Tuesday, August 16, 2011

Morning Update/ Market Thread 8/16 – Terminal Edition…

Good Morning,

Futures are lower this morning with the dollar slightly higher, bonds higher, oil lower, gold & silver higher, and most food commodities are slightly lower.

Stocks are creating a rising wedge pattern that is getting close to terminating. Below is a 30 minute chart of the SPX, you can see that wedge clearly and this morning we are off the upper boundary:

In Europe, news of weaker than expected GDP “growth” has disappointed the markets once again, and thus it is blamed for weakness this morning – the media always has to pin some label as to why…

Meanwhile the housing market in the U.S. continues to wallow in depression. Housing starts for July fell from June’s 629,000 to 604,000, with permits also falling and both disappointing. Here’s Econoclown:
New housing construction in July headed back down to trend sluggishness after an unexpected boost in June. Housing starts dipped 1.5 percent in July, following a 10.8 percent jump in June (originally up 14.6 percent). The July annualized pace of 0.604 million units beat expectations for 0.600 million units and is up 9.8 percent on a year-ago basis. The decline in July was led by a 4.9 percent drop in the single-family component, following a 7.5 percent surge in June. The multifamily component continued upward, gaining 7.8 percent after jumping 21.2 percent the prior month.

By region, the drop in starts was led by a monthly 37.7 percent decrease in the Midwest with the West declining 3.0 percent. The Northeast gained 34.7 percent while the South rose 5.6 percent.

Homebuilders remain cautious as housing permits slipped 3.2 percent, following a 1.3 percent rise in June. The July pace of 0.597 million units annualized came in below the median forecast for 0.606 million. Permits in July are up 3.8 percent on a year-ago basis.

The bottom line is that housing is still extremely anemic with perhaps mild strength in the multifamily component. Until labor markets improve significantly, this sector is likely to remain in the doldrums.

On the news, equity futures edged up but remained significantly negative due to disappointing news on second quarter growth in Europe.

The wave of deflation is already hitting Import and Export price data, with Export prices falling and Import prices rising. That would seem to me to be the worst of all worlds, and is a product of failed and corrupt central banking policy. Again, let’s bring in the clowns:
A monthly upswing in prices of petroleum products drove import prices up 0.3 percent in July vs June's revised 0.6 percent decline in a month when petroleum prices fell. Prices for imported petroleum products rose 0.6 percent in July and fed through to a 0.2 percent rise in industrial supplies excluding petroleum. The latter is a closely watched component which in June fell 0.4 percent. Prices for imported finished goods are mixed showing no change for capital goods though consumer goods do show a less-than-moderate gain of 0.4 percent.

Prices for US exports, down 0.4 percent in the month, were pulled down by a big fall in agricultural prices which fell 4.3 percent in July. Excluding agricultural prices, export prices rose an incremental 0.2 percent.

A look at year-on-year rates, which are the highest since 2008, shows the longer term effects of this year's high prices for both petroleum and agricultural products. Import prices, reflecting petroleum, are up a year-on-year 14.0 percent with export prices, reflecting agricultural products, up 9.8 percent. But the monthly readings in general are tame and should not upset expectations for tame readings in tomorrow's producer price report and Thursday's consumer price report.

Industrial Production was just released and contrasts with the Empire State report that was negative. Industrial Production, according to this report, supposedly rose .9% in July. This is, however, another “Fed” report – one that was also modified a few years ago so that the data more closely fit into their fake inflation under reporting models. Thus this report also suffers from a false upside bias, the same as our current GDP where financial engineering is equated to real production. Fluff and fraud in the engineered data, anything real is negative. Here are the clowns shoveling the fraudster’s manure:
Manufacturing appears to be on the mend as production improved sharply in July and June was not as soft as earlier believed. Overall industrial production in July posted a 0.9 percent gain, follow a 0.4 percent rise the prior month (originally up 0.2 percent). The latest figure topped analysts' forecast for a 0.5 percent boost.

By major industry, manufacturing showed significant improvement, advancing 0.6 percent, following rise of 0.2 percent in June (originally no change). The auto component finally made a comeback, jumping a monthly 5.2 percent after three consecutive declines including June's 0.9 percent decrease. And production was moderately healthy outside of autos. Excluding motor vehicles, manufacturing rose 0.3 percent, following a 0.2 percent rise in June.

Turning to other major sectors, utilities output rose 2.8 percent after increasing 0.8 percent in June. Mining output advanced 1.1 percent after growing 1.2 percent in June.

Overall capacity utilization in July improved to 77.5 percent from 76.9 percent the prior month. The June number came in higher than the median estimate for 77.0 percent.

Today's industrial production report is probably the strongest argument so far that second half growth is improving from a sluggish first half.

On the news, equity futures rose but remained negative on disappointing news on second quarter growth in Europe.

Pleeeaaassse! What nonsense. And even with their over reporting, these numbers are nothing but depression readings. Think about how long the economy has been shedding manufacturing and yet we STILL only have mid to upper 70s capacity utilization! Sick.

The impossible math of debt saturation will force the fraudsters to adjust their data some more before it’s over. And the clowns, fully dependent on the manure for their living, will no doubt continue to shovel it. But the impossible math just is, and therefore will not be denied – it is terminal.

Yesterday Starbuck’s CEO, Howard Schultz, called publically on all corporations to end their political contributions until the politicians reach a sound and workable agreement on the national debt. This is quite the statement from one of our large corporations, ground breaking that he would do that and unthinkable just a short time ago.

His call out is the result of seeing the impossible math manifest itself – thus it is another “other event” on the road to a total loss of confidence. What Shultz may or may not understand, is just how terminal the math situation is. There is no fix short of removing the bankers, clearing out the debt saturated condition, and taking back control of the production of our money.