Thursday, June 2, 2011

Morning Update/ Market Thread 6/2 - Panic or Blackmail (?) Edition…

Good Morning,

Equity futures are just above even this morning following yesterday’s 280 point nose dive. The dollar has lost all of yesterday’s gain and then some, yet the moves in equities and commodities are not reflecting that move lower in the dollar as they have been. Bonds are lower this morning, oil is slightly higher after a large drop yesterday, gold is hanging tough after rising yesterday (hint), silver is up slightly after getting nailed again yesterday, and most food commodities are higher today after a large move down yesterday.

Okay, so we know that the market is about 95% fluff, so why now? The data has been bad for weeks, so more bad data doesn’t seem like a likely candidate to me, although the manufacturing and housing data is obviously sliding off the proverbial cliff. No, the suspicious me is feeling manipulated again – we’re up against the debt ceiling, European countries are not complying by sucking IMF debt fast enough, and the end of QE2 is rapidly approaching. Is a threat being made somewhere along the lines of “See, this is what happens if you don’t comply?” Hmmm, I am suspicious because I know how the central bankers (who own and control the markets) work, and I’ve seen them do this time and again.

The more I view the market, the more I realize that it is a political tool and not the “free market” fantasized about by countless technicians – at least it’s no longer a free market, it’s more like a manipulative hologram.

Still, if one is doing TA on it, there is what appears to be a large bear flag following yesterday’s downstroke so it’s possible that there’s more to come:



The bad data flow continues with the Weekly Jobless Claims this morning coming in at 422,000 – still well above that 400k mark. This is down slightly from 424k last week and is worse than expected. Again, it takes this number getting below 350k, and staying there, to indicate job growth, and that has not happened yet. Here’s Econospin calling this number “good,” although I don’t know how anyone can – note yet another revision higher to last week’s data, that means this week’s number is somehow “good?”
Highlights
In badly needed good news on the jobs market, initial jobless claims are easing a bit from elevated levels. Claims fell 6,000 in the May 28 week to 422,000 (prior week revised to 428,000). The four-week average of 425,500 is down a sizable 14,000 and compares well with the month-ago level of 432,250. There are no special factors skewing the data with tornado-hit Missouri reporting some trouble but not enough to affect the total. Continuing claims are little changed, down 1,000 in data for the May 21 week to 3.711 million with the unemployment rate for insured workers unchanged at 3.0 percent. This report probably won't improve expectations for tomorrow's monthly jobs report but at least it won't be deepening pessimism.


Factory Orders will be released at 10 Eastern, we’ll report on that inside of the Daily Thread.

Note the sudden shift in the need to “keep the ‘Fed’s’ balance sheet high,” as if their “balance sheet” isn’t just an off the books addition to our national debt…
Fed May Signal Balance Sheet Will Stay at Record Amid Slowdown

June 2 (Bloomberg) -- A wave of surprisingly weak data on the U.S. economy may spur Federal Reserve policy makers to support growth by making it clear they’re in no hurry to shrink the central bank’s record balance sheet.

There’s a “strong possibility” that the Federal Open Market Committee will say following the June 21-22 meeting that it will keep reinvesting proceeds from maturing debt for a while, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Previously, the FOMC has said it will keep the benchmark interest rate near zero for an “extended period” without a similar pledge about its balance sheet.

Yesterday’s reports showing manufacturing grew at the slowest pace in more than a year in May and employers added fewer jobs than forecast prompted Feroli to cut his estimate for second-quarter economic growth. The slowdown may push policy makers to consider what options are left after their second $600 billion round of asset purchases sparked a Republican backlash. Saying the balance sheet won’t shrink immediately could dispel any notion that the Fed is about to push up borrowing costs.

“The idea of extending the period in which they maintain this level of accommodation is an easy call, a natural call and the right call,” said Neal Soss, chief economist for Credit Suisse Holdings USA Inc. in New York. A third round of asset purchases “is so contentious within the committee and the broader political environment, that they aren’t going to go there. That makes it very unlikely.”

What hogwash! The impossible math ensures that another round of QE is coming, count on it. If printing is halted at any point now, the impossible math dictates that a wave of deflation strikes. So, deflation, inflation, name your poison. You are being manipulated by/in the markets and your wealth is going to be transferred to them one way or the other as long as they are the ones in control of producing money. Central bankers are like a disease. You must treat the disease and stop talking about the symptoms.

Oh, yeah, as I type those bearish flags are breaking down… hope you didn’t buy into the LNKD IPO hype!