Wednesday, May 12, 2010

Blowing Smoke Up The Masses Asses

Top Stories
Stocks Pop as Investors Focus on Improving Economy- AP
Stocks bounced higher Wednesday after investors' focus returned to the improving health of the U.S. economy.

This from Yahoo Finance. I could not help but laugh. "...improving health of the U.S. economy"? This is called blowing smoke up the masses asses.

Reports that a growing Trade Deficit is a "sign" of a strengthening economy are greatly exaggerated. Rising Oil prices created this deficit, and rising Oil prices are BAD for any economy. A rising Trade Deficit has to funded with debt. How does increasing debt strengthen an economy? America, still trying to spend her way to prosperity. Will she ever learn?

Trade gap hits 15-month high
(Reuters) - The trade deficit hit its widest point in 15 months in March as a broadening economic recovery boosted demand for foreign goods, with a rise in exports and imports seen as a sign of growing global demand.

Both exports and imports climbed to their highest levels since October 2008, according to the report from the Commerce Department on Wednesday.

"It's an encouraging sign that growth in trade volumes is picking up, another indicator that the U.S. and global recovery is stronger," said Zach Pandl, a U.S. economist at Nomura Securities International in New York.

Some economists expect the data will lead to an upward revision in the government's measure of first-quarter economic growth.

The rise in imports more than offset the export gain and pushed the trade gap up 2.5 percent to $40.4 billion, the largest since December 2008.

The trade gap came in slightly ahead of expectations of Wall Street analysts for a deficit of $40.1 billion.

The bulk of the rise in imports reflected a jump in the dollar measure of oil imports as prices rose.

Oh, but what's a little more debt when it's thrown on a $13 TRILLION pile of the stuff? Apparently "investors" are standing in line to buy the stuff:

Solid bidding persists at $24 bln U.S. 10Y auction
NEW YORK, May 12 (Reuters) - Wednesday's $24 billion 10-year U.S. Treasury note auction won solid demand from investors, reinforcing the view of the firm support for longer-dated U.S. government securities.


The 10-year note sale followed a strong $38 billion three-year auction on Tuesday. The government will conclude its May refunding with a $16 billion sale of 30-year bonds on Thursday.

Although investors have been concerned that the burgeoning federal deficit and borrowing would reduce the appeal of Treasuries, that has been overshadowed by the sovereign debt crisis in Europe.

Investors have flocked to Treasuries as a safe-haven from the market volatility fueled by the fiscal woes of Greece and other debt-stricken euro zone members.

"This auction came in pretty strong. ... There is just so much uncertainty in the world right now," said Keith Blackwell, an interest rate strategist at RBC Capital Markets in New York.

At the latest 10-year auction, the bid-to-cover ratio, which gauges the amount of bids to the amount offered, was 2.96, far below the 3.72 at the April auction but above its long-term average.

The yield on the 10-year securities due May 2020 cleared at 3.548 percent, coming close to market expectations.

Oh sure, "...solid demand from investors, reinforcing the view of the firm support for longer-dated U.S. government securities." That's what the Treasury would like you to believe. Unfortunately, more smoke up the masses asses. Demand? I'll explain this "demand" right here. The banks borrow money from the Fed a ZERO percent. They take the money and buy US Treasury Bonds and earn 3.5% on them. In effect, the Fed is buying the Treasury's debt and allowing the banks to "print money" while Main Street twists in the wind.

Yep, the economy is booming...

Funny this story didn't find it's way into the Financial Headlines. If the economy is so strong, why are government revenues at ALL-TIME lows?

U.S. Posts 19th Straight Monthly Budget Deficit
WASHINGTON (Reuters) - The United States posted an $82.69 billion deficit in April, nearly four times the $20.91 billion shortfall registered in April 2009 and the largest on record for that month, the Treasury Department said on Wednesday.

It was more than twice the $40-billion deficit that Wall Street economists surveyed by Reuters had forecast and was striking since April marks the filing deadline for individual income taxes that are the main source of government revenue.

Department officials said that in prior years, there was a surplus during April in 43 out of the past 56 years.

The government has now posted 19 consecutive monthly budget deficits, the longest string of shortfalls on record.

For the first seven months of fiscal 2010, which ends September 30, the cumulative budget deficit totals $799.68 billion, down slightly from $802.3 billion in the comparable period of fiscal 2009.

Outlays during April rose to $327.96 billion from $218.75 billion in March and were up from $287.11 billion in April 2009. It was a record level of outlays for an April.

Department officials noted there were five Fridays in April this year, which helped account for higher outlays since most tax refunds are issued on that day.

"Department officials noted there were five Fridays in April this year, which helped account for higher outlays since most tax refunds are issued on that day. There is always an excuse to explain away the stunning disappointment this news represents. You can't polish a turd, and this Treasury report STINKS.

Yep, the nation's economic health is improving as we type this...

I guess it's all in how you read the news. Do you read just the headlines, or do you read between the lines? Is the glass half full, or is the glass half empty? Are you watching the game, or staring intently at the cheerleaders?

CNBC has to be the number one Rah-rahs. How do these government shills sleep at night? A strengthening economy? In your dreams...

Mortgage Finance Index: There's More Than the CNBC Headline
The Golden Truth
CNBC reported this morning that the Mortgage Bankers applications index jumped 3.9% last week. On the surface this looks healthy. If you bother to go to the MBA website and read their actual press release - CNBC and Bloomberg don't typically bother with this, especially if the details belie the headline - you'll find that the purchase applications actually dropped 9.5%. The increase in the index was from refi applications, which jumped nearly 15% as interest rates dropped last week. Here's the link: MBA Finance Index.

The housing market is about to take another cliff-dive, as home buyer tax credit expired on April 30, foreclosures and bank owned housing inventory spike and the "jingle mail" phenomenon - where underwater homeowners hand the house over the bank - becomes more pervasive. I saw a statistic last night which reported that 23% of all homeowners are now underwater.

While not many actually believe the Government reports and White House smoke-blowing about a recovering economy and improving job market, it's difficult to hide the decaying housing market, especially when "for sale" and "for rent" signs continue to proliferate on a daily basis. The big banks have marked most of their unsaleable credit paper up to fantasy. As the underlying asset base - housing and commercial real estate - continues to decline in value, expect that either the Fed will engage in a massive QE2 program or we'll have another big credit market accident later this year.

Homeowners abandoning houses en masse
Posted by Beth Braverman
A pair of studies released Thursday found that more homeowners are choosing to let an underwater home go into foreclosure, despite their ability to continue to make payments. Researchers at the University of Chicago and Northwestern University found that 31% of foreclosures appeared to be strategic, up from 22% in last year.

As the number of borrowers who walk away from their mortgages increases, the social stigma associated with foreclosure has started to wane, experts say. "It can be a very logical decision based purely on economics, numbers and returns," says Keith Gumbinger, of HSH Associates, a mortgage publishing website. "Is there better value to me to abandon this home and rent another one for less money?" A quarter of all borrowers — 11.3 million homeowners — were underwater on their mortgages at the end of 2009.

A Morgan Stanley report, also released Thursday, found that strategic defaulters tend to have higher credit scores, larger loan balances and more recent mortgages than those who remain in underwater homes. From an economic perspective, it makes sense for borrowers who are more than 25% underwater on their mortgage to consider walking away, says Paola Sapienza, a finance professor at Northwestern's Kellogg School of Management and a co-author of the study.

Borrowers who are up-to-date on their payments but underwater may also be walking away in protest after seeing government programs and bank policies aimed at their delinquent neighbors but offering little assistance for them, Gumbinger says. The Chicago study found that the probability of strategic default increases by 23% when homeowners learn that their neighbor with negative equity has received a partial loan for forgiveness.

Improving economy? NONSENSE!

Gold and Silver continued on the rampage today. Our hope for a Euro squeeze remains in the wings... The Precious Metals appeared to feed on today's budget deficit news. Revenue shortfalls do little to enhance the "safety" of Treasury Debt, or encourage "legitimate" investors to purchase it. Without adequate income, how do you pay off your debt?

Oh yeah, print money and buy more of the debt...

"Oh, but that doesn't pay off the debt."

Now you're getting it.

Gold is beginning to look a bit toppy on it's daily chart in the near-term. A brief reaction could be near. 1200 has set up as support in Gold, but a retest of 1226 before testing projected highs in this Spring leg up in Gold should be expected. Gold projects to 1280 on the low end and 1304 on the high end.

Silver appears to have room to run, and I suspect that any weakness in the Dollar near-term will push Silver quickly over 20. A close this week above 18.82 opens that door.

A look at the Gold/Silver Ratio [GSR] suggests Silver may be on the verge of a major move higher. This ratio has been capped at 63 all year. [A falling Gold/Silver ratio is bullish for Silver.] A break below 63 would likely vault Silver into the 20s. A move in Gold to 1304 with a GSR of 60 would equal 21.73 Silver. 1280 gold with a GSR of 60 would equal 21.33 Silver. Below 60 on the GSR and we may see some capitulation on the CRIMEX as the goons slit their wrists.

The European Debt Crisis is NOT over, but the financial news media wants you to believe it is. The California Debt Crisis is waiting on deck...and then things will begin to get ugly.



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