Tuesday, September 20, 2011

Morning Update/ Market Thread 9/20 - Bye Bye American Pie Edition...

Good Morning,

Equity futures are higher this morning… why? Well, let’s see… ummm… Italy was downgraded. Ummm… rates are blowing out all over Europe. Ummm… the possibility of more theft from the people and injections into the banks is lifting those animal spirits and feeding an HFT frenzy in front of the Central Criminal announcing that he’s doing the “twist” tomorrow? Yeah, that would be it – and the markets have not yet figured out that doing the “twist” is just the latest euphemism for printing money. It will amount to the same exact thing as “Quantitative Easing” only with one more step involved to throw you off the trail of common sense, thus the “twist.”

And thus we have the opposite of yesterday, with the dollar down, Euro up, bonds down, oil up (slightly), gold up, silver flat, and food commodities higher. Actually several of the major commodities, like oil, are bouncing off support, a break of which would be quite bearish.

This morning Housing Starts for the month of August came in substantially lower, falling from July’s 604,000 (revised lower) to 571,000. Housing starts fell off a cliff and went splat on the plateau below, this is right in the range of that plateau. Permits did rise, but they have done so before and not all will turn into completions in this environment, here’s econohope:
The housing starts report for August was mixed as starts dipped while permits rose moderately. Housing starts declined 5.0 percent in August, following a 2.3 percent decrease in July. The August annualized pace of 0.571 million units posted lower than the median projection for 0.592 million units and is down 5.8 percent on a year-ago basis. The dip in August was led by a 13.5 percent fall in the multifamily component, following a 7.2 percent gain in July. The single-family component edged down 1.4 percent after a 5.8 percent decrease the month before.

By region, the fall in starts was led by a 29.1 percent plunge in the Northeast.

However, a rebound in permits suggests that some of the weakness in starts was weather related as Hurricane Irene likely weighed on new groundbreaking. In contrast, housing permits rebounded 3.2 percent, following a 2.6 percent contraction in July. Permit issuance is less affected by weather since they issued indoors. The August pace of 0.620 million units annualized printed above analysts' expectation for 0.590 million. Permits in August are up 7.8 percent on a year-ago basis.

On the news, equity futures edged down while rates were little changed.

The FOMC announcement will come tomorrow, failure to announce “the twist” will be negative as it’s getting baked into the pie. This will appear innocuous and will be ignored by the media and most people who are not paying attention. A large percentage of those who are paying attention will also be fooled into thinking it is a simple shift out the yield curve. It will not be. Keep your eye on the ball – what will happen is they will “twist” short term debt into long term debt to drive down yields on the long end, but THEY MUST backfill that on the short end otherwise short rates would spike. That won’t happen because they will be QE’ing with their left hand while they are talking about what they are doing with their right hand.

Palm, Simulation, Switch, Misdirection!

When it comes to the “twist,” watch the left hand if you can (you can’t because they refuse to open their books). Thus you need to get and stay real until they are removed from the stage.

California is finally making a move cut out the criminal enterprise from their state. Creating a state chartered bank is definitely the right thing to do, everyone should be supporting this movement as Bill Still suggests in the video below: