Wednesday, August 31, 2011

Morning Update/ Market Thread 8/31 - Clear the Debt or Wallow Edition…

Good Morning,

End of month dreams and QE fantasy are my versions of what is responsible for the hyper-manic-inflate-at-any-cost moronic mentality, which of course, has led to a fluffy higher feel not-so-good queasy kind of “market.” Along with the queasy fantasy of higher stocks (for the time being), the dollar is lower, bonds are higher (watch out), oil is slightly lower, gold slightly lower, silver is higher, and food commodities are flat this morning but still high enough to make one choke.

Oh sure, the media says the data is great! That’s why the stock market ramped all night long and into the morning, yeah, that’s the ticket… it was the ADP report, yeah… no, wait, it was the rumor of another bailout, yeah, that’s the ticket…

Hello, “Consumer” Confidence crashed yesterday, as in cratered for the month of August. It plunged from the last already depression era read of 55.9 (1985 = 100 on this scale), all the way down to only 44.5. For those who do math, that’s a 20% one month plunge to depths reserved for times of great fear and anxiety – a dim outlook of the future is definitely there. And guess what? Retail Sales follow Consumer Confidence fairly closely. Not that I believe the Retail Sales Index, but I do believe they track one another, and so take a look at this chart showing the two together. Look closely, and you’ll see that when consumer confidence falls, so too do sales:

Don't panic, but August is a cliff month, and as more economic reports come out for that month, I think the picture is going to be pretty ugly, even with trumped up data.

It was reported this morning that Canada’s Q2 GDP turned negative for the first time in two years, also not a good sign for the trend.

The completely hypocritical and morally reprehensible Mortgage Banker’s Association reported that Purchase Applications supposedly rose by .9% in the prior week, but that Refinancing Activity fell by a whopping 12.2 crazy % in just one week. Whatever, these guys are clowns, their reports belong in the trash, and you will almost always be better off by doing the exact opposite of what they suggest. Here’s Econocomplicit:
Rates are coming down but points paid are going up which the Mortgage Bankers Association says is pulling down volume of refinancing applications which fell 12.2 percent in the August 26 week. A plus is that the purchase index ended three weeks of heavy decline though with only a mild 0.9 percent gain. Rates are near 10-month lows, at 4.32 percent for 30-year lows for a seven basis point decline in the week. Points for 30-year loans increased to 1.30 from 0.88 (including origination fee) for 80 percent loan-to-value ratio loans.

Turning to Employment, the first report out for August is the Challenger Job-Cut Report which actually showed improvement, falling from 66,414 to 51,114. This report has not, however, correlated well with the actual Employment Report which comes out Friday, but it’s still used to set expectations for the clown brigade:
In what may be good news for Friday's employment report, layoff announcements slowed in August to 51,114 from July's 66,414. These data are not seasonally adjusted which clouds month-to-month assessments which are especially sensitive to seasonal change. But a look at year-on-year rates of change shows a slower rate of deterioration this month, to 47% against August 2010's level of 34,768 from 59% against July 2010's 41,676.

The report makes special note that announcements of government layoffs, centered in the military, are the heaviest of any sector this month. Challenger, Gray & Christmas, an outplacement firm that compiles the report, warns that federal layoffs, tied to the need to lower the deficit, are likely to remain heavy this year and through the next several years.

The semi-worthless ADP Report also is used to set expectations, and they are saying that Nonfarm Payrolls fell from 114,000 in July to 91,000 in August, of course July was revised down, and this report was way off the mark last month. I’m not 100% sure, but I suspect this report is a part of the manipulate the markets, profit from HFT swings, rob ordinary people blind, scheme that the Wall Street boys run on the public. I don’t trust this data, and I don’t trust them – hence I say I would rather give my money to a known convicted felon than these guys, at least with the felon the pretense is gone:
ADP is calling for a 91,000 rise in private payrolls for August, down from a revised total of 109,000 in July. Expectations for Friday's non-farm payroll headline are plus 67,000 which would be lower than July's 117,000. Markets are showing no significant initial reaction to today's report.


Chicago PMI and Factory Orders are set to come out just after the open.

Macroeconomic Debt Saturation is the diagnosis. The cause of the disease is giving private individuals the power to produce money from nothing, then allowing them to corrupt all systems with it.

The cure is certainly not more “stimulus,” nor is it more “quantitative easing” which the private crooks at Goldman and JPMorgan are calling for. No, the cure is to remove the debt saturated condition and if you don’t want it to return, then you must also remove the crooks. Japan did not learn that lesson, and there they sit, wallowing in an economic and nuclear wasteland. Wallowing in their own waste, literally.

Wallowing in our own waste is the good/optimistic version of what’s in our future if we fail to clean out the debt along with the roots of the problem.

Until we put the clowns to bed, put on your nuclear rose colored glasses and get real, because it’s easy come for the fluff, and soon it’ll be easy fluff go.