Wednesday, February 2, 2011

Morning Update/ Market Thread 2/2

Good Morning,

Equity futures are down this morning, correcting yesterday’s schizoid parabolic run. The dollar is higher, having not quite made it all the way down to support yet, bonds are higher, oil is higher, gold is lower, and food commodities are zooming. Rice nearly hit lock limit up for the second day in a row yesterday, this morning corn is breaking out to new highs, while most other food commodities are rising strongly as well… ahh, the seeds of revolution… planted, of course, by Ben Bernanke and his banker boys.

The ridiculous MBA Purchase Applications Index rose a silly supposed 9.5% in the prior week – organizations and entities that can profit from economic data should not be allowed to disseminate it. A kid with a crayon could do a far better job, and at least he wouldn’t be biased. At least they admit it’s just noise:
Flat is the best description for the housing sector right now. Mortgage applications did surge in the January 28 week but the comparison, the Mortgage Bankers Association notes, is against a shortened holiday week. MBA's look at the two weeks together shows purchase applications flat and refinance applications down 5%. Mortgage rates are steady and still historically low, at 4.81 percent for 30-year loans.

The “Challenger” Job-Cut Report rose in January to 38,519 from December’s 32,004. Always on the lookout for something positive to spin, this is a better number than for January’s in recent history, so we’ll talk about that:
Challenger reports the fewest layoff announcements, 38,519, for any January since its series began in 1993. Challenger also counts hiring intentions which are strong at 29,492 and led by retail's 10,925. The latter compares with only 600 in January last year. This report points to strength for Friday's jobs report. ADP's estimate for private payrolls will be posted at 8:15 a.m. ET.

ADP’s Private Payrolls report showed a decline from 297,000 phony jobs to 187,000 phony jobs. This report is as worthless as the day is long. Still, people with very low wattage bulbs use this data to set their expectations – note how badly they missed versus the BLS last month (again), and how they now armed with hindsight lower last month’s GUESS by 50,000:
ADP's count of U.S. private payrolls slowed in January to plus 187,000 from a downwardly revised 247,000 in December (297,000 first reported). ADP missed badly in December, forecasting strength in what turned out to be weak results. Markets are showing no significant reaction to today's report.

The current Bloomberg consensus numbers for Friday’s report are for 150,000 private payrolls jobs and the headline rate to increase from 9.4% to 9.5%.

January is the month in which the “Birth/ Death” model gets corrected. Those who are not factoring this in will be disappointed – just look at the size of last January’s correction, it was massive:

Money and Markets published a good chart this morning showing how weak the Employment Population Ratio is with this “recovery” versus prior recessions. This is how the BLS creates a trumped up low headline rate, it shows severe stress on our population:

Yesterday the VIX closed back inside of its Bollinger bands, thus a market buy signal was given with that indicator. There are some patterns developing that may be terminating top patterns. The NDX has created what appears to be an expanding megaphone, while the other indices are etching out a more ascending and expanding wedge. We’ll see if they hold any water with POMO starvation rules in effect.

Surprisingly, some bearish type articles ( a glimpse of reality) are making it into the mainstream. Here are two that surprise me to see them admitted:
Interest on national debt: 'Skyrocketing' costs ahead

NEW YORK (CNNMoney) -- Interest payments on the national debt could total $5.5 trillion over the next decade, or about 79% of the new debt estimated to accrue between 2012 and 2021.
And that's the optimistic scenario.

"Interest payments on the debt are poised to skyrocket over the next decade," the nonpartisan Congressional Budget Office wrote in its most recent budget outlook report.

The CBO -- and everyone else for that matter -- assumes that interest rates will rise. Just how quickly is the question. The CBO assumes a gradual rise, and projects that the 10-year Treasury rate won't hit 5% before 2015, up from an average of 3.2% today.

The real worst scenario, however, will be much worse than that. The exponential bad math will assure that. In reality, if we count the money used to artificially buy down interest rates, we are already spending ALL of our nation’s income just to pay INTEREST on our debts! Should the “Fed” stop QE and other support programs, our interest expense will skyrocket. Thus our currency is in a death spiral that cannot be stopped within their central banker self-profit narcissistic paradigm.

Here’s another one that leaked into the mainstream consciousness, parroting Bill Still’s latest video that I posted yesterday:
Iceland Shows Ireland Did ‘Wrong Things’ Saving Banks

“Iceland did the right thing by making sure its payment systems continued to function while creditors, not the taxpayers, shouldered the losses of banks,” says Nobel laureate Joseph Stiglitz, an economics professor at Columbia University in New York. “Ireland’s done all the wrong things, on the other hand. That’s probably the worst model.”

Ireland guaranteed all the liabilities of its banks when they ran into trouble and has been injecting capital -- 46 billion euros ($64 billion) so far -- to prop them up. That brought the country to the brink of ruin, forcing it to accept a rescue package from the European Union in December.

All countries should tell the central bankers to pound sand – the entire globe will be far better off without them.

And now more blood is flowing in Egypt as protests there turn violent. Mubarak has yet to do what the people have told him to do, and should this drag on much longer it is likely to get very ugly. Again, the seeds of this violence are planted by our own central bankers, we are to blame for not taking care of our business and showing them the inside of a jail cell. That will come given time.

The price spiral created in food commodities is running unabated. Below is a chart showing rice and corn futures, both making new highs as I type:

That trajectory cannot be maintained for long without more violence occurring.

The dollar index is weighted 57% against the worthless Euro. The race to the bottom monetarily is in full throttle mode. The dollar index will not tell you that, instead the trajectory of food commodities and precious metals tells you all you need to know.