Friday, August 26, 2011

Morning Update/ Market Thread 8/26 - Slip Sliding Edition…

Good Morning,

Equity futures are slip sliding this morning, not receiving any help from a downwardly revised Q2 GDP. The dollar is lower, bonds are higher, oil is lower, gold is higher, silver is losing a tad of shine, and food commodities are just a little more palatable.

Second Quarter GDP was revised downward from 1.3% to 1.0%, below the consensus of the economic guessers, aka. “clowns.” Here’s Econocircus calling the action in the ring:
The economy got a downgrade for the second quarter but it was in line with expectations. The Commerce Department's second estimate for second quarter GDP growth was nudged down to a modest gain of 1.0 percent annualized, compared to the initial estimate of 1.3 percent and to first quarter growth of 0.4 percent. Analysts had projected a revision to 1.1 percent annualized.

Final sales of domestic product were revised to an annualized 1.2 percent from the initial estimate of 1.1 percent. Final sales to domestic purchasers were revised up to 1.1 percent from the original estimate of 0.5 percent annualized.

Economy-wide inflation was revised up marginally to 2.4 percent annualized, compared to the original estimate of 2.3 percent and the first quarter rise of 2.5 percent. The consensus forecast was for 2.3 percent.

While GDP growth was revised down, the more important measure of momentum---final sales-were revised up slightly. But today's numbers do not say much for the current status of the economy. Equity futures were little changed on the news as traders await Fed Chairman Bernanke's speech at Jackson Hole at 10:00 a.m. ET.

Hmmm… a miss is suddenly "in line," and it's amazing how all of the sudden final sales became more important than total GDP or inflation. Here’s a hint – that’s because total sales are not REAL. Inflation is vastly under reported and thus GDP and sales are both over reported. Again, the disconnect between reality and economic reports is a big part of losing confidence.

Nowhere is the disconnect greater than in the reporting of Corporate Profits. Year over year figures have been huge, but I’ve contended all along that they are FALSE. The vast majority of corporate profits come from the energy companies and the banks. With money printing out of control, rising energy prices create apparent energy company profits, but the truth is those profits are offset by destruction of the value of money. The major banks are using fraudulent accounting via Mark-to-Model accounting, along with a myriad of other accounting tricks and the offloading of junk onto the government via Freddie and Fannie. Remove the false accounting which is rampant throughout all of corporate America, and real corporate profits would have stayed very negative the past couple of years.

Now this morning, despite the fraudulent accounting, Q2 “profits” that were originally reported as being up 7.8% year over year were revised down to 0.0%! My, that’s quite the revision and shows just how fast the situation is changing. And if Q2 is flat year over year, then Q3 is very likely to wind up negative, again despite the false accounting.

All the fraud and overstatements mean that equities are very mispriced – have been for quite some time. Supposed Price to Earnings are just that, supposed. This is just one of the reasons why I claim that the markets are currently not real, and I would advise people not to participate in them or to contribute to the criminal misconduct.

“Consumer” Sentiment will be released at 9:55 Eastern this morning, it will be reported inside of today’s Daily Thread.

Of course we are all hanging on the Bernank’s every word – ugh. Could care less, really. The only word properly associated with that man is “guilty!” His actions have damaged this nation severely, but it’s not just him, it’s the entire notion of a private “Fed” controlling the production of money – that is a no win proposition for citizens who have become nothing but “consumers” in the narcissist’s lexicon.

What I now see in the equity markets is a larger sideways triangle that appears bearish – of course manipulation just is, so take that triangle within the framework of corruption that we have. Below is a daily chart of the SPX:

And below is a 1 hour chart of the futures with the DOW on the left and S&P on the right, you can clearly see the same triangle forming but in more detail:

Waiting on the Bernank with baited breath… Slip Sliding Away.