Friday, July 15, 2011

Morning Update/ Market Thread 7/15 - Wasted Time Edition…

Good Morning,

Yes, it’s a waste of time to report pre-open as the HFTs will simply use pre-market movement to shake non-HFT donators out of their position and turn profits. What profits? Try $3 trillion+ at both Citi and Bank of America – both outrageous “profits” made by churning in the markets but also by lowering loan reserves – as if they have any actual reserves at all, they don’t if they were to mark their “assets” to any semblance of reality. But these are the companies running America, they are your boss. But let’s pretend and note that the markets are slightly higher this morning despite a higher dollar, bonds are lower, oil is flat, gold is taking a breather just beneath $1,600, silver is higher, and food commodities are mixed. Don’t forget that today is Options Expiration, that means more fun and games.

In the Land of Make Believe, the CPI went negative on a month over month basis at -.2%, but is still (falsely) showing a +3.4% rate year over year. Reality is much, much greater than that. Here are some words from people who make a living playing within the central banker box:
Consumer price inflation turned negative for the first time in twelve months on another decline in energy costs. The consumer price index in June dipped 0.2 percent, following a 0.2 percent increase the month before. The June number matched the median estimate for a 0.2 percent decrease. Excluding food and energy, the CPI rose 0.3 percent, equaling the May rate and topping the consensus forecast for a 0.2 percent increase.

Turning to major components, energy dropped 4.4 percent, following a 1.0 percent decline. Gasoline fell 6.8 percent after decreasing 2.0 percent in May. Food price inflation slowed with a 0.2 percent gain after a 0.4 percent surge the month before.

Within the core new vehicles increased 0.6 percent, used cars and trucks jumped 1.6 percent, and apparel increased 1.4 percent in June. And owners' equivalent rent is no longer as soft as in recent months, rising 0.2 percent.

Year-on-year, overall CPI inflation held steady at 3.4 percent (seasonally adjusted) in June. In contrast, the core rate firmed to 1.6 percent from 1.5 percent in May on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.6 percent in June while the core was up 1.6 percent.

The headline is good news but the strong core will give Fed officials pause on taking on more quantitative easing. However, the motor vehicle prices gains are likely temporarily hot.

Gee, QE2 hadn’t even ended and this number turned negative. Just give the powers of deflation a little while and I think it will be roaring which will force their hand into QE3 once again so that they can keep their rob you Ponzi games alive.

The Empire State Manufacturing Report was negative for the second month in a row, Econodime is having a tough time spinning that one into gold:
The best news that can be squeezed from the Empire state report is that the rate of contraction is easing. The headline index came in at minus 3.76 in July, a sub-zero reading indicating month-to-month contraction in business conditions but above minus 7.79 to indicate a slightly less severe rate of contraction compared to June. Shipments are a clear positive, showing monthly expansion at plus 2.22 vs June's minus 8.02. Employment, at plus 1.11, also expanded though at a slower rate than June's 10.20.

Other readings are more downbeat including a minus 5.45 for new orders, the second negative reading in a row, and a minus 12.22 reading for unfilled orders that suggests manufacturers in the region are aggressively working down their backlog. Inventories also contracted as did the workweek. Price data confirm overall slowing with both input and output pressures easing.

Today's report points to a second month of weakness for the Philly Fed report on Thursday as well as to trouble for the July ISM report. But these are anecdotal reports, based on small samples and using diffusion methodologies. Today's industrial production report, to be released at 9:15 a.m. ET this morning, will offer definitive data on June.

Speaking of Industrial Production, in May it was originally reported at +.1%, but that was revised down to -.1% just to keep the trend of overstatements alive. For June they just reported +.2%, so that probably means next month we’ll find out it is either zero or -.2%. Reality is something else entirely.

“Consumer” Sentiment comes out in a few minutes, we’ll discuss that inside of today’s Market Thread, not than any of the bankers give a rip about what the non-Ferrari peons think. The Sentiment and Confidence reports used to matter, but not in today's world of QE masking.

The evening news is filled with scare tactics on the debt ceiling. Really, I couldn’t care less, but I hate being manipulated and that’s what all of this is about. If it were up to me I’d throw Obama, most of Congress, and all of the central bankers in jail and start over. Short of that I’m losing interest and don’t even view their wild shenanigans as worth my time at this point. I’ll keep track and keep reporting for now, but the pain/ give-a-rip meter is definitely pegged.