targeted on the bankers, but that seems to not be the way it works. If I could have my way, we’d have a Tahrir Square event occurring on the steps of the “Fed.”

Markets are closed on Monday, ahhh shucks, there goes another opportunity for a perfect JPM HFT POMO fueled rob the middle class and screw those on the margins narcissistic trading day.