Saturday, October 31, 2009

$323,739 Cost Per Job; "Stimulus" Stimulates Nothing But Debt

According to the government's own website:

Funds paid out so far = $83.8 billion + $52.1 billion + $71.4 billion = $207.3 billion
$207,300,000,000 / 640,329 = $323,739.83 cost per job created/saved.

Friday, October 30, 2009

Reversal of Fortunes

NEW YORK -- A day after they reacted enthusiastically to a third-quarter GDP report confirming that the economy was finally expanding again, financial markets made a 180-degree reversal Friday as consumer spending data from the same period highlighted the fragility of the recovery.
Following a report that consumer spending dropped a bigger-than-expected 0.5% in September, major U.S. stock averages turned south at the opening and extended their losses throughout the trading day. In the end, the Dow Jones Industrial Average closed off 249.85 points, or 2.5%, at 9712.73, more than reversing the almost 200-point gain that followed Thursday's report

John Mauldin Comments on Hyperinflation

from John Mauldin about hyperinflation:

At the beginning of the 20th century, Argentina was the seventh richest nation on earth. It's very name means "silver." "As rich as an Argentine" was a byword. Even after falling from the heights through a series of bad decisions, the country was still so wealthy that, in 1946 when new president Juan Peron first visited the central bank, he could remark that "There was so much gold you could barely walk through the corridors."
 My Uruguayan friend and Latin American partner, Enrique Fynn, tells me of his experience of going to Buenos Aires and buying a pack of cigarettes one evening. He went into the store the next morning for another pack, and the price had doubled. He came back that evening and the price had doubled again (thankfully for his health, he has quit!). There were no prices on any items in the grocery stores. There was a man with a microphone who would announce the prices of various items, often increasing the price every few hours by 30% or more.
Workers would get their pay in cash and rush to the store to buy anything, as by the end of the week their pay would be worthless. Of course, shelves were empty. The US dollar was king, and could purchase things at amazing prices. I heard stories that were truly compelling. (It made me wish I had gone shopping in Buenos Aires at the time!)
Interestingly, the dollar is still the real medium of exchange. I was told by several people that if you want to buy a house for half a million dollars, you bring the physical cash to the closing. One person counts the money and the other checks the paperwork and title. Argentina has the second largest hoard of physical dollars in the world, only exceeded by Russia. Is it any wonder they are concerned with the value of the dollar?
Let's look at some quotes from Ferguson (emphasis mine):
"The economic history of Argentina in the twentieth century is an object lesson that all the resources in the world can be set at nought by financial mismanagement... To understand Argentina's economic decline, it is once again necessary to see that inflation was a political as much as a monetary phenomenon...
"To put it simply, there was no significant group with an interest in price stability...
"Inflation is a monetary phenomenon, as Milton Friedman said. But hyperinflation is always and everywhere a political phenomenon, in the sense that it cannot occur without a fundamental malfunction of a country's political economy."

About that 3.5% GDP -- It's Not So Pretty After All!

from Mish Shedlock at Global Economic Analysis blog:

"Today the market is cheering over what is actually an ugly report. A misguided Cash-for-Clunkers added a one-time contribution of 1.66 percentage points to GDP. Auto sales have since collapsed so all the program did is move some demand forward. Government spending increased at 7.9 percent in the third quarter which is certainly nothing to cheer about. Personal income decreased $15.5 billion (0.5 percent), while real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent last quarter. Those are horrible numbers. The savings rate is down, which no doubt has misguided economists cheering, but people spending more than they make is one of the things that got us into trouble. The only bright spot I can find is exports. However, even there we must not get too excited as imports rose much more."

John Williams notes that one-time stimulus or inventory items represented 92% of the reported quarterly growth. The nature of the stimulus-related gains was that they tended to steal business activity from the future. The months ahead are the future. Accordingly, fourth-quarter quarterly GDP change will likely turn negative, again. (The King Report)
And David Rosenberg writes: "Only economists see the recession as being over; the man on the street sees it a little differently, perhaps less enthused by the fact that a lower rate of inventory destocking is arithmetically underpinning GDP growth at this time. Put simply, a Wall Street Journal/NBC News poll just found that 58% of the public believe the economic recession still has a ways to go -- and that is up from 52% in September and means that the private investor, unlike the hedge fund manager, is not interested in adding risk to the portfolio even after a 60% surge in the equity market.
"Only 29% of those polled believe the economy has hit bottom -- imagine having that psychology with nearly zero interest rates, a bloated Fed balance sheet and unprecedented fiscal deficits (poll was taken from October 23-25). Nearly two in three (64%) said the rally in the stock market (still a bear market rally -- not the onset of a new bull market) has not swayed their view (or ours for that matter)."

Bank Losses Still Getting Worse

Is this becoming too big to bail out?

from WSJ:
Wall Street is growing concerned that financial firms including Citigroup Inc. are at risk of facing stiff losses from some complicated tax-related assets that could soon fall in value and hurt the firms' capital.
When lenders and financial firms book quarterly losses, as many have repeatedly during financial crisis, they are allowed to book credits against future tax bills they will face in the future once they return to profitability. Portions of those complex assets, known as deferred tax assets, or DTA, can be added to firms' capital, which serves as an assurance against losses for depositors, and against dilution

Frightful Friday

from Marketwatch

The Consumer: Dead... or Dieing?

from WSJ:
The report Friday that U.S. consumer spending reversed sharply in September has quickly overturned the view -- rooted in the third quarter gross domestic product data Thursday -- that the recession had ended.
The 0.5% drop in spending after a revised-higher 1.4% gain in August underscored the outsized role played by federal incentives in the third quarter's 3.5% expansion, especially the "cash-for-clunkers" auto subsidies, which ended in August.

It's a Roller Coaster Out There!

Terrible Turmoil

The Worry Trade Again!

Worry is back! What a roller coaster this week!

Dollar up

Stocks down

Commodities down

Treasuries up

Stock Market Rout Follows Stock Market Rally

We've now lost today more than we gained yesterday! Over 200 points both days for the Dow! Wow! Volatility is back!

Treasuries Rising Again

from WSJ:
NEW YORK -- A dismal batch of personal income and expenditure figures helped Treasurys reverse some of the previous session's steep price declines early Friday.
By midmorning, the two-year note was 3/32 higher, yielding 0.94%, and the 10-year note was up 17/32, yielding 3.44%. Yields move inversely to prices.
The government report showing the largest drop in consumer spending in almost a year comes just a day after a surprisingly strong reading on third-quarter growth in the U.S.

Global Warming Scientists Doctor the Data to Fit Their Agenda? Say It Ain't So!

from UK Times:

Exaggerated and inaccurate claims about the threat from global warming risk undermining efforts to cut greenhouse gas emissions and contain climate change, senior scientists have told The Times.
Environmental lobbyists, politicians, researchers and journalists who distort climate science to support an agenda erode public understanding and play into the hands of sceptics, according to experts including a former government chief scientist.
Excessive statements about the decline of Arctic sea ice, severe weather events and the probability of extreme warming in the next century detract from the credibility of robust findings about climate change, they said.

Mortgage Loan Losses Continue to Rise

from WSJ:
The Federal Home Loan Banks, still struggling with soured investments in mortgage securities, reported a combined net loss of $165 million for the third quarter.
The loss reflected write-downs totaling $1.04 billion in the value of private-label mortgage-backed securities. Such securities, which generally were packaged and sold by Wall Street firms, aren't backed by any U.S. government entity.

Thursday, October 29, 2009

Dollar Down, Gold Up



Crude Oil Market Sees Growth on Improved GDP

Crude is rising!

GDP Rises and Jobless Claims Still Stubbornly Above 500,000

Mixed bag, but stocks are rising. Note the words "seasonally adjusted" in both these news reports from the government.

The U.S. economy expanded in the third quarter for the first time in more than a year thanks to a bounce back in consumer spending, but a weak labor market is expected to keep the recovery subdued.
Gross domestic product rose by a higher-than-expected seasonally adjusted 3.5% annual rate July through September, the Commerce Department said Thursday in its first estimate of third-quarter GDP.

The number of people filing for state unemployment benefits for the first time fell 1,000 to a seasonally adjusted 530,000 last week, the Labor Department reported Thursday.

Wednesday, October 28, 2009

Doom and Worry Rule the Day

from Bloomberg:
Oct. 29 (Bloomberg) -- An eight-month, 68 percent rally in global stocks failed to convince investors and analysts that it’s time to take on more risk or dispel their concerns about U.S. economic policies and its banking system.
Only 31 percent of respondents to a poll of investors and analysts who are Bloomberg subscribers in the U.S., Europe and Asia see investment opportunities, down from 35 percent in the previous survey in July. Almost 40 percent in the latest quarterly survey, the Bloomberg Global Poll, say they are still hunkering down. U.S. investors are even more cautious, with more than 50 percent saying they are in a defensive crouch.
“The doubt and the pessimism just won’t go away,” says James Paulsen, who helps oversee $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “They’re still so shell-shocked by what they went through despite the improvement in the market and the economy.”
Stock markets have bounded higher as the economic outlook has improved. The MSCI AC World Index of emerging and developed markets has risen by 68 percent since March. The S&P 500 index has gained 54 percent during that time.
Worldwide, investors and analysts now view the U.S. as the weak link in the global economy, with its markets seen as among the riskiest by a plurality of those surveyed. One in four respondents expects an unemployment rate of 11 percent or more a year from now, compared with a U.S. administration forecast of 9.7 percent. The jobless rate now is 9.8 percent, a 26-year high.
Dollar’s Decline
The skepticism about the U.S. is taking a toll on the dollar, with a plurality of respondents saying it will weaken against most other currencies in the next year, the yen being the major exception among the 11 currencies tested. Thirty-seven percent say the dollar should not continue as the world’s reserve currency in 10 years.
The poll is based on interviews conducted Oct. 23-27 with a random sample of 1,452 Bloomberg subscribers, representing decision makers in markets, finance and economics on six continents. It has a margin of error of plus or minus 2.6 percentage points.
“The stock market has had quite a run since July when more Bloomberg customers thought the Standard & Poor’s 500 index would rally than predicted a downturn,” says J. Ann Selzer, president of Selzer & Co., the Des Moines, Iowa-based firm that conducted the polls. “That rally may have dampened views of what to expect next. They may also think that there are better markets now for investments than the U.S.”
Emerging Markets
Respondents see China, Brazil and India as the markets with the most potential, and commodities as the asset of choice, replacing stocks as the most desirable investment class in last quarter’s survey. Real estate and bonds are out of favor, with 40 percent saying bonds will have the worst returns over the next year.
“Asia is the best place to put money as there are not mountains of consumer debt, bad mortgage lending, trade deficits or high unemployment,” says Peter J. Emblin, a fund executive at Thai Strategic Capital Management Co. in Bangkok who took part in the poll.
Investors and analysts in Asia are the most bullish, while those in the U.S. are the most cautious. A majority of Asian investors expect their country’s benchmark stock index to rise while a plurality of U.S. and European respondents thought their benchmarks would fall in the next six months.
Equity Rebound
“A lot of people have been surprised by the speed of the equity rebound,” says Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York, adding that the rally has probably been fueled by buying from hedge funds and traders. “It caught them off guard and they don’t believe it.”
Fund manager Paulsen thinks the stock markets rose largely because of the disappearance of panicked sellers. “I don’t think the market has gone up because of heavy buying. You only need a little bit of buying when there are no sellers.”
Asia’s optimism is understandable. The region is leading the global economy out of the worst recession since World War II, according to the Washington-based International Monetary Fund. The IMF said on Oct. 1 that the world economy will expand 3.1 percent next year after shrinking 1.1 percent this year, with China growing by 9 percent and India by 6.4 percent.
Global investors and analysts agree that the world economy is on the mend. Almost 75 percent describe the global economy as stable or improving, up from just over 60 percent in July.
Higher Rates
The worldwide recovery is seen as pushing up long-term interest rates, with 55 percent of those surveyed forecasting higher rates in their respective countries in the next six months. As a result, only 9 percent surveyed thought bonds were the best place to invest over the next year, half the number who favored bonds in July.
More than half of respondents see the yield on the 10-year Treasury note rising in the next half year, up from 47 percent in the July poll. In Asia, where some of the biggest holders of Treasury securities are located, led by China with almost $800 billion, investors are less convinced that yields will rise. Forty-five percent of those surveyed in the region think that. The 10-year note ended trading in New York yesterday at 3.42 percent.
Commodities are expected to benefit from an Asian-led worldwide economic expansion, according to the survey. More than one in three investors say commodities will offer the highest return over the next year. Oil, gold, copper, corn and soybean prices are all seen rising in the next six months.
$100 Oil
“It’s an emerging-market story,” says Matthew Johnson, director of interest rate strategy for UBS AG in Sydney and a poll participant. “It’s all about inelastic supply and fast- growing demand.” He sees oil prices rising to $100 per barrel in the coming months from around $77 now.
China garnered the most votes from investors when they were asked to pick which one or two markets would offer the best opportunities over the next year. Brazil came in second, followed by India.
By contrast, a majority of investors worldwide are pessimistic about the investment climate in the U.S. and the European Union, according to the poll, though the gloom about Europe was less pronounced than it was in July.
“The U.S. market has the most downside risk in the coming year,” says Marty Beskow, a poll participant and portfolio manager for Blue Water Capital Advisors in Duluth, Minnesota, formed in January. “Although the U.S. may experience a quarter or more of growth, the driver is not real demand but rather stimulus from the Federal Reserve and government spending that is unsustainable.”
More Pessimistic
Investors have turned more pessimistic about the U.S. government’s economic plan since the last poll, with more than 60 percent saying they feel that way, compared with 55 percent in July. Almost 20 percent expect U.S. banks to be in worse shape a year from now, about double the number who felt that way in July. Two in three say the banks will improve over the next year but will still have problems.
Billionaire investor George Soros said on Oct. 5 in Istanbul that the U.S. recovery will be sluggish as “basically bankrupt” financial companies and indebted consumers impede it.
Worldwide, investors see large budget deficits as the biggest threat to the U.S. economy over the next year. The deficit hit a record $1.4 trillion in the year ended Sept. 30.
Persistently high unemployment is seen as the next biggest threat. More than three-quarters of respondents expect the U.S. unemployment rate to be 9.5 percent or more a year from now.
Tax Increases
Unlike investors elsewhere, those in the U.S. see higher taxes as the biggest danger. “The increase in taxes is going to slow the growth rate of our economy to below 2 percent for the next 25 years,” says Gary Singleterry, who participated in the poll and is president of Singleterry Mansley Asset Management in Summit, New Jersey, which manages about $200 million.
Three-quarters of U.S. investors think the dollar should remain the world’s reserve currency over the next decade. No more than half their counterparts in Europe and Asia feel that way.
“I heard a story the other day from an old French lady who was in her 100’s when she died,” says Ben Watson, director of quantitative analytics for RBS Group (Australia) Pty Limited in Sydney and a poll participant. “In the 1920’s she remembers the U.S. being an emerging market very much like China is today. The 19th century was the European century, the 20th was the American century and the 21st will be China’s century.”
Click here for additional information on methodology and a full list of survey questions.

Saudis Sever Link to NYMEX Crude Contract

from FT:
Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.
The decision by the world’s biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world’s most heavily traded oil futures contract. It is the main contract traded on Nymex.

The Global Warming Fraud

So Let the Buying Begin

As expected! This occurred just at the level I expected -- the 50-day SMA!

Stocks Begin Freefall

We're reaching new lows for the day moment by moment. I still expect the 50-day average to hold, but who knows?

The Worry Trade is Back!

  • The Dollar continues to rebound higher, as do treasuries.
  • Stocks continue to sink, reaching the 50-day SMA support level
  • Commodities have reversed direction and become bearish again across the board.
  • Gold is drifting lower as the Dollar strengthens.

Broader Markets Weigh on Grains

Despite attempts to buy, grains have turned down again as the broader markets drag stocks down.

New Home Sales Disappoint, Stocks Drift Lower

Stocks are drifting lower on disappointing new home sales. This is particularly disappointing given that the housing rebate is still ongoing. What will happen when it expires Nov. 30th?

from MW:
U.S. new home sales unexpectedly fell 3.6% in September, the Commerce Department estimated Wednesday. The decline in new-home sales to a seasonally adjusted annual rate of 402,000 was well below the 438,000 pace expected by economists surveyed by MarketWatch. New-home sales in August were revised to a 417,000 level compared with the previous estimate of 429,000. This is the first decline in new home sales after five consecutive monthly gains. New-home sales are down 7.8% compared with a year ago. The supply of homes on the market fell to 251,000 in September, which is the lowest level since November 1982. Median sales prices have fallen 9.1% in the past year to $204,800.

S&P 500 Futures Drop Back to 50-Day Moving Average

Stocks bounced off the 50-day SMA previously and moved higher (see light blue line). Will stocks do it again? I expect strong support at this here as bulls attempt to defend this strategic level.

Evening Rises Yield to Continued Slide Overnight for Grains

from Arlan:
Most areas of Midwest should see up to a week of dry weather to make harvest progress as we move into next week
$$ higher & commodities sinking after European desks open. corn dn 6, beans dn 10, wheat dn 9

Shippers Sink Stocks

from WSJ:

Most Asian share markets ended lower Wednesday as shipping stocks and shipbuilders fell on worries about the strength of the global economic recovery.

Lending Still Losing

from WSJ:

A Wall Street Journal report that GMAC Financial Services and the Treasury Department were in advanced talks to prop up the lender with its third helping of taxpayer money was adding to the cautious tone, serving as a reminder of how some battered financial firms remain dependent on government lifelines. Dow Jones Industrial Average futures recently rose three points in screen trade.

The Longer and More Draw-Out the Top, the More Extended the Ensuing Decline

from Dr. Brett:

As a rule, the longer a market spends topping out (i.e., the longer the time that elapses between a momentum peak and an ultimate price peak), the more extended the subsequent decline. The trick is that the decline can become extended in time (as we saw during the June to July period) as well as price.

With the September momentum peak and the October price high, I expect that any decline could be extended in time--not just price--which is keeping me so far from buying this most recent dip below the 20-day VWAP. I will begin nibbling at the long side when we see signs of bottoming in the new highs/lows, Demand/Supply, and percentage of stocks below their 20-day moving averages.

Tuesday, October 27, 2009

Grains Stumble Despite Bullish Weather

It's snowing here today. We have about an inch on the ground and its still falling -- and so is the temp.

...but Stock Bulls Defend Modest Gains

Trading is extremely choppy today. I haven't touched stock indexes thus far.

Consumer Confidence Reaches 26-year Low

WASHINGTON (MarketWatch) -- U.S. consumers doubt that the much-touted economic recovery is under way, according to the latest report on consumer confidence released by the Conference Board on Tuesday.
The consumer confidence index was much weaker than expected, falling for the second straight month as the assessment of present-day conditions fell to its lowest level in 26 years.
"This indicator, and its component detail, appears to be pointing to a longer and more difficult journey to recovery than most would like to believe at the moment," said Josh Shapiro, chief economist at MFR Inc., in a note to clients.

Monday, October 26, 2009

Obamacare Will Lead to Substantially-Higher Taxes

Cap and Trade to Devastate Farms, Food Production

A new report on the effects of cap-and-trade legislation, released by Senators Kit Bond, R-Mo., and Kay Bailey Hutchison, R-Texas, says under House climate change legislation, America's farmers and ranchers would be hit with a considerable fuel tax increase. The outlook is for $550 million in higher fuel costs in 2020 and $1.65 billion in 2050. The senator's report is the first such report.

A Texas crop and livestock producer, visiting Washington, said cap-and-trade climate change legislation could hike the cost of fuel used for farming to the point that it will have a devastating economic impact on his and similar family-owned businesses. Richard Cortese, who farms near Little River, Texas says the type of gasoline and diesel fuel cost increases described in this report will make it very difficult for him to continue on the farm.

"I use diesel fuel for tillage, planting, harvesting and spraying and I use gasoline for service vehicles for checking livestock, utility vehicles and small engines," Cortese said. "Having a reliable and affordable supply of gasoline and diesel fuel is very important for my operation to continue to make a living for me and my family."

Phenomenon: Stocks, Bonds Sink Simultaneously

This is an interesting phenomenon because stocks and bond rarely decline at the same time. People buy bonds when the are worried and want a "safe" investment. I don't know what the implications are, but it is worrisome to me.

Stocks sink

Treasuries sink too

Socialism Is Force!

The only thing not shown is the next frame. It shows what happens when the blue man objects! It also tells us a great deal about the nature and character of those who would impose it. They are tyrants all!
original link
image link

Corn Clobbered!

Other grains broadly lower too. But I liked the headline!

The Dollar is a Rocket Today

Treasury Downtrend Emerging?

I have no confidence in what the market is selling in a traditional sense, because the government interventions are so extensive and frequent. I must remain fleet of foot these days.

Daily chart