Tuesday, April 12, 2011

Morning Update/ Market Thread 4/12 - Presidential Fantasy, Day 2 Edition

Good Morning,

Equity futures are solidly lower this morning with the dollar falling dramatically, bonds rising, oil continuing down a little, gold and silver are up, and food commodities are mixed.

The Small Business Optimism Index fell sharply in April, the survey showing higher costs, inventory building, and the largest component of the loss is falling earnings – here’s econospin looking for the nonexistent bright spot, but admitting it's another recessionary print:
Optimism among small businesses fell back in March, down more than 2-1/2 points to a recessionary 91.9. Data from the National Federation of Independent Business show weaker sales and a weaker outlook for business conditions. The report also cites a "marked deterioration" in profit trends. But there is a bright spot as small businesses are hiring and expect to continue to hire.

And here’s the entire report, one of the better reports being produced:

Small Business Economic Trends April 2010

The International Trade deficit narrowed just slightly in February (yeah, two months ago). Coming in at $-45.8 Billion, this is slightly less than January’s $-46.3 Billion, and is more than the consensus that was looking for $-44 Billion. Anyway you want to slice it, we are importing more than we export and have for years. That means that money is, and has been, draining out of this country for years. Since all money is DEBT, we must produce DEBT in order to pay for it. And what do the private bankers do who produce this debt? Why they sell it, of course, in one of the greatest wealth transfer/ criminal enterprises ever created – the mob are pikers compared to these guys. True, just printing money to cover the trade deficit is stealing, but at least it would be stealing without interest payments on top that are payable to private individuals who do nothing and perform no real function for that wealth transfer. Anyway, it’s a mess because of the way we falsely let the bankers indebt our nation. You won’t hear that from those who are living inside of the Central Banker Box, like Econoshill here:
The nation's trade gap narrowed moderately in February, to $45.8 billion from January's $47.0 bln (revised from $46.3 billion). Despite the decline, February's gap is still on the high end of trend. The petroleum goods gap narrowed to $25.8 billion from $26.9 billion in January.

Food imports and imports of consumer goods both rose and are at records. Imports of capital goods dipped as and did auto imports. Auto imports may become a big issue as the Japanese supplier issue unfolds. Imports in total fell $3.6 billion in the month.

Exports were also lower, down $2.4 billion. The export side shows declines for autos, industrial supplies and, despite a jump in civilian aircraft, a decline for capital goods exports. The decline in capital goods activity in this report points to slowing for business investment.

Today's data are for February which is even more ancient history than March. Oil at $110 is 30 percent more expensive than it was in February, a factor that will deepen the trade deficit. One factor that could narrow the trade gap is an unwanted one, that is supply disruption tied to Japan.

The trade deficit in 2007 ran more than $60 billion per month – that gives you some idea of the slow down in commerce since then, but remember that this is measured in dollars and thus the decline in activity is even larger in reality.

Gee, are we surprised to see Import prices rising 2.7% in March? I’m not. That’s 32.4% annualized inflation – are you getting nervous yet? Yep, the year over year import figure rose 9.7%! And exports rose 9.5%! Think we have any monetary inflation there? Imagine what this does to people on a fixed income, it decimates them. Here’s Econospin rationalizing the oil component away like it doesn’t exist and like it doesn’t translate into the price of absolutely everything – it does!

Import prices jumped 2.7 percent in March but were heavily skewed by a 10.5 percent surge in prices of petroleum imports. Excluding petroleum, import prices rose 0.3 percent, a step down from the prior four months which saw a 0.9 percent peak in January. The year-on-year rate for total import prices is definitely picking up steam, back near the double digits at a plus 9.7 percent rate in March.

Export prices are also on the rise, up 1.5 percent and at the high end of trend. The year-on-year rate is also nearing the double digits, at plus 9.5 percent. Here food inflation is at work with agricultural prices up 2.3 percent in the month.

Inflation in today's report is definitely hot but it's confined to energy and food. Today's data point to high non-core readings for Thursday's producer price report and possibly Friday's report on consumer prices as well.

Hot, hot, hot – hard for the “Fed” to say with a straight face that inflation is low… I know, but “it’s just transitory,” LOL. Remember that price stability mandate? How are they lookin’?

Speaking of the “Fed” creating higher prices and price instability, they release their latest hot money POMO schedule later this afternoon – Oooo, I can’t wait to see how badly they are going to debauch my money.

Things in Fukushima are just ugly. Yet another earthquake yesterday temporarily knocked power out to the plants. More people are catching up to the dangers of the radiation that’s spreading around the globe. Just three gallons of milk from that tested in Hawaii is enough to give the maximum allowable annual dose of radiation to an adult! And it is being found all over. The latest, seaweed samples from right here in Puget Sound are now testing positive for radioactive iodine, “shocking” the experts who didn’t believe it would make it here. Hey, if you have an infant or pregnant female close to you, I would encourage them to cut out the milk for awhile – as just one step of self-preservation.

It’s just sickening that our President is silent on this issue – he is nothing but a completely empty suit. Oh boy, we’re going to cut $80 billion from our budget! And I’m going to pee into the Pacific Ocean – same result. Impossible math, while they distract you with nonsense, POMO you to death, and ignore very real and very legitimate health concerns.

The holographic markets? They’re looking pretty weak – the NDX and Transports have been way underperforming and are now dragging the NDX and S&P below the 50dma. If they want to cool off that inflation, they’ll have to let some air out of the markets.

All this talk about really reforming entitlements? I call B.S. – it won’t happen because the math is impossible and it will be political suicide to actually be the one to take the super-sized ax that’s needed to them. No, the impossible math will continue all the way to collapse, just remember that it won’t be a straight line, there will be waves between here and there.

But guess what? Once you begin to think outside of the Central Banker’s box, then real solutions to the impossible math begin to appear. And this brings me to day 2 of my FANTASY Presidential rule. Remember that on day 1, we did the following:

Act 1 – Declare National Emergency giving the President temporary powers to override Congress and to revise/ eliminate current legislation.

Act 2 – Give the Japanese government 24 hours to remove TEPCO from control of Fukushima and to bring in outside experts whose purpose is nuclear containment, or risk having America move in and take it over.

Act 3 – Dissolve the Federal Reserve Bank, removing their corporate charter and placing all their assets into receivership.

Act 4 – Place all banks (and corporations that act like banks) into temporary receivership. During the transition they are to conduct business as usual, however, no new corporations can be created or merged, all bank assets are to be cataloged effective today, and nothing but straight pay will be allowed to any bank executive or employee. All banks and financial institutions will be run through a special one time bankruptcy.

Act 5 – Close all markets for a two week period to give time to get the entire restructuring plan known and digested – after that time, markets will open without limits – crash or fly to the moon, they will settle down eventually. Yes, a drastic shift of wealth, power, and control is going to take place.

Act 6 - Reinstate usury limits to be effective immediately.


Act 7 – Follow through on ensuring that the Japanese are working in full court press mode to contain radiation on site – provide all the expertise, support, and tools necessary to make it happen. Begin nationwide testing of food and water for nuclear contamination. Begin a nationwide education campaign regarding the REAL long term health effects of nuclear radiation. Appoint Arnie Gunderson to head the new nuclear reorganization, education, and safety initiative.

Act 8 – Appoint Bill Black to head a new accounting and fraud division. Give him orders to find, jail, and prosecute financial criminals as high up the chain as possible. Have him take over the FASB and implement meaningful new accounting standards, and make them extremely difficult to circumvent or to change.

Act 9 – Begin implementation of the remaining provisions of “Freedom’s Vision.” But re-evaluate the amount of money to be given to each individual, eyeing a much larger number. Appoint John Williams to head the reorganization effort that will consolidate and revamp the reporting of ALL economic statistics. The effects will be to cleanse out a large percentage of the debt and derivatives, and to create a new monetary system that targets Zero percent overall price inflation. This is a complex process, made that way due to the false trail and diversionary tactics of the “Fed,” but will be a more simple process in the end with no more national debt. I would appoint a team to begin its implementation and I would look for the team to have both the power and responsibility to get it done and to make adjustments as it is implemented. In the end there would be no more national debt, but banking would look and feel the same, although banking institutions would be solvent and would not be overleveraged and could not get overleveraged again. This would result in a mix of credit and sovereign dollars. A prime result would be the separation of special interest money from politics.

Another aspect that Freedom's Vision doesn't address is the capture and monopoly of the market exchanges - this would also be dealt with appropriately, say adios to HFT trading and ALL INSIDER advance knowledge.

It is possible to crank Freedom’s Vision up a notch and to impose term limits. It’s even possible to eliminate the IRS and taxes – something that could be looked at only after eliminating the “Fed.” This would NOT eliminate government, but it would eliminate taxes as an accounting tool, which is all they really are (other than a method to redistribute wealth [to the wealthy]). But that’s probably pressing what most people can handle for now, so we’ll see how day 3 in fantasy office goes. I don’t think I’ll need much longer as Freedom’s Vision pretty much puts a lid on the criminal behavior. But what needs attention and focus following all that is to create a positive, productive, and stable vision for the future. I’ll talk about that on my fantasy President Day 3.