Morning Update/ Market Thread 12/22

Good Morning,

Equities are higher this morning with bonds higher, the dollar higher, oil higher, and gold also higher.

Oil is pushing the $90.53 level which is a 50% retracement of the ’08 decline and thus is a very important level for oil – and for the economy:



The psychotic Mortgage Banker’s Association’s Purchase Applications Index fell another 2.5% in the past week with Refinancing activity falling a crazy 24.6%... in one week! That brought their overall index down by 18.6% - here’s Econoday:

Highlights
The number of buyers filing mortgage applications fell 2.5 percent in the December 17 week, the second straight decline to show no significant improvement from a month ago. The report warns that home sales are likely to remain "relatively weak" over the next few months.

Some of the softness is tied to rising mortgage rates which are really cutting into refinancing volume. Refinancing applications fell 24.6 percent in the week and are back to levels last seen in April. The average 30-year rate was 4.85 percent in the week, up one basis point from the prior week and up 35 basis points from one month ago. Next data on the housing sector are existing home sales for November, to be posted at 10:00 a.m. ET.

Wow, if a one basis point rise in mortgage rates results in that type of drop, it’s going to get real interesting when rates finally normalize – and at some point they will.

The third and final revision to Q3 GDP data came in at 2.6%. This is a revision higher than the previous 2.5% trumped up report, but not anywhere near as high as expectations which were looking for 3.0%. It’s all false and all fraud, but here’s Econoday’s summary:

Highlights
The economy got an upgrade this morning from the Commerce Department but it was notably below expectations. For the second month in a row, third quarter GDP growth was revised up, this time to 2.6 percent annualized from the prior estimate of 2.5 percent. Analysts had projected a 3.0 percent final estimate.

The upward revision was primarily due to a higher estimated for inventory investment with small improvements to net exports and residential investment also contributing. Softening the upgrade were downward estimates for personal consumption, nonresidential fixed investment, and government purchases.

The biggest disappointment of the report is that demand numbers were revised down. Final sales of domestic product were lowered to 0.9 percent from last month's estimate of 1.2 percent. Final sales to domestic purchasers were downgraded to 2.6 percent from the second estimate of 2.9 percent for the third quarter.

Absolute strength within final sales is still found in PCEs, revised down to an annualized 2.4 percent boost in the third quarter from the prior estimate of 2.8 percent. Investment in equipment & software gained 15.4 percent versus the previous third quarter estimate of 16.8 percent. Government purchases advanced 3.9 percent, compared to 4.0 percent for the prior third quarter figure. Absolute weakness was found in residential and nonresidential investment. Also, net exports worsened.

Year-on-year, real GDP in the second quarter is up 3.2 percent, compared 3.0 percent in the second quarter.

On the inflation front, the GDP price index's growth rate for the third quarter was nudged down to 2.1 percent annualized from the prior estimate of 2.3 percent. The consensus forecast was for 2.3 percent.

Probably the best thing you can say about today's report is that it reflects old data. The mix between final sales and inventories is not as good as expected. But more recent economic data have been far more upbeat. Most likely, the final figures for third quarter GDP will not have a significant impact on estimates for fourth quarter GDP.

On the news, equities eased but remained positive.

Again, our GDP is grossly overstated as it is based largely on financial engineering which itself is built upon fraud. I’m not talking a few percentage points either, I’m talking about a very sizable chunk of it.

I note that Bloomberg is running an article on it that states that the “Price Rise is Slowest in 50 years.” Again, that’s just flat out fraudulent – GDP benefits from low inflator numbers, it makes the economy appear stronger than it really is. So if they’re using the lowest deflator numbers of the past 50 years while everything but housing is soaring in price, then the gap between reality and the fantasy that is our government’s GDP number is gapping wider.

Existing Home Sales were expected to come in at 4.75 million for the month of November with October coming in at only 4.43 million. The actual report for November just came in at 4.68 million, slightly below expectations. The FHFA Price Index rose .7% in the month, but is down 3.4% year over year.

New Home Sales will be reported tomorrow along with a slew of other data, again markets will be closed on Friday.

Morning Update/ Market Thread 12/21

Good Morning,

Equity futures continue to drift higher this morning on extremely low volume. The dollar is down, bonds are up slightly, oil is again pressing $90 a barrel, and gold is down a little while food commodities continue to climb into the stratosphere.

Good thing that there’s plenty of money to placate one in seven Americans with food stamps. Otherwise there just might be hard enough times to cause an uprising that could stand a chance of brining meaningful change instead of meaningful money destruction:

1 in 7 Americans rely on food stamps

PICNEW YORK (CNNMoney.com) -- The use of food stamps has increased dramatically in the U.S., as the federal government ramps up basic assistance to meet the demands of an increasingly desperate population.

The number of food stamp recipients increased 16% over last year. This means that 14% of the population is now living on food stamps. That's about 43 million people, or about one out of every seven Americans.

In some states, like Tennessee, Mississippi, New Mexico and Oregon, one in five people are receiving food stamps. Washington, D.C. leads the nation, with 21.5% of the population on food stamps.

"The high unemployment rate caused the high participation rate," said Dottie Rosenbaum from the Center for Budget and Policy Priorities, a think tank.

But it's not just the nation's stubbornly high unemployment rate of 9.8% that's driving the increase in food stamp use. Some states are expanding their definitions of poverty to include more people.

At the same time, the 2009 American Recovery and Reinvestment Act boosted annual funding to the nationwide food stamp program, known as the Supplemental Nutrition Assistance Program, by $10 billion.

The average recipient receives $133 in food stamps per month, according to the U.S. Department of Agriculture. That amount varies from state to state; in Hawaii the average is $216, while it's $116 in Wisconsin.

But the Recovery Act funding increased the maximum food stamp benefit by 13.6%, which translates to about $20-24 dollars per person per month.

The U.S. government considers food stamps to be effective stimulus for the economy, because the recipients usually spend them right away.

And see, the media gets to tout that we “only” have 9.8% unemployment instead of the more than 17% or more that exists in reality. Sigh…

Not to worry because the “Fed” in all their glorious wisdom will continue to kill the value of your money by not only buying up every single piece of worthless debt in America, but they will provide “liquidity” in the form of “Swap lines” with the world’s other central banks so that they too can keep the dollar killing money pump going:

Dec. 21 (Bloomberg) -- The Federal Open Market Committee authorized the extension through Aug. 1 of its temporary dollar liquidity swap arrangements with the European Central Bank and the central banks of Japan, Canada, Switzerland and the United Kingdom.

The arrangements, established in May, had been authorized through January, the Federal Reserve said today in a statement.

One world government? Seems we already have one and Bernanke is the figurehead world President. Don’t worry about the debt in Europe though, we have that covered because Americans can afford it.

No economic data today, just POMO after POMO. There will be two POMO’s today, should be more than $10 billion plus. Isn’t that special? Why I’ll bet you’re feeling more wealthy already.

Meanwhile stocks appear to me to be carving out another potential rising wedge pattern in the short term…



…That’s inside of another rising wedge pattern in the longer term:



I hope you’re enjoying time with your families in front of the holidays, don’t follow the debt example of our national leaders and be sure to teach your children well…

Morning Update/ Market Thread 12/20

Good Morning,

Equity futures are up this morning as the buildup of tension on the Korean Peninsula with ongoing military exercises has fortunately so far not resulted in another spat of violence. The dollar is unchanged, bonds are higher, oil is flat, and gold is higher.

Expect light volumes and tons of POMO money this shortened holiday week, a week that is traditionally bullish – pour tens of billions onto the fire and you can see food commodities, oil, and momentum stocks all moving straight up in a ridiculous and reckless manner. Sentiment is far too bullish with most measurements near historic bullish levels, stochastic indicators are overbought on all timeframes through monthly, insider selling is still extreme as it appears that distribution is occurring in a wave 5 movement, and the VIX closed on Friday at the lowest level since last April which also shows that complacency is mounting:



The Chicago "Fed" National Activity Index fell further in the month of November, falling from -.28 to -.46. This negative report fails to backup other “growth” indicators that are being fluffed up by monetization and manipulation. Here’s a quick Econoday summary:

Highlights
The Chicago Fed's national activity index slipped to minus 0.46 from October's minus 0.25 (minus 0.28 first reported). Three of four components fell in November including employment. The three-month moving average improved slightly to minus 0.41 yet still suggests that U.S. growth is below historical trend. Inflation indications point to subdued pressure over the coming year.

Gee, I guess we need to pump the POMO a little harder, eh?

Very little economic data is reported through tomorrow, then we’ll get the 3rd and final trumped up rendition of Q3 GDP, Existing Home Sales, then Durable Goods and New Home Sales on Thursday. All markets are closed on Friday but banks will be open.

MY TAKE FOR 2011…

With the Private banks running the country, the money pumping will continue as in their eyes inflation must occur for their “business” model to work. This monetization is slowly eroding confidence in our money and it is already dramatically affecting the major asset classes which are; DEBT, equities, real estate, and commodities. The dollar is at the center of the wheel as all these “assets” are priced in dollars:



So, commodities are already too high, debt is already far too high, real estate is a bubble that has already burst, and equities are at extreme real valuations manipulated higher by “Fed” intervention and flat out accounting fraud. As the money pumping continues through 2011, I think that we will see one or more of these “asset” categories exhibit extreme moves under extreme stress.

Which ones and in which direction? Again, I’m not a decision maker in this regard and you likely aren’t either… thus attempting to guess is an attempt to guess the actions of others who are in a position of power. For example, we all know that Bernanke is going to monetize come hell or high water, but yet even he could be put under pressure by other decision makers eventually, and thus it makes betting on any single outcome seem foolish to me.

Should he continue to print unfettered and the current trend of higher commodities continue, then you will see dramatic margin compression for businesses and for the cost of living. There is no free ride, one of these asset categories will give way… you can have higher equities, but the tradeoff might be that you force either the dollar lower, or you force the interest rates for debt higher (or both). So, I think we see wild swings and more volatility in reaction to the pumping and we are also getting closer to those “other events” that history shows appear within a decade of the beginning of the bursting of a credit bubble. This one began bursting in 2007, and thus it is very likely that significant “other events” occur before the year 2017 is over.

Open Weekend Thread...

Morning Update/ Market Thread 12/17

Good Morning,

Stocks are roughly flat at the open this morning, the dollar is up as Moody’s downgrades Ireland’s debt once again, bonds are higher, and both oil and gold are up slightly. Today is Quadruple Witching day, expect heavier volume.

Speaking of heavy volume, massive volumes of Visa and Mastercard sold off as the “Federal Reserve” proposed new rules that would dramatically limit the amount of processing fees they can charge on debit transactions. Shares of both fell by approximately 10% and the selling continues this morning:



While I wholeheartedly support limited fees in what amounts to a duopoly, I would rather have unfettered competition and I also question the “Feds” ability to propose and to implement such a rule on entities which are not banks under its jurisdiction. Of course Congress has simply turned over the economy to the private banks (“Fed”), so I guess it’s just business as usual for the “Fed” to dictate terms to everyone else. Still, this should help smaller businesses and consumers:

Visa, MasterCard sink on debit card fee cap plan

NEW YORK (CNNMoney.com) -- The Federal Reserve rolled out a proposed rule Thursday that caps the fees banks can charge retailers when customers swipe their debit cards.

The rules would likely hurt credit card network companies Visa and MasterCard the most. Shares of Visa closed nearly 13% lower following the news, while shares of MasterCard (MA, Fortune 500) slipped more than 10%.

Under the proposal, merchants would be charged no more than 12 cents per debit-card transaction, the Federal Reserve Board said at a meeting Thursday.

Mandated by the Dodd-Frank Wall Street reform act and part of a measure introduced by Senator Richard Durbin (D-Ill.), the fee cap aims to make "swipe" fees -- also known as interchange fees -- "reasonable and proportional" to what it actually costs banks and issuers to authorize, clear and settle transactions.

The rule is open for public comment until Feb. 22. After the comment period ends, the Fed will consider recommendations and make revisions if necessary.

Along with the main issuers MasterCard and Visa, profits for big banks are also likely to suffer under the new rule.

With average interchange fees currently running from $1 to $1.30, the 12-cent cap will cut these charges by up to 90%, JPMorgan analyst Tien-tsin Huang wrote in a note to clients.

Moshe Katri, an analyst at Cowen and Co., said Wall Street had been expecting a 50% cut.

Bank of America (BAC, Fortune 500), one of the nation's largest issuers of credit cards, estimated in July that a cap on interchange fees could drain $1.8 billion to $2.3 billion from its annual debit card revenue.
"The rules proposed by the Federal Reserve today will have a dramatic impact on the cost of banking services for consumers nationwide," the American Bankers Association said in a statement. "They essentially relieve retailers of paying their fair share for a card payments system that offers them tremendous benefits."

In its meeting, the Fed acknowledged that the rule could impact debit card use, by leading issuers to eliminate rewards programs for debit cards or encourage consumers to use other forms of payment.
But the Merchants Payments Coalition said the cap is much needed, given that swipe fees have tripled since 2001, costing retailers more than $48 billion last year alone.

"For years, big banks and credit card networks have used hidden fees and fine print to keep consumers and merchants in the dark, setting rules and raising fees with impunity," the coalition said in a statement. "Reining in these out-of-control fees will bring savings to small business and consumers struggling to make ends meet."

It would be a win for consumers because the lower costs for retailers could result in savings for customers.

"The proposed regulations will benefit consumers by lowering the billions of dollars annually in non-negotiable swipe fees paid by merchants to large banks and the dominant credit card networks," Ed Mierzwinski of the U.S. Federation of Public Interest Research Groups said in a statement. "Lower swipe fees mean lower prices at the checkout counter."

That is a very sizable cut in fees and if implemented will greatly impact Visa and MC’s bottom lines.

The largest owner of the “Fed” is JPMorgan. If you pay attention, you will find that not only is JPM the world’s largest holder of derivatives, but they are also the ones who are always in some way connected with unethical market manipulation such as silver and oil manipulation (all markets really), they were Madoff’s banker yet didn’t expose him (because of big profits), and now we are learning more details about an ex-JPM banker who is involved in municipal bond market price rigging:

Ex-JPMorgan Banker Says Minnesota Broker Helped Him Rig Bids

Dec. 17 (Bloomberg) -- A former JPMorgan Chase & Co. banker who conspired to fix prices on municipal-bond investment contracts said he was aided by a Minnesota company that ran auctions for the deals on behalf of public agencies.

James Hertz, 53, who admitted fraud and conspiracy charges, said Sound Capital Management Inc., an Eden Prairie-based financial adviser to local governments, told him what a competitor bid so he could adjust his offer and win the deal, according to a transcript of his plea hearing Nov. 30. The charges say Hertz received tips about other bids from “Broker E,” an unidentified Minnesota firm.

Bigger Profit
Hertz testified that information from Sound Capital boosted JPMorgan’s earnings on the transaction.

“This resulted in JPMorgan Chase being awarded the contract at an increased profit,” he said during his court appearance.

And there you have it – yet another example of market rigging profiting JPM at everyone else’s expense. It is clear that JPM and the other banks that comprise the “Fed” have a serious issue with morals and ethics. They have grown far to powerful, the big banks and the “Fed” need to be broken up now.

While Moody’s is downgrading Ireland, S&P had threatened that should we extend the Bush era tax cuts that our mounting deficits could jeopardize our joke of a triple-A rating. Yet it appears that we are going to do exactly that, yet Congress can’t even pass an authorization to lift the cap on the deficit spending that’s required. All I can say is that the math doesn’t work in any way, shape, or form and that we are absolutely bankrupt as a nation. Money printing will fail to help the economy, it will only hurt it in the long run.

Meanwhile McHugh brought up an interesting point about the now confirmed Hindenburg Omen. He noted that there was wide media attention covering the last one in August, but that there has been no mention of this current one. That is interesting – it seems the last one got a lot of attention because the one prior led to the ’08 crash. Can we only remember as far back as the last one? Well, the one in August may not have led to a major decline, but I would be cautious betting that two in a row will not. Of course market participants (HFT owners) believe that the “Fed” has their back and thus they cannot lose. Oh yeah, just like Visa and MC.

I still think the markets are vastly overvalued – “earnings” are based only upon accounting fraud and any supposed economic growth that’s occurring is also based upon the same accounting fraud coupled with a devaluation of our money. Measure things in money that’s going down and you will have APPARENT growth. Real growth is another matter entirely. Mark the bank’s asset to market and you will have a market that is worth far, far less than today’s value. This true valuation will eventually assert itself given time.