Friday, September 2, 2011

Modest Follow-Through

It's amazing to me that stocks aren't down 500+ points. We're down less than half that amount in very choppy trading. It is becoming clearer by the day that the United States and global economies are both tipping into a new recession. It's bound to get worse!

Gold Explosion!

We're now almost back to $1900/oz.

You Don't Say! Obama Acknowledges Growth to Slow!

(Reuters) - President Barack Obama sharply cut estimates on Thursday for U.S. economic growth, underscoring the difficult challenge he faces in spurring a stronger recovery and creating more jobs.
In a midyear review of his annual budget, Obama predicted average unemployment of 9 percent in 2012, when he will have to fight for re-election. The president will give a major speech on Sept. 8 on how he plans to lift hiring and growth.

No Jobs! Need I Say More?

The chart says it all! There no jobs created in August! As in the entire country! As in a big fat ZERO! That stock market rally following last week's Bernanke speech is now history!
But in this bizarro world, I wouldn't be surprised if Wall St find this to be good news, and reason to rally with the expectation that the Fed just must create still more money!

Thursday, September 1, 2011

Global Factory Output Slows

It's no wonder stocks are weak in evening trading. Based upon recent history, the European session is likely to show even further weakness.

Moderate Selling Continues

It's jobs eve! There is plenty of worry about what tomorrow's report will bring!

Euphoric Insanity Didn't Last Long Either

I took my profits and ran for cover as quickly as I could. I got out very close to the top, and I'm glad I did! This one was pure luck! This choppiness suggests some exhaustion from the rally of the last few days.

Sanity Didn't Last Long

ISM just came in with a headline modestly better than consensus. The internal data was terrible!

Zero Hedge give us some details:
"The problem is that the beat was once again on purely artificial data, with Inventories and Customer Inventories posting the largest increase in the month, or basically the two most hollow economic series. Far more important - Production, dropped to 48.6, the lowest since May 2009. Another Pyrrhic victory was the increase in imports and decrease in exports: we all know what that means for GDP."

A Rare Moment of Sanity

Perhaps this is the selling preceding tomorrow's NFP report. Many on Wall St may not want to be long on the eve of what could be another disappointing report.

Productivity Drops, Jobless Claims Remain Elevated

from Wall St Journal:
Stock futures are rallying for some strange reason, though the morning’s plate of economic data was sort of ugly.
Jobless claims came in at 409,000, just a little higher than the 407,000 economists expected. The prior week’s claims were revised up, as they always are, to 421,000 from 417,000. This level of claims is really too high.
Second quarter productivity was revised down to a decline of 0.7%, the biggest drop since the fourth quarter of 2008, from a first reading of -0.3%. It has fallen for three quarters in a row, for the first time since 1979.

from Yahoo Finance:

WASHINGTON (AP) — Worker productivity in the United States fell this spring more quickly than previously estimated while labor costs were rising at a faster clip. Both developments could pose threats to a fragile economic recovery.
The U.S. Labor Department reported Thursday that productivity declined at an annual rate of 0.7 percent in the April-June period, a bigger drop than the 0.3 percent decline reported a month ago. Labor costs rose at an annual rate of 3.3 percent, faster than the 2.4 percent increase originally reported.
The changes reflected downward revisions made last week to overall economic growth which showed the economy's output barely growing in the spring. Declining productivity, if it persists for a prolonged period, would represent a serious economic threat while rising labor costs would cut into corporate profits.

More Optimism on Wall St

What's to worry if the Fed's promised to get your back?

Wednesday, August 31, 2011

Stocks Rise In Asian Session, Sink in European Session

Another phenomenon often manifests itself. Tomorrow morning, after the European markets have closed, Wall Street tend to bid up stocks. We'll see!

Stocks Flatline for the Day!

Amazing reversal, even with a hint of good news early in the trading session.

Please Destroy Us, Mr. Bernanke!

Dear Ben,

Please print us more money. We want you to prop up the stock market. Everybody knows it's a Ponzi scheme that will collapse without your support. You don't want us to end up like Bernie Madoff's clients. No, Ben, we love Ponzi schemes. We get in early and get out before they collapse. That's why we're rich. The bad thing is that they sometimes collapse before we can get out. But you already bailed us out twice in the last couple of years through printing trillions of dollars. Why not a third time?

That will also keep the bond-market bubble inflated. We have to admit that you've done an excellent job there, hands down. Negative real yields all the way up the yield curve! Awesome. Now if you could just print a few trillions and buy up the sovereigns from the PIIGS. Euro crisis over. End of story. And we'd get richer because we'd sell them to you at face value though we bought them at fifty cents on the dollar.

And why not forever? Just keep printing. Because as soon as you stop, stock markets will crash again, and credit markets will seize, and then we're back on this awful ride to hell.

Of course, it'll cause inflation, which is good. You yourself said that. You stated many times that you want inflation. In fact, you said that one of the goals of the Fed, after propping up the markets, is to create inflation. So stick to it, Ben. Don't slack off suddenly just because some cowboy threatened you.

Inflation, in conjunction with your near-zero yields, has all sorts of benefits. For example, it will eat up the Social Security trust fund, whose $2 trillion balance is invested in treasuries. Fixed-income investors, retirees, and everybody who has any savings will also be demolished. And homeowners. But don't worry. They won't figure it out. They don't get a statement every month that shows how much inflation cost them. It's a quiet way of stealing from them, and it'll impoverish them over time, but it'll make us, the recipients of the money you print, richer.

You see, Ben, we can charge higher prices for our goods and services. And even if we have to pay more for raw materials, we look good. Our inventories increase in value, and we can claim sales jumped 10% because we raised prices by 10%. Analysts dig that.

Recently, Ben, you've done a decent job on inflation. In July, we were running at an annual rate of 6%. Not bad. But you need to preempt any cooling off. So keep printing.

Now, we're not talking about wage inflation. Oh no. We have to keep wages down. We need cheap labor, or else we'd have to send these jobs to China—which we're doing anyway. And not just to assemble iPhones. Heck, our lawyers in India are doing the same work as our local lawyers for one-tenth the pay. So, if our local lawyers want to be competitive.... Just think how much more profit we could make if wages collapsed!

Real wages have been declining for ten years and fell another 1.7% since July 2010. But that's not enough. So get with it, Ben. Print more. And don't worry about the wusses out there who say that choking the middle class like that will put us into a permanent recession. Just get the banks to loan them lots of money so they can buy our stuff, and when the loans blow up, you buy them from the banks at face value. Full circle, Ben.  
The trillions you've printed and handed to us, well, we put them to work, and we created jobs in China and Mexico and Germany, and we bought assets, and it inflated prices, and now we're even richer. We're proud of you, Ben. Think of the influence you have. And not just here. Around the world, Ben! Look at the Middle East and North Africa. See the food riots, rebellions, and civil wars it caused? Thousands of people died and entire governments were toppled.... Oh, wait. That's a bad example.

And then there is Congress. We invested in them through campaign contributions and other mechanisms to get them to spend trillions of dollars every year on our products and services, and they even started a few wars, and it made us richer—without taxing our companies or us. It's a wonderful system.

But the deficits have become so huge that they exceed what the Treasury can borrow. So we're glad, Ben, that you stepped up to the plate and printed enough money to monetize the deficit. But Ben, you can't just stop now! You've got to keep at it. Or else, the whole system will blow up. Well, it'll blow up anyway, but we don't want it to blow up now. So, Ben, you don't have a choice. Otherwise, we'd lose a lot of money in our schemes, and nobody wants that.

MIT's Billion Price Projects Spits in the Face of Government Inflation Fraud

from Zero Hedge:

There is the CPI... and then there is the MIT's billion price project which, as the name implies, tracks the prices of a billion products in real time. And according to the latter, annual inflation has hit a multi year high of about 4%. Perhaps someone can advise the talented Mr Evans that the 3% inflation he would so love to achieve... has in fact been eclipsed. At least, according to the real world. So take 4% inflation, add $2.5 trillion in "much more" easing, and what you get is only an economic Ph.D.'s guess. Alas, we are unqualified to have an opinion on the matter.

Wall St Bets... On Inflation!

Despite a steady drumbeat of bad economic news, Wall St is buying up stocks steadily since Bernanke's speech last Friday. They are convinced that more inflationary quantitative easing by the Fed is on the way. Worse yet, they are convinced that it is necessary!
They are therefore ignoring the strong likelihood of another recession that is already under way, and are instead placing their bets... on more inflation. They are therefore bidding higher the stock market, even in the face of a growing chorus of evidence in support of the view of a new recession.
This is going to have terrible results, because the higher cost of the inflation that the Fed denies is going to contribute toward, and even accelerate the onset of that recession. The Fed, in its refusal to acknowledge its destructive role in driving us toward that cliff, is advancing the very scenario it claims it wants to prevent. By pursuing a policy that now has an evidentiary history of raising inflation and putting greater pressure on household budgets, they are increasing the likelihood of that recession. It's a classic case of shooting oneself in the foot.
And like the Fed, they either still don't get it, or, as I believe, don't care about the destructive consequences! They don't care because higher inflation and monetary policy that causes it serve their interest. They therefore pressure the Fed to create still more of it despite that it harms their countrymen and advances the very economic scenario that we are now dreading.

Tuesday, August 30, 2011

What? Wall St Loses It's Nerve

Just As I Predicted! For Wall St, Consumers Are Irrelevant!

Consumer Collapse

Stocks reversed, but probably only temporarily. Wall Street is having another Pollyanna Party.

from Zero Hedge:
August consumer confidence plummets from 59.2 to 44.2, far below consensus of 52, dropping to its lowest level since April 2009... And even uglier is the 6 month outlook chart which collapsed from 74.9 to 51.9, one of the biggest monthly drops in history.

Case Shiller Declines, Stocks Rise

USD Bounces off Support, Eurozone Weakness

Fed's Evans Sends Gold Rocketing, Stocks Rebounding

Stocks Sink, More Global Worries

Monday, August 29, 2011

Stocks Know No Bounds Either

Food Commodities Know No Bounds

Grains are at similar levels to the commodity bubble of 2009, but there is no media coverage any more. These charts are today's chart for soybeans. Other food commodity prices are similarly leaping higher.

Intraday (today)

Daily chart -- that trend doesn't look "transitory" to me!
Corn -- highest price levels in three years! Up 120% since last summer! Corn is up 25% since July 1st!

Good News, Bad News Meltup

Stocks have broken out to a new rally, leaving behind the bad news of the past few weeks. This morning, consumer spending increased unexpectedly (but only due to back-to-school shopping -- what's so "unexpected" about that?), which has sent stocks rallying even beyond the overnight meltup. Now, however, more bad economic news has emerged. Pending home sales dropped 1.3% in July, and the Dallas Fed survey has showed continued contraction of economic activity. However, over the past few days, Wall St has once again begun ignoring the bad economic news, claiming that its all "priced in", and the economic contraction is being shrugged off once more. If the jobs report this Friday is a poor one, we will see another sharp correction in stocks. Let's hope its a good one, in which case we will see this rally fueled.

from Zero Hedge:
The second economic disappointment of the day comes from the Dallas Fed, which dropped from -2.0 to -11.4 on expectations of -9.0- this was the 4th consecutive negative print month. The report was, in a word, horrible, with just 2 of the 15 constituent indices posting an increase, and the bulk solidly in the red, led by Unfilled and New Orders which dropped 16.8 and 11.2, respectively: not good for economic growth. On the employment side there was nothing good either, with both employment and hours worked declining by -6.7 and -10.1, respectively.