Morning Update/ Market Thread 7/13 – World Wide Spread of the Debt Plague Edition…

Good Morning,

Equity prices are higher this morning, the dollar is lower, bonds are lower, oil is higher ($97), gold is setting a new all-time high ($1,580), silver is soaring, and food commodities are literally choking the life out of people living on the margins.

Yesterday the “Fed” hinted at QE3 in their meeting minutes and that has reignited the fluff trade. Meanwhile CNN is talking that we need to bring in “big thinkers” to fix our economy… you know, people like Bill Clinton, Alan Greenspan, and other banking big wigs. You know, because these “big thinkers” can solve these impossible math problems and they certainly had no part in creating them! Maybe the big banks can all donate a few million to put them up in a lavish hotel while they ponder it for awhile.

The fluff on trade was supposedly set off by China reporting year over year “growth” at 9.5% which is above the 9.3% “growth” estimate. First of all, I’m just going to say that whenever you see a percentage growth number that large you should instantly turn on your skeptic mode. Growth numbers that large are absolutely not sustainable in the real world, and certainly not for the duration that the Chinese have been making this claim. So, that brings up the non-real world that unfortunately is the world’s fluff monetary system. You can create money and debt to make numbers larger, but that is apparent growth, it is money growth, not REAL growth.

This is laid bare by today’s Import and Export Prices report where we find the closest American report on real inflation. This is where we see that Export Prices have zoomed 9.9% in the past year, and that Import Prices have rocketed 13.6% in the past year! “Holly inflation, Batman!”

“Boy Wonder, if only you knew what the real Evil Doers where up to!”

“Holly cannoli, it’s a world-wide black plague of historic debt saturated proportions! What’s an average guy investor like me supposed to do?”

“There, there, Boy Wonder, just hang on to your wallet and find REAL things to invest in… the fluff always collapses in the end, and the Evil Doers always wind up behind bars… or maybe not, but it’s up to us to try!”

And so it goes, another day another trumped up statistic of monumental debt proportions. But hey, on a month over month basis the price of oil fell and created a momentary lower inflation blip, thus a green light for QE3, right? Whatever, here’s Econonoclue:
A monthly downswing in oil prices led a sweep of declines in June import prices which fell 0.5 percent overall and, importantly, also fell excluding petroleum products, down 0.2 percent. Declines are broad through nearly all input components with output components, including capital goods and consumer goods, showing moderating pressure from already incremental rates. Yet the monthly decline didn't hold down the year-on-year increase which at 13.6 percent is the largest since August 2008, which was the month of course just before the financial meltdown.

The export side shows a mild 0.1 percent increase though here too the year-on-year rate is extremely elevated, at 9.9 percent with the non-agricultural rate at a record 7.8 percent. The monthly rate, as it is on the import side, was held down by the drop in oil prices which offset a sharp 0.7 percent rise in agricultural products.

Today's report is a reminder that lower oil prices, and with them easing pressure on the consumer tied to gas prices, is a big plus for coming economic data on June. Because of oil, both producer prices on Thursday and consumer prices on Friday are expected to show headline declines.

Let’s go back to that 13.6% import inflation and compare that to China’s supposed 9.5% “growth.” Is it really positive growth at all with those numbers? Hardly, it’s nothing but monetary fluff – all of it.

The hyper hypocritical Mortgage Banker’s Association today reported that their whack-job Purchase Index sank another 2.6% in the past week, while their Refinancing Index fell a supposed 6.2%. That number is tame by their standards, but again, I find it impossible to believe economic statistics that swing that much in a single week. Nothing they report is believable, it’s pure bull. Here’s Econoday helping to spread the fertilizer:
July is off to a weak start for the housing sector, at least based on data from the Mortgage Bankers Association that shows a 2.6 percent decline in purchase applications for the July 8 week. Refinancing applications also declined, down 6.2 percent. The declines came despite a sizable drop in rates during the week with 30-year mortgages down 14 basis points to an average 4.55 percent. Next data on the housing sector will come Monday with the housing market index.

What, no bottom call to go along with that? Please sir, may I have another?

So, we have gold climbing to a new all-time record – that tells you all you need to know really. And people thought $500 an ounce was unbelievable, we’re now more than three times that level. Europe is a debt saturated wreck, the Yen continues to climb in a surreal corium like slow-motion melt up of bizzaro proportions, it’s like watching their version of monetary China Syndrome. Yet stocks are high, high, high, while big corporations create artificial “profits” (formerly known as fraud), small businesses suffer, and individuals either can’t find a job or are working for a pittance with frozen and downsized wages against raging inflation in everything that one NEEDS. Yep, those “big thinkers” are needed badly.

Other than precious metals I’ve seen little that inspires confidence as a place to put my money to work. I refuse to participate in these markets as I know the rot that lies underneath. They aren’t even real, they are simply a manipulated HFT game for the money changers. But what I’ve come to realize is that despite all of this messed up reality there are still opportunities for those who think outside of the central banker box. And it’s obvious that resolution to the debt saturation plague is going to be a decades long journey. So, I’m choosing to live my life in a positive manner and am developing a business that will work in almost any monetary environment, not dependant upon the credit issued by a group of screwed up narcissistic bankers. There are opportunities out there, just make damn certain you’re putting your money to work in something real… something that does not support their debt is money scheme.