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Friday, June 17, 2011
Morning Update/ Market Thread 6/17 - Money is Debt – Debt Saturation Equals Structural Unemployment Edition…
Good Morning,
Equity futures are zooming this morning… wish I had a good mainstream explanation, perhaps it is all that “dumb money” that thinks the stock market is a farce? Perhaps it was Research Somewhat in Motion who aroused the animal spirits when they lowered guidance and announced layoffs are coming? Maybe it was just a technical bounce off the SPX 200dma? Or perhaps… just perhaps… it was HFT machines owned by the insolvent debt pumping central banks? Does it matter? Are you in control of your “investment?” Do you trust them, really? Is this the best place for your money? Are there any safe places for your money when private central bankers are in charge? Just questions to ponder as we watch the dollar sink, bonds go lower, oil is drilling a hole in the ground, but magically gold and silver are hanging tough, while food commodities begin their journey back to Earth.
While I’m mentioning food commodities, below is a daily chart of Rice and Wheat. Both have etched out what appears to be a possible Head & Shoulders formation, both are at the neckline, so further selling may confirm those patterns:
Two days ago I showed you a chart of the dollar exactly when it was touching overhead resistance, and now it has pulled back from that point since that time. The direction of break out of this triangle will be the tell for the future of equities and commodities:
As I mentioned, the SPX yesterday perfectly bounced off the 200dma, and the HFTs have been partying ever since:
Despite the bounce yesterday, the VIX continued to rise and closed above the upper Bollinger for the second day in a row. If prices hold higher today and cause the VIX to return inside of the Bollinger range then a short term market buy signal will be generated:
I’ve been watching IYR again as I know that commercial real estate tends to lag residential. It has been descending back towards its 200dma, a break below that line would probably indicate that another wave of deflation is taking root. Regarding real estate, it is usually the second wave of deflation that you want to start thinking about buying – it will be a time when most are giving up. That time is getting closer:
RIMM has lost more than 50% of its value since February. Guidance last night caused it to plunge 18% overnight. I think you’re going to see more companies fall victim to the forces of margin compression and then deflation as QE unwinds. There are rumors the next trick by the “Fed” is already in motion. The problem for them is that they have already saturated the macro economy with debt – new schemes that fail to unsaturated the debt will only lead to failure and more hardship for Americans.
Don’t believe me? Who do you trust more? Bernanke who has been wrong on every single one of his prognostications, or me who at least has been mostly right all along? Want proof? Okay, here’s more proof...
If you look at a chart of Base Money, it's pretty hard to argue that money pumping has not been occurring:
Now, if you look at the Mean Duration of Unemployment, you are going to be startled, and you are certainly not going to see any form of “recovery” or “job creation” here:
Now, if you combine the two charts, and you work in Congress, you should be calling not only for Mr. Bernanke’s resignation, but you should be working on repealing the “Federal (not) Reserve (not there) Act,” and you should be replacing it with something along the lines of Freedom’s Vision:
Not proof enough? Do I need to pull out the “Chart of the Century” showing the clearly diminishing returns of debt?
Just as a kicker, when you pour hot money into a debt saturated environment, something bad happens to the velocity of money. When people, businesses, and governments finally get their hands on private created debt money, because they already carry so much debt they have no choice but to turn that money back around and send it back to the bank (plus interest). Thus velocity goes nowhere, it is a symptom of debt saturation. Below is a chart of the M1 money multiplier – how’s the “Fed” looking so far?
The St. Louis “Fed” finally added velocity to their data base, so now I can make velocity charts. When looking at the MZM velocity (MZM is currently the largest measurement of “money”) something struck me:
Oh yeah, velocity is dead, but doesn’t that chart look just like a chart of interest rates? Okay, let’s combine the Federal Funds rate with MZM Velocity and see what happens:
Hmmm... So what’s happening here? Well, in 1980 then Chairman Volcker raised rates to nearly 20% to kill inflation and rates have been falling ever since. But so has the velocity of money… but at some point velocity fell off a cliff, that point in my opinion, is the point at which macroeconomic debt saturation was reached. It was the same point at which the addition of debt began producing negative returns on the diminishing returns chart. It has lead to structural unemployment, deflation in things you hold as an “asset,” and inflation in things you need to consume.
“Consumer” Sentiment and supposed “Leading” Indicators will be released this morning and will be covered inside of today’s Daily Thread.
Europe and Greece? Same, same. Only we’re far worse off, but simply better at covering it up… so far.
If we want our kids to lead a truly free life, then we need to get busy.
If you haven’t been following the Fukushima situation outside of the mainstream “news,” then you don’t know what’s going on. It is a very dire and very dangerous situation that is affecting the entire globe and will definitely affect your children’s futures. We follow that situation every day inside the Daily thread, I think it’s wise to pay attention.
Equity futures are zooming this morning… wish I had a good mainstream explanation, perhaps it is all that “dumb money” that thinks the stock market is a farce? Perhaps it was Research Somewhat in Motion who aroused the animal spirits when they lowered guidance and announced layoffs are coming? Maybe it was just a technical bounce off the SPX 200dma? Or perhaps… just perhaps… it was HFT machines owned by the insolvent debt pumping central banks? Does it matter? Are you in control of your “investment?” Do you trust them, really? Is this the best place for your money? Are there any safe places for your money when private central bankers are in charge? Just questions to ponder as we watch the dollar sink, bonds go lower, oil is drilling a hole in the ground, but magically gold and silver are hanging tough, while food commodities begin their journey back to Earth.
While I’m mentioning food commodities, below is a daily chart of Rice and Wheat. Both have etched out what appears to be a possible Head & Shoulders formation, both are at the neckline, so further selling may confirm those patterns:
Two days ago I showed you a chart of the dollar exactly when it was touching overhead resistance, and now it has pulled back from that point since that time. The direction of break out of this triangle will be the tell for the future of equities and commodities:
As I mentioned, the SPX yesterday perfectly bounced off the 200dma, and the HFTs have been partying ever since:
Despite the bounce yesterday, the VIX continued to rise and closed above the upper Bollinger for the second day in a row. If prices hold higher today and cause the VIX to return inside of the Bollinger range then a short term market buy signal will be generated:
I’ve been watching IYR again as I know that commercial real estate tends to lag residential. It has been descending back towards its 200dma, a break below that line would probably indicate that another wave of deflation is taking root. Regarding real estate, it is usually the second wave of deflation that you want to start thinking about buying – it will be a time when most are giving up. That time is getting closer:
RIMM has lost more than 50% of its value since February. Guidance last night caused it to plunge 18% overnight. I think you’re going to see more companies fall victim to the forces of margin compression and then deflation as QE unwinds. There are rumors the next trick by the “Fed” is already in motion. The problem for them is that they have already saturated the macro economy with debt – new schemes that fail to unsaturated the debt will only lead to failure and more hardship for Americans.
Don’t believe me? Who do you trust more? Bernanke who has been wrong on every single one of his prognostications, or me who at least has been mostly right all along? Want proof? Okay, here’s more proof...
If you look at a chart of Base Money, it's pretty hard to argue that money pumping has not been occurring:
Now, if you look at the Mean Duration of Unemployment, you are going to be startled, and you are certainly not going to see any form of “recovery” or “job creation” here:
Now, if you combine the two charts, and you work in Congress, you should be calling not only for Mr. Bernanke’s resignation, but you should be working on repealing the “Federal (not) Reserve (not there) Act,” and you should be replacing it with something along the lines of Freedom’s Vision:
Not proof enough? Do I need to pull out the “Chart of the Century” showing the clearly diminishing returns of debt?
Just as a kicker, when you pour hot money into a debt saturated environment, something bad happens to the velocity of money. When people, businesses, and governments finally get their hands on private created debt money, because they already carry so much debt they have no choice but to turn that money back around and send it back to the bank (plus interest). Thus velocity goes nowhere, it is a symptom of debt saturation. Below is a chart of the M1 money multiplier – how’s the “Fed” looking so far?
The St. Louis “Fed” finally added velocity to their data base, so now I can make velocity charts. When looking at the MZM velocity (MZM is currently the largest measurement of “money”) something struck me:
Oh yeah, velocity is dead, but doesn’t that chart look just like a chart of interest rates? Okay, let’s combine the Federal Funds rate with MZM Velocity and see what happens:
Hmmm... So what’s happening here? Well, in 1980 then Chairman Volcker raised rates to nearly 20% to kill inflation and rates have been falling ever since. But so has the velocity of money… but at some point velocity fell off a cliff, that point in my opinion, is the point at which macroeconomic debt saturation was reached. It was the same point at which the addition of debt began producing negative returns on the diminishing returns chart. It has lead to structural unemployment, deflation in things you hold as an “asset,” and inflation in things you need to consume.
“Consumer” Sentiment and supposed “Leading” Indicators will be released this morning and will be covered inside of today’s Daily Thread.
Europe and Greece? Same, same. Only we’re far worse off, but simply better at covering it up… so far.
If we want our kids to lead a truly free life, then we need to get busy.
If you haven’t been following the Fukushima situation outside of the mainstream “news,” then you don’t know what’s going on. It is a very dire and very dangerous situation that is affecting the entire globe and will definitely affect your children’s futures. We follow that situation every day inside the Daily thread, I think it’s wise to pay attention.
Thursday, June 16, 2011
Morning Update/ Market Thread 6/16
Good Morning,
Equity futures were lower again this morning, but are now bouncing towards even, with the dollar higher, bonds higher, oil down again now just above $94 a barrel, gold & silver are hanging tough with gold at $1,528 an ounce still, and food commodities are in correction mode and are lower again this morning.
The DOW is getting close to its 200 day moving average which may offer some support just above 11,700. The key number to watch here is 11,613, as a daily close below that level will produce a major DOW Theory non-confirmation:
Yesterday the VIX jumped its 200dma and closed above the upper Bollinger band. This sets up a potential market buy signal that will be triggered once a daily candle closes back inside of the Bollinger bands:
The dollar is up against overhead resistance at this moment. There is a descending triangle in place on the daily timeframe, a break above this level is bullish for the dollar which will imply bearish for equities and commodities:
Below is a monthly chart of the dollar. There is a larger pennant formation that is very bearish on the longer timeframe. The dollar broke below this pennant, the bottom of which will offer resistance to the dollar if it moves higher. Keep in mind that the dollar index is meaningless in my mind due to the manipulated nature of all the currencies against which it is measured – I watch it just to see how we’re being manipulated:
Weekly Jobless Claims came in slightly better than last week, but still well above the 400k mark at 414,000. The prior week was initially reported at 427k, but of course was revised upward to 430k. The monkeys who build the “consensus” simply parrot the previous week’s number and thus this number was “better than consensus.” Again, numbers over 350k are a job losing proposition, this number is nothing to celebrate and it has been years now of job shedding – listening to the government claim they are “creating jobs” is nothing but a nauseating outright lie. Here’s Econospin:
It’s one thing to be optimistic, but it’s quite another to be a shill.
Housing Starts rose a little in May, rising from April’s 523k to 560k which is exactly what we would expect for the spring time. Definitely nothing to celebrate either, these numbers are less than half the number of starts pre-2007. The shills want to call a bottom every month, you would think that after years of being wrong they would at least humbly zip it, unfortunately no such luck:
The nation’s Current Account Deficit grew in the first quarter from $113.3 Billion to $119.3 Billion. This number is as trumped up as the day is long, the United States now has trillions upon trillions in debt off balance sheet in Freddie, Fannie, and on the “Fed’s” balance sheet. Unfunded liabilities, of course, are also multiples of the acknowledged current account deficit. The math is impossible, the lies about it are non-stop, and this is one whopper of a lie. Yet, as much of a lie as it is, it is still horrid:
Lies, fluff, and more lies. Whatever, we know how this ends, we just don’t know every jink in the road on the way to the destination.
If you want a clue as to some of the “other events” that will follow impossible math like this, look no further than Greece. Now Ireland is finally growing a set, too, stating that bond holders should take a hair cut along with everyone else. I say it is the bond holders who not only knowingly took a stupid risk, it was them who created the risk in the first place. It is the bond holders who should take the hit, not the people – that is the rule of law which has stood for centuries, only recently it has been turned upside down by the money changers who created the unworkable system that benefits only them.
Martin Armstrong has been busy writing and this morning he released an interesting and timely piece on the situation in Greece including a nice review of history:
Greece-061611
Equity futures were lower again this morning, but are now bouncing towards even, with the dollar higher, bonds higher, oil down again now just above $94 a barrel, gold & silver are hanging tough with gold at $1,528 an ounce still, and food commodities are in correction mode and are lower again this morning.
The DOW is getting close to its 200 day moving average which may offer some support just above 11,700. The key number to watch here is 11,613, as a daily close below that level will produce a major DOW Theory non-confirmation:
Yesterday the VIX jumped its 200dma and closed above the upper Bollinger band. This sets up a potential market buy signal that will be triggered once a daily candle closes back inside of the Bollinger bands:
The dollar is up against overhead resistance at this moment. There is a descending triangle in place on the daily timeframe, a break above this level is bullish for the dollar which will imply bearish for equities and commodities:
Below is a monthly chart of the dollar. There is a larger pennant formation that is very bearish on the longer timeframe. The dollar broke below this pennant, the bottom of which will offer resistance to the dollar if it moves higher. Keep in mind that the dollar index is meaningless in my mind due to the manipulated nature of all the currencies against which it is measured – I watch it just to see how we’re being manipulated:
Weekly Jobless Claims came in slightly better than last week, but still well above the 400k mark at 414,000. The prior week was initially reported at 427k, but of course was revised upward to 430k. The monkeys who build the “consensus” simply parrot the previous week’s number and thus this number was “better than consensus.” Again, numbers over 350k are a job losing proposition, this number is nothing to celebrate and it has been years now of job shedding – listening to the government claim they are “creating jobs” is nothing but a nauseating outright lie. Here’s Econospin:
Highlights
In what is very good news for the economy, the number of unemployed filing for first-time jobless claims fell 16,000 in the June 11 week to 414,000 (prior week revised 3,000 higher to 430,000). The four-week average, though unchanged at 424,750, is more than 15,000 below where it was a month ago in a comparison that points to stronger payroll growth and a lower unemployment rate for the June employment report. Continuing claims also came down, down 21,000 to 3.709 million in data for the June 4 week with the unemployment rate for insured workers unchanged at 2.9 percent. There are no special factors skewing this report, one that should help boost confidence in the economic outlook and help limit the troubles underway in the financial markets.
It’s one thing to be optimistic, but it’s quite another to be a shill.
Housing Starts rose a little in May, rising from April’s 523k to 560k which is exactly what we would expect for the spring time. Definitely nothing to celebrate either, these numbers are less than half the number of starts pre-2007. The shills want to call a bottom every month, you would think that after years of being wrong they would at least humbly zip it, unfortunately no such luck:
Highlights
Housing construction shows signs of life in May. Housing starts rebounded 3.5 percent, following a revised 8.8 percent drop in April (originally down 10.6 percent). May's annualized pace of 0.560 million units topped analysts' projection for 0.547 million units and is down 3.4 percent on a year-ago basis. The gain in May was led by a 3.7 percent rebound in the single-family component, following a 3.3 percent decline in April. The volatile multifamily component made a partial comeback, rising 2.9 percent after falling 21.7 percent the month before.
By region, the drop in starts in was led by a monthly 18.1 percent gain in the West with the South rising 1.5 percent. However, the Midwest and Northeast saw declines of 4.1 percent and 3.3 percent, respectively.
Housing permits are pointing to a little more optimism on the part of homebuilders. Housing permits jumped 8.7 percent in May, following a 1.9 percent decrease in April. Overall permits posted at an annualized rate of 0.612 million units and are actually up 5.2 percent on a year-ago basis.
Housing starts remain at low levels but the May numbers for starts and permits indicate that there is modest demand in some local markets for new construction-likely built to order rather than spec. But the fundamentals are unchanged. There is still enormous supply on the market and the best sustainable trend in the near term is incrementally up or more likely merely holding steady.
On the news, equity futures rose (became less negative) with a better-than-expected jobless claims number also contributing.
The nation’s Current Account Deficit grew in the first quarter from $113.3 Billion to $119.3 Billion. This number is as trumped up as the day is long, the United States now has trillions upon trillions in debt off balance sheet in Freddie, Fannie, and on the “Fed’s” balance sheet. Unfunded liabilities, of course, are also multiples of the acknowledged current account deficit. The math is impossible, the lies about it are non-stop, and this is one whopper of a lie. Yet, as much of a lie as it is, it is still horrid:
Highlights
The nation's current account deficit deepened in the first quarter, to $119.3 billion vs a revised $112.2 billion in the fourth quarter (revised from $113.3 billion). The deeper deficit is due to a wider trade gap on goods & services, at $140.8 billion vs the fourth quarter's $118.8 billion. Note that much of this is tied to oil prices. A plus in the report is the balance on investment income which rose to a surplus of $54.8 billion vs the fourth quarter's $39.9 billion reflecting mostly short-term investment from foreigners. The bottom line is that the current account as a percentage of GDP is 3.2 percent, above 3.0 percent in the fourth quarter but under the 3.3 percent of the third quarter.
Lies, fluff, and more lies. Whatever, we know how this ends, we just don’t know every jink in the road on the way to the destination.
If you want a clue as to some of the “other events” that will follow impossible math like this, look no further than Greece. Now Ireland is finally growing a set, too, stating that bond holders should take a hair cut along with everyone else. I say it is the bond holders who not only knowingly took a stupid risk, it was them who created the risk in the first place. It is the bond holders who should take the hit, not the people – that is the rule of law which has stood for centuries, only recently it has been turned upside down by the money changers who created the unworkable system that benefits only them.
Martin Armstrong has been busy writing and this morning he released an interesting and timely piece on the situation in Greece including a nice review of history:
Greece-061611
Wednesday, June 15, 2011
Morning Update/ Market Thread 6/15
Good Morning,
Equity futures are down considerably this morning, nearly wiping out all of yesterday’s gains. The dollar is higher, bonds are up slightly, oil is lower, gold & silver are down slightly, and most food commodities are lower. Corn is now back below the breakout point I showed a couple days ago.
The situation in Europe is driving the Euro significantly lower. Riots over austerity measures have been occurring in Greece and while that’s going on you have criminal bankers and others like Steve Forbes over there proposing to “privatize” Greek assets (and split them up for their pleasure and control.) Of course the bankers tried to do the same thing in Iceland but fortunately the people took action and told the bankers to go pound sand. Hopefully more people will follow Iceland’s example in that regard.
I really like the way the media tried to justify the oversold bounce yesterday – like they could even hint at supposedly “good” data. What nonsense, as there was certainly no data that was good, even as trumped up as most of it is. Today’s data is also mostly negative.
Of course the corrupt and conflicted narcissists over at the Mortgage Banker’s Association managed to pull a positive number out of thin air for the previous week, reporting that mortgage applications increased by 4.5% in the past week, but get this, they also say that refinance applications increased by a whopping 16.5%! My, oh my… that is a whopper… of a fantasy or a lie – pick one. Sorry, but anyone believing that refinance applications can make that size of swing in one week is on some powerful drugs. The people at the MBA are sick and need help – for those who don’t know the history here, these are the same guys who derided Americans for walking away from their underwater mortgages at the same time that they were doing the same exact thing from their own corporate headquarters. That’s called hypocrisy, and that’s just the tip of how messed up these people are. Their data is a great example of a special interest group who tries to influence “consumers” perceptions by manipulating data to spin those perceptions. In my opinion, the mortgage bankers behavior is a great example of why special interests should be separated from government and they should not be allowed to report major industry statistics on their own activities. At any rate, here’s the joke for what it is, Econogullible reporting:
Pleeeeaaaaase…. How Gullible can you be? Oh, that’s right, got to shill to keep the façade in tact.
CPI numbers came in similar to the PPI with the month to month number softening but year over year accelerating. Regular readers know that these numbers also do not reflect reality, they understate overall inflation:
The Empire State Manufacturing Index cratered again, this time going all the way to negative 7.8 in June from May’s positive 11.88 reading. This is way off of expectations with the consensus looking for positive 14:
Industrial Production for May barely held onto positive at just .1%, again less than expected. The trend is definitely down here too, and an ominous sign is that Capacity Utilization fell to just 76.7%. That’s a depression era read, again it’s a sad statement that we are more than three years past the beginning of the collapse that began in ’07 and that companies have had that long to reduce capacity yet even as they do so utilization remains low which tells me there is still too much capacity out there. That fact alone has implications for commercial real estate and also on employment data. Here’s Econohope:
Sorry Econohay, it is not fair to say that Capacity Utilization was unchanged. It was only unchanged when compared to the revised lower number from the previous month – you must compare oranges to oranges, that means initial report to initial report and revised number to revised number. This is a classic way that today’s media creates a positive spin on negative data. The people reporting the data have learned this too and provide the open door with higher initial readings that get quietly revised downward later. Its part of the sickness that’s infested today’s pretend economy.
Speaking of sick, our own complicit U.S. Treasury works with the “Fed” to mask the flow of funds to obscure reality… no audit, no looking at the trail of money. But we know the trail… the “Fed” prints money or issues bonds indebting Americans and then they use that money to roll-over prior existing bonds (Ponzi), but they also send money (and gold) overseas to international banks. Then the Treasury gets to come out and say that those same international banks purchased bonds from the United States! It’s simply a giant shell game to obscure the truth – the truth being that America cannot really finance our massive debts. So the Treasury and “Fed” work together to obscure reality and that’s how we wind up with a positive flow of Treasury International Capital:
Here’s the entire TIC report:
TIC Press Release APRIL
By the way, recent articles suggest that the Chinese have divested themselves of 95% of the U.S. bonds they previously held. Of course the buyer of last resort was the U.S. government who simply printed money to buy them. If those reports are true (I don’t know as I don’t believe any of the flow data as there is no audit trail), then the Chinese no longer hold the supposed magical and mystical power over the United States that the threat of bond sales holds, now do they? Did the United States defuse that bomb at the expense of higher commodity prices and a weaker dollar? If so, it’s a great example of how all loans get repaid with interest in one way or the other. Instead of just paying back the loans, you pay them back every time you eat, every time you fill up at the gas station.
The Home Builder’s Housing Market Index cratered again in June, falling from the already depression level read of only 16 all the way to 13. And June is the middle of spring, it’s supposed to be the time of year that shows strength. Yikes.
Equity futures are down considerably this morning, nearly wiping out all of yesterday’s gains. The dollar is higher, bonds are up slightly, oil is lower, gold & silver are down slightly, and most food commodities are lower. Corn is now back below the breakout point I showed a couple days ago.
The situation in Europe is driving the Euro significantly lower. Riots over austerity measures have been occurring in Greece and while that’s going on you have criminal bankers and others like Steve Forbes over there proposing to “privatize” Greek assets (and split them up for their pleasure and control.) Of course the bankers tried to do the same thing in Iceland but fortunately the people took action and told the bankers to go pound sand. Hopefully more people will follow Iceland’s example in that regard.
I really like the way the media tried to justify the oversold bounce yesterday – like they could even hint at supposedly “good” data. What nonsense, as there was certainly no data that was good, even as trumped up as most of it is. Today’s data is also mostly negative.
Of course the corrupt and conflicted narcissists over at the Mortgage Banker’s Association managed to pull a positive number out of thin air for the previous week, reporting that mortgage applications increased by 4.5% in the past week, but get this, they also say that refinance applications increased by a whopping 16.5%! My, oh my… that is a whopper… of a fantasy or a lie – pick one. Sorry, but anyone believing that refinance applications can make that size of swing in one week is on some powerful drugs. The people at the MBA are sick and need help – for those who don’t know the history here, these are the same guys who derided Americans for walking away from their underwater mortgages at the same time that they were doing the same exact thing from their own corporate headquarters. That’s called hypocrisy, and that’s just the tip of how messed up these people are. Their data is a great example of a special interest group who tries to influence “consumers” perceptions by manipulating data to spin those perceptions. In my opinion, the mortgage bankers behavior is a great example of why special interests should be separated from government and they should not be allowed to report major industry statistics on their own activities. At any rate, here’s the joke for what it is, Econogullible reporting:
Highlights
Mortgage bankers were very busy in the June 10 week as applications for both purchases and especially for refinancings jumped sharply. The purchase index rose 4.5 percent to offset a similar sized decrease in the prior week. The refinancing index added to a solid gain in the prior week with a 16.5 percent surge. Favorable terms are an important plus behind the demand with 30-year mortgages down three basis points to an average 4.51 percent. One week's data is only week's data but the June 10 week is a good start for the summer housing season. Home builders will have their say at 10:00 a.m. ET this morning with the housing market index.
Pleeeeaaaaase…. How Gullible can you be? Oh, that’s right, got to shill to keep the façade in tact.
CPI numbers came in similar to the PPI with the month to month number softening but year over year accelerating. Regular readers know that these numbers also do not reflect reality, they understate overall inflation:
Highlights
Consumer price inflation softened in May on a decline in energy costs. The consumer price index in May grew at a 0.2 percent rate, down from 0.4 percent in April. The latest figure, however, came in higher than the consensus forecast for no change. Excluding food and energy, the CPI jumped 0.3 percent, following a 0.2 percent rise the month before. Analysts had forecast a 0.2 percent increase.
Turning to major components, energy came down 1.0 percent, following a string of strong gains including 2.2 percent in April. Gasoline declined 2.0 percent after jumping 3.3 percent in April. Food prices rose 0.4 percent, matching the boost in April.
Within the core, indexes for apparel, shelter, new vehicles, and recreation all contributed to the acceleration, rising more in May than in April. These increases more than offset declines in the indexes for airline fare, tobacco, and personal care. New & used vehicles rose a strong 1.0 percent but this may be a temporary effect of supply disruptions of parts from Japan and less availability of some auto models.
Year-on-year, overall CPI inflation worsened to 3.4 percent (seasonally adjusted) from 3.1 percent in April. The core rate bumped up to 1.5 percent from 1.3 percent in April on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.6 percent in May while the core was up 1.5 percent.
Today's inflation report lowers the odds of the Fed engaging in QE3 as there clearly are some warm spots within the CPI. With energy softening a bit, food price inflation is standing out more.
The Empire State Manufacturing Index cratered again, this time going all the way to negative 7.8 in June from May’s positive 11.88 reading. This is way off of expectations with the consensus looking for positive 14:
HighlightsUmmm, it was the weather! No, it was Japan. But it couldn’t possibly be debt saturated American “consumers” within their debt saturated governments, could it? Oh never mind, get out there and shop some more, your nation needs you… to be further in debt.
For the first time since November, monthly business conditions in the New York manufacturing region contracted in what is an ominous, though nevertheless still isolated, indication for the national economy. The Empire State index fell nearly 20 points in the June reading to minus 7.79 in what the report describes as a "steep" decline. New orders fell nearly 21 points to minus 3.61, again a negative reading indicating month-to-month contraction compared to May. Shipments are even worse, down nearly 35 points to minus 8.02.
Other details include faster delivery times, which is an indication of weak activity, and a moderating rate of inventory accumulation which is another sign of weakness. Input costs remain extremely high while pricing power for output prices is easing. The report also shows a moderating rise in the number of employees and a contraction in the workweek.
If the sister report on Thursday from the Philadelphia Fed also turns negative, talk will definitely pick up for contraction in the national ISM manufacturing report for June. National data for May on the manufacturing sector will be posted at 9:15 a.m. ET this morning in the industrial production report.
Industrial Production for May barely held onto positive at just .1%, again less than expected. The trend is definitely down here too, and an ominous sign is that Capacity Utilization fell to just 76.7%. That’s a depression era read, again it’s a sad statement that we are more than three years past the beginning of the collapse that began in ’07 and that companies have had that long to reduce capacity yet even as they do so utilization remains low which tells me there is still too much capacity out there. That fact alone has implications for commercial real estate and also on employment data. Here’s Econohope:
Highlights
Industrial production posted a modest rise in May but was held back by a drop in utilities. Manufacturing improved moderately but was quite strong outside of autos. Overall industrial production in May edged up 0.1 percent, following no change in April (originally unchanged). The market median forecast was for a 0.2 percent gain.
However, manufacturing made a comeback, rebounding 0.4 percent in May, following a 0.5 percent fall the prior month. April auto production had been constrained by shortages of parts from Japan related to the March earthquake and tsunami and this damping effect appears to have continued into May with motor vehicle assemblies essentially flat. Excluding motor vehicles, manufacturing advanced a robust 0.6 percent after a 0.1 percent dip in April.
Utilities dropped 2.8 percent after increasing 2.4 percent the month before. Mining output expanded 0.5 percent after a 0.8 percent boost in April.
On a year-on-year basis, overall industrial production slowed to 3.4 percent from 4.7 percent in April.
Overall capacity utilization in May was unchanged at 76.7 and came in lower than the consensus estimate for 77.0 percent.
The details for the production report are quite encouraging as the headline number was weighed down by utilities and manufacturing excluding autos was very healthy. Taking into account that auto assemblies eventually will work around current parts shortages, forward momentum looks good and the national numbers for May are much more positive than the June numbers from the Empire State report.
The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
Sorry Econohay, it is not fair to say that Capacity Utilization was unchanged. It was only unchanged when compared to the revised lower number from the previous month – you must compare oranges to oranges, that means initial report to initial report and revised number to revised number. This is a classic way that today’s media creates a positive spin on negative data. The people reporting the data have learned this too and provide the open door with higher initial readings that get quietly revised downward later. Its part of the sickness that’s infested today’s pretend economy.
Speaking of sick, our own complicit U.S. Treasury works with the “Fed” to mask the flow of funds to obscure reality… no audit, no looking at the trail of money. But we know the trail… the “Fed” prints money or issues bonds indebting Americans and then they use that money to roll-over prior existing bonds (Ponzi), but they also send money (and gold) overseas to international banks. Then the Treasury gets to come out and say that those same international banks purchased bonds from the United States! It’s simply a giant shell game to obscure the truth – the truth being that America cannot really finance our massive debts. So the Treasury and “Fed” work together to obscure reality and that’s how we wind up with a positive flow of Treasury International Capital:
Highlights
The net inflow of foreign investment improved in April but is still at a very moderate $30.6 billion, far below what's needed to fund the nation's fiscal debt and trade deficit. Private foreign accounts were however big buyers of US equities in the month with a net inflow of $16.6 billion. Including official accounts, the net inflow into equities was $17.8 billion. But April was a good month for the stock market which hit a peak at month end, a peak that is now a distant memory and which points to trouble for these readings in the coming reports.
Outside of equities, official accounts, which include foreign central banks, were the biggest buyers in the month with net inflow into Treasuries of $24.4 billion vs a net outflow from private accounts of $1.0 billion. There was a net outflow from both official and private accounts for corporate bonds. When including short-term securities, total inflow in the month nearly doubled to $127.1 billion which is a welcome positive. But a negative in the report is a high level of outflow from the US into foreign securities, at $14.2 billion in the month.
A look at Treasury holdings by nations shows a $7.6 billion rise in mainland China, which is also a positive, to $1.15 trillion and a small decline in Japan to $906.9 billion. UK-based accounts, which are the third largest holders of US Treasuries, shows a $7.8 billion increase to $333.0 billion.
Here’s the entire TIC report:
TIC Press Release APRIL
By the way, recent articles suggest that the Chinese have divested themselves of 95% of the U.S. bonds they previously held. Of course the buyer of last resort was the U.S. government who simply printed money to buy them. If those reports are true (I don’t know as I don’t believe any of the flow data as there is no audit trail), then the Chinese no longer hold the supposed magical and mystical power over the United States that the threat of bond sales holds, now do they? Did the United States defuse that bomb at the expense of higher commodity prices and a weaker dollar? If so, it’s a great example of how all loans get repaid with interest in one way or the other. Instead of just paying back the loans, you pay them back every time you eat, every time you fill up at the gas station.
The Home Builder’s Housing Market Index cratered again in June, falling from the already depression level read of only 16 all the way to 13. And June is the middle of spring, it’s supposed to be the time of year that shows strength. Yikes.
Tuesday, June 14, 2011
Morning Update/ Market Thread 6/14
Good Morning,
Stocks are higher on still weak economic data this morning. The dollar is lower, bonds are lower, oil is higher, gold & silver are up, and food commodities are mostly lower.
The market is shooting higher this morning, choosing once again to pretend that weak economic news is good news. Of course we know that the market was oversold and looking to bounce, the ever sloshing hot money just has to look for something to do, all of yesterday’s ridiculous and superfluous M&A activity is a shining bubble example.
Let’s start with the NFIB Small Business Optimism Index. It seems small business owners are not very optimistic at all, as this index fell for the third straight month, landing on 90.2 in June from 91.2 in May. Here’s Econoday acting shocked that small businesses don’t see economic recovery – and I say no kidding, just look at all the trillions thrown at too big to fail businesses while the small guys and middle-class are left to foot the bill:
Here’s the entire report below. Again, weak consumer spending and also weak services which is counter to other, perhaps more manipulated statistics:
NFIB Small Business Trends June 2011
The PPI is slowing rapidly now that oil has backed off. Rising .2% in May, this is down sharply from the .8% month to month rise in April, still high, but decelerating. PPI less food & energy left the ‘core’ also at .2%. While the market may like this reading today, all I can say is that the reading went sky high with the money pumping and is now creating a brand new trend that is very obvious – namely that increase in prices is falling off rapidly as we face the prospect of ending the flow of hot money. In other words, without the hot money we can swing very rapidly from inflation to deflation as the deflationary forces of debt saturation are extremely powerful. Here’s Econoday, as the year over year PPI chart shows, overall inflation is still quite high:
Retail Sales in May are reported as falling .2%. This is also a sharp deceleration from April’s prior supposed .5% gain. Since I know this report vastly overstates real retail sales, I take a negative print here to mean that sales are really decelerating. Remember, this report does not correct for real inflation, and it also suffers from survivor bias. Here’s Econoday, note that gasoline sales increased solely due to the rising price of gasoline – that does NOT equal more products sold, it equals more money printed. Also note the downward revision for April… again:
The market is in a dangerous position from my point of view. The hot money players I’m sure will try to engineer a bounce, justified or not by economic data. Remember that bubbles require fuel for the fire, so we need to see where the fuel is, not just assume that it’ll be coming immediately. The market is all fluff, so removing or even slowing the flow of hot money will allow the deflationary forces to take over.
Another point for caution here is that yesterday the market was flat to slightly higher, yet the VIX rose and jumped over the 200 day moving average:
Stocks are higher on still weak economic data this morning. The dollar is lower, bonds are lower, oil is higher, gold & silver are up, and food commodities are mostly lower.
The market is shooting higher this morning, choosing once again to pretend that weak economic news is good news. Of course we know that the market was oversold and looking to bounce, the ever sloshing hot money just has to look for something to do, all of yesterday’s ridiculous and superfluous M&A activity is a shining bubble example.
Let’s start with the NFIB Small Business Optimism Index. It seems small business owners are not very optimistic at all, as this index fell for the third straight month, landing on 90.2 in June from 91.2 in May. Here’s Econoday acting shocked that small businesses don’t see economic recovery – and I say no kidding, just look at all the trillions thrown at too big to fail businesses while the small guys and middle-class are left to foot the bill:
Highlights
You would never know the economy is in recovery based on reports from the National Federation of Independent Business whose small business optimism index continues to move south, down three tenths in May to a recessionary level of 90.9. The report points to weak consumer spending as the main factor, one that's hitting services which is a central sector to small businesses. The report has a sharp political tone saying, without much detail, that Washington policies aren't encouraging small businesses to hire. The report's job creation indications are deteriorating with capital spending and inventory plans weakening. One in four respondents say weak sales are their top problem. Inflation is also cited as a major concern.
Here’s the entire report below. Again, weak consumer spending and also weak services which is counter to other, perhaps more manipulated statistics:
NFIB Small Business Trends June 2011
The PPI is slowing rapidly now that oil has backed off. Rising .2% in May, this is down sharply from the .8% month to month rise in April, still high, but decelerating. PPI less food & energy left the ‘core’ also at .2%. While the market may like this reading today, all I can say is that the reading went sky high with the money pumping and is now creating a brand new trend that is very obvious – namely that increase in prices is falling off rapidly as we face the prospect of ending the flow of hot money. In other words, without the hot money we can swing very rapidly from inflation to deflation as the deflationary forces of debt saturation are extremely powerful. Here’s Econoday, as the year over year PPI chart shows, overall inflation is still quite high:
Highlights
At the producer level, inflation slowed but there were still f hot spots in the data. Overall PPI inflation in May softened to 0.2 percent from April's 0.8 percent jump. May came in higher than the median projection for a 0.1 percent increase. By major components, energy still gained, by 1.5 percent after a 2.5 percent gain in April. Specifically, gasoline increased 2.7 percent, after jumping 3.6 percent in April. However, food fell 1.4 percent, following a 0.3 percent rebound the month before. At the core level, PPI growth eased to 0.2 percent after a 0.3 percent rise in April and equaling the median forecast for 0.2 percent.
Retail Sales in May are reported as falling .2%. This is also a sharp deceleration from April’s prior supposed .5% gain. Since I know this report vastly overstates real retail sales, I take a negative print here to mean that sales are really decelerating. Remember, this report does not correct for real inflation, and it also suffers from survivor bias. Here’s Econoday, note that gasoline sales increased solely due to the rising price of gasoline – that does NOT equal more products sold, it equals more money printed. Also note the downward revision for April… again:
Highlights
Headline retail sales slipped in May, tugged down largely by auto sales and with other components mixed. Overall retail sales in May dipped 0.2 percent, following a revised 0.3 percent gain in April (originally up 0.5 percent). May's decline was less negative than the median forecast for a 0.3 percent decrease. Excluding autos, sales advanced 0.3 percent, following a 0.5 percent rise in April. The consensus called for a 0.3 percent increase. Gasoline sales gained but only moderately. Sales excluding autos and gasoline in May printed at a 0.3 percent rise, matching the increase the month before. Overall, the trend is upward but at a modest pace the last two months following strong months in March and February.
The market is in a dangerous position from my point of view. The hot money players I’m sure will try to engineer a bounce, justified or not by economic data. Remember that bubbles require fuel for the fire, so we need to see where the fuel is, not just assume that it’ll be coming immediately. The market is all fluff, so removing or even slowing the flow of hot money will allow the deflationary forces to take over.
Another point for caution here is that yesterday the market was flat to slightly higher, yet the VIX rose and jumped over the 200 day moving average:
Monday, June 13, 2011
Morning Update/ Market Thread 6/13 - Living in a College Educated Fantasy Edition…
Good Morning,
Equity futures are slightly higher prior to the opening bell this morning. The dollar is off a little, bonds are also lower, gold and silver are basically flat, while most food commodities are higher with corn continuing higher after its breakout last week.
There’s no significant economic data today, however, the rest of the week is very busy with manufacturing data, inflation data, housing data, TIC data, “Consumer” Sentiment, and “Leading” Indicators.
Of course the data, even in its fantasy form, has been hardly positive of late… and that’s before QE2 actually is over. And we’ve had six straight down weeks in the market. Note in the weekly chart below that the SPX broke well below the May down channel and closed the week below the bottom of the weekly Bollingers:
The market is definitely oversold on a daily basis, but not quite yet on a weekly basis. The truth is that the selling so far has been pretty mild and orderly. Sentiment is turning bearish which means that the trend could reverse soon. But with macroeconomic debt saturation and QE fuel running low, I believe deflationary forces will exert themselves rapidly without more soon – there needs to be more fuel to send the bubble even higher and so far that’s not on the horizon. Still, there’s certainly enough fuel sloshing around the globe that anything can happen, and several market technicians believe there’s still another rally leg left that may even reach new highs – we’ll see. The technical target to watch if the descent continues is DOW 11,613… a daily close below that level would produce a major DOW Theory non-confirmation because the Transports reached new all-time highs and the Industrials have not.
The article that leaves me most inflamed from the weekend actually comes from CNN regarding the surging costs of college tuition. Here in Washington State the Governor just signed legislation that deregulates state college price controls and allows colleges like the University of Washington to raise tuitions as they see fit… and still receive state taxpayer money. The University of Washington’s immediate response? Jack tuition costs 20% for next year!
As if creating a monopoly on books isn’t enough. Perhaps they need more money to hire the best coaches for the football team and to cater to potential athletes. Perhaps they need to renovate the Roman Coliseum, errr, I mean Husky Stadium (again)? But here’s what has me so hot under the collar and I know that no mainstream reporter will touch… The University of Washington is sitting on well over a billion (!!!!) dollars in endowment money. Hmmm… what could a university do with a billion dollars in terms of education? Why would they sit on that much cash? WHO benefits from them sitting on that much cash? And… isn’t taking taxpayer subsidies while jacking tuition really just subsidizing that endowment? Robbing Peter to make Paul rich off of Wall Street trading and management fees? Hmmm, perhaps Nate’s onto something there… Meanwhile, here’s the mainstream explaining how you are caught in the middle-class squeeze, your productive efforts effectively using the college education mantra to fuel more profits on Wall Street:
I love articles about college in the mainstream that talk in single sentences, the irony is priceless.
The bottom line is that Americans are being fleeced in a huge way. Government has been completely captured by those who control the production of money and college has become just another avenue to drive profits and to indebt the public. Again, this is insidious, as people don’t realize that assuming “good debt” for college is actually trading their future productive efforts for an education that is now fully bubble priced.
The solution? It’s the same as for all the other impossible math – you must take back the power of money creation and detangle the special interests from government. While you’re doing that if you want economic prosperity you also must correct the debt saturated condition. That is the only way meaningful change is going to happen, but since it means regaining control of the production of money, it will require a battle that evidently the public is not yet ready to face.
The radiation from Fukushima is still pouring into the environment. Below, Arnie Gunderson discusses hot particles in Japan and those that have made it to the West Coast of the United States - beware if you're eating food and experience a metallic taste:
Equity futures are slightly higher prior to the opening bell this morning. The dollar is off a little, bonds are also lower, gold and silver are basically flat, while most food commodities are higher with corn continuing higher after its breakout last week.
There’s no significant economic data today, however, the rest of the week is very busy with manufacturing data, inflation data, housing data, TIC data, “Consumer” Sentiment, and “Leading” Indicators.
Of course the data, even in its fantasy form, has been hardly positive of late… and that’s before QE2 actually is over. And we’ve had six straight down weeks in the market. Note in the weekly chart below that the SPX broke well below the May down channel and closed the week below the bottom of the weekly Bollingers:
The market is definitely oversold on a daily basis, but not quite yet on a weekly basis. The truth is that the selling so far has been pretty mild and orderly. Sentiment is turning bearish which means that the trend could reverse soon. But with macroeconomic debt saturation and QE fuel running low, I believe deflationary forces will exert themselves rapidly without more soon – there needs to be more fuel to send the bubble even higher and so far that’s not on the horizon. Still, there’s certainly enough fuel sloshing around the globe that anything can happen, and several market technicians believe there’s still another rally leg left that may even reach new highs – we’ll see. The technical target to watch if the descent continues is DOW 11,613… a daily close below that level would produce a major DOW Theory non-confirmation because the Transports reached new all-time highs and the Industrials have not.
The article that leaves me most inflamed from the weekend actually comes from CNN regarding the surging costs of college tuition. Here in Washington State the Governor just signed legislation that deregulates state college price controls and allows colleges like the University of Washington to raise tuitions as they see fit… and still receive state taxpayer money. The University of Washington’s immediate response? Jack tuition costs 20% for next year!
As if creating a monopoly on books isn’t enough. Perhaps they need more money to hire the best coaches for the football team and to cater to potential athletes. Perhaps they need to renovate the Roman Coliseum, errr, I mean Husky Stadium (again)? But here’s what has me so hot under the collar and I know that no mainstream reporter will touch… The University of Washington is sitting on well over a billion (!!!!) dollars in endowment money. Hmmm… what could a university do with a billion dollars in terms of education? Why would they sit on that much cash? WHO benefits from them sitting on that much cash? And… isn’t taking taxpayer subsidies while jacking tuition really just subsidizing that endowment? Robbing Peter to make Paul rich off of Wall Street trading and management fees? Hmmm, perhaps Nate’s onto something there… Meanwhile, here’s the mainstream explaining how you are caught in the middle-class squeeze, your productive efforts effectively using the college education mantra to fuel more profits on Wall Street:
Surging college costs price out middle class
NEW YORK (CNNMoney) -- What do you get when college costs skyrocket but incomes barely budge? Yet another blow to the middle class.
"As the out-of-pocket costs of a college education go up faster than incomes, it's pricing low and medium income families out of a college education," said Mark Kantrowitz, publisher of financial aid sites FinAid.org and FastWeb.com.
The numbers confirm what most middle class families already know -- college is becoming so expensive, it's starting to hold them back.
The crux of the problem: Tuition and fees at public universities, according to the College Board, have surged almost 130% over the last 20 years -- while middle class incomes have stagnated.
Tuition: In 1988, the average tuition and fees for a four-year public university rang in at about $2,800, adjusted for inflation. By 2008, that number had climbed about 130% to roughly $6,500 a year -- and that doesn't include books or room and board.
Income: If incomes had kept up with surging college costs, the typical American would be earning $77,000 a year. But in reality, it's nowhere near that.
In 2008 -- the latest data available -- the median income was $33,000. That means if you adjust for inflation, Americans in the middle actually earned $400 less than they did in 1988. (Read: How the middle class became the underclass).
Financial aid: Meanwhile, the amount of federal aid available to individual students has also failed to keep up. Since 1992, the maximum available through government-subsidized student loans has remained at $23,000 for a four-year degree.
"There does seem to be this growing disparity between income and the cost of higher education," said Justin Draeger, president of the National Association of Student Financial Aid Administrators. "At the same time, there's been a fundamental shift, moving away from public subsidization, to individuals bearing more of the cost of higher education."
Facing that disparity, it's no wonder then that two other trends have emerged: Families are taking on unprecedented levels of debt or downgrading their child's education from a four-year, to a two-year, degree to cut costs.
Student debt is often viewed as a good kind of debt, because a college education seems to promise a better future.
College grads, after all, have much lower unemployment rates than high school grads. And they earn $1 million more over their lifetimes, according to a much-quoted figure from the Labor Department . (Read: Is a college degree really worth $1 million?)
But even in this case, too much of a good thing can still be bad.
About two thirds of students graduating with four-year degrees recently did so with loans hanging over their heads, and their average bill comes in at a whopping $23,186, according to FinAid.org.
Of those, Kantrowitz estimates that about half will still be repaying their loans in 20 years -- the traditional student loan period. And for many, that may very well mean they won't be able to buy a home, save for retirement or fund the next generation's education.
"They could still be paying back their own student loans, when their children are in college," he said.
I love articles about college in the mainstream that talk in single sentences, the irony is priceless.
The bottom line is that Americans are being fleeced in a huge way. Government has been completely captured by those who control the production of money and college has become just another avenue to drive profits and to indebt the public. Again, this is insidious, as people don’t realize that assuming “good debt” for college is actually trading their future productive efforts for an education that is now fully bubble priced.
The solution? It’s the same as for all the other impossible math – you must take back the power of money creation and detangle the special interests from government. While you’re doing that if you want economic prosperity you also must correct the debt saturated condition. That is the only way meaningful change is going to happen, but since it means regaining control of the production of money, it will require a battle that evidently the public is not yet ready to face.
The radiation from Fukushima is still pouring into the environment. Below, Arnie Gunderson discusses hot particles in Japan and those that have made it to the West Coast of the United States - beware if you're eating food and experience a metallic taste:
Hot Particles From Japan to Seattle Virtually Undetectable when Inhaled or Swallowed
With all the disinformation and left/right “solutions” that the mainstream and conflicted politicians use to box us in with, it’s obvious that the majority have their minds captured as well. I sure hope that we won’t always have to be, living in a fantasy…
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