Tuesday, May 17, 2011

Morning Update/ Market Thread 5/17

Good Morning,

Equity futures are down a little this morning after rising about 80 DOW points overnight as part of the typical overnight futures ramp job. These no volume overnight ramps are just one of the not so subtle ways that the market is manipulated higher. And thus no matter what occurs in the world, as long as the printing press is allowed to continue, the stock market is captive to our narcissistic masters (all “markets”). The dollar is higher, bonds are higher, oil is down, gold & silver are down, and most food commodities are higher.

Housing Starts came in substantially worse than expected, falling from March’s 549,000 units to only 523,000 units in April. This is way off the consensus guess of 570k, and not a good thing especially when put into the spring context which is when we expect gains. Unbelievably, Econopray doesn’t mention the southern storms as being a factor, and this is probably the one time that they actually were as you can see that the southern market was hit the hardest. Also, this number has become extremely volatile with large monthly shifts that are greater than 10% moves, and also very large revisions. This is a red flag for me… it tells me that there is likely manipulation occurring and probably outright fraud. We know that NAR has been caught red handed in this regard and so I wouldn’t be surprised to learn that this report is being massaged as well:

Housing activity is continuing to confound and is refusing to establish any kind of uptrend. Housing starts in April fell back 10.6 percent, following a revised rebound of 12.9 percent in March. The April annualized pace of 0.523 million units posted below the median market forecast for 0.570 million units and is down 23.9 percent on a year-ago basis. The drop in April was led by a 24.1 percent fall in the volatile multifamily starts component, following a 30.8 percent jump in March. The single-family component dipped 5.1 percent after rebounding 7.0 percent in March.

The good news within the report was an upward revision to starts in March which were revised up to 0.585 million from the original estimate of 0.549 million.

By region, the drop in starts in was led by a monthly 23.0 percent plunge in the South with the Northeast declining 4.8 percent. However, gains were seen in the Midwest and West, up 15.7 percent and 3.7 percent, respectively.

Housing permits have been volatile in recent months but trending flat. Housing permits declined 4.0 percent in April, following a 7.5 percent surge the month before. Overall permits came in at an annualized rate of 0.551 million units and are down 12.8 percent on a year-ago basis.

The bottom line is that housing is flat and at anemic levels. Likely, we need to look to other sectors in the economy to keep the recovery moving forward. Recovery in housing appears to be some time off but that is not a surprise to many.

Note that starts at this level are less than half what they were – a true depression.

Industrial Production was just released and also came in worse than expected for April. In March it supposedly “grew” (apparent growth) by .8%, but was flat month to month versus a consensus of +.4%. The Capacity Utilization Rate fell from an already woeful 77.4% to 76.9% when higher was expected. Utilization rates this low are sick, especially when it’s been years now since the financial crisis began and thus companies have had plenty of time to shed excess capacity. This tells me that the shedding is not over, and in the big picture is just another confirmatory piece to my debt saturation thesis:
Industrial production surprised on the downside for April with weakness led by a drop in auto assemblies. Overall industrial production in April was unchanged, following a revised 0.7 percent gain the prior month (originally up 0.8 percent). Analysts had called for a 0.4 percent advance for the latest month. Notably, manufacturing posted a 0.4 percent decline in April, following a 0.6 percent gain in March. Auto assemblies likely were weighed down by supply disruptions for parts from Japan. Excluding motor vehicles, manufacturing rose 0.2 percent after a 0.4 percent advance in March. Moving to other sectors, utilities increased 1.7 percent after gaining 0.7 percent in March. Mining rose 0.8 percent after a 1.4 percent jump the month before.

Within manufacturing, durable goods dropped 1.0 percent in April. The output of motor vehicles and parts fell 8.9 percent after increasing 3.6 percent in March. Nondurables edged up 0.1 percent in April after advancing 0.5 percent in March.

Overall capacity utilization in April slipped to 76.9 percent from 77.0 percent the prior month. The April rate fell short of analysts' estimate for 77.6 percent.

Today's report is disappointing at the headline level and for total manufacturing. But the auto industry is relatively healthy based on demand and recovery should be expected soon for assemblies. Non-auto manufacturing is mixed but still net positive.

Yesterday Little Timmy Geithner announced that he’s robbing government retires in order to keep government afloat. Great choice to make the most political impact – hold retirement pension funds hostage for maximum scare effect. The implied threat, of course, is raise the debt ceiling or the people will suffer further. Gee, WHO is it that benefits from still more debt? Uh, huh.

Don’t worry, Little Timmy promises to pay it all back.

Japan officials finally admit that unit 1 has suffered a complete and total meltdown, and that the molten corium is not only laying on the bottom of the reactor, but has exited the bottom and may very likely be in the basement of the reactor building. It is also possible that it is beyond the concrete and that it is the world’s first true “China syndrome” meltdown.

What these reactors are doing to Japan is horrific, and the radiation continues to spread around the globe. How does our President react? Yesterday he urged Japan’s government to “to take steps to prevent a further decline in Tepco stock!”

That’s right, he is concerned about phony paper and once again missed the opportunity to do something real on behalf of humanity. He sounds just like a central banker, I won’t be surprised to learn that he’s been romping with maids. Sick. Speaking of which, Arnold Schwarzenegger just admitted to romping with household staff. Politicians and bankers… so many have that sick narcissistic tendency – power trippin’.