Saturday, December 11, 2010
Friday, December 10, 2010
I’m still getting caught up and am working from secondary computers, so I’ll keep this short and be back to normal posts on and off next week.
Equity markets are higher this morning, bonds are lower despite being below the lower Bollinger (interest rates higher), the dollar is higher, oil is about even, and gold is lower.
Not much has changed, obviously, from last week. The push to extend the Bush Tax cuts is not turning out to be the done deal that the markets assumed earlier this week. Should those cuts not be extended it would be negative for the markets in the short run, and should they be extended it will be negative for our deficits and thus negative in the long run. You can’t fool Mother Nature or mathematics.
Of course there’s been no real cure for Europe either. That’s because the central banks want to “cure” a debt problem with more debt – just debt of a different flavor. That will never work and is laughable not only because it’s like watching a child stand on a roof flapping his arms thinking he can fly, but mainly it’s ridiculous that the people still haven’t thrown the bankers out on their collective rears. Did I mention that the Euro is going to fail in its present form? It already has… Same goes for the dollar, same goes for the Yen.
Interest rates have shot higher over the past couple of weeks with the ten year rising from 2.3% in October to just a fraction under 3.3% today. That’s a very sizable move, and when you think about it, it means that the cost of borrowing in that time frame, which mortgage rates are tied to, just rose by a whopping 43%! What’ll happen to the housing market once higher rates shift into the market? Nothing good.
And speaking of nothing good, that’s pretty much what Bank of America is up to… let’s all pretend that the paperwork is legal and that the systems have been fixed… what a joke. Again, there are no adults, our regulators and political system are failing us in letting the banks walk all over state law as well as the people of the United States:
NEW YORK (CNNMoney.com) -- Bank of America said Friday it was ending its hiatus on foreclosure sales, and promised to get its act together after a series of sloppy home seizures prompted the bank to back off and re-examine its process.
"We have identified areas of our process that can be improved and while we make these improvements, it's important that we move ahead with efforts to reduce the number of abandoned properties across the country," said Barbara Desoer, president of Bank of America (BAC, Fortune 500) Home Loans, in a statement. "The properties can drag home values in neighborhoods and slow the eventual recovery of the housing market."
The bank said it plans to proceed with 16,000 foreclosures this month, though it will observe a "holiday suspension" of sales and evictions from Dec. 20 to Jan. 2. Freddie Mac (FMCC) and Fannie Mae (FNMA) have announced a similar holiday freeze.
It’s not that foreclosures are necessarily a bad thing, the housing market does need to clear, but simple fairness dictates that if people can fail and be forced out of their homes, then banks should also be allowed to fail and be kicked out of their homes! This is no small point, this is all about one of those pesky natural laws – when the people see the rule of law being applied inconsistently then eventually those abusing will pay the price. The problem with foreclosures currently is the legality of the way in which they are proceeding and how the rule of law has been subverted beginning with the creation of MERS.
Meanwhile the central banks have created massive bubbles in everything, not just housing. Now China is still attempting to cool their bubble:
Dec. 10 (Bloomberg) -- China ordered lenders to park more money with the central bank for the third time in five weeks to counter the threat from inflation after November’s lending and trade surplus topped analysts’ estimates.
Reserve requirements will increase 50 basis points starting Dec. 20, the People’s Bank of China said on its website today.
Policy makers refrained from adding to October’s interest- rate increase, ahead of data tomorrow that may show inflation accelerated to the fastest pace since July 2008. The People’s Bank of China has lagged behind counterparts from Malaysia to South Korea and Taiwan that boosted rates earlier in the year as capital flowed into the region leading the global recovery.
An interest-rate increase would be “a more potent weapon” and is likely this weekend, said Shen Jianguang, a Hong Kong- based economist at Mizuho Securities Asia Ltd.
Higher interest rates soon? The holders of debt are already reading this and moving – this is very significant to the markets and to the way in which capital moves.
Our International Trade Balance declined to “only” -$38.7 Billion in October. That is down from -$44 billion and below consensus. Of course Econoday never met a report they didn’t think was positive, and this is long term positive, but a contracting trade deficit for us means that the credit bubble is likely contracting and overall means an economy that is still pulling in. Keep in mind that when we talk trade, it is measured in DOLLARS, and thus reading import and export statistics and thinking, like Econoday and most economists, that goods and services are actually increasing or decreasing is a big mistake as what is likely a bigger mover of these numbers is the changing value of the currencies in which they are measured:
It is good news all around. The deficit is down as exports are up, oil imports are down, and nonoil imports rebounded moderately. The overall U.S. trade deficit in October shrank to $38.7 billion from a revised $44.6 billion shortfall the month before. The October gap was less negative than analysts' projection for a $44.0 billion deficit. Exports improved, jumping 3.2 percent, following a 0.5 percent rise in September. Imports declined 0.5 percent after slipping 0.7 percent the prior month.
The narrowing of the trade gap was primarily in the petroleum gap which dropped to $19.1 billion from 21.7 billion in September. On the boost in exports, the nonpetroleum shortfall also shrank-to $31.0 billion from $34.1 billion the prior month.
Nonoil goods imports in October rebounded 0.4 percent, following a 1.2 percent decrease the previous month. The comeback suggests businesses are expecting the consumer sector to remain relatively healthy.
By end-use categories, the increase in goods exports was broad based but was led by a $2.6 billion boost in industrial supplies with foods, feeds & beverages up $0.7 billion. Also rising were automotive, up $0.4 billion; capital goods ex autos, up $0.4 billion; and consumer goods, up $0.1 billion. The capital goods number was held back by a $0.4 billion drop in civilian aircraft exports.
The decrease in goods imports was led by a $1.7 billion drop in industrial supplies with the crude oil subcomponent down $2.3 billion. Also declining were capital goods ex autos, down $0.9 billion, and foods, feeds & beverages, down $0.1 billion. Consumer goods imports rebounded $1.3 billion. Automotive imports were flat.
The latest trade report is good news for manufacturers. Demand overseas is holding up nicely. And businesses may be giving the consumer sector an upgrade and vote of confidence with the rebound in imports of consumer goods. Businesses apparently expected these goods to not sit on stockroom shelves.
On the news, markets were little changed as equity futures remained up moderately.
Yes, a lowering trade deficit is good in the long run, but this report is not a good short term read on the economy. Oil, for example, is measured in dollars, not in barrels when counted as an import. Well, oil during the month of October was pretty steady, rising from $79 a barrel to $81. Thus, if the price of oil went up, but imports fell, what does that tell us about demand? Demand isn’t necessarily holding up, it only appears that way because you’re measuring things that have become more expensive priced in dollars! This report tells you exactly NOTHING about the real number of goods and services sold, especially when your measurement of inflation is broken.
And in this report you will find exactly what we are actually importing and exporting, it’s called Inflation! For the month of November, Export prices jumped 1.5%... in one month! And that’s by our broken measurements, what was it in reality? Year over year Export prices are up a whopping 6.5%! That’s the kind of math that can get away from you in a hurry, those numbers are far too big to be sustainable. Import prices also rose, up 1.3% in the month – here’s Econospin:
Import & export prices jumped sharply in November, pointing to pressure for next week's producer and consumer price reports. The headline import price increase of 1.3 percent is the largest since November last year. Pressure is centered in oil-related products with petroleum products up 4.1 percent in the month. Import prices for industrial supplies jumped 3.2 percent on top of a 3.0 percent jump in October. Excluding petroleum in the industrial supplies component, import prices rose 2.2 percent and show a third straight rise, at 2.8 percent, for durable products. Some of this pressure is appearing in finished goods, at least for consumer goods where import prices rose 0.3 percent, a gain offset in part by the prior month's 0.5 percent decline. Country data show price pressure coming from especially Latin America and Canada.
Higher food prices also pressured import prices and are the central source of pressure for export prices. Export prices jumped a very sharp 1.5 percent for the largest increase since July 2008. Export prices for foods/feeds/beverages jumped 6.6 percent in November -- that's a one-month increase following a run of low to mid single digit gains in prior months. U.S. exporters enjoyed a 0.4 percent price rise for finished consumer goods following a 0.6 percent gain in October. Prices of capital-goods exports rose 0.3 percent.
This report reflects inflation underway for oil and food prices. Oil prices, now near $90, have increased about $15 since the Federal Reserve first announced in late September its quantitative easing program, a program that has raised the floor for commodity prices.
And that’s exactly why “Quantitative Easing” (yes it IS money printing) only masks reality in the short run, but makes the problems FAR worse in the long run. The real problem is DEBT… our money system is based in it to the favor of the bankers and to the detriment of the people. Nothing is fixed until you fix that relationship and clear the debt saturated condition.
Consumer Sentiment for us non-insiders is released at 9:55 Eastern this morning.
Regarding the markets, it appears to me that the move in bonds is getting long in the tooth, as is the move up in equities. We are in a low volume environment and just drifting in wave 5 for now.
Thank you to all who kept the market thread alive over the past couple of days. As I settle in and we get past the holidays we’ll start to get a better handle on the markets.
Thursday, December 9, 2010
This is an automated post in order to create a daily market thread. Thank you for participating and keeping each other informed until normal posts resume...
Wednesday, December 8, 2010
This is an automated post in order to create a daily market thread. Thank you for participating and keeping each other informed until normal posts resume...
Tuesday, December 7, 2010
I am in the process of moving, so this will be an abbreviated update. Wednesday and possibly Thursday will be automated posts in order to create a daily comment thread.
This morning futures are significantly higher on news that a compromise has been reached that will extend the Bush era tax cuts. It will also extend the emergency unemployment benefits by an entire year, thus keeping any revolution at bay – temporarily, at least. The bottom line from my perspective is that it is yet another accelerating event in which no decision can be made to actually tackle our deficits. Quite the opposite, in fact this will hugely add to our deficits as the math of debt simply gets worse and worse as no adult is willing to tackle reality.
It is also a political ploy designed to make this an issue once again just in front of the 2012 elections – that’s why the tax cut extension was made to be 2 years in duration. The democrats would like to blame republicans, and visa versa of course. Reality is that they are both puppets of the central banks.
Naturally gold and oil are spiking to new highs – neither seeing any adults approaching, just can kicking.
There was a small movement in the McClellan Oscillator yesterday, so expect today’s move to be large. It’s likely a part of wave 5 up which is pushing bullish sentiment to extremes.
Hate to say it, but we look a lot like Zimbabwe at this point. Money printing galore, no adult decisions, rising equities, higher unemployment, all combined with record numbers of people on food stamps. While markets may go higher for awhile, you will see more and more real people unable to keep up with a false economy. Those profiting from this now will fall the hardest in the end.
Have a good week, I’ll be back up soon and will have more time to write once settled into our new place.
Monday, December 6, 2010
Equity prices are slightly lower just prior to the open this morning. The dollar is substantially higher, bonds are higher, oil is down slightly, and gold is up slightly. Just don’t forget that it is a Monday morning in December, thus we can expect low volume and the algos to kick into POMO high gear at some point after the open.
The Euro is solidly lower following comments by Merkel in Germany that they are not in favor of either increasing the size of the bailout pool, nor in introducing phony joint EU bonds:
Germany Snubs Pleas to Increase Aid Fund, Introduce Joint Bonds
Dec. 6 (Bloomberg) -- Germany rejected calls to increase the European Union’s 750 billion-euro ($1 trillion) aid fund or introduce joint bond sales, signaling its refusal to bear extra costs to stamp out the debt crisis.
With EU finance ministers gathering in Brussels today for their monthly meeting, German Chancellor Angela Merkel rebuffed pleas from Belgium and central bankers to boost the emergency fund to save countries such as Portugal and Spain from falling prey to speculation.
“Right now I see no need to expand the fund,” Merkel told reporters in Berlin today. She said EU treaties bar joint bond sales, which might force up Germany’s borrowing costs, the lowest in Europe.
European political discord pushed down bonds in Spain and Portugal today, reversing gains made last week after purchases by the European Central Bank briefly eased concern about the spreading crisis.
The yield on Spain’s 10-year notes climbed 14 basis points to 5.13 percent as of 1:35 p.m. in London. Portugal’s 10-year yield increased 2 basis points to 5.73 percent. The euro halted a three-session rally, dipping 1.2 percent to $1.3253.
Countries including Greece are “in denial” in saying they’ll be able to repay their full borrowing bills, Kenneth Rogoff, a Harvard University professor and former International Monetary Fund chief economist, told Bloomberg Television today. “We’d be very lucky to avoid restructuring.”
Under pressure to shield taxpayers in Europe’s largest economy, Merkel is drifting back into the role she played in the early stages of the crisis, when Germany held out against an aid package for Greece.
The political standoff may saddle the ECB with more of the crisis-management burden, said Citigroup Inc. economists including Juergen Michels and Michael Saunders in London in a Dec. 3 e-mailed note.
“Eventually the ECB will be forced to increase its contribution to the rescue packages substantially,” the economists wrote. “We expect that after another round of market tensions, the European fiscal policy makers will eventually come up with additional measures to fight the crisis.”
Of course doing the reasonable thing should earn the euro some love, but quite the opposite in this time of drug induced infusions to infinity and beyond. Of course the central banks will come up with more phony money, if they don’t the game is over for them… and of course if they do the game is also over for them, so the outcome is known, it’s only the timing and events along the way that are open to question. That’s what happens when you let the math of debt get away from you. Just as it has in most places around the globe, China included, and that’s why China is now enforcing price controls in order to keep inflation in check:
Wal-Mart Among Companies Facing China Price Controls
Dec. 4 (Bloomberg) -- The southwestern Chinese city of Kunming, where Wal-Mart Stores Inc. and Carrefour SA have operations, has imposed temporary price ceilings on daily necessities to counter inflation.
Kunming’s government asked five retailers -- three non- Chinese, one Chinese and one based in Hong Kong -- to report any price adjustments and give reasons for the changes two days in advance of making any alterations, the National Development and Reform Commission’s local branch said on its website yesterday.
Besides the five companies, other food, cooking-oil and beverage producers are requested to apply for government approval 10 working days before making price changes, the statement said.
The city government also imposed temporary price ceilings on daily necessities in major parts of the city starting from yesterday to the end of February, according to the statement. Prices of grain, cooking oil, meat, eggs, milk and noodles are to be kept at levels before Nov. 17, the statement said.
The city limited retail prices of vegetables, depending on type, to 40 percent to 100 percent higher than wholesale prices, the statement said.
“The city’s consumer prices in the first 10 months rose 4.4 percent, the highest among China’s 36 large- and medium-size cities,” the Kunming government said in the statement, adding that the new regulations aim at keeping prices stable and promoting a “harmonious” society amid “strengthening inflation expectations.”
China’s own policies have added to the hot money being pumped by the U.S., Europe, and Japan. They are a control government who is fighting against human nature. Price controls NEVER work, history proves that they will always ultimately fail in the long run. Having to implement them is a sign from a historical perspective that those pesky “other events” are coming.
There is no economic data here in the U.S. today, this week will be a fairly light week for data with low market volumes expected.
Scorpions – Winds of Change:
Sunday, December 5, 2010
Bernanke has been nothing but wrong, and wrong again. His latest lip flapping will also be proven wrong, well, at least half of it will be – the part about him probably needing to do even more QE than announced… that part is a rare glimpse of the truth:
Bernanke Says Further U.S. Monetary Stimulus PossibleMost of the following is an attempt to convince you that he's got it all under control. He wouldn't be doing this interview if he did...
Dec. 5 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said U.S. unemployment may take five years to fall to a normal level and that Fed purchases of Treasury securities beyond the $600 billion announced last month are possible.
“At the rate we’re going, it could be four, five years before we are back to a more normal unemployment rate” of about 5 percent to 6 percent, Bernanke said according to a transcript of an interview airing today on CBS Corp.’s “60 Minutes” program. The purchase of more bonds than planned is “certainly possible,” said Bernanke, 56. “It depends on the efficacy of the program” and the outlook for inflation and the economy.
Sorry, this interview simply makes me angry... PEOPLE OF AMERICA DO NOT BE CONNED! The "Fed" isn't going to go after the bad actors, THEY ARE THE BAD ACTORS! Watch their actions and look through their meaningless words!
Note the scare tactics to convince you not to revolt at the trillions he’s shoveling mainly into the banks. At some point this levitation will have to end, or our current version of the dollar will end – period. Yet another LIE again is that they are not “printing” money. Oh yes they most certainly are, and no, he certainly cannot raise interest rates anytime he wants with an economy that is completely saturated in their debt – doing so is possible with little or no debt, but not when the entire system is saturated.
The markets are completely dependent upon larger and larger doses – the math is exponential. Employment will not ever return to “normal” as long as the economy is saturated with PRIVATE banker “Fed” DEBT. The more debt they pump, the higher unemployment will go. However, the private banks currently OWN the equity markets. The following chart shows the “Feds” current holdings of U.S. Treasuries versus the S&P 500 index – this chart from ZeroHedge says it all – the market is false, it is trumped up by their money printing:
His printing is destroying confidence and is causing the money he’s printing to leave this country and go elsewhere – that is why you don’t see new production in this country, you see it elsewhere. There are consequences for all actions, you cannot wish nor print your debts away, that is complete fantasy, as phony as the central bank’s balance sheets.