Wednesday, September 14, 2011

Morning Update/ Market Thread 9/14 - Americans in Deep Edition...

Good Morning,

Equity futures are higher this morning despite the continued flow of negative data. The dollar, of course, has to be lower for this to occur, bonds are also slightly lower, oil is lower, gold & silver are both slightly lower, and most food commodities are only slightly more palatable at this morning’s level.

The still very much conflicted Mortgage Banker’s Association reported their still not believable American’s in Deeper Purchase Applications for the shortened prior holiday week. Purchase Applications, according to them and their adjustments, were up a whopping 7%, and Refinancing activity rose 6%. Not believable, sorry… not even in the slightest little bit do I believe that. Here’s Econogullible:
In a shortened September 9 week that included Labor Day, the purchase index shot 7.0 percent higher with the refinance index up 6.0 percent. Mortgage bankers were busy in the week as interest rates came down with the average 30-year mortgage falling six basis points to an extremely low 4.17 percent. But the purchase index, which before this week had been long lifeless, will have to extend its gains in the upcoming weeks before it signals strength in the underlying housing market. Next data on the housing sector will be the home builders' housing market index on Monday.

With macroeconomic debt saturation, Americans are in deep all right. The “Fed’s” overproduction and then manipulation of credit flows has helped to feed waves of inflation and deflation. Lately, the data has been pointing to inflation with a skyrocketing money supply, and now the inflation data, as trumped-up as it is, is pointing to inflation rounding the corner and heading back down. Here’s the PPI data, remember that the PPI leads the CPI, so it will take awhile for the wave to get going:
Inflation eased in August at the producer level despite a surge in food prices. Producer prices in August were unchanged percent after rebounding 0.2 percent in July. The August figure was marginally higher than the consensus forecast for a 0.1 percent decline. By major components, energy fell 1.0 percent after dipping 0.6 percent the month before. Gasoline dropped 1.0 percent, following a 2.8 percent decrease in July. Food costs, in contrast, surged 1.1 percent after jumping 0.6 percent the month before.

At the core level, PPI inflation slowed to a 0.1 percent pace after accelerating to 0.4 percent in July. Analysts had projected an increase of 0.2 percent. Weakness in the core included declines in prices for passenger cars (down 0.4 percent) and computers (down 2.6 percent). On the upside, the leader was tires (up 1.4 percent) which contributed over twenty percent of the August increase in the core. Higher prices for radio and television communication equipment also contributed to the rise in the finished core index.

For the overall PPI, the year-ago pace in August came in at 6.5 percent, compared to 7.2 percent in July (seasonally adjusted). The core rate in July held steady at 2.5 percent on a year-ago basis (seasonally adjusted). On a not seasonally adjusted basis for August, the year-ago headline PPI was up 6.5 percent while the core was up 2.5 percent.

Inflation is slowing at the producer level and this portends well for tomorrow's CPI. The Fed will need good inflation numbers before enacting another round of monetary easing.

The “Fed” is almost always out of synch with the waves – this produces the same effect as Pilot Induced Oscillation. Because there is a time lag with their stimulus, if it really was going to work at all, they need to add the stimulus well BEFORE the next wave of deflation begins to show up. Once it shows up, sorry, too late and thus the cycle is fed out of phase by them and grows larger instead of smaller. Of course along the way they managed to saturate the entire globe, and thus their games will be coming to an end soon.

Retail Sales for August missed expectations by coming in at 0.0% versus the prior still weak .5%. Remember, this data is completely unreal as it fails miserably to correct for the devaluation of our money and also suffers from survivor bias. Still, here’s Econoday playing along:
Retail sales in August came in softer than expected. By type of sales, numbers were about evenly mixed. Overall retail sales in August slowed to flat (no change) after rising 0.3 percent in July (originally up 0.5 percent). The August figure was below the market median estimate for a 0.2 percent boost.

Excluding autos, edged up 0.1 percent, following a 0.3 percent rise in July (originally 0.5 percent). The consensus had called for a 0.3 percent increase. Gasoline sales rose 0.3 percent after jumping 0.9 percent in July. Sales excluding autos and gasoline in August increased 0.1 percent, following a 0.2 percent rise in July.

Leading the increase were electronics & appliance stores and sporting goods, hobby & book stores. Tugging down, the notables were miscellaneous store retailers and also clothing stores.

Outside of autos and gasoline, sales were mixed. Leading the increase were electronics & appliance stores (up 0.5 percent) and sporting goods, hobby & book stores (up 2.4 percent). Tugging down, the notables were miscellaneous store retailers (down 2.2 percent) and also clothing stores (down 0.7 percent).

Retail sales on a year-ago basis in August came in at 7.2 percent, compared to 8.3 percent in July. Excluding motor vehicles, sales were up 7.3 percent on a year-on-year basis, compared to 8.4 percent the month before.

Clearly, the August retail sales numbers are somewhat disappointing. Hurricane Irene likely dampened sales a bit on the East Coast and we will need to see September numbers for further evaluation. Still, it looks like the consumer is being more cautious after the political circus over the debt ceiling legislation and retrenchment in equities.

On the initial release, equity futures eased.

The boat show is going great, a load of fun, many great leads, contacts, and opportunities coming out of it already, and still most of the week to go.

I’ll leave you for today with a graphic representation of America in Deep…

America Is A Country In Debt:

While politicians bicker about debt ceilings and government spending, American families suffer under an increasingly hefty debt load.

American Family Consumer Debt Facts