CARTEL CAPITULATION WATCH
The DOW leaped 129 to 9955, while the DOG rebounded 26 to 1782. Seems many, many market technicians were calling for a recovery from deeply oversold conditions.
Thank goodness for the foreigners:
09:01 June foreign holdings of Treasuries rose a net $71.8B in June
Note the demand for the 10-yr auction on 8/12 was very strong, with foreign demand cited as a reason.
* * * * *
Then again:
Bill,
Did you see that Caribbean banks bought 17 Billion in US assets? Meanwhile, the JAPANESE and CHINESE only purchased 1.9 Billion. The FED must have some offshore printing presses and by the way, you will not hear one word about this in the press.
Regards,
Sabregold
GATA’s Mike Bolser:
Hi Bill:
The Fed added $7.5 Billion in temporary repurchase agreements today August 16th 2004, an action that upped the repo pool to $51.269Billion. The pattern of the pools' 30-day ma however continues to round off from its previous straight line phase ands we must watch this closely as it signals a change in Fed tactics. After being restrained by a removal of repo pool support early in 2004 the DOW has not regained its previous upward trend. Indeed, the DOW's 30-day ma has set a new low for the move.
Perhaps an event awaits in the near future that will somehow jump the DOW far higher. There does seem to be some "Diamonds" buying (DOW future contracts) from the primary dealers (according to sources) and they generally don't move without reason. The bond sentiment is also waning and why not with commodities screaming along, except for the controlled precious metals. Anyone measuring real interest rates must be aghast at their losses. Recall that real interest rates are the Fed Funds rate minus the CPI. However, the CPI is adulterated and untrustworthy so a better measure is the actual money growth figure of M1 and that number runs at 9% per year yielding a substantial negative value (1.51% - 9%= -7.5%). This is what one is losing each year if we utilize the M1 money growth as a proxy for an adulterated CPI.
Models
Hurricane Charley caused a great deal of consternation for some and relief for others when it changed course inland early Friday morning. I was spared a direct hit East of Tampa while others fared much worse. Seeing the videos of screaming winds, commercial buildings turned to rubble and steel construction architecture roofs ripped off is a sobering experience and the puny preparations I had made seem almost laughable in retrospect.
The fateful turn came as a surprise to expert NOAA meteorologists and their myriad of standard pressure-based computer models. Alone against the conventional view was a product called VIPIR. It is a model based only upon radar signatures and upper winds data. It called for the inland turn as early as Wednesday evening but the local NBC affiliate that had paid a small fortune for it didn't believe the results because they conflicted with Miami. Only when the storm actually began its move did the local broadcaster weather man remark about the conflict. His tone and emphasis told me that there had been a great deal on behind the scenes discussion about the conflict. It seems that Miami did not want to change the original track, preferring to keep evacuation orders in place. In any event the decision was retained until it had to be changed.
Lesson
There is a parallel involved between forecasting weather and attempting to predict the interventional actions of government operators suppressing commodities markets. Often the conventional TA wisdom fails.
Almost all the big speculators on Wall Street use standard TA models based upon the greed/fear, over sold, over bought paradigm espoused by Elliot Wave Analysis doctrine. The Fed interventionists know this all-too-well and exploit it as if they were playing a violin while the specs get blasted and act befuddled afterwards.
Their entire belief mechanism is flawed because it is based on a flawed principle...that the market is controlled by only two forces, buyers desiring profit and sellers fearing losses. Their "black box" models are equally flawed and useless against the third party Fed's attacks.
Until these large strategic commodity speculators wake up and appreciate that they are in an interventional war and their expensive computer weapons are simply outdated, they will continue to be blind-sided as badly as the poor souls flattened in Punta Gorda, Florida.
The key difference with this analogy is that the retirees had no say in choosing their defense models.
Today's DOW and Gold
Defying TA logic but exactly confirming interventional analysis, the PM Fix delivered another spike at 10AM EST while the DOW was rescued by 100 points just as it seemed sure to bomb. We sit at $403 per ounce but don't expect it to run too much higher. I hope I'm wrong.
Mike
Been salivating this past week to read Bill King’s analysis of the latest jobs numbers (he has been on vacation). Here it is:
The King Report
M. Ramsey King Securities, Inc.
Monday Aug. 16, 2004 – Issue 2974 "Independent View of the News"
While we were away the employment report was highly disappointing for the precise reason that we warned. The CES Business Birth/Death Rate was due to deduct jobs for July (-83k in ’03), and given the 182k jobs it manufactured for June, the July number would be down at least 265k jobs. The actual B/D rate for July was -93k…Economists that forecast a higher number based on 4 to 5-years ago and 30-years ago data do NOT understand their milieu. Today’s employment numbers cannot be compared to numbers from different years because they are compiled and tabulated differently.
There was no B/D Rate prior to a couple years ago. It was the ‘plug’ or ‘bias’ rate. And that did not start until 1985. Furthermore, the survey and its sampling have repeatedly been changed or altered. A year ago the BLS commenced altering seasonal adjustments each month. The previous few years, the seasonal adjustments were changed semiannually. And before that the seasonal adjustments were altered annually.
There are an inordinate number of economists and forecasters that don’t know or understand how certain economic data is compiled, calibrated or calculated; and they don’t know the methodology. Yet brokerage firms pay them princely sums for their wisdom that is based on faulty data, which is in violation of the ‘scientific process’ that is learned in most high schools.
As dawn follows night, permabulls immediately upon release of the grossly disappointing non-farm jobs number bellowed that the Household Survey is the better indicator of US economic strength. Of course they have not been reading our missives or they would’ve learned not only does the Fed and other bean counters adhere to the CES due to its superior surveying sample and means, but the Household Survey counts jobs that don’t exist and paychecks that don’t exist. Several times this past year we have included verbatim BLS verbiage that lists the numerous non-paycheck earning jobs that the BLS includes as a ‘job’ in the Household Survey.
If you lose your high-paying financial industry job and then become a day trader or hedge fund manager or consultant or web site operator or professional gambler or ‘talent’ scout, you are employed as far as the Household Survey is concerned, whether you have earnings or not. And if your spouse takes a job selling real estate or also becomes a consultant, your household now has produced a net 1 new job (2 new jobs minus your job loss). And if a formerly unemployed household member becomes your assistant or helper, your job loss has produced two new net jobs as far as the Household Survey is concerned.
For those that have not paid attention or are new to our report or are insufferable permabulls, we will once again cite the BLS verbatim from the "Employment Situation Explanatory Note" to its monthly employment report as to the questionable employment it counts as jobs.
"Household survey. The sample is selected to reflect the entire civilian noninstitutional population. Based on responses to a series of questions on work and job search activities, each person 16 years and over in a sample household is classified as employed, unemployed, or not in the labor force.
People are classified as employed if they did any work at all as paid employees during the reference week; worked in their own business, profession, or on their own farm; or worked without pay at least 15 hours in a family business or farm. People are also counted as employed if they were temporarily absent from their jobs because of illness, bad weather, vacation, labor-management disputes, or personal reasons.
Differences in employment estimates. The numerous conceptual and methodological differences between the household and establishment surveys result in important distinctions in the employment estimates derived from the surveys. Among these are:
--The household survey includes agricultural workers, the self-employed, unpaid family workers, and private household workers among the employed. These groups are excluded from the establishment survey.
--The household survey includes people on unpaid leave among the employed. The establishment survey does not.
--The household survey is limited to workers 16 years of age and older. The establishment survey is not limited by age." http://www.bls.gov/news.release/empsit.tn.htm
The final arbiter of US jobs, IRS data, has shown little of no job growth the past few years, which contradicts the Household Survey.
You can ‘DK’ the ISM employment opinion surveys; they don’t include firms that have gone tapioca…PS - the household survey is subject to lying about one’s predicament – few people like telling strangers that they are indigent or unemployed. And there is the quality of jobs issue – as low paying gigs proliferate.
Remember the Atlanta example we mentioned in the spring? BLS said Atlanta had 84k new jobs in 2003, but the state later discovered that it had lost 65k jobs because the BLS did NOT sample closed firms.
California has discovered it has a big drop in jobs for July. San Francisco Chronicle: "California lost 17,300 payroll jobs in July, the state Employment Development Department reported Friday, an unexpected drop that overshadowed a slight dip to 6.1 percent in the state's unemployment rate." http://www.sfgate.com/cgi-bin/…004/08/14/MNG51886891.DTL
-END-
The following was sent to me by
http://www.otcjournal.com/
It is well written and gets right to the point of where we are today regarding the US stock market. The bulls are running with their earnings argument for higher stock prices. The bears like me are pointing to the fact that the good news is all behind us and that the stock market’s continuing fade tells us what lies ahead:
***
The chart you are looking at (compliments of the Agile Trader) represents a very strange and rare anomaly. You won't see it very often, and it won't stay this way for very long. Something will break hard, either one way or another.
The black line represents the level of the S&P 500 since December of 1998. The blue line is the operating earnings of the S&P 500 over the same time frame.
Note that up until about March of this year, the lines have roughly followed each other. Prices generally lead earnings by a few months as the market adjusts for perceived growth or deterioration.
Point A on the chart represents the beginning of '00 decline. Point B represents the subsequent beginning of the earnings decline. Note the two events are about six months apart.
Point C represents an unusual anomaly. The price of the S&P has radically and visibly diverged from the earnings line. Prices have fallen sharply while earnings have continued to accelerate at the most rapid pace in six years. This divergence cannot last. The lines have to begin to move in the same direction in the near future.
Here's the Big Question- Which line will move towards the other? Is the market accurately forecasting an earnings collapse, wherein the blue line will turn down and follow the black line, or will the market shake off the current IOU (interest rates, oil, uncertainty) fears, and turn back up in concert with earnings? That is the $64,000 question, and the one we will explore today.
The bullish argument is simple; In a word: EARNINGS. Earnings estimates for the S&P 500 stand at $66.77 for '04, and $73.20 for CY '05 (9.3% growth). This is exactly the kind of earnings growth the market loves. Not too radical to the upside. Steady and sustainable.
The PE ratio for the trailing 52 weeks stands at 16.9. For the next 52 wks, the PE ratio stands at 15.3. These are historically low levels in a low interest rate environment. Even with the FED raising interest rates, their policy is still highly accommodative to growth.
From Thomson Financial on August 9th:
This quarter will represent the 4th consecutive quarter of 20% growth or better for the S&P 500 index, which has only occurred twice in the past 25 years. More companies are beating estimates and fewer companies are missing estimates than during an average quarter. With 450 companies reporting earnings, 69% have come in above analyst estimates, 16% have matched estimates, and 15% have come in below estimates. In a typical quarter, 58% of companies beat the estimates, 22% match estimates, and 20% miss the estimates. In the aggregate, companies are beating the estimates by 4.3%, which is below the record high 7.9% recorded in the Q104, but above the historical average of 3%.
In short, earnings are strong and rising. Earnings growth rates are subsiding, but still remain healthy. A number of the smaller issues I cover in the OTC Journal have reported growth, growth, growth, and the stocks keep going down, down, down.
-END-
THE SAD NEWS.
CNBC AND THEIR COMMENTATORS ARE RAVING ABOUT THE ECONOMY AND THAT RETAIL SALES ARE SURE TO IMPROVE, SEE WAL-MART'S STELLAR PERFORMANCE IN INCREASING THEIR SALES.
THE SAD NEWS IS THAT MILLIONS OF PEOPLE INCLUDING WEALTHY AND PREVIOUSLY WEALTHY AND MYSELF WHO USED TO NEVER SET A FOOT INTO WAL-MART NOW FIND IT NECESSARY TO BUDGET MUCH MORE STRINGENTLY. THE INCREASE IN WAL-MART TURNOVER IS IN MY VIEW SIMPLY PROOF HOW TOUGH IT IS GETTING IN NORTH AMERICA AND HOW MUCH POORER PEOPLE ARE OFF BECAUSE OF FAILED ECONOMIC POLICIES AND FRAUDULENT MARKET INTERFERENCE, CAUSING MILLIONS OF INVESTORS TO LOOSE FORTUNES.
CHINA'S TRADE SURPLUS WITH THE U.S., WHICH INCREASED FROM $12 BILLION TO $14 BILLION IS MOSTLY DUE TO WAL-MART.
THE JOKE.
CNBC GUEST COMMENTATOR, UPON HEARING THE HUGE TRADE DEFICIT FIGURES:
"THIS IS PROOF HOW GREAT THE AMERICAN ECONOMY IS DOING AND HOW POORLY THE ECONOMIES OF EUROPE AND ASIA ARE DOING. THE FOREIGNERS ARE TRULY DOING POORLY, BECAUSE THEY CANT AFFORD TO BUY AMERICAN PRODUCTS, WHILST AMERICANS ARE DOING GREAT, BECAUSE THEY CAN AFFORD TO BUY MORE FOREIGN PRODUCTS."
HAVE FUN
ELMAR
Unfortunately, Mahendra nailed it again. From his 2004 WORLD & FINANCIAL PROPHECIES book, Page 19 - second paragraph:
"A hurricane will once again hit the USA East coast area around August. The hurricane will result in heavy damage and the people in the affected area should therefore brace themselves."
The strongest hurricanes affecting Florida usually hit in September.
Mahendra Mania is breaking out all over. Even my ex-wife Karen subscribed to his service (http://www.mahendraprophesy.com). This weekend he alerted his subscribers to look for a stock market rally and for oil to fall 10 to 15%. Those who bought the opening on the one and sold the opening on the other have big smiles. Crude oil closed at $46, down 58 cents per barrel.
Spoke to the "M" man this afternoon. He is all excited about what is in store for gold and silver, not only in the next couple of days, but the next couple of months. Oh yes, he is long platinum too. It has rallied over $80 per ounce in three weeks:
October platinum
http://futures.tradingcharts.com/chart/PL/A4
The HUI gapped up over its downtrend line on the opening and remained firm all day long, closing at 194.51, up 4.66
HUI
http://bigcharts.marketwatch.c…&o_symb=hui&freq=1&time=8
The XAU gained 1.85 to 89.69.
Chuck Cohen has been very impressed with the Newmont action. It keeps coming back and is very close to breaking out:
Newmont closed at $41.99, up $1.07.
http://new.stockwatch.com/swne…utilit_snapsh_result.aspx
Meanwhile, the smaller golds remain dismal. Some don’t even trade and many investors can’t wait to get out of them on rallies. Very strange, yet VERY BULLISH. As gold moves up from here, they will all take off all of sudden with no sellers in sight.
Frank Veneroso is VERY high on X-Cal Resources, who has been a stout GATA supporter for many years. I believe it is the largest holding in his gold fund. Frank says they have the real deal. Their CEO, Sean Kennedy, is top notch.
I am surprised from time to time by some of the responses I receive from Café members. For example, some do not realize that MIDAS is me, Bill Murphy. Don’t know why that is except I have not made it obvious to all. For others I have not made my background clear enough. Yes, I am a graduate of the School of Hotel Administration at Cornell University in Ithaca, New York and did play Pro Football with the Patriots about a hundred years ago.
Because of my anti-Wall Street/establishment views, one which have become more strident as the years have passed since The Café opened in early September 1998, other Café members probably think I am an angry radical and too downbeat on New York/Washington. Yes, I do think the elitists have taken America down the wrong path (big time), but it is a cultivated opinion acquired after focusing on the reality of the goings-on in Washington/Wall Street over the last six years. It is not anything I could have thought of in my wildest imagination based on where I started and from what I thought I knew just a number of years back.
....
Speaking of fun. Ironically, I just heard from an old friend whom I dated in New York as a bachelor when living in Manhattan. If any Café member is thinking about the hottest spot in Florida to go to, South Beach is it. It's something else. And if so, you might want to contact one clever woman, Rhonda Gainer, who knows the score down in that part of Florida. I know, I used to live in South Beach and was a part owner in a restaurant there before moving on to Coconut Grove, Florida, etc., and then on to DALLAS!
If you want to be on top of the South Beach scene, give my friend Rhonda a call. Voila:
http://www.ehopeinternational.com/secondsummer2004.html
Rhonda, another Cornellian and in great shape, is sharp as a tack!
GATA BE IN IT TO WIN IT!
MIDAS
