Thursday, June 23, 2011

Morning Update/ Market Thread 6/23 - Paint it Red Edition…

Good Morning,

Well, Trichet says risk signals “Red” as crisis threatens banks, so that coupled with a significantly down market add up to our central banker manipulated market theme of the day. The dollar is screaming higher, Euro lower, bonds higher, oil down significantly to the $91 level, gold and silver are taking hits, as are most food commodities.

Trichet Says Risk Signals ‘Red’ as Crisis Threatens Banks

June 23 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said risk signals for financial stability in the euro area are flashing “red” as the debt crisis threatens to infect banks.

“On a personal basis I would say ‘yes, it is red’,” Trichet said late yesterday in Frankfurt after a meeting of the European Systemic Risk Board, referring to the group’s planned “dashboard” to monitor risks. “The message of the board is that” the link between debt problems and banks “is the most serious threat to financial stability in the European Union.”

In other words, no hint of more stimulus from Bernanke yesterday and thus those who own the banks, and own the exchanges, and own the HFT machines are going to continue with the deflation trade until they get what they want – more drugs for the addicts. Of course the addicts are also the pushers – they broke the cardinal sin of pushers everywhere… don’t get addicted to the product!

Of course their debt saturated condition has created structural unemployment and the numbers out this morning for last week are just like Groundhog day… going on four years now of structural weakness and they still haven’t admitted that the only way to truly stimulate the economy is to do the exact opposite of what they are, and that means working to unsaturate. Of course that assumes they care which is probably a bad assumption. Here’s Econoday, take a look at the revision for last week, twice as large as usual:
It's an uncertain jobless report for the June 18 week though the headline news isn't good showing a 9,000 rise in initial claims to a higher-than-expected 429,000. The Labor Department had to estimate results for six states, which is a sizable number, due to what it says are "technology issues" which must mean computer problems. Hopefully, the department erred to the high side and the total will come down with next week's revision. But revision is another negative in today's with the prior week revised 6,000 higher to 420,000.

A look at month-ago change, which offers a gauge for the monthly employment report, is also mixed. The 429,000 level is 15,000 higher than the May 14 week, a sampling comparison for the household survey which generates the unemployment rate. But a look at the four-week averages for the same weeks is a positive, showing a nearly 15,000 improvement to 426,250 in the latest week.

Among other data, there's little change in the June 11 count for continuing claims, at 3.710 million, and no change in the unemployment rate for insured workers, at 2.9 percent.

There's little initial reaction but this report won't be a positive for today's financial markets. And it's also a disappointment that initial claims aren't moving lower and seem stubbornly above 400,000, in fact they've been over 400,000 now for 11 straight weeks.

Not that 400k is anything but a psychological number… it’s been four years of over 350k, and that means that jobs have been continually shed during that time – there was never any “recovery,” there was only money printing that created apparent “growth” in their trumped up statistics.

While I’m on the subject of trumped up statistics, it is being suggested that they monkey with the inflation statistics again. This would be done for the same reasons it has been done in the past, in order to “save” money paid out in programs tied to inflation. This perversion causes a huge disconnect between almost all of the statistics and reality. The disconnect is already so large that it’s simply intolerable, the thought of making that disconnect larger still is simply revolting:
Change To Inflation Measurement On Table As Part Of Budget Talks -Aides

WASHINGTON -(Dow Jones)- Lawmakers are considering changing how the Consumer Price Index is calculated, a move that could save perhaps $220 billion and represent significant progress in the ongoing federal debt ceiling and deficit reduction talks.

According to congressional aides familiar with the discussions, the proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.

Such a move is widely seen by economists as resulting in a slower rise in inflation. That would impact an array of federal programs that are linked to CPI including the Social Security program and income tax brackets set by the federal government.

The proposal could lower federal spending by around $220 billion over the next decade, based on calculations by last year's White House deficit commission, which recommended the change as part of its final report.

According to two congressional aides familiar with the budget negotiations, the shift is being "seriously discussed" as part of the ongoing talks to strike a budget deal, that would be used to ease the passage of a required increase in the country's debt limit.

Those talks involve Democratic and Republican lawmakers from both chambers and are led by Vice President Joe Biden. The group held its latest meeting Tuesday as they strive to reach the broad outlines of a compromise on federal spending by the end of the month.

In a press conference that took place before the meeting, House Majority Leader Eric Cantor (R., Va.) declined to comment on the specific proposal, other than to say that "a lot of things are on the table." But asked whether the proposal would be interpreted as a tax increase and therefore a non-starter for Republicans, Cantor said it could be seen as both impacting tax rates and benefits paid out by the federal government.

In other words, the impossible math is “forcing” them to consider doing crazy things… anything but the right things. You know, things that would actually benefit the people they are supposed to represent. And that’s because they are representatives alright, they represent the special interests who get them elected, they certainly don’t represent you and me. And there’s your representative government for you.

The soon to be extinct middle-class meanwhile wallows in the aftermath of their conflicted actions. The private “Fed” of course set up this dynamic and politicians are completely unwilling to even discuss changing what really needs to be changed. The Chicago “Fed” numbers came in negative again this morning, once again highlighting the failure that is private central banking – negative .37 and note that the prior month was revised downward too:
A positive swing in production-related indicators made for improvement in the Chicago Fed national activity index which comes in at minus 0.37 for May vs a revised minus 0.56 for April. Production, which brought down the April reading by 0.16, added 0.05 to May's headline.

But now the negatives. The drag from employment increased to minus 0.04 from minus 0.02 while consumption & housing subtracted 0.36, a heavy negative though a little less heavy than the minus 0.40 of the prior month.

The index's three-month average deepened to minus 0.19 from April's revised minus 0.15, which of course is a negative. A possible negative is the outlook for the June report where early indications on production are unusually negative and which point to an unwanted swing for what was May's biggest plus.

New Home Sales are released at 10 Eastern this morning.

The VIX is back over the 200 dma, and the market is clearly still inside of the downtrend that began in May. Those who believe that QE can end to no effect are simply high, or are shills distributing their dramatically overvalued shares to you. Don’t worry, it’s all just another manipulation designed to get the private central bankers what they want – more of your productive life energy.