Kamis, 30 Juni 2011

Morning Update/ Market Thread 6/30

Good Morning,

Equity futures are slightly higher again this morning, the dollar is lower but bouncing, bonds are lower, oil is flat around $95, gold is slightly higher, silver is flat, and food commodities are mixed.

Of course the notion that Greece was “bailed out” is just a twisted euphemism for being stuck with even more impossible debt. That tragedy is far from over, in fact it was only made worse.

The bounce in our markets is already running into resistance. The VIX went down and touched the lower Bollinger band yesterday while the major averages all slammed into their upper Bollingers, none have broken the downtrend as of yet. Below is a daily chart of the DOW showing it up against the upper Bollinger, up against down slopping resistance, and just below the now down slopping 50dma:



The XLF gapped higher yesterday and closed above the upper Bollinger. Phony money galore, I hope they enjoy the little pop while they can, today is supposed to be the last of the $600 Billion QE2, however, when looking at the POMO schedule we find that today’s POMO operation is NOT the last, that they have operations scheduled on July the 6th and 11th, and a statement that a new POMO schedule will be posted on July 13th. So, there you have the end of QE2, and the unnamed beginning of QE3 with no end of the market manipulation whatsoever. Sold to them.

Meanwhile debt saturated Americans continue to wallow in low employment. Weekly Jobless Claims came in at 428,000 which is much higher than the consensus looking for 420k. Here’s Econohope:
Highlights
No worse but only little better is the indication for the June employment report based on initial jobless claims which edged only 1,000 lower in the June 25 week to 428,000. A look at the four-week average, up 500 in the week to 426,750, shows no change from the May 28 week. But this month-to-month comparison of the four-week average does show improvement through the month, including an important 14,000 improvement in the household-survey sample week of June 18 vs May 14 (426,250 vs 440,250).

Continuing claims have also been improving slightly from a month ago, down 12,000 in data for the June 18 week to 3.702 million to bring the unemployment rate for insured workers down one tenth to 2.9 percent.

The Labor Department cites no special factors skewing the data. There's no significant initial market reaction to today's report.



While Americans may not have figured it out yet, the Greeks have – and the violence continues. Public workers in Britain are now also taking to the streets as the criminal “upper” class is robbing their retirement plans. There are clearly two sets of laws in the world at this juncture in history, those that apply to the money changers, and those that apply to everyone else. Look for more rioting here in America as the impossible math expresses itself more fully in the near future.

The Chicago PMI will be out shortly, that should be interesting and we’ll report it (almost) live right here, inside of our Daily Market Thread.

Rabu, 29 Juni 2011

Morning Update/ Market Thread 6/29

Good Morning,

Equity futures are higher again this morning, the reason du jour being the Greek Parliament’s passing of yet another phony “bailout.” As if dumping oceans of debt on someone bails them out. As if “restructuring” bonds into permanent fixtures that never ever retire is some sort of cure. As if forcing the populace to pay higher taxes to the wealthy class actually moves an economy forward. Of course the people are rioting, they recognize a stick-up when they see one, and they know who the victims are. In the U.S. we remain oblivious to reality as we are placated with endless tripe from those who stole the ability to produce our money. So the dollar goes down some more, bonds sink a little lower, oil rises a little higher, gold & silver continue to climb, and food commodities rise on the hope the dopes can keep their robbery in motion a little longer. We’ll be revisiting this Greek tragedy soon enough.

News flash for ya – there is only one real way to bail Greece out, and that’s through the process of default. Default eliminates their debt saturated condition and nothing else will except debt forgiveness which is exactly the same thing, with exactly the same results. The U.S., of course, is in a FAR deeper hole than all the PIIGS but again we don’t acknowledge reality because we are baffled with phony debt to GDP boloney that doesn’t consider the “Fed’s” balance sheet, our off balance sheet debt, nor any of our future financial obligations. If you or I used that type of accounting we’d be in prison. Do the math, and our true debt compared to our income – the only measurement that really matters – and you will find that there is no place on earth like America. It’s nice to be temporarily unaware, what a luxury to be the world’s purveyor of fraud.

Speaking of fraudsters, the hypocritical Mortgage Banker’s Association says that their Purchase Index fell another 3.0% last week – nice of them to invent a number that doesn’t move 20% or 30% in one week, maybe they are reading here that we don’t really believe that kind of action? Here’s Econospin speechless over the fact that interest rates fell and yet refinancing activity also fell:
Highlights
Mortgage applications for home purchases extended their June decline, falling 3.0 percent in the June 24 week in results that point to weakness for the month's home sales. Applications for refinancing fell 2.6 percent, but unlike purchase applications, have been trending higher most of the month. Mortgage rates fell significantly in the week, down 11 basis points for 30-year loans to an average 4.46 percent.

Pending Home Sales are released at 10 Eastern this morning and will be reported inside of our Daily Thread.

Yesterday, “Consumer” Confidence was reported lower again, and for once the State Street Investor Confidence report was also lower. Yet the markets continued to bounce on the supposed Greek bailout as if the world was all going to pretend for awhile longer that such a farce was actually possible.

The Gulf oil disaster long forgotten, the fact that we have Fukushima followed by four nuclear plants threatened in the United States and it is garnering no change of policy in the United States is going to be a far greater tragedy than anything produced in Greece. We have pushed the energy envelope far beyond our understanding of nature, but it is our lack of acknowledging that fact when confronted head on that is truly stunning.

As of now the downtrend is still intact, however the markets did manage to get above key overhead resistance yesterday. Below is a daily chart of the DOW, a break above that trendline, now about 12,300, would mean that an uptrend has replaced the downtrend since May:



Remember, that the end of month, beginning of month window dressing is occurring and there are a lot of changes coming in July, such as the end of open POMO. The fireworks around that time should be interesting to watch.

Selasa, 28 Juni 2011

Morning Update/ Market Thread 6/28

Good Morning,

Equity futures are continuing to rise during this last week of the month, and last week of scheduled POMOs to the tune, as Carl Sagan would say, “billions and billions.” Unfortunately, with these billions it’s the inverse chance of finding intelligent life. The dollar is down, bonds are down, oil is up, gold & silver are up, and food commodities are mixed.

Yesterday the dollar tried to push through overhead resistance, but that down slopping upper trend line of the descending wedge turned it around once again:



My suspicion is that this wedge will break to the upside once we’re past the end of the month. However, do not rule out the possibility that the “Fed” is still going to be stealthily buying with both hands to keep the façade from falling over. The current façade is built upon nothing but printing and fraudulent accounting. The one supposed bright spot is earnings, but earnings are trumped mark-to-fantasy earnings, just one of many “modern” accounting shenanigans.

This morning April Case-Shiller data was released with the 10 city index coming in positive for the first time in 8 months, up .8% unadjusted. Remember, this data is old, it is for April which is the beginning of spring and thus you expect strength. When seasonally adjusted, this data was flat, 0.0%. Of course any number that is even slightly positive, even if completely weak on a historical basis, gives the shills something to base their latest bottom calls upon. Of course anyone with an ounce of patience and common sense will be far more patient than that – not Econoshill:
Highlights
Indications are building that home prices are beginning to recover, the latest is Case-Shiller data for April that show no change in its adjusted composite index of 10 major metropolitan areas. Case-Shiller data are three-month moving averages which indicate actual gains for April given contraction in prior months. There's still a lot of cities showing negatives but many areas out West, where some of the heaviest of the price contraction hit, are now moving into positive ground including LA and San Francisco. Year-on-year, however, the contraction is deepening, to minus 3.1 percent though this reading is compared against stimulus-boosted sales a year ago.

Unadjusted readings are very positive though seasonality plays a big part in the housing market which benefits from warm weather. The unadjusted composite 10 index is up 0.8 percent in the month though the year-on-year rate remains negative at minus 3.1 percent (the same reading as the adjusted rate).

Today's report falls in line with recent price indications in both the existing and new home sales reports. Housing data tomorrow will be highlighted by pending home sales which the National Association of Realtors has already promised will be very strong.



Below is the entire Case-Shiller report, it’s a much more balanced read than Econoday, however even they inject their hopeful bias, despite pesky facts like having 6 of the 20 cities they track hit new index lows:

Case Shiller April

No, the home price adjustment is not over. However, a big chunk of it is, and as I’ve pointed out we are nearing the peak of Option-Arm resets and that will continue to pressure prices for at least another year – once that anchor is removed from the market it will at least stand a chance.

Yesterday the Dallas “Fed” Survey plunged to a negative 17.5 reading from the prior negative 7.4. Of course this was unexpected and was hardly mentioned in the business press. When you combine the negative manufacturing data of the past couple of months, you wind up with the most negative situation since 2008, which was formerly the most negative of modern records… well, we just beat that according to this chart compiled by Zero Hedge which shows the combined two month change:



“Consumer” Confidence is released at 10 Eastern – the sun is out, the irradiated birds are singing, nothing but blue skies…

Senin, 27 Juni 2011

Morning Update/ Market Thread 6/27

Good Morning,

Equity futures are slightly higher this morning with the dollar poking through, but then retreating from the top of the descending wedge it’s been testing. Bonds are flat, oil is lower ($90 range), gold & silver are lower with gold sitting on the $1,500 mark (up slopping support $1,410ish), and most food commodities are lower with corn gapping significantly lower.

Commodities continue to correct with, I think, the perception that QE is about to go away. That perception is not exactly correct, as I pointed out that in the last FOMC minutes they reiterated that they would continue to “reinvest bond principle,” which is just another way of stating that they would continue to print, but not quite as much as before. “Reinvesting bond principle” is a deceptive trick designed to lead you to believe that it’s just a roll-over operation… but that is certainly not true. Normally debt that matures simply goes away, it is retired. Not retiring debt that has matured is exactly the same thing as just creating money from nothing – again, it is just money printing, to use what is now quaint terminology.

Bloomberg actually picked up on this, but of course is not calling it printing as they are nothing but front men for the private “Fed.” Still, there are grains of truth here that should be understood:
Fed May Buy $300 Billion in Treasuries After QE2

The Federal Reserve will remain the biggest buyer of Treasuries, even after the second round of quantitative easing ends this week, as the central bank uses its $2.86 trillion balance sheet to keep interest rates low.

While the $600 billion purchase program, known as QE2, winds down, the Fed said June 22 that it will continue to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system.

The central bank, which injected $2.3 trillion into the financial system after the collapse of Lehman Brothers Holdings Inc. in September 2008, will continue buying Treasuries to keep market rates down as the economy slows. The purchases are supporting demand at bond auctions while President Barack Obama and Republicans in Congress struggle to close the gap between federal spending and income by between $2 trillion and $4 trillion.

“I don’t think the Fed wants to remove accommodation in any way, shape or form,” said Matt Toms, the head of U.S. public fixed-income investments at Atlanta-based ING Investment Management, which oversees more than $500 billion. “It’s quite natural for them to reinvest cash,” he said. “That effectively maintains the accommodative stance.”

Still, this is significantly less accommodation than the continual growth in balance sheet debt that has been occurring. I don’t think they can just let the status quo be, they must continue to grow the numbers or the forces of deflation will quickly take over – you can already see that in commodities and especially in the financials where the rotting insolvency continues to fester.

That rot is clearly seen in the charts. Below is the XLF which on Friday produced a “Death Cross” with the 50dma crossing below the 200dma. Not only that, but the upper Bollinger band is in the same location as the cross – that will provide serious overhead on the next rally attempt:



The $BKX Index is even worse, it produced a Death Cross about a week ago. Both of these crosses have largely gone unnoticed, but have significant implications for the broad market:



The disconnect between warning signs like those and the pumping in the mainstream has never been bigger. CNN published an article with a chart (I won’t show) projecting future stock price possibilities that were higher, way higher, and only slightly lower – of course completely ignoring where stocks would be if even a small portion of the graft were removed. And on Bloomberg it’s all about “analysts” moving their revenue projections up next year, as if never ending growth will never end. Of course the weight of exponential math ensures that it will end.

The Economic Calendar is fairly light this week with Consumer Confidence tomorrow, the Manufacturing ISM and Construction Spending on Friday. I’m sure that falling oil prices may boost Confidence which is exactly the ploy in releasing oil from the strategic reserves – purely political, but there are many potential consequences to irrational actions like this. Zero Hedge did a piece on those potential consequences, it’s worth a read: As The IEA-OPEC Nash Equilibrium Collapses, Is A 1973-Style OPEC Embargo Next?

Personal Income and Outlays were reported this morning and it was softer than expected pretty much all the way around. Incomes supposedly grew .3% in May, but that was below consensus and April’s number was also revised lower. Of course prices were higher against Consumer Spending that was 0.0, flat, month to month despite all the money debasing, which shows you how quickly deflationary forces can move back in – still, it’s only one month’s number and year over year is still up, but is decelerating from the prior month. Again, these numbers are in no way “real,” as measuring in a devalued currency produces apparent growth, not real growth. And when you monkey with the statistics, you have little real information to go on – thus $1,500 for gold doesn’t seem like such a stretch, does it? Here’s Econospin on the numbers:
Highlights
In May, income growth was moderate but spending was flat largely on a dip in auto sales with gasoline appearing to also weigh down. Inflation news is mixed. Personal income in May rose 0.3 percent, matching the gain the month before. The latest figure came in lower than analysts' expectation for a 0.4 percent advance. Wages & salaries increased a modest percent, following a rise of 0.4 percent in April. This component was softened by no change in the government subcomponent.

Personal spending weakened in May, posting at no change, following a 0.3 percent boost the prior month. The median market forecast called for no change. By components, durables dropped 1.5 percent after no change in April. Nondurables dipped 0.3 percent, following a 0.2 percent rise the month before. Services gained 0.2 percent, following a 0.1 percent slip in April. Within PCEs, the drop in durables likely was related to shortages of autos dependent upon Japanese parts. The nondurables dip probably was due in large part to a decline in gasoline prices.

On the inflation front, the headline PCE price index eased to a 0.2 percent rise from 0.3 percent in April. However, the core rate edged up to 0.3 percent from 0.2 percent in April. The consensus projected a 0.2 percent rise for the core for the latest month.

On a year-ago basis, headline PCE inflation rose to 2.5 percent from 2.2 percent in April. Core PCE price inflation firmed to 1.2 percent on a year-ago basis from 1.1 percent in April.

Year on year, personal income growth for May printed at 4.2 percent, compared to 4.4 percent the month before. PCEs growth rose a year-ago 4.7 percent, down from 4.8 percent the prior month.

Today's personal income report adds to the "soft patch" scenario. Income is still growing but not at a strong enough pace for the latest month. And spending is flat. However, there are arguments that the softness is transitory. Improvement in employment would boost income. An easing of supply disruptions in the auto sector will likely lead a rise in durables spending. However, nondurables will likely weighed down by additional near-term declines in gasoline prices.

Waves of inflation and deflation as the deflationary forces of debt saturation fight against a determined private group of narcissist bankers hell bent on creating inflation to keep their Ferraris out of the repossessor’s hands.

Jumat, 24 Juni 2011

Morning Update/ Market Thread 6/24 – Still No Adults Edition…

Good Morning,

Equities are close to even this morning after being down earlier. The dollar is higher, with oil falling to just above $91 a barrel, gold and silver fading too, and most food commodities rising slightly.

The dollar is approaching key down slopping overhead resistance again. Yesterday it rose right into it and retreated right on queue:



The Yen is getting close to breaking out of its sideways move and also needs to be watched closely.

As I watch the actions of the United States, the central bankers, the Japanese, and the Europeans I am left to just shake my head and wonder if there are any adults left in this world whatsoever? It seems to me that the globe is being run by a bunch of precocious teens who know absolutely nothing about reality – certainly they never learned even the most basic math.

Release oil out of the strategic reserve into record high levels of inventory and falling demand. Okay, boy, am I impressed. I could go on and on about how that is only 16 hours of world consumption, but I see through their games. That’s why I prefer to view such immature actions simply as manipulation to drive the markets in their preferred direction, and to make a political statement so as to look like the clowns are actually “doing something.”

Then we get version 1,238 of the same old play, this one is definitely a Greek tragedy. Again, no adults, just immature narcissists fighting over how they will split up and rob the productive efforts of the people. Sickening.

As far as I can see, no one in a position of power is willing to even admit reality… Well, there is one, unfortunately Mr. Farage doesn’t reside in America:



Note the reaction of others when confronted openly about reality. Nothing. It’ just like talking to a stone wall.

Meanwhile our completely trumped up statistics show a .1% improvement in GDP from 1.8% to 1.9% supposed “growth.” This is the third revision for Q1, 2.0 was the consensus of idiots. Complete baloney, the only thing that’s actually growing is the supply of digital money and the private “Fed’s” balance sheet. Here’s Econoday for anyone who still cares to read the spin:
Highlights
The economy in the first quarter was marginally stronger than previously believed as the Commerce Department's third estimate for GDP growth was nudged up to 1.9 percent annualized from the prior estimate of 1.8 percent. The consensus called for 1.9 percent growth.

Final sales of domestic product were unrevised at an annualized 0.6 percent. Final sales to domestic purchasers were revised down to 0.4 percent from the earlier estimate of 0.7 percent annualized. The lower estimate for final sales to domestic purchasers was from lower numbers for investment in equipment & software and government purchases. PCEs growth was unrevised overall.

Economy-wide inflation was incrementally higher with the GDP price index rising 2.0 percent, compared to the earlier estimate of 1.9 percent. Analysts expected 1.9 percent.

What irrelevant bull.

The Durable Goods report came in plus 1.9% in May, most of which was aircraft orders which is about the only thing of value still made in America – although I note that at the Paris airshow that EADS (Airbus) is outselling Boeing by about 4 to 1 this year. Again, money printing equals higher costs, those higher costs translate into “higher sales,” and thus apparent growth is created. Of course the problem with apparent growth is that wages don’t keep up, and thus eventually only the wealthy have the money to fly or even to eat. Here’s the spin the way the narcissists see it:
Highlights
Manufacturing may not be as weak as suggested by recent manufacturing surveys. New factory orders for durables in May rebounded 1.9 percent, following a revised 2.7 percent decline the month before (previously estimated at down 3.6 percent). May's figure came in higher than analysts' projection for a 1.5 percent gain. New durables orders excluding transportation also made a comeback, increasing 0.6 percent after a 0.4 percent drop in April.

For the latest month, gains were broad-based by industry. Transportation led the way with a monthly 5.8 percent jump, following a 9.4 percent drop in April. The swing in both months was largely nondefense aircraft (Boeing) which surged 36.5 percent in May after a 29.0 percent fall the month before. Defense aircraft rebounded 5.5 percent after a 0.4 percent dip. However, the auto industry appears to still be suffering from supply shortages. Motor vehicles edged up only 0.6 percent, following a 5.3 percent fall in April.

Also seeing gains in May were primary metals, up 1.8 percent; machinery, up 1.2 percent; computers & electronics, up 0.4 percent; and electrical equipment, up 3.2 percent. Fabricated metals were flat while "other durables" slipped 0.8 percent.

Business investment is improving in coming months as new orders for nondefense capital goods excluding aircraft also rebounded, by 1.6 percent after dipping 0.8 percent in April. Shipments for this series rose 1.4 percent, following a 1.5 percent decline the month before.

Today's report is good news for manufacturing and the economy. Yes, durables orders are volatile but the gains were widespread and were not dependent on a rebound in autos. Once supply disruptions are addressed, autos will add to underlying strength in coming months.

Sorry, but this same old tripe is just getting old.

Kamis, 23 Juni 2011

Morning Update/ Market Thread 6/23 - Paint it Red Edition…

Good Morning,

Well, Trichet says risk signals “Red” as crisis threatens banks, so that coupled with a significantly down market add up to our central banker manipulated market theme of the day. The dollar is screaming higher, Euro lower, bonds higher, oil down significantly to the $91 level, gold and silver are taking hits, as are most food commodities.

Trichet Says Risk Signals ‘Red’ as Crisis Threatens Banks

June 23 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said risk signals for financial stability in the euro area are flashing “red” as the debt crisis threatens to infect banks.

“On a personal basis I would say ‘yes, it is red’,” Trichet said late yesterday in Frankfurt after a meeting of the European Systemic Risk Board, referring to the group’s planned “dashboard” to monitor risks. “The message of the board is that” the link between debt problems and banks “is the most serious threat to financial stability in the European Union.”

In other words, no hint of more stimulus from Bernanke yesterday and thus those who own the banks, and own the exchanges, and own the HFT machines are going to continue with the deflation trade until they get what they want – more drugs for the addicts. Of course the addicts are also the pushers – they broke the cardinal sin of pushers everywhere… don’t get addicted to the product!

Of course their debt saturated condition has created structural unemployment and the numbers out this morning for last week are just like Groundhog day… going on four years now of structural weakness and they still haven’t admitted that the only way to truly stimulate the economy is to do the exact opposite of what they are, and that means working to unsaturate. Of course that assumes they care which is probably a bad assumption. Here’s Econoday, take a look at the revision for last week, twice as large as usual:
Highlights
It's an uncertain jobless report for the June 18 week though the headline news isn't good showing a 9,000 rise in initial claims to a higher-than-expected 429,000. The Labor Department had to estimate results for six states, which is a sizable number, due to what it says are "technology issues" which must mean computer problems. Hopefully, the department erred to the high side and the total will come down with next week's revision. But revision is another negative in today's with the prior week revised 6,000 higher to 420,000.

A look at month-ago change, which offers a gauge for the monthly employment report, is also mixed. The 429,000 level is 15,000 higher than the May 14 week, a sampling comparison for the household survey which generates the unemployment rate. But a look at the four-week averages for the same weeks is a positive, showing a nearly 15,000 improvement to 426,250 in the latest week.

Among other data, there's little change in the June 11 count for continuing claims, at 3.710 million, and no change in the unemployment rate for insured workers, at 2.9 percent.

There's little initial reaction but this report won't be a positive for today's financial markets. And it's also a disappointment that initial claims aren't moving lower and seem stubbornly above 400,000, in fact they've been over 400,000 now for 11 straight weeks.


Not that 400k is anything but a psychological number… it’s been four years of over 350k, and that means that jobs have been continually shed during that time – there was never any “recovery,” there was only money printing that created apparent “growth” in their trumped up statistics.

While I’m on the subject of trumped up statistics, it is being suggested that they monkey with the inflation statistics again. This would be done for the same reasons it has been done in the past, in order to “save” money paid out in programs tied to inflation. This perversion causes a huge disconnect between almost all of the statistics and reality. The disconnect is already so large that it’s simply intolerable, the thought of making that disconnect larger still is simply revolting:
Change To Inflation Measurement On Table As Part Of Budget Talks -Aides

WASHINGTON -(Dow Jones)- Lawmakers are considering changing how the Consumer Price Index is calculated, a move that could save perhaps $220 billion and represent significant progress in the ongoing federal debt ceiling and deficit reduction talks.

According to congressional aides familiar with the discussions, the proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.

Such a move is widely seen by economists as resulting in a slower rise in inflation. That would impact an array of federal programs that are linked to CPI including the Social Security program and income tax brackets set by the federal government.

The proposal could lower federal spending by around $220 billion over the next decade, based on calculations by last year's White House deficit commission, which recommended the change as part of its final report.

According to two congressional aides familiar with the budget negotiations, the shift is being "seriously discussed" as part of the ongoing talks to strike a budget deal, that would be used to ease the passage of a required increase in the country's debt limit.

Those talks involve Democratic and Republican lawmakers from both chambers and are led by Vice President Joe Biden. The group held its latest meeting Tuesday as they strive to reach the broad outlines of a compromise on federal spending by the end of the month.

In a press conference that took place before the meeting, House Majority Leader Eric Cantor (R., Va.) declined to comment on the specific proposal, other than to say that "a lot of things are on the table." But asked whether the proposal would be interpreted as a tax increase and therefore a non-starter for Republicans, Cantor said it could be seen as both impacting tax rates and benefits paid out by the federal government.

In other words, the impossible math is “forcing” them to consider doing crazy things… anything but the right things. You know, things that would actually benefit the people they are supposed to represent. And that’s because they are representatives alright, they represent the special interests who get them elected, they certainly don’t represent you and me. And there’s your representative government for you.

The soon to be extinct middle-class meanwhile wallows in the aftermath of their conflicted actions. The private “Fed” of course set up this dynamic and politicians are completely unwilling to even discuss changing what really needs to be changed. The Chicago “Fed” numbers came in negative again this morning, once again highlighting the failure that is private central banking – negative .37 and note that the prior month was revised downward too:
Highlights
A positive swing in production-related indicators made for improvement in the Chicago Fed national activity index which comes in at minus 0.37 for May vs a revised minus 0.56 for April. Production, which brought down the April reading by 0.16, added 0.05 to May's headline.

But now the negatives. The drag from employment increased to minus 0.04 from minus 0.02 while consumption & housing subtracted 0.36, a heavy negative though a little less heavy than the minus 0.40 of the prior month.

The index's three-month average deepened to minus 0.19 from April's revised minus 0.15, which of course is a negative. A possible negative is the outlook for the June report where early indications on production are unusually negative and which point to an unwanted swing for what was May's biggest plus.

New Home Sales are released at 10 Eastern this morning.

The VIX is back over the 200 dma, and the market is clearly still inside of the downtrend that began in May. Those who believe that QE can end to no effect are simply high, or are shills distributing their dramatically overvalued shares to you. Don’t worry, it’s all just another manipulation designed to get the private central bankers what they want – more of your productive life energy.

Rabu, 22 Juni 2011

Morning Update/ Market Thread 6/22 - Running with the Devil Edition…

Good Morning,

Not much action to report ahead of the FOMC whipsaw to come at 12:30 Eastern… so, while we wait to be manipulated by that group of narcissists the dollar is slightly higher, bonds are higher, oil is higher, gold is passing $1,550 again to the upside, silver is also higher, and food commodities are mixed.

Yesterday Existing Home Sales reportedly fell from 5.05 million to only 4.81 million. Hello, it’s springtime, sales are supposed to be rising, not falling… and this is yet another depression era print with home sales down, get this, 15.3% year over year. Not to worry, the National Association of Realtors thinks this is the bottom… just like the last 50 times they thought it was the bottom:
Highlights
The housing slide deepens with existing home sales falling 3.8 percent in May to a 4.81 million annual rate. The year-on-year rate deepens to minus 15.3 percent from April's minus 13.8 percent. Supply on the market, at 3.72 million, is falling but not enough relative to the decline in sales as months supply rose to 9.3 months vs April's 9.0 months.

The glass half full shows a rise in prices, up 3.4 percent for the median to $166,500 and up 2.0 percent for the average to $214,400. But the heavy supply doesn't point to much pricing power in the months ahead. Another plus is that sales of single-family homes, the central component in the report, fell at a slower rate of minus 3.2 percent vs minus 8.1 percent for the much smaller condo category. Also, heavy weather may have played a role as the month's contraction is deepest in the Midwest.

The National Association of Realtors is definitely looking at the bright side and is actually spilling the beans on next week's pending home sales data saying the report, though based on incomplete data, will show "solid gains." The NAR believes, and hopefully they're right, that May will prove to be the year's bottom for the housing sector. New home sales, which had been especially weak though improving in the last couple of reports, will be posted on Thursday.

NAR is another great example of a conflicted special interest who has no business reporting on important economic data pertaining to their own industry. They have already been caught red handed manipulating sales data to make the market appear better than it actually is, but of course the special interests have the money and thus nothing has changed because they have captured our government and regulators.

Here it is almost July, and we are getting close to the peak in Option-Arm resets – in fact the peak is just a couple months away:



My take is that a bottom in housing prices is no longer that far away… they now could bottom within the next year to 18 months. Remember who it is that is saying that. No, the impossible math of debt has not been fixed, and until it is the market will have difficulty moving forward, but a significant weight is about to be lifted so the next round of QE may actually produce house price inflation – I would not bet against it.

While I’m not waiving the “All Clear” flag yet by any means, I am saying that with this next wave of deflation that buying real estate into the fear this time will be appropriate… as long as it pencils out. It’s really only appropriate to own income producing property and enough to live comfortably and safely upon. Otherwise real estate should not be considered an “investment” as it is actually a liability that requires cash out of your pocket. I will say this, that here in the northwest it is still very difficult to get rental property to number out, and it absolutely must before I would consider owning more.

The corrupt and hypocritical Mortgage Banker’s Association, another fine special interest group, says that Purchase Applications fell 2.8% this week, while Refinancing Applications fell 7.2%. While a 7%+ move in one week is still completely unbelievable, it is only half of last week’s move. I personally cannot believe we let clowns such as the MBA utter a single word about the economy in public – completely corrupt, but here’s the “data:”
Highlights
The number of mortgage applications fell in the June 17 week cutting into but not reversing very strong gains in the prior week. The index tracking purchase applications fell 2.8 percent with refinancing applications down 7.2 percent, which in combination pulled the composite index down 5.9 percent. Behind the pull back, at least in part, are the week's slightly higher rates, at 4.57 percent for 30-year loans for a six basis point rise in the week.

Whatever… see the Option-Arm chart above.

The FHFA House Price Index will be released at 10 Eastern this morning and will be reported inside of our Daily Thread.

Question? Who is the dumb one? The “Fed” clowns who are never right and manipulate the globe, or those who wait to parse and hang on their every ill conceived word? And, if a dollar falls in the forest, how much harder will you have to work to afford a pitchfork? Thoughts to ponder…

Selasa, 21 Juni 2011

Morning Update/ Market Thread 6/21 - Clunk, clink, clunk goes the can Edition…

Good Morning,

Equity futures are continuing higher this morning following Friday’s VIX market buy signal – a short term signal. The dollar is down, bonds are flat, oil is higher, gold & silver are higher, and food commodities are also higher.

Note how the market has a somewhat self-regulating feature in that commodities zoom with the hot money stimulus and eventually work to cap profits. This definitely robs the people of their discretionary money. We keep waiting for the bond market to discipline the equity market, but with the “Fed” buying up bonds that discipline is being enforced in other ways… eventually. We hit a high, pulled back, and now may be starting another run… will it continue? Tough to tell, but for it to continue over a longer duration it will need more fuel or it will peter out.

You can see how the dollar impacted this move if you look at how it came right to the top of the upper downtrend line and then turned back down off it. Again, when it breaks this range we’ll have a better idea of what the next wave is going to look like:



Take a look at how the VIX responded following the return to inside of the Bollinger band range:



The Russell 2000 still looks like a Head & Shoulder’s top to me, we may be bouncing off the neckline now to form a right shoulder:



The NDX may also be building a similar pattern.

Underpinning the fundamentals, of course, is macroeconomic debt saturation. It’s everywhere and it’s exactly what’s plaguing Greece and really all of Europe as well (and most of the world as well). This is producing symptoms of stress that you can see everywhere. The stress pops up here, then pops up there, and the “Fed” and their IMF and other central bank cronies go around trying to put out the brush fires while simultaneously keeping their failing scheme in motion. The latest stress is really in the credit markets again where interbank lending occurs. This can be seen in the SHIBOR rates. Below is a weekly chart of SHIBOR, you can see the stress building, and it’s building quickly:



Existing Home Sales are released at 10 Eastern today, we’ll cover it inside the Daily Thread. Tomorrow is FOMC manipulate you day.

Speaking of existing homes and brush fires… the HUD is implementing a $1 billion program today to help distressed homeowners who have taken a hit to their income in certain states – Washington state is one. They are offering no interest loans up to $50k… get yours today! Seriously, if you are in distress, you should look into it, here’s a link to an article describing it: $1 Billion in Homeowner Aid Offered

Of course that program is just another sad Band-Aid that in reality is just another back door bailout of the banks designed to keep liquidity flowing through them for a little while longer, all the while preventing what needs to happen from really happening. Clunk, clink, clunk goes the can…

Senin, 20 Juni 2011

Morning Update/ Market Thread 6/20 - Burning Ring of Fire Edition…

Good Morning,

Equity futures are lower this morning, with the dollar higher over the weekend but falling sharply just prior to the open, bonds are doing likewise, oil was lower but is rising, gold & silver are staying level, while food commodities are continuing their correction lower.

There is no economic data today and it is a light week ahead with Home Sales data, the final trumped revision of Q1 GDP, and of course we get to sit on pins and needles to listen to the latest tripe coming from the “Fed’s” private lips as they release their FOMC meeting minutes and then hold a press conference to tell us how they are devaluing our money further, thus robbing our productive efforts – can’t wait.

Funny that they are willing to hold a phony press conference, but yet the real government is working hard to repress information to the public. You know, little things like experts saying that the amount of radiation from Fukushima is going to be 20 times worse than Chernobyl. Or that the infant mortality rate in the United States is jumping, up 35% in the northwest it was just announced but ignored by the mainstream – experts pin the cause on Fukushima radiation.

Experts also are warning that Fukushima corium is eating its way through the concrete pad beneath the reactors and that the Japanese need to be building an underground dam to prevent the spread of radiation into the ground water and into the ocean – but that is being ignored by TEPCO, and the government, long overcome with special interest pressure, does not press for action and thus the radiation continues to spill out uncontained.

A Frenchman has been posting videos of radiation readings around Japan for months now… one of his films went viral and the day following all of his YouTube videos have been taken down.

Here in the United States we already have one nuclear power plant completely underwater with the Missouri River flooding, two more are now threatened. It has been reported by the alternative media that our own government has issued a news blackout regarding these incidents and potential threats they represent.

Also blacked out here in the United States, a New Hampshire man committed self-immolation this weekend by setting himself on fire on the steps of a county courthouse, he did not survive, and our media is not reporting this. He wrote a 15 page missive basically slamming the breakdown of the rule of law in this country. He was a Marine with 21 years of service – you can read about it here: NH MAN BURNS SELF AT COURTHOUSE IN PROTEST

The fiat fire continues to burn around the world with violence resulting all over the middle east, and protests occurring in Europe. The on again, off again re-“bailout” of Greece is quite the circus to watch. The IMF (same old private bankers who anointed themselves) want to create money from nothing to both lend and to buy up the infrastructure, including airports and highways if you can believe that, and I’m sure you can because you’re reading here. Of course this is just completely turning over your sovereignty to a bunch of thug criminals dressed in suits.

And thus the beat goes on with no meaningful real solutions in sight. Should Greece continue to resist banker efforts, and I sure hope they do, then as their bonds default it will ripple through the banks and another financial freeze will be very likely to occur, this time with money hesitant to flow into debt saturated countries and the dominos will topple from there – as they should. They should because without clearing out the debt saturated condition, there will be little or no economic prosperity for any but those who create the debt money.

On Friday the VIX closed just below the upper boundary of the Bollinger band. This produced a market buy signal, but remember that it can take awhile for the market to respond - or it could happen right away or not at all depending on the will of the crooked casino owners (of course):





Jumat, 17 Juni 2011

Weekend Open Thread...



Morning Update/ Market Thread 6/17 - Money is Debt – Debt Saturation Equals Structural Unemployment Edition…

Good Morning,

Equity futures are zooming this morning… wish I had a good mainstream explanation, perhaps it is all that “dumb money” that thinks the stock market is a farce? Perhaps it was Research Somewhat in Motion who aroused the animal spirits when they lowered guidance and announced layoffs are coming? Maybe it was just a technical bounce off the SPX 200dma? Or perhaps… just perhaps… it was HFT machines owned by the insolvent debt pumping central banks? Does it matter? Are you in control of your “investment?” Do you trust them, really? Is this the best place for your money? Are there any safe places for your money when private central bankers are in charge? Just questions to ponder as we watch the dollar sink, bonds go lower, oil is drilling a hole in the ground, but magically gold and silver are hanging tough, while food commodities begin their journey back to Earth.

While I’m mentioning food commodities, below is a daily chart of Rice and Wheat. Both have etched out what appears to be a possible Head & Shoulders formation, both are at the neckline, so further selling may confirm those patterns:



Two days ago I showed you a chart of the dollar exactly when it was touching overhead resistance, and now it has pulled back from that point since that time. The direction of break out of this triangle will be the tell for the future of equities and commodities:



As I mentioned, the SPX yesterday perfectly bounced off the 200dma, and the HFTs have been partying ever since:



Despite the bounce yesterday, the VIX continued to rise and closed above the upper Bollinger for the second day in a row. If prices hold higher today and cause the VIX to return inside of the Bollinger range then a short term market buy signal will be generated:



I’ve been watching IYR again as I know that commercial real estate tends to lag residential. It has been descending back towards its 200dma, a break below that line would probably indicate that another wave of deflation is taking root. Regarding real estate, it is usually the second wave of deflation that you want to start thinking about buying – it will be a time when most are giving up. That time is getting closer:



RIMM has lost more than 50% of its value since February. Guidance last night caused it to plunge 18% overnight. I think you’re going to see more companies fall victim to the forces of margin compression and then deflation as QE unwinds. There are rumors the next trick by the “Fed” is already in motion. The problem for them is that they have already saturated the macro economy with debt – new schemes that fail to unsaturated the debt will only lead to failure and more hardship for Americans.

Don’t believe me? Who do you trust more? Bernanke who has been wrong on every single one of his prognostications, or me who at least has been mostly right all along? Want proof? Okay, here’s more proof...

If you look at a chart of Base Money, it's pretty hard to argue that money pumping has not been occurring:



Now, if you look at the Mean Duration of Unemployment, you are going to be startled, and you are certainly not going to see any form of “recovery” or “job creation” here:



Now, if you combine the two charts, and you work in Congress, you should be calling not only for Mr. Bernanke’s resignation, but you should be working on repealing the “Federal (not) Reserve (not there) Act,” and you should be replacing it with something along the lines of Freedom’s Vision:



Not proof enough? Do I need to pull out the “Chart of the Century” showing the clearly diminishing returns of debt?

Just as a kicker, when you pour hot money into a debt saturated environment, something bad happens to the velocity of money. When people, businesses, and governments finally get their hands on private created debt money, because they already carry so much debt they have no choice but to turn that money back around and send it back to the bank (plus interest). Thus velocity goes nowhere, it is a symptom of debt saturation. Below is a chart of the M1 money multiplier – how’s the “Fed” looking so far?



The St. Louis “Fed” finally added velocity to their data base, so now I can make velocity charts. When looking at the MZM velocity (MZM is currently the largest measurement of “money”) something struck me:



Oh yeah, velocity is dead, but doesn’t that chart look just like a chart of interest rates? Okay, let’s combine the Federal Funds rate with MZM Velocity and see what happens:



Hmmm... So what’s happening here? Well, in 1980 then Chairman Volcker raised rates to nearly 20% to kill inflation and rates have been falling ever since. But so has the velocity of money… but at some point velocity fell off a cliff, that point in my opinion, is the point at which macroeconomic debt saturation was reached. It was the same point at which the addition of debt began producing negative returns on the diminishing returns chart. It has lead to structural unemployment, deflation in things you hold as an “asset,” and inflation in things you need to consume.

“Consumer” Sentiment and supposed “Leading” Indicators will be released this morning and will be covered inside of today’s Daily Thread.

Europe and Greece? Same, same. Only we’re far worse off, but simply better at covering it up… so far.

If we want our kids to lead a truly free life, then we need to get busy.

If you haven’t been following the Fukushima situation outside of the mainstream “news,” then you don’t know what’s going on. It is a very dire and very dangerous situation that is affecting the entire globe and will definitely affect your children’s futures. We follow that situation every day inside the Daily thread, I think it’s wise to pay attention.

Kamis, 16 Juni 2011

Morning Update/ Market Thread 6/16

Good Morning,

Equity futures were lower again this morning, but are now bouncing towards even, with the dollar higher, bonds higher, oil down again now just above $94 a barrel, gold & silver are hanging tough with gold at $1,528 an ounce still, and food commodities are in correction mode and are lower again this morning.

The DOW is getting close to its 200 day moving average which may offer some support just above 11,700. The key number to watch here is 11,613, as a daily close below that level will produce a major DOW Theory non-confirmation:



Yesterday the VIX jumped its 200dma and closed above the upper Bollinger band. This sets up a potential market buy signal that will be triggered once a daily candle closes back inside of the Bollinger bands:



The dollar is up against overhead resistance at this moment. There is a descending triangle in place on the daily timeframe, a break above this level is bullish for the dollar which will imply bearish for equities and commodities:



Below is a monthly chart of the dollar. There is a larger pennant formation that is very bearish on the longer timeframe. The dollar broke below this pennant, the bottom of which will offer resistance to the dollar if it moves higher. Keep in mind that the dollar index is meaningless in my mind due to the manipulated nature of all the currencies against which it is measured – I watch it just to see how we’re being manipulated:



Weekly Jobless Claims came in slightly better than last week, but still well above the 400k mark at 414,000. The prior week was initially reported at 427k, but of course was revised upward to 430k. The monkeys who build the “consensus” simply parrot the previous week’s number and thus this number was “better than consensus.” Again, numbers over 350k are a job losing proposition, this number is nothing to celebrate and it has been years now of job shedding – listening to the government claim they are “creating jobs” is nothing but a nauseating outright lie. Here’s Econospin:
Highlights
In what is very good news for the economy, the number of unemployed filing for first-time jobless claims fell 16,000 in the June 11 week to 414,000 (prior week revised 3,000 higher to 430,000). The four-week average, though unchanged at 424,750, is more than 15,000 below where it was a month ago in a comparison that points to stronger payroll growth and a lower unemployment rate for the June employment report. Continuing claims also came down, down 21,000 to 3.709 million in data for the June 4 week with the unemployment rate for insured workers unchanged at 2.9 percent. There are no special factors skewing this report, one that should help boost confidence in the economic outlook and help limit the troubles underway in the financial markets.



It’s one thing to be optimistic, but it’s quite another to be a shill.

Housing Starts rose a little in May, rising from April’s 523k to 560k which is exactly what we would expect for the spring time. Definitely nothing to celebrate either, these numbers are less than half the number of starts pre-2007. The shills want to call a bottom every month, you would think that after years of being wrong they would at least humbly zip it, unfortunately no such luck:
Highlights
Housing construction shows signs of life in May. Housing starts rebounded 3.5 percent, following a revised 8.8 percent drop in April (originally down 10.6 percent). May's annualized pace of 0.560 million units topped analysts' projection for 0.547 million units and is down 3.4 percent on a year-ago basis. The gain in May was led by a 3.7 percent rebound in the single-family component, following a 3.3 percent decline in April. The volatile multifamily component made a partial comeback, rising 2.9 percent after falling 21.7 percent the month before.

By region, the drop in starts in was led by a monthly 18.1 percent gain in the West with the South rising 1.5 percent. However, the Midwest and Northeast saw declines of 4.1 percent and 3.3 percent, respectively.

Housing permits are pointing to a little more optimism on the part of homebuilders. Housing permits jumped 8.7 percent in May, following a 1.9 percent decrease in April. Overall permits posted at an annualized rate of 0.612 million units and are actually up 5.2 percent on a year-ago basis.

Housing starts remain at low levels but the May numbers for starts and permits indicate that there is modest demand in some local markets for new construction-likely built to order rather than spec. But the fundamentals are unchanged. There is still enormous supply on the market and the best sustainable trend in the near term is incrementally up or more likely merely holding steady.

On the news, equity futures rose (became less negative) with a better-than-expected jobless claims number also contributing.



The nation’s Current Account Deficit grew in the first quarter from $113.3 Billion to $119.3 Billion. This number is as trumped up as the day is long, the United States now has trillions upon trillions in debt off balance sheet in Freddie, Fannie, and on the “Fed’s” balance sheet. Unfunded liabilities, of course, are also multiples of the acknowledged current account deficit. The math is impossible, the lies about it are non-stop, and this is one whopper of a lie. Yet, as much of a lie as it is, it is still horrid:
Highlights
The nation's current account deficit deepened in the first quarter, to $119.3 billion vs a revised $112.2 billion in the fourth quarter (revised from $113.3 billion). The deeper deficit is due to a wider trade gap on goods & services, at $140.8 billion vs the fourth quarter's $118.8 billion. Note that much of this is tied to oil prices. A plus in the report is the balance on investment income which rose to a surplus of $54.8 billion vs the fourth quarter's $39.9 billion reflecting mostly short-term investment from foreigners. The bottom line is that the current account as a percentage of GDP is 3.2 percent, above 3.0 percent in the fourth quarter but under the 3.3 percent of the third quarter.

Lies, fluff, and more lies. Whatever, we know how this ends, we just don’t know every jink in the road on the way to the destination.

If you want a clue as to some of the “other events” that will follow impossible math like this, look no further than Greece. Now Ireland is finally growing a set, too, stating that bond holders should take a hair cut along with everyone else. I say it is the bond holders who not only knowingly took a stupid risk, it was them who created the risk in the first place. It is the bond holders who should take the hit, not the people – that is the rule of law which has stood for centuries, only recently it has been turned upside down by the money changers who created the unworkable system that benefits only them.

Martin Armstrong has been busy writing and this morning he released an interesting and timely piece on the situation in Greece including a nice review of history:

Greece-061611

Rabu, 15 Juni 2011

Morning Update/ Market Thread 6/15

Good Morning,

Equity futures are down considerably this morning, nearly wiping out all of yesterday’s gains. The dollar is higher, bonds are up slightly, oil is lower, gold & silver are down slightly, and most food commodities are lower. Corn is now back below the breakout point I showed a couple days ago.

The situation in Europe is driving the Euro significantly lower. Riots over austerity measures have been occurring in Greece and while that’s going on you have criminal bankers and others like Steve Forbes over there proposing to “privatize” Greek assets (and split them up for their pleasure and control.) Of course the bankers tried to do the same thing in Iceland but fortunately the people took action and told the bankers to go pound sand. Hopefully more people will follow Iceland’s example in that regard.

I really like the way the media tried to justify the oversold bounce yesterday – like they could even hint at supposedly “good” data. What nonsense, as there was certainly no data that was good, even as trumped up as most of it is. Today’s data is also mostly negative.

Of course the corrupt and conflicted narcissists over at the Mortgage Banker’s Association managed to pull a positive number out of thin air for the previous week, reporting that mortgage applications increased by 4.5% in the past week, but get this, they also say that refinance applications increased by a whopping 16.5%! My, oh my… that is a whopper… of a fantasy or a lie – pick one. Sorry, but anyone believing that refinance applications can make that size of swing in one week is on some powerful drugs. The people at the MBA are sick and need help – for those who don’t know the history here, these are the same guys who derided Americans for walking away from their underwater mortgages at the same time that they were doing the same exact thing from their own corporate headquarters. That’s called hypocrisy, and that’s just the tip of how messed up these people are. Their data is a great example of a special interest group who tries to influence “consumers” perceptions by manipulating data to spin those perceptions. In my opinion, the mortgage bankers behavior is a great example of why special interests should be separated from government and they should not be allowed to report major industry statistics on their own activities. At any rate, here’s the joke for what it is, Econogullible reporting:
Highlights
Mortgage bankers were very busy in the June 10 week as applications for both purchases and especially for refinancings jumped sharply. The purchase index rose 4.5 percent to offset a similar sized decrease in the prior week. The refinancing index added to a solid gain in the prior week with a 16.5 percent surge. Favorable terms are an important plus behind the demand with 30-year mortgages down three basis points to an average 4.51 percent. One week's data is only week's data but the June 10 week is a good start for the summer housing season. Home builders will have their say at 10:00 a.m. ET this morning with the housing market index.

Pleeeeaaaaase…. How Gullible can you be? Oh, that’s right, got to shill to keep the façade in tact.

CPI numbers came in similar to the PPI with the month to month number softening but year over year accelerating. Regular readers know that these numbers also do not reflect reality, they understate overall inflation:
Highlights
Consumer price inflation softened in May on a decline in energy costs. The consumer price index in May grew at a 0.2 percent rate, down from 0.4 percent in April. The latest figure, however, came in higher than the consensus forecast for no change. Excluding food and energy, the CPI jumped 0.3 percent, following a 0.2 percent rise the month before. Analysts had forecast a 0.2 percent increase.

Turning to major components, energy came down 1.0 percent, following a string of strong gains including 2.2 percent in April. Gasoline declined 2.0 percent after jumping 3.3 percent in April. Food prices rose 0.4 percent, matching the boost in April.

Within the core, indexes for apparel, shelter, new vehicles, and recreation all contributed to the acceleration, rising more in May than in April. These increases more than offset declines in the indexes for airline fare, tobacco, and personal care. New & used vehicles rose a strong 1.0 percent but this may be a temporary effect of supply disruptions of parts from Japan and less availability of some auto models.

Year-on-year, overall CPI inflation worsened to 3.4 percent (seasonally adjusted) from 3.1 percent in April. The core rate bumped up to 1.5 percent from 1.3 percent in April on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.6 percent in May while the core was up 1.5 percent.

Today's inflation report lowers the odds of the Fed engaging in QE3 as there clearly are some warm spots within the CPI. With energy softening a bit, food price inflation is standing out more.



The Empire State Manufacturing Index cratered again, this time going all the way to negative 7.8 in June from May’s positive 11.88 reading. This is way off of expectations with the consensus looking for positive 14:
Highlights
For the first time since November, monthly business conditions in the New York manufacturing region contracted in what is an ominous, though nevertheless still isolated, indication for the national economy. The Empire State index fell nearly 20 points in the June reading to minus 7.79 in what the report describes as a "steep" decline. New orders fell nearly 21 points to minus 3.61, again a negative reading indicating month-to-month contraction compared to May. Shipments are even worse, down nearly 35 points to minus 8.02.

Other details include faster delivery times, which is an indication of weak activity, and a moderating rate of inventory accumulation which is another sign of weakness. Input costs remain extremely high while pricing power for output prices is easing. The report also shows a moderating rise in the number of employees and a contraction in the workweek.

If the sister report on Thursday from the Philadelphia Fed also turns negative, talk will definitely pick up for contraction in the national ISM manufacturing report for June. National data for May on the manufacturing sector will be posted at 9:15 a.m. ET this morning in the industrial production report.
Ummm, it was the weather! No, it was Japan. But it couldn’t possibly be debt saturated American “consumers” within their debt saturated governments, could it? Oh never mind, get out there and shop some more, your nation needs you… to be further in debt.

Industrial Production for May barely held onto positive at just .1%, again less than expected. The trend is definitely down here too, and an ominous sign is that Capacity Utilization fell to just 76.7%. That’s a depression era read, again it’s a sad statement that we are more than three years past the beginning of the collapse that began in ’07 and that companies have had that long to reduce capacity yet even as they do so utilization remains low which tells me there is still too much capacity out there. That fact alone has implications for commercial real estate and also on employment data. Here’s Econohope:
Highlights
Industrial production posted a modest rise in May but was held back by a drop in utilities. Manufacturing improved moderately but was quite strong outside of autos. Overall industrial production in May edged up 0.1 percent, following no change in April (originally unchanged). The market median forecast was for a 0.2 percent gain.

However, manufacturing made a comeback, rebounding 0.4 percent in May, following a 0.5 percent fall the prior month. April auto production had been constrained by shortages of parts from Japan related to the March earthquake and tsunami and this damping effect appears to have continued into May with motor vehicle assemblies essentially flat. Excluding motor vehicles, manufacturing advanced a robust 0.6 percent after a 0.1 percent dip in April.

Utilities dropped 2.8 percent after increasing 2.4 percent the month before. Mining output expanded 0.5 percent after a 0.8 percent boost in April.

On a year-on-year basis, overall industrial production slowed to 3.4 percent from 4.7 percent in April.

Overall capacity utilization in May was unchanged at 76.7 and came in lower than the consensus estimate for 77.0 percent.

The details for the production report are quite encouraging as the headline number was weighed down by utilities and manufacturing excluding autos was very healthy. Taking into account that auto assemblies eventually will work around current parts shortages, forward momentum looks good and the national numbers for May are much more positive than the June numbers from the Empire State report.

The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.

Sorry Econohay, it is not fair to say that Capacity Utilization was unchanged. It was only unchanged when compared to the revised lower number from the previous month – you must compare oranges to oranges, that means initial report to initial report and revised number to revised number. This is a classic way that today’s media creates a positive spin on negative data. The people reporting the data have learned this too and provide the open door with higher initial readings that get quietly revised downward later. Its part of the sickness that’s infested today’s pretend economy.

Speaking of sick, our own complicit U.S. Treasury works with the “Fed” to mask the flow of funds to obscure reality… no audit, no looking at the trail of money. But we know the trail… the “Fed” prints money or issues bonds indebting Americans and then they use that money to roll-over prior existing bonds (Ponzi), but they also send money (and gold) overseas to international banks. Then the Treasury gets to come out and say that those same international banks purchased bonds from the United States! It’s simply a giant shell game to obscure the truth – the truth being that America cannot really finance our massive debts. So the Treasury and “Fed” work together to obscure reality and that’s how we wind up with a positive flow of Treasury International Capital:
Highlights
The net inflow of foreign investment improved in April but is still at a very moderate $30.6 billion, far below what's needed to fund the nation's fiscal debt and trade deficit. Private foreign accounts were however big buyers of US equities in the month with a net inflow of $16.6 billion. Including official accounts, the net inflow into equities was $17.8 billion. But April was a good month for the stock market which hit a peak at month end, a peak that is now a distant memory and which points to trouble for these readings in the coming reports.

Outside of equities, official accounts, which include foreign central banks, were the biggest buyers in the month with net inflow into Treasuries of $24.4 billion vs a net outflow from private accounts of $1.0 billion. There was a net outflow from both official and private accounts for corporate bonds. When including short-term securities, total inflow in the month nearly doubled to $127.1 billion which is a welcome positive. But a negative in the report is a high level of outflow from the US into foreign securities, at $14.2 billion in the month.

A look at Treasury holdings by nations shows a $7.6 billion rise in mainland China, which is also a positive, to $1.15 trillion and a small decline in Japan to $906.9 billion. UK-based accounts, which are the third largest holders of US Treasuries, shows a $7.8 billion increase to $333.0 billion.

Here’s the entire TIC report:

TIC Press Release APRIL

By the way, recent articles suggest that the Chinese have divested themselves of 95% of the U.S. bonds they previously held. Of course the buyer of last resort was the U.S. government who simply printed money to buy them. If those reports are true (I don’t know as I don’t believe any of the flow data as there is no audit trail), then the Chinese no longer hold the supposed magical and mystical power over the United States that the threat of bond sales holds, now do they? Did the United States defuse that bomb at the expense of higher commodity prices and a weaker dollar? If so, it’s a great example of how all loans get repaid with interest in one way or the other. Instead of just paying back the loans, you pay them back every time you eat, every time you fill up at the gas station.

The Home Builder’s Housing Market Index cratered again in June, falling from the already depression level read of only 16 all the way to 13. And June is the middle of spring, it’s supposed to be the time of year that shows strength. Yikes.