Thursday, April 28, 2011

Morning Update/ Market Thread 4/28 – Con men, Sideshows, and Carnival Barkers Edition…

Good Morning,

Ever notice that the word “CONfidence” begins with the root con? I’ll have more on that in a minute…

Meanwhile, stocks are down, the dollar is down and has been more or less crashing nonstop (but is now bouncing a little due to bad economic data), bonds are shooting higher on the bad data, oil set a new high and pulled back slightly, gold is at another new all-time high, silver is climbing again back to just under $50 an ounce despite margin intervention just the other day, and most food commodities are just slightly lower.

Weekly Jobless Claims shot up from 403,000 to 429,000. This is the third week in a row now back above 400k, and this rise was against expectations that it would fall to 390k. Here’s Econohope finding it hard to continue the improvement claim:
Initial jobless claims are definitely on the rise and it may not be auto related. Initial claims jumped 25,000 in the April 23 week to 429,000 which is nearly 40,000 above expectations (prior week revised 1,000 higher to 404,000). The Labor Department said layoffs in the auto sector were isolated and not a major factor. The four-week average rose a steep 9,250 to 408,500 and is nearly 15,000 above the month-ago level. Initial claims were on a convincing downward trend, but no longer with this month's data pointing to trouble for the April employment report.

Any number above 350k represents job contraction, jobs have been contracting now for years, not just months.

GDP for the first quarter supposedly rose by an annualized rate of 1.8% against expectations of 2.0% or more. This is down sharply from Q4’s 3.1%. Here’s Econospin, then I’ll de-spin it for you:
The economy slowed during the first quarter of 2011. However, the detail shows moderate forward momentum. First quarter GDP growth eased to a 1.8 percent annualized pace, following a 3.1 percent boost in the fourth quarter. First quarter growth came in lower than the median projection for 2.0 percent.

The softer growth in the first quarter was largely due to a sharp upturn in imports, a deceleration in personal consumption, a larger decrease in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by a sharp upturn in private inventory investment.

Nonetheless, relative strength was seen in personal spending, investment in equipment & software, and inventory investment. Exports also continued to rise although not as rapidly as earlier. PCEs rose an annualized 2.7 percent, following 4.0 percent in the fourth quarter. Equipment & software improved to 11.6 percent from 7.7 percent the prior quarter. Inventories rose a moderate but stronger $43.8 billion, compared to $16.2 billion in the fourth quarter. Exports gained 4.9 percent in the first quarter, following 8.6 percent in the previous quarter.

Weakness included a drop in government purchases (down 5.2 percent), nonresidential structures (down 21.7 percent, residential structures (down 4.1 percent), and imports (up 4.4 percent).

Final sales of domestic product posted at a sluggish 0.8 percent in the first quarter, compared to 6.7 percent the prior quarter. Final sales to domestic purchasers (takes out net exports) slowed to a 0.9 percent increase from a 3.2 percent rise in the fourth quarter. Deceleration in both was primarily due to a sharper drop in government purchases and a fall in structures investment-especially nonresidential but also residential.

Economy-wide inflation picked up with the GDP price index jumping _ percent from a modest 0.4 percent rise in the fourth quarter. Analysts had forecast 2.2 percent.

Year-on-year, real GDP in the first quarter is up 2.3 percent, compared to 2.8 percent in the fourth quarter.

Economy-wide inflation picked up with the GDP price index jumping 1.9 percent from a modest 0.4 percent rise in the fourth quarter. Analysts had forecast 2.2 percent.

Overall, the headline number was disappointing as were the final sales figures. But key components-consumer spending, equipment investment, and inventory investment-are maintaining forward momentum.

The GDP report is nothing but fluff – and is a big part of the CON. It’s so far removed from reality that I’m personally shocked that anyone takes this seriously. The big picture is that DEBT should not count as productivity, nor should any financial engineering – remove that and our true productivity would likely be half of what is reported. But let’s ignore that and play along with the central banker game…

Below is the table from the BEA’s GDP Report with the current “deflators” highlighted:

The “Deflator” is used to supposedly correct for inflation to make the GDP number “Real.” This deflator is supposed to represent annualized inflation. So, the BEA adds up all the “productivity” and then subtracts the deflator to find “real growth.” Note that last year there was a string of 2.0% deflators, then in Q4 it fell to .3%, and is now a supposed 1.9%.

Okay, but does that really represent annualized inflation? Not even close. Of course the PPI and CPI numbers are also complete fantasy, but as I look around I see a set of numbers that seems closer to the truth – namely Import and Export Prices. March is the end of Quarter one, and in the month of March Import prices were reported up by 2.7% just for that month alone! Annualize that number (without compounding) and it’s a staggering 32.4%! But if you just add up the prior year’s Import price inflation, it adds up to 9.7%!!! And just to prove that this is no fluke, export prices rose 9.5% in the past year even with our government’s own figures.

Import and export prices more accurately measure the true fall in the value of the dollar. Now, trade inside of the United States may not see all of this price inflation immediately, that takes time. Still, real inflation, in my opinion, is much greater than the deflator values suggest. In essence what I’m saying is that the supposedly positive GDP reflects money creation, not productivity as it is anything but “real.”

Remember, there are three types of “money;” Sovereign, credit, and “other” (derivatives, margin, etc.), the total of which is completely impossible to track and very much out of control.

Let’s take a quick look at a long term dollar chart that Jesse made, this will give you the long term perspective of just how far the dollar has fallen in value versus the “basket” currencies it is measured against:

The dollar is now down in the .72 region, not far above the all-time lows.

Keep in mind that the dollar index is NOT real either – all the currencies in that basket are depreciating. So, to see real, you need to compare the dollar to something outside of that basket, and that would be the real price of tangible things – just look at the price of gold or even a candy bar to get an idea of real dollar devaluing.

So, if stocks rise while the dollar is falling in value, is the rise “real.” No, because that share of stock, if sold, will actually buy you less than it used to.

And now we have an interesting development with the Russell 2000 small cap Index rising to new all-time highs yesterday:

Of course the other indices have a way to go, but the Transports are pretty close, while the NDX and XLF are very far away from their respective all-time highs. Still, should the major indices join the RUT, then the big picture wave count changes. And this is exactly why McHugh has changed his big picture outlook to a belief that the Grand Supercycle wave III did not in fact top in the year 2000 as almost everyone believed. If his read is correct, that means that the timeframe from the year 2000 until March 2009 was wave 4 within III and that we are currently in a wave 5 movement to complete Grand Supercycle III. If that read is correct, then it means that once wave 5 of III tops, that we will experience something on a larger scale than the past decade as wave IV progresses.

I personally do not know what is true in regards to the waves, but what I see fundamentally is that money printing allowed the private banks to capture the markets and to capture our political system. I think that waves will happen until complete confidence in the current money system is gone, and that confidence is eroding further every day.

Bernanke’s CON of a press CONferenence didn’t seem to promote CONfidence in the dollar. Instead the dollar tanked some more, gold, silver, oil, and even stocks rose as there is obviously no end in sight to zero percent interest rates or the artificial money printing and capture of the planet.

For confidence to flourish, people must believe that the rule of law is being upheld. I maintain that there is the natural rule of law, and then there is the man-made version which can be manipulated and changed. I maintain that the bankers have captured politics with their money printing, and that they have had the man-made laws changed to suit them. The gap between the man-made laws and what is real and natural is getting larger and larger. As that gap grows, it will reach a point at which the people will just find it unacceptable to live with the glaring gap.

The most important natural rule of law is that the agreed to money system not disadvantage the majority. This is the basis of usury and why it is so important – in this regard we are miles and miles away from the natural and proper order of things (rule of law). But a symptom of the money capture is political capture… and this is why it’s important to have leaders that we have confidence in.

And I must say that I did not have any confidence in George Bush, but I now have even less confidence in Obama. Both, of course, are obvious puppets of the central banks – as have national level politicians been since the CON of the “Federal Reserve Act.” But never in my life have I seen so many con men in so high of places.

First of all, I’ll point out that Donald Trump is nothing but a narcissistic con man – what he does he does for his own gain, not for the gain of humanity. Again, simply look at his stance on the banks and on Wall Street – he has repeatedly stated that he would leave them alone, and if anything would further deregulate them. That alone is all you need to know – he is making overtures for his own personal gain and thus what he says lacks the underlying truth.

Now, let’s address the “birther” issue… I started out skeptical. In fact, I even was guilty of ignoring this issue and falling into the media boxing it in as “nutty.” Like most people, I failed to appreciate fully the implications that it represents – so let’s take a fresh big picture look. This issue is important for several reasons, the largest of which is confidence.

A nation’s leader should have 100% of their loyalty resting in the country which they lead. If they do not, then they may fail to make decision to the benefit of those who he represents. With Obama, I think any rational, thinking, American has to wonder if that is the case. The issues are much more complex than simply being born in the United States… It is possible to be born in the U.S., but to not have 100% of your loyalties here – that is one major issue that is largely ignored. But to me, the way this whole issue has been handled destroys my personal confidence in our President.

If it were me, I would have simply provide the long form, notarized copy of my certificate that’s sitting in the drawer in my desk a long time ago. By the way, my certificate is worn, folded, and is obviously not fresh off the computer printer. Still, a fresh copy can be requested from the hospital, but if it comes from the hospital, I can guarantee you that it doesn’t come in a layered .pdf form…

Something is not kosher. For it to be in .pdf form at all, it would have had to have been scanned as a whole, not layered. And that to me casts Obama in the role of a CON MAN. And in turn that further erodes my CONFIDENCE in him and in his administration – and that is why this is such an important issue that is being made more important by the day. Obama’s “Sideshow, and Carnival Barker” comment yesterday was obviously aimed at Trump. Yet, if Obama was not himself a CON MAN, then he would not be forced to step inside of the circus tent – and that is clearly where he resides.

No, this issue is not dead, it is more important than ever as this document release, if proven to be trumped (and I think the .pdf layers do that), then it could be the downfall of a President. And I must say, that he deserves the downfall for many things, he is not an adult and has failed to reel in and contain the out of control central bankers. The results of which are a destroyed middle-class, unnecessary wars (and thousands of deaths), totally captured markets, and the loss of confidence in our monetary and political systems. Obama’s lack of honest dealing with the “birther” issue absolutely is important – it strikes at the very character of our markets, of our political system, and the way in which we represent ourselves to the rest of the world. We are being led by a CON MAN, not that changing him out will change that – we must change out WHO controls the production of money to have significance.

Meanwhile, the special interest captured government of Japan is failing to reel in TEPCO who is absolutely making the Fukushima matter worse. More radiation, and now tinkering with the reactors and fuel rod pools is getting very dangerous with the threat of further explosions possible. Particles heavier than plutonium are now being found in the United States, and the total radiation being expelled is rising to new heights. There are too many details to cover here, so please join us in the daily thread if you wish to understand the real issues involved.