Saturday, January 22, 2011

Weekend Open Thread...

Friday, January 21, 2011

Morning Update/ Market Thread 1/21

Good Morning,

Equity futures are higher this morning with the dollar down sharply, bonds lower, oil down slightly, and gold is down which does not match the fall of the dollar. Yesterday’s mid-day bounce did move food commodities sharply higher as well.

Despite the bounce yesterday, the McClellan Oscillator worsened to the -100 range showing that the majority of stocks are now in downtrends, but new 52 week highs and lows remained subdued.

There is no significant economic data released today, and it is Options Expiration with a $7 to $9 Billion POMO operation planned for today.

I’m only going to discuss one important news item today, and that is President Obama’s appointment of GE’s CURRENT CEO, Jeff Immelt, to Chair a new White House Economic Advisory Council. His appointment is meant as a replacement to outgoing Paul Volcker. Here is the CNN spin:
Obama taps GE chairman to chair new White House economic group

Washington (CNN) -- The White House will announce a new economic advisory council on Friday, one that will be headed by Jeffrey Immelt, the CEO and chairman of General Electric.

"Because we still have a long way to go to get Americans back to work and strengthen our economy, the President will announce on Friday that he will sign a new Executive Order creating a new board, the President's Council on Jobs and Competitiveness, which will have a new composition and new mission as we move to a new phase in our economic recovery," a White House statement said.

"The Council will focus on finding new ways to promote growth by investing in American business to encourage hiring, to educate and train our workers to compete globally, and to attract the best jobs and businesses to the United States."

The council replaces the old Economic Recovery Advisory Board that was headed by Former Federal Reserve Chairman Paul Volcker.

"President Obama has asked me to chair his new President's Council on Jobs and Competitiveness," Immelt said in a Washington Post op-ed piece published Friday. "I have served for the past two years on the President's Economic Recovery Advisory Board, and I look forward to leading the next phase of this effort as we transition from recovery to long-term growth.

"The president and I are committed to a candid and full dialogue among business, labor and government to help ensure that the United States has the most competitive and innovative economy in the world," he said.

"Jeff Immelt's experience at GE and his understanding of the vital role the private sector plays in creating jobs and making America competitive makes him up to the challenge of leading this new Council," President Barack Obama said in a statement. "I also want to thank my friend Paul Volcker, whose service not just during this difficult period but for decades has been invaluable to me and the American people."

Repugnant is the first word that comes to mind, “oh shit” are the next ones.

It appears to me that the special interest takeover of the United States is just about complete. Immelt took over GE from “Chainsaw” Jack Welch in the year 2000, then proceeded to run the company into a bankrupt condition largely by taking on far too much risk within GE Capital which made GE effectively a financial company who just also happens to make jet engines. They could care less about making light bulbs or appliances, they were making subprime loans like crazy to every homeowner with a heartbeat and to every rag tag airline around the globe. They got into derivatives, and when their leverage turned on them, it bankrupted the company. But instead of the rule of law (and the rule of nature) being allowed to run its course, Hank Paulson and the boys stepped in with billions to bail GE out. Today they're back to being a mark-to-fantasy Ponzi financial company reporting false profits just like the rest of the insolvent financials. In fact, just this morning (coincidentally?) GE and Immelt reported stellar profits:
General Electric posts 31% earnings jump

NEW YORK (CNNMoney) -- General Electric logged higher fourth-quarter earnings and revenue Friday that beat Wall Street's expectations, getting a boost from its finance arm and strong growth in equipment orders.

The Fairfield, Conn.-based conglomerate said its fourth-quarter earnings from continuing operations rose 31% to $3.9 billion. Earnings per share rose to 36 cents per share, up 33% from a year earlier. Analysts polled by Thomson Reuters had forecast a profit of 32 cents per share for the quarter.

Net income, including discontinued operations, was $4.5 billion, up 51% from a year earlier.

The industrial giant said its year-over-year revenue rose 1% to $41.4 billion -- the first positive growth in nine quarters. Analysts expected the company to report a 4% drop in revenue to $39.9 billion.

"GE ended 2010 with three consecutive quarters of strong earnings growth," Chairman and CEO Jeff Immelt said in a prepared statement, highlighting gains in the industrial segment, as well as strength in orders and equipment.

Orders on the rise: Fourth-quarter orders were up across the board. Overall industrial orders jumped 12% year-over-year, with a 20% surge in equipment orders and a 5% increase in service orders. Orders in energy infrastructure grew 4%. Meanwhile, the company's backlog increased by $3.1 billion to a record $175 billion.

"They have been posting solid order growth for a while now, so it's not difficult to see the company continuing to grow because of this," said Daniel Holland, an equity analyst at Morningstar.

The health care sector was another bright spot, with revenue rising 8% and profit jumping 10% in the quarter.

GE (GE, Fortune 500) manufactures products ranging from jet engines and health care technologies to light bulbs and electric cars, so the company is widely viewed as a barometer of the overall health of the economy.

"It was a team effort in terms of the overall story," said Holland. "It seems like the individual businesses are starting to make their way through the recession and are starting to turn around."

Revenue and profit at the company's energy infrastructure was also an encouraging sign, with revenue only slipping slightly and profit inching higher.

"You always want to see growth particularly out of its power generation segment," he said. "That segment is driven by electricity demand across the world, and electricity demand is linked to economic growth and activity -- so we want to see the wheels of the economy continuing to improve."

GE Capital recovering: GE Capital, the company's finance division that was hard-hit during the financial crisis, continued to improve in the fourth quarter. Net income in the unit rose to $1.1 billion from $100 million a year earlier.

"GE Capital is doing better than I think anyone would have expected a couple quarters ago, let alone two years ago when we were in the depths of the recession," said Holland. "Even in its weakest spot -- commercial real estate -- you're seeing losses lessen."

Did you catch all that? The spin in the talk and in the reporting is that orders and infrastructure grew… but that growth is anemic, especially when you consider that it is measured in dollars and that their revenue growth is WEAK. So, where did profits really come from? GE Capital whose profits jumped from $100 million to $1.1 BILLION!!! That’s a one BILLION dollar jump in financial profits in one year!! Can you say “Mark-to-Model? I thought you could. I can also say, “ACCOUNTING FRAUD.” This on the back of hot money pouring in from the “Fed.”

Remember, those closest to creation of money, particularly Ponzi money, profit the most from it. Of course Immelt loves the current hot money, no adult, no rule of law, Ponzi environment and I’m certain will do everything in his power to keep it flowing to the benefit of his FINANCIAL company along with all the other PHO Wall Streeters.

Again, I will simply point you to a doubling in the past 6 months in underlying food commodities and warn that another year of the current policies and hot money will literally produce starving Americans, not just starving people in 2nd and 3rd world countries. I cannot think of a worse pick, this President continues to show that he is a President of the special interests and NOT OF THE PEOPLE.

They sell these appointments as if they are bringing economic “expertise” in to help the economy and to create jobs, but what they are really doing is accelerating the looting and the debasement of our money. These are the same people who ran the economy into the ground, they ran their businesses into the ground, and they are the exact wrong people to be appointing. America is in BIG TROUBLE.

Did you catch that yesterday the “Fed” changed their own rules again which now makes it so that they will not allow themselves to become technically insolvent on paper? Oh the acts that desperate people will take… if you’re reading this I know that thankfully some people are paying attention.

I read a line this morning from a good article that said basically, “We’re like Tunisia, only less aware…”

Thursday, January 20, 2011

Morning Update/ Market Thread 1/20

Good Morning,

Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: "There are three kinds of lies: lies, damned lies, and statistics."
~Mark Twain, autobiography, 1904

Yesterday’s correction continues this morning with equities down across the board, the dollar is up, bonds down, oil is sharply lower and back below $90 a barrel, while gold is falling as well - now at $1,348 which is down $21 so far.

Weekly Jobless Claims fell to 404,000 for last week from 445,000 the week prior. This is better than consensus that was looking for 420k. This series has been very volatile lately, and what has been the trend of increasing non-seasonally adjusted numbers ended with a very large drop in the raw data for this week. This, frankly, concerns me as I know that reality is not that volatile, so why is this data?

The DOL wants me to believe “The advance number of actual initial claims under state programs, unadjusted, totaled 550,594 in the week ending Jan. 15, a decrease of 212,504 from the previous week.” Huh? I’m supposed to believe that actual initial claims fell by 27.8% in one week, is that right? Sorry, I don’t believe it reflects reality, this type of reporting is beginning to look like what the Mortgage Banker’s Association does with Housing numbers. Still, note that the raw number is much larger than the reported number due to seasonal adjustments. Here’s Econoday marching ahead without question:
Initial jobless claims swung in the other direction for the January 15 week, dropping an unexpectedly sharp 37,000 to 404,000 from a revised 441,000 the prior week. The latest decline more than offset the prior week's 30,000 boost. With recent weekly volatility, the four-week average likely provides the best insight. The average is down 4,000 to 411,750 and is down more than 14,000 from a month ago in what is good signal for the monthly payroll report.

Continuing claims claims fell for the third week, down 26,000 in data for the January 8 week to 3.861 million. The four-week average is down 53,000 to 4.006 million. The unemployment rate for insured workers is unchanged at 3.1 percent.

Just remember that despite what is propagated by The Ministry of Truth, weekly claims above 350k are still showing that jobs are being lost in the economy, not created.

Existing Home Sales, the Philadelphia Fed Index, and supposed Leading Indicators are released at 10 Eastern this morning. I will report results inside of the Daily Thread.

I found the following comments very interesting. They came from Forbes’ Annual Investing Roundtable. The first comes from Bill Gross:

I don't know if the U.S. has reached a desperate point, but it is employing instruments and vehicles and policies that smack of desperation. We are not looking at a default here, but at years of accelerating inflation, which basically robs investors and labor of their real wages and earnings. We are looking at a currency that almost certainly will depreciate relative to other, stronger currencies in developing countries that have lower levels of debt and higher growth potential. And, on the short end of the yield curve, we are looking at creditors receiving negative real interest rates for a long, long time. That, in effect, is a default. Ultimately creditors and investors are at the behest of a central bank and policymakers that will rob them of their money.

Gee, is Bill not on the Insider’s list anymore?

And this second comment comes from Marc Faber, a classic and nothing but the truth:
If you measure the stock market not in dollars but gold, it is down 80% since 1999. I no longer regard the U.S. dollar as a valid unit of account. People shouldn't value their wealth in dollars because one day, in dollars, everyone will be a billionaire.

How true. Although I note that food commodities began correcting yesterday… and interesting that corn topped out at $666, the same level at which the SPX bottomed in March of ’09… interesting. Also interesting is that the rounded low in corn was exactly half that amount at $333. I do pay attention to strange numbers like that as they do tend to stick around a long time, meaning that they often do mark significant turning points.

And more countries are trying to stem the flow of “Fed” hot money. Brazil just raised interest rates by .5% in order to keep inflation down. It’s a problem for Brazil as it makes their currency relatively strong. Again, the “Fed’s” pumping affects everyone around the globe… how much more abuse are the relatively good players going to take?

Our landlord came visiting yesterday. China’s Hu and President Obama gave a press conference that was just embarrassing from my perspective. Obama’s speech was nothing but why we were going to be good little boys for our landlord, and when Hu began to speak, he didn’t give a speech but instead turned to Obama and began asking questions like a banker would ask of someone who is asking for a loan.

This reminded me of when Bill Clinton took over the White House Press Conference. Obama is out of his element when the teleprompter is turned off. He is failing to LEAD and to take care of business that needs to be taken care of. Proof that he and our government are nothing but banker puppets came again last night… all you have to do is look at the guest list of those attending the White House dinner last night with Obama and Hu. High on the list was all of the top BANKERS. I’m sorry, but giving private banks the run of the White House with current, past, and foreign Presidents is just SICK. We need to separate our government from private special interests, until then our economy will be nothing but a façade.

Equally SICK is this:
Goldman's Eileen Rominger to Join S.E.C.

The Securities and Exchange Commission has announced that Eileen Rominger, the global chief investment officer of Goldman Sachs Asset Management, has been named its director of investment management.

She is not the first GS employee to be transferred to their S.E.C. Division. How much more of this government takeover are the people going to allow? Very ill, and we are stepping further and further along that scale towards despotism.

It sure is looking more like a correction has begun, a drop in the SPX below 1,275ish will signal that one is under way. The bottom of the large rising wedge is now approximately 1250ish, we can look for support there next should 1,275 fall.

Just remember that the markets do not move in a straight line and headfakes will come in both directions. I note that the McClellan Oscillator has turned negative again.

Wednesday, January 19, 2011

Morning Update/ Market Thread 1/19

Good Morning,

Equity futures are lower this morning as Goldman Sachs (GS) and Wells Fargo (WFC) report weaker earnings that go along with weak economic data. However, in what is obviously a trend, the dollar is weaker breaking below support, and that is leading to oil that is now making new highs above $93 a barrel to go along with rising gold price. Bonds are lower again. Food commodities are soaring, corn continues to make new highs and has DOUBLED IN THE PAST SIX MONTHS, now rising 101% (wheat has risen 90%+, rice has risen 60%, and oats have risen 115%):

Overnight India took measures to attempt to cap food price. Many countries have tried, the harder they try, the harder they will fail. Those food inflation figures absolutely are destabilizing to the world, they are dangerous and they are lethal to real people, yet here in the United States we don’t see how our letting the “Fed” destroy the value of our money is destroying peace and prosperity throughout the globe – a tragedy. We cheer the overthrow of despot governments, but that will not help the starving people of the world… not until we change WHO produces and controls the quantity of money.

The unethical and completely hypocritical Mortgage Banker’s Association reports that it’s Home Purchase Index fell again in the last week by 1.9%. Here’s Econoday:
Home sales aren't likely to pick up "anytime soon" is the conclusion of the Mortgage Bankers Association whose purchase index remains depressed, down 1.9 percent in the January 14 week to extend a run of weakness. Refinancing is another matter as those who already own a home seek to lock in low rates. The refinance index rose 7.7 percent in the week with the average 30-year rate at 4.77 percent vs 4.78 percent in the prior week. Housing starts will be posted today at 8:00 a.m. ET.

These indices are not to be taken seriously, but regardless they are near all-time historic lows, it is obvious that home sales are still very anemic.

Indeed, Housing Starts for December stunk up the joint again – ugly, as starts fell to a one-year low (not unexpected given the season). Starts totaled just 529,000, this figure is roughly one-third of 2006 values. This compares to 555,000 in November, and a consensus of 550k, another miss:
Housing may be gaining forward momentum but adverse weather appears to have delayed groundbreaking. For the latest month, starts declined while permits strengthened. Housing starts in December slipped back 4.3 percent, following a 3.8 percent rebound in November. The December annualized pace of 0.529 million units fell short of the median forecast for 0.550 million units and is down 8.2 percent on a year-ago basis. The reversal in December was led by a 9.0 percent drop in single-family starts, following a 5.8 percent gain the month before. The multifamily component rebounded 17.9 percent after declining 5.0 percent in November.

By region, the December boost in starts was led by a 45.8 percent increase for the West. Declines were seen in the Midwest, down 38.4; the Northeast, down 24.7; and South, down 2.2 percent. The sharp weakness in the Midwest and Northeast indicates that snow storms played a role in damping starts.

Housing permits, in contrast, made a 16.7 percent comeback in December after declining 1.4 percent in November. Overall permits posted at an annualized rate of 0.635 million units and are down 6.8 percent on a year-ago basis. The latest boost was led by the multifamily component which was up a sharp 53.5 percent while single-family permits improved 5.5 percent.

The gain in permits may be a significant positive as it in part reflects optimism of homebuilders. December starts were relatively weak and this likely was due to atypically adverse weather for the month. Permits are much less affected by weather as homebuilders simply fill out paperwork indoors while starts depend on whether bulldozers and workers have good weather to operate. However, the Commerce Department noted that building code changes took effect on January 1 in California, Pennsylvania and New York. In turn, some of the multifamily strength likely is due to construction companies getting approval before the tighter regulations.

Today's report should be seen as a positive despite starts falling short of expectations. The big issue going forward is whether homebuilder optimism is confirmed by gains in home sales. If sales stay flat, starts will ease. But meanwhile, homebuilders have reason to be cautious and the boost in permits should be seen in that context. Optimism is up but more toward multifamily than single-family.

Note that the multi-family housing segment has been picking up lately. This is because the big players can get funding to build cheap housing for the poorer masses. Here’s an article from Bloomberg describing how the big home builders, who have access to capital markets, are the ones who have survived taking out all the small players. Thus we are left with cookie-cutter homes built quickly and on the cheap:
Biggest Builders to Gain Market Share as Demand Rises

Jan. 19 (Bloomberg) -- The biggest U.S. homebuilders are poised to benefit from a fledgling rebound in demand for new houses this year, with competitors having gone out of business during the recession and sales likely to climb from record lows.

D.R. Horton Inc., Lennar Corp. and Toll Brothers Inc. are among companies planning to boost their community counts by at least 10 percent this year after writing down property values, buying land at discounted prices and obtaining financing unavailable to smaller, closely held builders.

“It’s a definite bull tenet for the big builders,” said Ivy Zelman, chief executive officer of Cleveland-based advisory firm Zelman & Associates, who rated all homebuilders “sell” in December 2006 and now has “buy” on five of the 13 she covers. “That’s one of the reasons we’re recommending investors be long a handful of homebuilding stocks.”

The National Association of Home Builders expects new single-family home sales to rise to 405,000 this year, while Moody’s Analytics Inc. projects an increase to 540,000. The annual pace of sales averaged 319,640 for the 11 months through November, down 15 percent from a year earlier, according to Commerce Department data.

While new home inventory may be low, don’t believe for a second that there’s a new building boom on the horizon, shadow inventory of existing homes is extremely high and you can buy nice homes for far less than you can build. With material inflation, the gap between the cost to buy used versus to build can only grow, and land prices have already corrected sharply in most areas.

The fact that Wall Street is funneling money into home builders now is just more proof of the distortions they create. It’s sad to see our economy grind through consolidation to the point that a few large companies can dominate an industry. Those who have access to the easy money survive while those who don’t fail. Again, very important WHO creates that money. Oh yeah, welcome to WalMart…

Income at Goldman and WFC fell largely due to lower profits on trading. Gee, are they running out of suckers? I’ve always questioned how long the game continues after the top 5 banks own nearly all the equity. How do they make money trading at that point, trading to one another? Once the government has POMOed all their stinky debt off their hands, then what? Who can they sell their overpriced crap to? What happens when that price finally corrects? How high will food and oil prices rise when the next bailout comes? And finally, when will the people of America finally get smart and throw the bankers out on their asses?

News that Ireland is printing their own Euros without resistance from the ECB has many observers in a state of shock. Are other countries going to be permitted to do so? Definitely monetization occurring all over the place, we are seeing global food and energy inflation while at the same time the real economy continues to suffer. I think those “other events” are going to come at an ever accelerating pace now, there’s so much news I can hardly keep up.

The market action yesterday produced yet another small movement in the McClellan Oscillator, thus we can expect a large directional move today or tomorrow.

The VIX rose against higher prices yesterday, yet another divergence and it also closed back inside the range of its Bollinger bands, thus producing another market sell signal. The past two signals have been run over by POMO hot money and have thus failed, but the two prior to that did produce larger corrections that followed.

The wave count appears to be complete at this time, and the rising wedges also appear to be complete. This completion, or near completion, of what is most likely a wave 5 means that a higher order correction should follow. Obviously the technicals must fight against hot money, and thus we are likely to see that hot money avoid obviously poor buying technicals and flood to where the momentum is greatest, namely food commodities – and boy are we seeing all foodstuff spike today – sad, and shameful. I hope you guys are ready, this is a mess… the bankers are running over the people of the globe as if they have blinders on. They are blinded by their own greed…

Tuesday, January 18, 2011

Guest Post - Disinformation Fog Intensifies As Economic Turmoil Develops

By Giordano Bruno

Neithercorp Press – 1/18/2011

In the past few years, the concept of economic globalism has revealed itself as quite the Trojan horse; once posing as the next step in the evolution of “free market” capitalism and the savior of third world nations striving for development status, now revealed as a fiscal plague spreading delirium and destruction wherever it touches ground. There is no denying that the economies of the world are irrevocably tied to one another, but until recently, this was always thought of as a “good thing” in mainstream financial circles. Today, the great failings of engineered interdependency are painfully apparent. The EU’s many peripheral nations are dropping one after another like flies in a fog of DDT, rising economies in Asia are bloated with investment capital escaping from debt default in the West, causing impressive levels of inflation, and the U.S. is on the verge of a currency implosion as the Federal Reserve opens the floodgates of fiat in a bid to hide our system’s extreme destabilization and maintain what little international faith is left in our ability to service our rampant liabilities. Globalism has led us to disaster…

Of course, this disaster is not quite so obvious if you only follow the MSM’s version of events, or the pithy, watered down observations of mainstream economists, central bank officials, and puppet politicians. In fact, it’s difficult for the average person only mildly versed in economics to understand just what is going on! The closer we get to the edge of the ravine, the deeper the deception becomes. Most Americans feel the danger intuitively, and see the warning signs in their local communities, but clear, concise information in the midst of this ‘Gordian Knot’ of lies is difficult to come by.

Treasury Secretary Timothy Geithner claims that the Fed’s quantitative easing programs are no threat to the dollar and that our country “will not engage in devaluation”, all while commodity and energy prices skyrocket to record levels and numerous nations threaten to dump the Greenback as the world reserve currency. China claims that their inflation is manageable, releasing CPI data that is even more arbitrary and skewed as our own, while the Chinese masses grow louder in their anger over a lack of purchasing power to match exploding housing and food prices. The U.S. blames the lack of global recovery on China’s undervalued Yuan and its unfair trade imbalance. China blames the lack of global recovery on the overprinting of the dollar. Europe sits across the Atlantic hoping both China and the U.S. will keep printing and sending currency care packages to keep the EU afloat, all while claiming every three months or so that the “crisis has passed”.

So, what’s the truth in all of this?

In the following, I will attempt to dismantle the latest disinformation campaigns, explaining the most important factors surrounding the developing calamity between the world’s major economic powers in the easiest terms possible; including how these factors will directly and indirectly affect you…

Truth: Dollar Devaluation Is Occurring, Inflation Is Here

As we have covered in recent articles, widely visible inflation in the U.S. has been steadily developing for at least one and a half years. Food, energy, and metals prices across the board are soaring, and commodities actually outperformed stocks, bonds, and the dollar in 2010:

Wholesale prices (according to “official” numbers) rose 1.1% in December, following a 1.5% gain in November. These figures are diluted, to be sure, but the fact that inflation is being reported at all signals probable danger for the coming year:

Grain prices surged in 2010. Corn gained nearly 60%, while soy and wheat gained around 40%. Cooking oil prices jumped 62%:

Anyone today who denies inflation is evident in our economy is either blind, dishonest, or mentally deranged. In any case, they are not to be trusted. The question now is, is this inflation being caused by devaluing world currencies like the dollar, or a myriad of random chaotic “coincidences”…

Lie: Current Inflation Is Caused By “Global Recovery”, And “Rising Demand”

The great lie surrounding these inflationary warning signs is that they are a product of “recovery”, and increasing demand in the U.S. and developing countries. While the “demand” argument may be partly true for gold and silver’s rise, it is certainly not true for oil and grains. Global demand for goods overall is dropping off a cliff, as is evident in the Baltic Dry Index, which measures shipping and freight rates around the world. The BDI has suffered a 20% decline in the past three weeks alone:

If shipping demand is falling around the world, then demand for goods is falling around the world. If demand for most base goods is falling, then demand is not the cause of our current price spikes. Period.

More Americans filed for consumer bankruptcy in 2010 than in any year since 2005. Keep in mind that the government’s new rules making bankruptcy filing far more difficult took effect after 2005. This means that even with harsher bankruptcy guidelines, we still saw a massive wave of filings last year. If demand is actually a substantial factor, then U.S. consumers are burying themselves in red ink in order to support it:

Considering that over 8 million Americans have stopped using credit cards just since Christmas 2009, I think it much more likely that consumer demand in the U.S. is flat, or, still falling, despite the claims of the MSM:

Mainstream analysts are often quick to point out that annual retail sales for 2010 were up over 6%, claiming this is a sure sign of recovery. Unfortunately, in their effort to ignore inflationary factors in 2010, they forgot to consider that perhaps rising retail sales were not due to increased consumption, but INCREASING PRICES on goods we already buy daily. Black Friday and Christmas season sales were generally unimpressive compared to 2009. Black Friday sales were flat and December sales were up only 0.6%. Are Americans really buying more, or are they forced to spend more on goods they need due to inflation?

Lie: The BDI Is Falling Because Of An Expanding Shipping Fleet

A new disinfo tactic I’ve noticed in the past two weeks is the suggestion that the BDI is not falling because of decreasing demand for raw goods, but a growing fleet of idle freight vessels in an already tight market. That is to say, some analysts are suggesting that it is not demand that is falling, but the supply of ships that is growing.

While it is true that world freight fleets are to add 200 new ships, this is not to occur for another year and a half:

The BDI plummeted in 2008, and has not shown any signs of recovery since. This was not due to a new supply of ships, but directly tied to the global economic collapse. The “growing fleet” argument seems to be a distraction designed specifically because of the public’s growing awareness of the Baltic Dry Index and its implications.

Another poorly conceived argument is that the BDI is inaccurate because it does not take into account that smaller fleet vessels are seeing increased freight rates while larger ships are falling out of favor. It’s true, that if you only count the shipping frequency of smaller boats, demand appears to be rising (barely). However, I hardly see how this is a good thing. Increased demand for smaller boats means no one is shipping enough volume to make leasing a large vessel worthwhile. Smaller volume still equals smaller demand.

Lie: Food Inflation Caused By “Bad Growing Season”

It would appear that the “mystery” of exploding food prices has been solved, and according to a USDA report released this month, the culprit is “weak agricultural output” causing a diminished supply of staple grains in the U.S.:

This release was so shocking to markets because the report’s figures were so far below the USDA’s original estimates for harvest at the middle of this year, but why should we care about the USDA’s estimates? Are they not arbitrary? Why not look at the actual output for previous years compared to 2010 and get a real sense of what is happening?

If we are going to compare the crop outputs of 2010 to 2009, we should also keep in mind that 2009 was a record year for agricultural production. Did the USDA really assume that 2010 would meet or surpass such a bumper crop?

Corn harvests reportedly dropped 5% compared to last year, however, 2010 was still the third largest crop on record. Soybean production was down only 1% from 2009. Cotton (not edible, but still important) was up 50% from 2009. Wheat was down less than 1% from 2009. One of the only grains affected in a substantial way in 2010 was Sorghum. The crop yield for Sorghum dropped 10% compared to 2009, but the planting area used in 2010 was 19% less than a year before, so this drop was to be expected:

What does this mean? The U.S. had a GOOD year for crop output, not a bad one. And what about Russia’s summer disaster wheat crop? Are our exports picking up the slack of bad harvests overseas, causing prices to rise? Actually, warmer Russian weather in November spurred wheat production, helping alleviate the weaker summer yields:

Are there dangers in world grain output due to weather? Yes, but not enough to warrant a doubling of commodity prices. The REAL concern of agriculturalists, not just in Russia but in many nations, has not been the weather, but the ever expanding costs of production itself! From fuels to fertilizers, the process of growing food is becoming more and more expensive. What is facilitating this surging cost of production? How about the one factor that no one seems to want to discuss; the devaluation of major currencies, most especially the dollar? I find it interesting that so much disinformation on supply and demand in commodities is hitting the news streams just as the Dollar and the Euro begin to unhinge. In my view, this engineered hysteria is meant to distract us from the collapse of our currency, and to create plausible scapegoats for the inevitable ill effects that devaluation will bring.

Lie: Oil Inflation Caused By Rising Demand

Same argument, different commodity. Oil output has been more than ample in light of the fact that oil consumption in almost every nation has fallen substantially in the past three years:

What about the surprise shutdown of the Alaskan pipeline this month? Is our supply in danger? No. According to the EIA (Energy Information Administration), the U.S. exports (that’s right, exports!) over 2 million barrels (2009 figures) of petroleum and petroleum byproducts a day, most of it from the Alaskan fields!

Apparently, Americans didn’t need that oil when the pipeline was working, so shutting it down certainly wouldn’t diminish supply here at home.

Oil is pegged to and traded in the world reserve currency; the dollar. Any devaluation in the dollar will have immediate effects on the value of oil. OPEC nations can and have been absorbing the inflationary costs, but they can only succeed in this for a short time. Eventually, the fundamental expenses will overwhelm them, and they will be forced to allow the price per barrel to take flight. That time has essentially come. Prices are likely to climb at breakneck speed in 2011, not because of demand, but because of the crumbling Greenback.

Truth: China Is Preparing To Dump The Dollar

Most economists should have seen the Chinese problem back in 2005, when their central bank started issuing Yuan denominated treasury securities called “Panda Bonds”:

Maybe the cute name threw mainstream pundits for a loop, or maybe they just couldn’t see the true purpose behind such a move.

China is the largest holder of U.S. debt and dollars. It is also the largest holder of forex reserves in the world. China’s coffers are bloated with savings. So then, why would the Chinese government introduce a plan to sell their own debt securities? They don’t need constant inflows of foreign cash to stay afloat like we do here. Their currency was pegged to the dollar so issuing a Yuan denominated security would have been pointless, at least in the eyes of the common investor. What did the Chinese central bank know that we didn’t?

It took some connecting of dots, but in 2008, when the ASEAN trading bloc took shape and they began to allow Yuan bonds for cross border trades, the reason was clear; China was planning to de-peg from the dollar. China was going to allow their currency to valuate. China was going to move towards a consumer based economy. China was going to drop the dollar as its reserve currency for international trade. And, eventually, China was going to dump their U.S. Treasury holdings altogether.

Why would China start preparations for this all the way back in 2005? It seems like a serious gamble, unless they KNEW what was coming in 2008. Unless they knew that the credit crisis would strike hard, that U.S. consumption would falter for years, not months, damaging Chinese exports. Unless they knew that the Federal Reserve would recklessly pour fiat into the system. Looking back at China’s actions, one can only conclude that their central bank was made aware of coming events by others, or, they are all Jedi, and deserve some kind of award for their incredible powers of foresight.

So far, the Chinese have de-pegged from the dollar, Yuan bonds are now being issued by the World Bank, and China has dropped the dollar in bilateral trades with Russia. We are only a step or two away from a global shunning of the dollar and a treasury dump by our biggest creditor.

Truth: China Is Suffering From Inflation

Concise data on Chinese inflation is even more impossible to obtain than it is here in the U.S. The “official” inflation rate in China increased by 5.1% last year, however, some estimates double that figure:

Chinese property prices rose for the 19th month in a row last December, while Chinese demand for housing remained low. Government subsidization of residential construction has created modern day “ghost towns”; entire complexes of apartments and retail spaces devoid of inhabitants:

China has introduced its own stimulus measures in the face of the global credit crunch. While our fiat dollars have all been stuffed into the pockets of corporate banks and foreign entities, their fiat Yuan is going directly into their real economy. This is why China’s inflation is so immediate, while ours is still partly subdued.

Does this mean China is in the midst of its own bubble, ready to pop and rain down financial havoc? Not necessarily…

Lie: China Can Counter Inflation Without Boosting The Yuan

China has one option; extreme Yuan appreciation boosting the buying power of their populace in order to counter rising prices. China denies this possibility in public forums, but their central bank’s actions tell a different story.

Reserve requirements (the amount of money Chinese banks must hold as a safety net) have been upped several times, mushrooming to 19%. This is meant to remove excess liquidity from the economy, but so far the move has failed miserably. China has also raised interest rates to curb lending several times to no avail. As noted above, inflation continues.

I believe Chinese as well as Western central bankers are well aware that the Yuan will have to spike considerably if inflation is going to be halted, but currency valuation is not something that can be enacted without consequence. Generally, for one currency to rise quickly, another currency tends to fall. In this case, that currency will be the dollar.

Forget about all the empty rhetoric you hear in the MSM or are liable to hear during Chinese President Hu Jintao’s visit this week in Washington. Already, Hu has called for greater cooperation between the U.S. and China while at the same time stating that the dollar based system is a “product of the past”:

The U.S. government has called for greater cooperation with China while the Senate has issued a statement demanding Congress institute a bill that would label China as a “currency manipulator” on the eve of Hu’s visit:

The meeting between Hu and Obama will generate nothing, because neither Hu nor Obama actually have any say in the financial decisions they will discuss. Those decisions are made by the central bankers of our respective nations, and the central banks want an end to the dollar. When it comes down to it, the banking elites of China and the U.S. are both working towards this goal, while the masses are led to believe that they stand opposed.

Most revealing has been China’s support of the EU. Why are the Chinese suddenly so interested in propping up European economies that are destined to default? It’s definitely not out of the kindness of their hearts. First, China gains greater proliferation of the Yuan by tying itself closer to Europe, Africa, and the rest of Asia. Greater Chinese investment in the EU makes a switch to the Yuan (or a basket of currencies) and a move away from the dollar more acceptable to the citizenry of Europe. (Notice that all the American taxpayer dollars that were sent to tide over the EU were made secret, while all that Chinese money sent to the EU is loudly paraded for all to see. China: good guy. America: bad guy). Second, the greater the proliferation of Yuan bonds, the faster the Chinese can begin to dump their U.S. Treasuries. This is the key!

China must shrink its forex and T-bill reserves in order to drive an appreciation of the Yuan able to cut off inflation concerns. Timothy Geithner claims this will be good for the U.S. Hu claims it would be bad for China. They are both liars. Ultimately, inflation will be used by China as the excuse to drop the dollar completely, which is what they have been planning to do since at least 2005. The private Federal Reserve and our government will announce victory and a “managed” devaluation of the dollar, only to have the treasury bubble snap and bury us in hyperinflation, which is what they wanted all along, for many reasons, but most importantly to allow for the birth of the IMF’s SDR as the new global currency (amply supported by the new improved Yuan).

The Saga Of Disinformation Continues

I thought the economic situation was confusing two years ago. I never dreamed the pretzel could become so twisted so fast. The reason it is vital to stay on top of the fog and misdirection should be evident; deception in the economy can be used to steer the public and our country towards terrible ends. While many of us might become exhausted with the constant reminders of the dark road ahead, we cannot take for granted that the battle for the truth is far from over. We have made great headway over the years, far more than I dared imagine possible, but this is a beginning, one that must be cradled carefully, like the embers of the first fire.

The nature of propaganda is to strut, to pound its chest and wail the closer we get to reality. The more Americans stumble upon the facts behind the false statistics and false smiles of establishment pundits, the more we will be subjected to globalist think-tank fancies and elaborate insanities. In this, we find our most reliable gauge of impending jeopardy, and salvation. Bigger grifts signal precarious times, but also desperation amongst the perpetrators and con men. There does come a time when people become weary of being fooled, and they turn their blunderings from a hindrance into an education. Ironically, lies very often destroy themselves, by frustrating their intended victims into action.

You can contact Giordano Bruno at:

Longwave Despotism...

Posted for your consideration relative to current events... (ht Kevin)

Morning Update/ Market Thread 1/18

Good Morning,

Equity futures are slightly lower in general with the NDX lower due to AAPL being down 5% this morning. The dollar is lower and is flirting with a support level in the 78.8 area, bonds are down sharply just prior to the open, while oil is lower, and gold is higher.

The Empire State Manufacturing Index rose from a relatively low 10.6 to 11.92, this is well below the 14.0 that was the consensus, but is slightly higher than December’s report. Note that December was revised lower to an even weaker 9.89 – here’s Econoday:
Manufacturing activity is accelerating in the New York region this month according to the Empire State general business conditions index which rose more than two points to 11.92, a reading well over the breakeven zero level and slightly above December's revised growth of 9.89. New orders show significant acceleration to 12.39 vs December's 2.03 and vs November's steep contraction of minus 23.80. Shipments, which follow new orders, accelerated to 25.39 from 7.16 in December and from minus 5.27 in November.

The gains however are far from straining the supply chain, a factor that points to limited gains ahead for employment. Unfilled orders extended their long run of contraction while deliveries continue to speed up, not slow down. Inventories, at plus 4.21, show a build this month but follow a run of draws.

Employment did rise in the month, to 8.42, but the slack in unfilled orders and lack of pressure in deliveries suggest that existing capacity is sufficient to meet production needs. Still this report, especially the new orders index, is positive for the outlook hinting at an incremental gain for the nation's manufacturing sector during January. The Philly Fed will release its manufacturing report for the Mid-Atlantic region on Thursday.

Yawn… very slow “growth” here, and remember that many of the index values are first measured in dollars that are not adjusted correctly due to errors in measuring real inflation.

Treasury International Capital (TIC) data for November from the Treasury shows a supposed (no, I don’t believe their data) $39.0 billion net inflow of funds. The Treasury no longer produces this report in .pdf, otherwise I would show the entire report. Diving deeper we find that China was a net seller, while the U.K. was the supposed big buyer. With no international audit trail whatsoever, these numbers are simply not believable and should not be taken at face value from my perspective.

The Housing Market Index is released at 10 Eastern this morning.

The most important and telling economic data this morning comes from the UK where inflation was just reported as climbing steeply to 3.7%, with prices rising 1.0% on a month to month basis (12% annualized). Their “Retail Prices Index” jumped even more, climbing to 4.8%. This from a central bank whose official target is 2.0%. This from a country who is imposing austerity measures and who just imposed a higher VAT on its people – riots to commence in the near future.

Speaking of riots, pay attention to events in Sudan and in the Ivory Coast, two despot lead nations that are likely next in the Tunisia like revolution department. By the way, riots in Tunisia continue as the people are not happy with the new coalition government that includes some of the old politicians – they want a completely clean slate.

Citigroup released earnings that failed to meet expectations on both the top and bottom lines. They are claiming profits are up from last year, but in fact Citi’s revenue fell by 6% from a year ago and profits would not have been there without Citi taking smaller write down provisions for it bad debts. In other words, the only way Citi can claim a profit is via accounting fraud, and that is just the tip of the iceberg as they are running shell companies and still marking their “assets” to their own fantasy model.

As I’ve been typing I watched bonds shoot lower just prior to the open, and on the opening bell prices shot higher – the market is completely HFT driven and controlled, completely unnatural. As I’ve been saying, at some point the bankers (who own the HFT machines, own the exchanges, own the “Fed,” and produce false money to fuel their HFTs) will fail to get their way. We have stupidly given a very small minority complete control of our money system, of our economy, and by extension our political system.

Monday, January 17, 2011

Holiday Update – Signs of a Potential Top…

Of course today is a holiday and thus markets are closed. However, events in play are adding to the feeling that a potential top in the market is in or is close at hand. I’ll get to the technical market aspects in a moment, but first let’s consider some “other” events.

Tunisia’s revolution is another feather in the cap of freedom as another tyrant is removed from power, this time in Northern Africa. Ben Ali’s regime was high on the scale of despotism despite a relatively high standard of living compared to surrounding countries. This revolution has other despot countries, such as Egypt, on notice and now on guard. In fact Egypt’s, and many other tyrannical countries’ markets, are under heavy selling pressure today. My hope is that the new government gets the money system right alongside of their political system – they must both work together to produce true freedom. Stay away from the world’s private banks, look towards Iceland as a model.

DEBT is pressuring many other parts of the globe as well. Spain, Portugal, and Belgium just cancelled market based bond auctions in favor of more secretive private bank run auctions as demand was obviously not there. Europe is a basket case, with all countries in debt trouble. Bankrupt countries like Japan stand no chance of providing any real help to Europe, the best they can accomplish is to further destroy their own currencies. The ECB would like for the IMF to create more phony money to bail their whole debt based system out by providing more debt! This is laughable and is so far removed from reality that one must seriously question banker and political sanity.

It matters not, as all debt-based global monetary systems are in a state of free-fall. Food riots? No mention in the press as to the real root cause, namely the debasement of money. Real people go hungry when bankers get greedy, thus you will see more revolution and more violence throughout the world – these are the “other” events that history says are coming.

Yet here in America we are still playing ostrich with our collective heads in the sand. Our media at best can now acknowledge that our national debt is “Ugly:”
National debt: The ugly facts

NEW YORK -- Commentary: Maya MacGuineas is the director of the fiscal policy program at the New America Foundation.

The facts are ugly. The federal debt, which has averaged less than 40% of the total economy, now represents more than 60%. It's likely to hit 100% in a little oYou want more? Here's more.

Pretty much every impartial analyst has declared the situation unsustainable. And many European countries have already been hit by nervous credit markets worried about their debt levels.

Bottom line: If Congress and the president fail to make changes to current policies, the United States will experience some form of a fiscal crisis.

Not a pretty picture. And yet policymakers continue to drag their feet.

When it comes to fiscal policy, the political system is stuck in posturing mode.

Sorry, the abominable $858 billion tax deal President Obama struck with Republicans last month, in which both sides piled on more to the public debt and called it a win-win, does not qualify as my kind of fiscal compromise.

Geithner's debt ceiling warning
It's time for real compromise.

As long as each political party sees an advantage to delaying, we will continue to inch along, closer and closer to that inevitable crisis.

Last week, both Moody's and Standard and Poor's commented on the need for the United States to make changes or jeopardize its triple-A credit rating. A few years back, such warnings would have seemed inconceivable.

The gridlock comes in part from both sides believing they are right.

Republicans view smaller government as promoting more individual freedoms and as better for the economy because it allows for lower taxes. Fair enough.

Democrats see government as serving a more useful purpose -- one that is particularly justified because of the needs of an aging population, years of under investment and growing income inequality. Also legit.
On top of that, both sides blame the other for having made the problem worse for political reasons. Unfortunately, both are right.

No, the real unfortunate is that both parties are wrong, and so is the author of this article. The reality is FAR AND AWAY more UGLY than that!

Our current national debt has entered a parabolic growth phase, and because it went parabolic on banker bailouts, instead of acknowledging the debt, we now “expand the Fed’s balance sheet” by trillions. We use false accounting so bad that our country’s own chief accountants haven’t been willing to sign off on our financials for years. We fail to use GAAP accounting principles and thus ignore our promises and liabilities. We have lowered interest rates on each economic cycle to accommodate more and more DEBT, and now the private banks (the “Fed) has resorted to all out money printing. So much so, that this month there are 19 of 20 market days with POMO operations adding up to an incredible $112 billion in just one month!

Think about how large that parabolic figure is! It is nearly THREE TIMES our nation’s trade deficit! Think about that! There is no way it can end and still maintain the façade of economic or market growth, no way. In fact, the numbers MUST GET LARGER or the apparent growth ends. And that’s just one reason why finding physical gold and silver is getting harder and harder – the latest report showing that the European silver shortage is striking the U.K.

And how are equity markets priced? Ridiculous and fraudulent is all I can say. Fraud is rampant and now condoned, here’s yet another example of accounting fraud: US Banks Reporting Phantom Income on $1.4 Trillion Delinquent Mortgages.

With QE2 slated to end by June of this year, look for another banker induced crisis to generate enough angst to get QE3 or TARP 12,000 or whatever they call the next bailout – it will be necessary.

Just look at what has transpired in the Municipal Debt markets over the past couple months and in the past 3 weeks in particular. I talked about it coming years ago, I talked about it as the current CRASH began, and I’m talking about it again because there are so many Muni funds crashing to new 52 week lows, that the NYSE new lows number shot up to 153! This figure is high enough to generate another Hindenburg Oman, however, the McClellan Oscillator is just positive and thus another one was not triggered this week. This split in the market is a warning that should not be ignored, it is yet another expression of the sickness created from debt saturation. Municipalities are in big trouble, especially if their cost of financing sky rockets. Below is a weekly chart of the S&P National Municipal Bond Fund, it has already fallen 9.4% from its peak just a couple of months ago:

The market is now so concentrated in a few hands, and the indices are so weighted by just a few momo stocks, that the slightest hiccup can produce very large and sudden movements. Witness the NDX which is now comprised of 20% AAPL. Steve Jobs just announced he is stepping back out of the company on medical leave and though it is a holiday, shares trading in Germany are off 8%, and look at the effect it just had on the Q’s this morning:

In the short time frame, the SPX is up against the top of its latest channel which is inside of a larger rising wedge, and you can see how price is diverging (still) against a declining RSI (showing waning momentum):

Ultimately something has got to give. Right now it is food and commodity prices. They shoot up to destroy people’s standard of living and the poor countries are negatively impacted first as they have less marginal ability to absorb price shock – thus revolutions and violence – the root cause of which are our own private bankers who cleverly call themselves the “Fed.”

What’s next to give? Can the markets actually fall with $112 billion a month in direct support? What happens when the primary dealers (who happen to own the “Fed) own all of the stock? What happens when they don’t get their way? What happens when municipalities fail, what excuse can be found/generated to bail them out? What happens when the revolution moves from Tunisia, to Egypt, then into Europe, and then onto the U.S.? Will we ever be smart enough to produce and control our own money system by removing the private banks from it?

Technically the markets are HISTORICALLY overextended even with trumped up valuations (valuations are not real, they are fraudulent). Never before in the past 82 years of modern history have stock prices remained above their 10 day moving average for 30 straight days as they have now!

Bullish sentiment is extreme, the CBOE Put/Call ratio is at the lowest point in the past 3 years. Note on the chart below how extreme lows tend to correlate with stock market tops. Also note how this past week’s close of .57 is lower than all the other weekly lows that occurred at lower price levels, thus creating yet another market divergence of which there are more than I can recall ever seeing:

The VIX closed a daily candle on Friday beneath the lower Bollinger Band, thus setting up an entire market sell signal once the VIX returns to within the confines of 2.0 deviation bands:

Money and Markets just posted the following chart comparing the CRB to the Baltic Dry Shipping Index. It shows a giant sized divergence that is, I believe, a direct indication of MONETIZATION. It shows that commodities are zooming in price not due to demand, but simply due to global money printing. Note that this chart was also divergent prior to the late ’07 top:

The markets are now into areas of very heavy volumetric resistance. The DOW Industrials are now at the same place they peaked in the year 2000, 11 years ago. This area is also the area where the plunge in both the DOW and the S&P began in earnest in 2008 (wave 3). Thus we know there is resistance and under even slightly normal circumstances I would expect a pull-back or at least sideways action for quite some time:

The question then becomes, can POMO power through all that resistance? Again, it boils down to choices… still. Is it okay to starve people throughout the rest of the world? How long until the people become the resistance? Note that when the rule of law breaks down to despotism (corporate fascism here in the U.S.), that eventually the natural rule of law kicks in – other events then occur.

Lastly, there was a very small change in the McClellan Oscillator on Friday, meaning that a large directional price move can be expected Tuesday or Wednesday.

Enjoy your $15 hamburger, $20 is only a few more POMO months away! Other events are in motion and on the way. It’s been a long time coming…