Thursday, May 12, 2011

Morning Update/ Market Thread 5/12 - Squeezing the Turnip Edition…

Good Morning,

Equity futures are lower again prior to the open, with the dollar continuing its bounce higher, bonds continuing higher, and oil, gold, silver, and most food commodities receiving further smack down treatment.

China announced they are tightening up bank reserve requirements again, this time by .5%, which is adding pressure to the commodity trade in addition to the usual CME and banker manipulations. The increased oil margin requirement is a good example of how political pressure begins to bear down on the market once prices begin to affect sentiment (and yesterday the CME DOUBLED the trading limits on oil and gas as a part of the slam down).

The obfuscation from the media, of course, is to pin the blame on anything and everything but the excess money policies of the fantasy “Fed.” It’s always one of the never ending profit opportunities, errr, I mean WARS that’s to blame, or it’s the fantasy “recovery” bolstering demand, but never is it the “Fed.” Well, here’s where all the lies are laid bare…

Yesterday there was yet another large build of oil inventory, taking it to the highest levels EVER, including during the last crisis when demand crashed.

Gasoline demand is DOWN, and refineries are producing gasoline at very low refinery utilization rates. So, if inventories are at record highs, and demand is falling, why is the price so high? And there’s the lie right there. There is no economic recovery, the storyline of burgeoning demand and falling supply is FALSE, at least at this juncture in time. And that is proof that it is a monetary phenomenon.

Below is an updated chart of base money versus oil price – again, note that the sudden and dramatic rise in hot money has led to the mirror image in oil price since the debt saturated crash in 2007/2008:

Now, further proof to the lie is found by comparing the Baltic Dry Shipping Index to the price of commodities. In general, as the price of commodities rise, the cost of shipping also rises IF the rising price is due to an increase in demand:

In this case, however, you can see the continued collapse in shipping rates while commodity prices zoomed. Again, this is proof of a monetary phenomenon, and proof that we’re not talking about real demand.

Same goes for the stock market! Below is the BDI versus the SPX – if the move in stocks is real, where’s the real demand? It’s not there, because it’s not real, it’s monetary:

That disconnect between the BDI and SPX is HISTORIC. And that makes sense, doesn’t it, as the money debasement is also historic. Below is a chart showing the timing of the Base Money ramp with the latest ramp in equities:

It’s no accident that they are coincident – our economy grew as debt was added over the years, but then we reached saturation and the economy collapsed, as in free fall. Then came the money printing, and now we are experiencing the fluff – the saturated condition remains, the debt service remains, but the fluff is keeping prices high.

And all this adds up to pressure. The reality, of course, is that the middle-class squeeze is in full swing and high energy and food prices are just one part of that blood out of a turnip squeeze.

Another large part of the squeeze is coming from health care costs:
Your family's health care costs: $19,393

NEW YORK (CNNMoney) -- Health care costs for a family of four rose again in 2011, with employees paying a much larger share of the rising expenses, according to a new industry report Wednesday.

American families who are insured through their jobs average health care costs of $19,393 this year, up 7.3%, or $1,319 from last year, according to independent actuarial and health care consulting firm Milliman Inc.

More significantly, employers are making workers shoulder an even bigger share of total health care expenses.

Of the $1,319 annual increase, workers' out-of-pocket costs this year rose 9.2%. That was more than the 6.6% increase the prior year.

Payroll deductions for insurance coverage rose 9.3% this year, also more than the year before.

However, employers' share of workers' health care costs fell 6% in 2010, compared to 8% the year prior.

So, not only are healthcare costs rising, but corporations are winning the battle to push even more of the costs off on the employees. This expense is becoming a huge percentage of total income, keep in mind that the last officially reported median income was a little over $45,000. Thus total healthcare costs are approaching HALF of income – if the employer is paying half of that, then the employee is paying a quarter of their income just on healthcare.

This is yet another example of impossible math in progress – healthcare costs simply cannot continue to rise and for us to still have a functioning economy. Costs here are yet another bubble created by the fast and loose monetary situation. Add up the cost of bubble taxes, bubble home ownership, bubble auto prices, bubble healthcare, bubble energy, and bubble food costs then you will clearly see that massive pain is already in progress for those on the margins right here in this country, not just in other parts of the globe.

Weekly Jobless Claims are adding to the impossible math with yet another week well above the 400k level. Coming in at 434,000, this is down 40k from the prior 474k (revised higher, of course, to 478k). I note that without seasonal adjustments, the raw figure was down only half that amount. While Econopray is hopeful, this is another horrid reminder that the economy continues to shed jobs and that the supposed “recovery” is nothing but a monetary hoax:
In what is a big relief for the jobs outlook, initial claims fell back sharply as hoped following a giant special-factor spike in the prior week. Initial claims fell 44,000 in the May 7 week to 434,000 with the prior week revised to 478,000. Despite the decline, the current level is significantly above March with the four-week average continuing to rise, up 4,000 to 436,750 for a very significant 40,000 increase from the month-ago comparison. Claims thankfully came down in the latest week but further declines will be needed in the weeks ahead before confidence in job growth can build.

Keep that dream alive, Prozac saturated turnip. Evidently you enjoy the squeeze.

The PPI continues to rise, and the rise is accelerating. In April, the PPI rose .8% (9.6% annualized), compared to March’s .7% uptick. Gee, doesn’t that feel good? And this is the trumped up version of reality. Here’s more Econohope, expressing their ‘core’ belief in obfuscation:
Producer price inflation at the headline level continues to run hot while the core is more moderate. Nonetheless, the core has been a little warmer in recent months. Overall PPI inflation in April increased 0.8 percent, following a 0.7 percent jump in March. April's figure topped analysts' estimate for a 0.6 percent rise. Energy increased 2.5 percent after a 2.6 percent advance in March. The main culprit was gasoline which rose 3.6 percent in April, following a 5.7 percent surge the month before. However, food also added to the latest PPI jump, rebounding 0.3 percent after a 0.2 percent dip in March. At the core level, PPI growth held steady at 0.3 percent, coming in higher than the median forecast for 0.2 percent. Upward pressure at the core was led by passenger cars and light trucks.

It’s all contained… that’s why they are raising margin requirements and smashing the outsiders in the commodity space (while simultaneously printing money like mad).

Speaking of hot money, the Treasury just released their latest POMO schedule – “only” $93 billion more in the next month, the lowest yet of QE2! And even that isn’t enough to keep everything moving higher. But I’m sure the perfect trading insiders were well positioned in advance.

Speaking of insider trading, RAJ was convicted on all counts. To me this is nothing other than finding a few scapegoats to keep appearances up. RAJ obviously was not a true insider – he may have been acting like one, though, and obviously he did not have the insider handshake. Meanwhile, quarter after quarter, the real insiders continue to spew disinformation while bringing home the HFT bacon with perfect trading performances.

So, if the PPI rises .8% in the same month that Retail Sales rose a supposed .5%, did Retail Sales really rise at all? My answer is NO, they didn’t! Real Retail Sales are negative, as in fewer real items sold – end of discussion.

Well, not entirely the end… you see, Retail Sales are trumped on the high side at the same time inflation numbers are trumped on the low side.

Markets? What are the master manipulators up to?

Ouch, that squeeze sure hurts...