Tuesday, November 29, 2011

Morning Update/ Market Thread 11/29 - “Outlook Negative” Edition…

Good Morning,

Equity futures are slightly higher this morning, with the dollar down slightly, bonds down slightly, oil higher, gold & silver lower, and food commodities roughly flat.

American Airlines, formerly the world’s largest airline, filed for bankruptcy this morning, their stock plummeting to 6 cents a share. They claim nothing will change operationally, that they will operate their flights and that they will continue purchasing the 480 new airplanes they ordered this July. Primarily it’s all about “restructuring.” What does that mean? It means they made too many promises to their debtors and to their employees and they are going to use this filing to primarily take it out on their employees because the bankruptcy laws in this nation strongly favor capital over people. This means that retirement plans will be vulnerable, wages will fall (while costs rise), and yet the company will still get their shiny new planes.

Fitch, one of the rating agencies that never takes action until well after the fact, finally put the United States on “outlook negative” from “stable” regarding its phony triple-A rating. Hmmm… current account deficit is 100% of trumped up GDP and they still affirm triple-A and finally produce an “outlook negative” because the “Super Committee” couldn’t tackle the impossible math?

Guess what, it’s FAR, FAR, worse than that. In the first place our GDP is vastly overstated – I say 40% or more. But primarily I say “WTF, over” to this deceive you metric in the first place, and I ask what in the world does a nation’s supposed “productivity” have to do with a nation’s debt?

Comparing those two things is exactly like comparing your personal debts to the productivity of your neighborhood! Who gives a damn? And what does that have to do with anything? Remember, we are no longer consenting to the lies!

The only thing that matters in regard to debt is the ability to service it, and that requires income, not productivity! The United States trumped up debt figure is $15 Trillion, but it only takes in $2.7 trillion in income, thus debt is 555%, or 5.55 times income! Now, if you include the debts at Freddie and Fannie, and all the other off balance sheet debt, our true national debt is more like 37 times our national income!

Dividing our Current National Income by our Current National Debt produces a chart with the following trajectory:

Current National Income Divided by Current National Debt:

Yep, outlook negative all right. And doesn’t that chart have the same ring to it as the diminishing returns charts I’ve been showing? Yep, same trajectory, that’s because our money is debt.

Meanwhile, the largest “asset” held by the 99%, their house, continues to slide in value. The latest Case-Shiller data shows that home prices fell another .6% in the month of September:
Evidence is building fast that home prices are falling into deepening contraction, the likely result of distressed sales tied to foreclosures. Case-Shiller data for September show a very heavy 0.6 percent monthly decline for the both adjusted and unadjusted 20-city indexes. These are three-month averages which indicate an especially severe decline for September alone. In a mild offset, contraction in year-on-year rates moderated slightly to minus 3.6 percent, again for both the adjusted and unadjusted 20-city indexes.

Home prices in Atlanta appear to be plunging, down a monthly adjusted 4.1 percent in September -- again, this is not a year-on-year reading. The decline follows monthly drops in Atlanta of 3.0 percent in August and 1.1 percent in July. Atlanta, together with Phoenix and Las Vegas, are posting new crisis lows though the report is confident that for the nation as a whole, the price collapse of 2007 through 2009 will not be repeated.

Falling home prices are a heavy load on home owners, preventing some from selling their homes and forcing some into financial distress. One upside, as seen in recent data on new and existing homes, is that lower prices, together with extremely low interest rates, are giving a very welcome boost to sales. At 10:00 a.m. ET this morning, the Federal Housing Financing Agency will post its home-price data.

Heck, my home’s assessed value fell 10% year over year, and I have no doubt that’s very close to the market reality.

Below is the entire Case-Shiller report:

Case-Shiller Q3 Data

Consumer Confidence as well as the FHFA Home Price data are released shortly and will be reported inside of today’s Open Thread.

I, Nathan Martin, no longer consent to the lies.