Tuesday, October 25, 2011

Morning Update/ Market Thread 10/25

Good Morning,

Equity futures are lower this morning with the dollar and bonds only slightly higher, oil is still trying to strangle the global economy by pushing $95 a barrel, gold is higher while silver is flat, and food commodities are generally higher.

The 20 City Case-Schiller Index was flat for the month of August, but down 3.8% year over year. Here’s Econodream:
Home prices, at best, may be stabilizing according to Case-Shiller data that show no change in the adjusted composite-20 index for August. The reading ends three prior months of 0.1 percent declines (July revised downward from no change). The unadjusted reading, at a very weak plus 0.2 percent vs plus 0.9 percent and plus 1.1 percent in the two prior months, points to price contraction in August given that monthly readings in this report are three-month averages. Nevertheless, the unadjusted year-on-year pace of minus 3.8 percent is the best reading since February in what hints at a flattening in the slope of price contraction. At 10:00 a.m. ET this morning, the FHFA house price index will be released.

I’d hardly call a 3.8% year over year price decrease “stabilized,” more like just not in complete free-fall. As we get quite a bit of home data this week, keep the Option-Arm Reset chart in mind and how we are now past peak, but it will take time to work these through the economy.

Keep that chart in mind, too, as you wonder in fascination at the wild antics of the Obama Administration opening up Fannie, Freddie, and FHA loans to no doc, no appraisal, don’t care if they are underwater, refinancing. Nuts, certainly NOT a cure for housing, just another attempt to help the banks while pretending to help the people, all such efforts only delay a real bottom in the housing market.

Here’s the entire Case-Schiller report, I note that there is positive spin bias language in their reports, and that makes Schiller a part of the problem, especially knowing that they allowed S&P (a corrupt organization and a big part of the problem) to own this report – thus I do not consider it unbiased, and again point out that companies with financial interests in economic reporting should NOT be allowed to produce and then publically disseminate economic statistics on that industry. I’m not saying that private entities shouldn’t report, only that such entities not have financial entanglements.

Case-Shiller August 2011

Consumer Confidence, FHFA House Price Index, and the Richmond “Fed” Index are all released at 10:00 Eastern this morning and will be reported inside of the Daily Thread.

For those still gambling in the casino, I just want to point out what can happen when stocks reach ridiculous valuations – Take a look at what happened to Netflix on their report last night, and, oh yeah, I think a large part of the market is just as ridiculous and just as airy:

NFLX Futures 5 Minute Chart:

NFLX 10 Year Chart:

$304 a share to $75 in just three months - bubble buildup always comes off way faster than it was put on. Whenever you see a parabolic rise, you rightly should be nervous as parabolic rises always collapse at some point, always. This money pumping economy has produced a manipulated market where excess builds very rapidly and then moves on to the next bubble very rapidly. This is gambling, it is not “investing,” and the equity markets are not serving their intended purpose efficiently because of the manipulation.

A lot has been said about the Occupy Wall Street movement, but lately they are again being marginalized in the media – simply not reported or when they do report they talk about how much they are “costing” local governments and businesses, LOL. David Icke made a fairly lengthy video discussing this movement that I think is important to watch, not that I agree with everything he says, but I do think that his advice to the movement to be “Street Savvy” is important. I would say it differently, I would say “keep your eye on the ball and don’t lose focus.”

Agree completely that we need to be wary of creating the same problem on an even larger scale, pushes in that direction are self-serving for those who currently posses the money creation power. But I would caution about being careful what you ask for – you do not want to swing from one extreme (infinite leverage) to the other (no leverage, no fractional reserves), or you will definitely not be happy with the results. Again, there is a way to transition to a stable and reasonable economy that works to the benefit of everyone, and I’ll be spelling that out again in my next articles revisiting Freedom’s Vision.