Friday, March 18, 2011

Morning Update/ Market Thread 3/18

Good Morning,

Equity futures are higher again this morning as the G7 steps in to intervene in the currency markets:
Officials of the United States, the United Kingdom, Canada and the European Central Bank said in a statement that they will join with Japan in "concerted intervention in exchange markets."

"As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," the ministers said in the statement. "We will monitor exchange markets closely and will cooperate as appropriate."

This action has caused the Yen to drop, but the dollar is also dropping. Once again, the markets are anything but “free,” they are captured completely by the central banks.

And the result? Oil continues to spike higher, now well back above $100, gold & silver continue higher; Rice, Wheat, Corn, and all food commodities race skywards! Inflation rages, yet incomes in real terms are falling. The population is growing, but yet there are fewer people employed. Statistics are growing again, but mostly those that are measured in dollars.

My current journey into “the hot zone” has produced nothing but sticker shock. Rising prices are everywhere, from gas, to dog grooming, dog food, more expensive dinner, on and on. To add insult to injury, I received a $25 parking ticket because I failed to notice that the spots in front of the Tacoma Spaghetti Factory where I have parked free for years and years were now pay for parking with tiny signs that had small print indicating that you now walk half a block to the little pay station. None of the 6 of us noticed, and thus the ticket upon completion of the meal. Slowly but surely, the city is turning into a police state with ticket by mail cameras everywhere and simply more and more attempts to squeeze every last unit of revenue out of you they can. My reaction? After more than 40 years of going there with family, that will probably be my last time – and letters to the chain’s CEO and the Mayor will be in the mail by tomorrow letting them know how they are driving revenue away. Of course I already moved away, and am glad that I did.

While I have never been one living on the margins, I am now beginning to feel very unsecure with the relationship of rising costs and steady income. I am trying to imagine what it will be like if gas, food, and most other things rise by say another 50% in cost. That type of a move will put the vast majority of Americans on the margins if they weren’t already there, and right now, I can only see one central banker action after another to get us there. The one notable central banker exception is in China where more tightening occurred this morning, but they are so far gone off the deep end of money creation it’s not even funny.

Today is options expiration, no data releases until next week.

The markets did produce a short term Dow Theory sell signal when both the Industrials and the Transports made new closing lows. Now we are bouncing on intervention once again, and this has caused the VIX to close back inside the range of the Bollinger bands, and thus a new market buy signal has been generated:

Just-in-time has shown its vulnerability as GM has been forced to close a truck assembly line in Shreveport, LA due to a lack of parts coming from Japan. I think events there are dire for the world economy, the ripple has just begun.

And now the U.N. has authorized the creation of a “No-Fly Zone” in Libya. That’ll mean another war front for our military and yet another big question mark for the Middle-East. I’m not entirely sure how to read events there, I get the feeling that there’s a lot more to it than just the spreading of freedom – I believe “freedom” has become as manipulated as our “free” markets – and the manipulation is coming from the same exact few individuals WHO control the production of money around the globe.