Thursday, June 9, 2011

Morning Update/ Market Thread 6/9

Good Morning,

Equity futures are close to even prior to the open this morning, with the dollar higher, bonds higher, oil higher, gold & silver higher, and food commodities also higher.

Jobless Claims continue to be a disaster in this debt saturated environment, coming in at 427,000, up from 422k, on expectations of a decline to 418k. Naturally the prior week was revised higher, as always. Here’s EconoLSD:
Initial jobless claims aren't coming down but they're stable and at lower levels than they were a month ago. Initial claims came in at 427,000 in the June 4 week vs a revised 426,000 in the prior week and 429,000 the week before that. The four-week average of 424,000 is down 2,750 in the week and is down nearly 15,000 from a month ago.

Continuing claims in data for the May 28 week fell 71,000 to 3.676 million with the unemployment rate for insured workers ticking down one tenth to 2.9 percent.

There are no special factors in this report which is mildly positive for the economic outlook. It would be nice if claims were under 400,000 as they were in March but it's the June to May comparison that's most important right now and this report offers an early indication of improvement.

Huh? “Mildly positive for the economic outlook?” Oh boy… that’s some powerful hallucinogenic someone’s taking.

I hate to sound like a broken record, but it’s been week after week for YEARS now that this economy has been shedding jobs. Any number above 350k is a losing jobs proposition in this report and there has not been a number that low in over four years – 400k is a psychological number but meaningless and is still a job shedding proposition.

And now that it’s been proven that first debt pumping, and then money printing don’t work to create more jobs, austerity is now coming into vogue again. Of course austerity is just the other side of the private central banker false choice paradigm. And austerity is coming to the unemployed as the Federal emergency program is winding down and now the states are beginning to shorten their benefit periods. So, we may begin to see these numbers come down, if only because people will not be eligible to file claims. Here’s an article explaining some of this:
Unemployment benefits fading away

NEW YORK (CNNMoney) -- Even though the nation's jobless rate is on the rise, millions of people could see their unemployment checks stop coming at the end of the year.

Nearly all Americans who find themselves out of work starting next month will likely receive only 26 weeks of state unemployment checks -- at most.

Why? Because the deadline to file for extended federal benefits expires at the end of the year.

"Most people who lose their jobs after July 1... won't be eligible for federal unemployment benefits," said George Wentworth, senior staff attorney at the National Employment Law Project.

And as Washington prepares to pull back, a growing number of states are cutting their share of benefits. South Carolina is poised to become the fourth state this year to reduce state benefits to 20 weeks, while Arkansas and Illinois have shorn one week off their unemployment insurance coverage.

Earlier this week, President Obama broached the idea of extending the federal safety net in detailing steps Congress has taken to help unemployed Americans and the overall economy. His comments came just a few days after the government reported surprisingly weak employment growth for May, when the jobless rate rose again to 9.1%.

"One of the things that I'm going to be interested in exploring with the members of both parties in Congress is how do we continue some of these policies to make sure that we get this recovery up and running in a robust way," Obama said Tuesday.

Jobless discouraged by weak economy
To help the jobless get by during the downturn, Congress extended federal unemployment benefits in 2008 to a maximum of 73 weeks. However, those looking for work have to periodically file for additional benefits to qualify for the full 73 weeks. The deadline to file for those extensions is Jan. 3, 2012.

To help the jobless get by during the downturn, Congress extended federal unemployment benefits in 2008 to a maximum of 73 weeks. However, those looking for work have to periodically file for additional benefits to qualify for the full 73 weeks. The deadline to file for those extensions is Jan. 3, 2012.

At the moment, Congress not thinking much about unemployment insurance. Lawmakers are wrestling with raising the debt ceiling and how to cut the budget -- not spend more.

And therein lies the rub – the government wants to “help,” however they need to spend less, not more. This type of convoluted situation is a product of the impossible math created by the glaring flaw in our nation that allowed private individuals to control the production of money, to profit from it, and then allowed them to use that money to capture government. Trillions for them, morsels for everyone else, to be followed by austerity.

Hey, at least our International Trade numbers came down in April falling $4.5 billion or about 9.3% (!)… which is actually good in the long term, but shows weakness in the short term as auto imports and oil collapsed during that month. Here’s Econodope explaining why every bad data point is actually good:
The trade deficit shrank more than expected in April, largely on a dip in oil prices. The April trade gap shrank to $43.7 billion from a revised $46.8 billion in March (originally $48.2 billion). The shortfall was less negative than the median forecast for $49.0 billion. Exports rose 1.3 percent after jumping 4.9 percent in March. Imports slipped 0.4 percent after gaining 4.2 percent the prior month.

The improvement in the trade deficit was led by the petroleum gap which narrowed to $26.1 billion from $30.2 billion in March. The nonpetroleum goods differential expanded to $31.2 billion from $30.2 billion the month before. The services surplus grew to $14.4 billion from $14.3 billion in March.

Looking at end use categories for goods, exports increased 1.6 percent while imports dipped 0.5 percent in April. The boost in exports was led by a $2.0 billion gain in industrial supplies, with increases also seen in capital goods excluding autos (up $1.2 billion) and consumer goods (up $0.3 billion). Auto exports fell $0.8 billion while food, feeds & beverages dipped $0.2 billion.

The decline in goods imports was led by a $2.8 billion drop in auto exports with industrial supplies falling $1.5 billion. Consumer goods imports rose $2.1 billion, capital goods ex autos increased $0.6 billion, and foods, feeds & beverages advanced $0.4 billion.

On a not seasonally adjusted basis, the April figures show surpluses, in billions of dollars, with Hong Kong $2.6 ($2.7 for March), Singapore $1.2 ($0.9), Australia $1.1 ($1.1), and Egypt $0.5 ($0.4). Deficits were recorded, in billions of dollars, with China $21.6 ($18.1), OPEC $9.6 ($10.8), European Union $7.5 ($9.0), Mexico $5.5 ($6.2), Germany $3.8 ($4.6), Japan $3.6 ($6.1), Ireland $3.0 ($2.6), Venezuela $2.8 ($3.0), Nigeria $2.5 ($2.5), Canada $2.5 ($2.6), Taiwan $1.2 ($0.6) and Korea $1.0 ($0.6).

The latest trade number is technically favorable (in GDP accounting) toward GDP but part of the improvement likely was due to lower imports from Japan which actually constrained U.S. output, especially for autos (meaning a net negative effect on Q2 GDP). However, the downward revision to March should add to Q1 GDP.

…And the GDP forecasting blather continues unabated as if it has any basis in reality and we’re all going to sit on pins and needles waiting to hear how the number is massaged to be positive when in fact it’s actually negative.

In Japan they are now finding tea leaves that are contaminated more than 100 miles from the Fukushima plant. For the first time it was suggested by the Japanese government that they may consider closing down all 54 of their nuclear power plants and possibly as early as next year. I highly doubt they can accomplish that, but at least they are thinking in the right direction – finally. Note that yesterday the Swiss Cabinet called for closing down all five of their nuclear plants as they follow the lead of Germany.

The markets are in a very oversold state, it has been four days now with zero percent of stocks over their ten day average. Rallies usually follow that circumstance so I won’t be surprised by some sort of bounce soon. Still, one must consider that this dip has been pretty mild so far… my read is that the banks are beginning to melt under the thought that QE is actually going to come to an end. The market kind of believes it, but not really – thus the shallow descent. However, at some point more QE will either come to the rescue or it won’t.

Many people are comparing this dip to last year’s dip about the same time. The problem with that thinking is that last year it was the announcement of QE2 that stopped the bleeding… so you have to ask yourself is that going to happen this time too? My answer is that I think they probably will, but that things may have to deteriorate further in order for them to justify it. So, gambling in these markets boils down to whether or not the private central bankers have the ability/ will to continue printing money to fuel their further manipulations. No thanks, I won’t even offer a guess as it’s their casino and I prefer to stay out of casinos and I don’t play state sponsored lotteries either.