Thursday, May 26, 2011

Morning Update/ Market Thread 5/26 - Ground Control to Major Tom Edition…

Good Morning,

Equity futures were higher overnight but have fallen back on more negative economic data (remember, bad is good as long as we can print still more fluff… until it isn’t). The dollar is significantly lower, bonds are shooting higher, oil is down slightly as are gold & silver, while food commodities are mostly higher still.

Here’s the deal, Major Tom… Once macroeconomic debt saturation is reached, the more debt you pump into a system, the higher unemployment will go. All the money printing fluff in the world won’t create real jobs, in fact that will also destroy jobs in the long run as well if the total quantity of all money types are not kept under control.

And once again the Weekly Jobless Claims shoots higher, this time jumping back up to 424,000 with yet another revision higher to the previous week. This economy has not stopped shedding jobs, the nascent “recovery” was really no recovery, it was simply a money fluff façade. Here’s Econoday having a hard time making excuses – it’s obvious that that they, along with all the shills who surround this industry, don’t understand the underlying dynamics:
With no special factors to blame, initial jobless claims rose 10,000 in the May 21 week to a 424,000 level that's 20,000 higher than expected. Revision to the May 14 week is also a negative, up 5,000 to 414,000. The Labor Department isn't citing any weather or auto-related factors for the results. The four-week average of 438,500 is nearly 30,000 higher than a month ago in a comparison that points to trouble for the May employment report. Even the four-week average for continuing claims is higher, at 3.742 million in data for the May 14 week vs 3.702 million in mid April. Stock futures are moving off early gains following this report and following a softer-than-expected revision to first-quarter GDP.

The first revision of Q1 GDP also failed to live up to the fluff hype. The consensus was looking for a revision higher to 2.1% annualized growth rate, but it came in at a disappointing 1.8%. Again, this figure is completely distorted with debt, false deflator values, and other manipulations. Even taken at face value, “growth” here is far less than real inflation (again due to false deflator use) and thus it is my claim that real economic product is negative and still shrinking. Here’s Econoshill doing their best to pump you up:
The economy did not get the hoped for upgrade for the start of the year. The Commerce Department's second estimate for quarter GDP growth was unrevised at up 1.8 percent annualized and came in lower than the consensus forecast for 2.1 percent. The first quarter remains notably softer than the 3.1 percent pace in the fourth quarter.

Unfortunately, demand numbers were nudged down and inventory investment bumped up. Final sales of domestic product were revised to an annualized 0.6 percent from the initial estimate of 0.8 percent. Final sales to domestic purchasers were revised to 0.7 percent from the original estimate of 0.9 percent annualized. The downward revision to final sales was mainly in personal spending, now at up 2.2 percent instead of the initial 2.7 percent for the first quarter.

For overall relative strength (not merely the direction of revisions), PCEs growth remained moderately healthy. Also, business investment in equipment & software is strong. Inventory investment is positive but levels are still low. Weakness remained in government purchases, nonresidential structures, and net exports.

Economy-wide inflation was unrevised, with the GDP price index posting at 1.9 percent. The median forecast was for 1.9 percent.

Even though the headline number was disappointing, odds are that growth will not slow further in coming quarters. Momentum is still favorable for consumer spending, equipment investment, exports, and inventories.

Gee, I think I have to pull out my favorite word for all that gobbly-gook, OBFUSCATION. If you read something about the economy and it sounds like they are making up fancy words to try to make it sound good, then you are witnessing someone who either doesn’t actually understand real economic dynamics or it is an intentional effort to dazzle you with their bullshit. That is an example of both.

In the real economy, yesterday we found out that oil inventories built to a new record high while demand for gasoline is still falling.

Oil Inventories:

Also yesterday, the FHFA Home Price Index showed that home prices are still cratering, the year over year rate of crater is increasing, coming in at -5.8%. Various things are being blamed for the falling prices in the media, the latest being foreclosures. No, foreclosures are a sick and twisted symptom of banker asset stripping. The root of the problem is the fraudulent and still out of control bankers who created a huge fraud bubble in housing.

Take a look at the FHFA Home Price Index chart (the red line) and it is obvious that a new downtrend is in progress – call it a “double-dip” if that makes you happy, the truth is that it’s all part of the same fraud, the first dip is from the subprime fraud, and the second dip that’s occurring now is being driven by the Option-ARM scam. Compare the shape of the two charts below and I think the correlation is obvious – wave of subprime, wave of Option-Arm…

Note that there is about a four to nine month lag between the resetting maximum and the home price minimum. Taking that into the future, then, home prices MAY reach a low point sometime in the first half of 2012. Take that with a grain of salt, of course, as there are other threats to the economy, especially since it’s obvious that we’re nowhere near changing out WHO it is that controls the production of money.

Major Tom, are you there?