Tuesday, April 19, 2011

Morning Update/ Market Thread 4/19 - Can’t Quit Cold Turkey Edition…

Good Morning,

Stocks are continuing to bounce mildly after yesterday’s “Negative Watch” meltdown. The dollar is significantly lower, bonds are higher again (and against higher equities), oil is down slightly, gold pushed into a new high at $1,500 but is hovering just below that resistance level, and most food commodities are higher.

Yesterday’s action pushed the NDX into its lower Bollinger band, and the XLF closed below its lower band:

Whenever you see prices push these bands in today’s HFT computer controlled holographic world, it’s usually safe to assume that the market will at least pause there, and that’s what we’re seeing. Yesterday was a 90%+ panic selling down day that did cement a double-top looking ‘m’ formation. We’ll see.

Bloomberg is reporting, and others are guessing, that Bernanke may not be able to quit printing cold turkey! No duh, the impossible math dictates that cannot happen unless he’s willing to let the air out of the overinflated balloon:
Bernanke May Avoid ‘Cold Turkey’ End to Record Stimulus

April 19 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may keep reinvesting maturing debt into Treasuries to maintain record stimulus even after making good on a pledge to complete $600 billion in bond purchases by the end of June.

The Fed chief’s top two lieutenants said this month the economy and inflation are too weak to warrant the start of a monetary-policy reversal. Investors and economists including David Kelly at JPMorgan Funds see that as a signal the Fed will keep its balance sheet at current levels by replacing about $17 billion a month in maturing mortgage debt with Treasuries.

Ending the reinvestment policy and the $600 billion program at the same time would be like quitting stimulus “cold turkey,” said Kelly, who is based in New York and helps oversee $400 billion as chief market strategist at JPMorgan. “It does make sense to reinvest for a while,” he said. “Then they could watch how bond yields react to that.”
What they are suggesting here is to “reinvest maturing debt.” This talk is nothing but code/ disinformation language designed to confuse and confound the average person. They are simply saying that as debt matures that they will replace that debt with more debt in an equal number, versus the current equal number replacement PLUS. It’s still “QE,” and it’s still nothing but outright money printing in laymen terms.

No, it doesn’t matter what they call it, they cannot actually stop doing it without markets and the economy falling off the cliff which they created (to their own benefit).

This morning Housing Starts came in higher for March than in February as is what happens every spring. The number came in at 549,000 new starts, up from 479,000. Sounds great until you realize that these are all-time low depression era readings, that it is expected that the numbers go up in the spring, that housing completions set another new all-time low reading, and that apartment building is responsible for the majority of the starts (to house formerly middle-class Americans). Here’s Econoshill, having trouble spinning this one – yet I note the headline in CNN reads “Housing market shows some muscle.” To that I say sick and twisted, we are going to get fully what we deserve for being so full of fluff:
Housing construction may be returning to normalcy after recently volatile winter months. Starts are up but still at a depressed pace. Housing starts in March rebounded 7.2 percent, following a monthly 18.5 percent drop in February. The March annualized pace of 0.549 million units came in higher than analysts' estimate for 0.525 million units and is down 13.4 percent on a year-ago basis. The improvement in March was led by a monthly 7.7 percent boost in single-family starts, following an 8.8 percent decrease in February. The multifamily component made a 5.8 percent partial comeback after plunging 39.4 percent in February. Overall starts for February were revised up to 0.512 million units annualized from the original estimate of 0.479 million.

By region, the rebound in starts in was led by a 32.3 percent jump in the Midwest. Also improving were the West, up 27.6 percent, and the Northeast, up 5.4 percent. The South slipped 3.3 percent.

There may be modest improvement ahead for housing starts. Housing permits gained 11.2 percent in March after decreasing 5.2 percent the prior month. Overall permits came in at an annualized rate of 0.534 million units and are down 13.3 percent on a year-ago basis.

Today's report is modest good news for a sector where expectations have been running low. Activity is still at a depressed level but now there is hope that housing is not back on a downtrend. Despite the favorable numbers, it is good that they were not much better. Supply is still high and too much of a boost in starts would simply mean pullback later until demand is more robust.

The March housing starts reports provided small lift to equity futures which earlier had been boosted by favorable earnings reports.
Hey, it’s hard to go lower once you’ve fallen off a cliff. And any bounce off a cliff-dive looks big percentage wise to those who don’t ‘do’ math. So, let’s turn to a graphic for the math challenged to clearly illustrate my point:



Think you’ll find a picture like that in the mainstream? Why not? Nope, just “Housing market shows some muscle.” Delusional/ Economic Mass Psychosis comes to mind. While disinformation is nothing new, the scope and extent of it certainly is.
"If you don't read the newspaper you are uninformed, if you do read the newspaper you are misinformed."
- Mark Twain
Did Bill Gross do the opposite of his book and go long bonds? Say it isn’t so. Why gee, I’ve been pointing out how all this talk of him selling everything came well after the fact and at a time that bonds were very close to major long term support. Since this time bonds have proceeded almost straight up, and today finally it’s being reported that maybe he went long again. Duh.

Let me help the uninitiated… The markets, all of them, are rigged. The exchanges are owned by the big banks who also create money from nothing. They own HFT computers and fuel their trading with their freshly printed money. There are NO regulators – forget that quaint notion. The politicians not only do not care, they are in on it and promote it. Ordinary citizens who try to play in their casino will lose – just like a casino, you will win just enough to keep you coming back as long as you still believe in their illusion. It’s a sick and twisted situation that is nothing but outright theft in my opinion – at least a casino is honest and you know the odds going in. In the ‘markets,’ not only do you not really know the odds, you are told nothing but lies and disinformation regarding the odds. The insiders manipulate everything – all of it. There are super-insiders who reside at the Primary Dealers (they OWN the “Fed” literally), and then there are ancillary insiders, like Bill Gross, who are given access to the real inside story as long as they do the bidding for the higher ups and promote their games.

Of course then there are various levels of insiders below the ancillary level, most of these people are unaware patsies who are tossed bones as long as they support the games. All the real insiders realize that there are no regulators – and that they are safe from having bought off the politicians. The only people ever prosecuted are the patsies who have either failed to support the game properly, or who have been made a sacrificial lamb for the real insiders – Bernie Madoff comes to mind in this regard – as the big boys knew his scam and only allowed regulators to get him when the pressure was on to feed a lamb to the sharks following the turmoil they created.

So, that’s the way the real world works – “invest” at your own risk within that context. Good luck, you’ll need it.

Let’s turn to the Fukushima nuclear situation again… no, I won’t let it go – it’s the most important event still occurring on the planet. Here’s Arnie Gunderson with his latest update. This one gets a little bit technical, so you may want to replay it to follow along – I note that when he puts up the temperature charts that the first digit is not in view, so the very bottom of the temperature graph is Zero, then 50 degrees Celsius, 100, 150, 200, etcetera.

Gundersen Discusses Current Condition of Reactors, TEPCO Claim of "No Fission" in Fuel Pool, and Lack of Radiation Monitoring in

I will note that unlike what Arnie said about pressures, it’s NOT good to have ZERO pressure in a nuclear reactor – that means the containment is compromised. Some pressure would be expected, but too high of pressure is not good either. The bottom line is that these reactors and cooling pools are all sick, and the situation is worse than the Japanese are letting on. Another example is the fact that robots couldn’t get into reactor number two as the steam was too thick and fogged over the camera lenses. At the doorway radiation levels were sky high – and so how do you get workers in? You don’t because you can’t.

TEPCO couldn't get enough data on the radiation level in the Reactor 2 building. Two remote-controlled robots went through the door to the Reactor 2 building on April 2. But after measuring 4.1 milli-sievert/hr near the door, the camera lens quickly became foggy due to high humidity (94 to 99%) and couldn't record the radiation level.

Meanwhile we still don’t discuss how to really contain it on site, and all the while radiation continues to pour into the environment. The latest? Fallout is now being found in the Southern Hemisphere, meaning there’s no place on the planet that’s unaffected. Our own FDA refuses to test Pacific fish? Heck yes, do as Arnie says and write your politicians, that is totally unacceptable.

Here’s a link to see the latest Xenon dispersion cloud… note that by the 23rd a very large and dense band will be aimed right at the west coast with levels similar to those passing over Japan. While on this site, you can also see the dispersion of cesium and how it’s making its way all across the United States: North America Xenon dispersion forecast from Fukushima through 4/23