Fin/Inv

It is the same story but two vastly different headlines.

Gold (GLD; daily chart above) has shown quite the compressed trading range since the early 2009 stock lows, frustrating bulls and bears alike. It's on my longer-term watchlist as a breakout candidate, particularly if we continue to sustain weakness in USD. As a surrogate currency and possible beneficiary of a reflationary/inflationary outlook, gold could become quite a story on a break above $1000/oz.
.

From HotelNewsNow.com: STR reports US performance for week ending 22 August 2009

In year-over-year measurements, the industry’s occupancy fell 7.2 percent to end the week at 60.4 percent. Average daily rate dropped 10.2 percent to finish the week at US$95.70. Revenue per available room for the week decreased 16.7 percent to finish at US$57.84.

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week trailing average).

The three week average is off 7.3% from the same period in 2008.

The average daily rate is down 10.2%, and RevPAR is off 16.7% from the same week last year.

Comments: This is a multi-year slump. Although the occupancy rate was off 7.3 percent compared to last year, the occupancy rate is off over 11 percent compared to the same week in 2007.

The end of July through the beginning of August is usually the peak leisure travel period. So the peak occupancy rate for 2009 was probably a month ago at 67%. And that is far below normal.

Earlier this year business travel was off much more than leisure travel. So it was expected that the summer months would not be as weak as earlier in the year. September - after Labor Day (Sept 7th) - will be the real test for business travel, and for the hotel industry.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

1:19pm EDT: I’m all packed and ready to head out the door - here’s one final updated count chart for you rats:

The bulltarts really don’t want to let this one go - so expect a lot more of this whipsaw until the tape finally picks a direction. Notable this morning was a distinct incrase in participation as evidenced by the signal line on the Zero Lite. At least we’ve got ourselves a bit of a battle going on.

The Dollar is hanging on - so far so good. Again, this correlation can detach for a while - but in conjunction with recent investor sentiment readings it does provide supportive evidence that there will be a strong headwind for equities moving forward. The easy pickings most likely have come to an end.

I actually grabbed just a few more Spiders and Cubes at today’s highs plus I have a few stingy GTCs in the queue. If I don’t check in before tomorrow afternoon - have yourselves a great weekend my intrepid stainless steel rats!

Cheers!

Mole

Another nice graphic from FinViz: Note how, among the actively traded currencies, the market recovery has been led by New Zealand and Australia vs. the U.S. dollar (top chart). The currencies of the resource producing countries, as a whole, have fared better than those of the resource consumers; countries most affected by economic crisis and rising debt levels have also seen their currencies lag.

But it turns out that AUD/USD is not a bad proxy for risk appetite in the recent market. If you note the second chart from the bottom, you'll see that AUD dropped precipitously during the market crisis, as investors sought the safe haven of USD. While stocks made their bottom in March, AUD held its late 2008 lows and proceeded higher, with peaks roughly corresponding to those in stocks: a relatively flat corrective period into early July, a push to new highs, and most recently rangebound trade.

Which is why, when I saw stocks (ES futures; second chart from top) break below their multiday range this morning, I was particularly interested to see a smart snapback rally in AUD/USD (third chart from top). A five-minute chart that's a little broader (bottom chart) shows that AUD/USD actually moved nicely above yesterday's highs.

These are the kinds of little tells I look for in handicapping whether risk assets will be coming back into favor vs. rolling over. I thought the snapback in stocks, led by currency snapbacks vs. USD, was a point in favor of the equity bulls.
.

Both stocks are halted on the Canadian Venture Exchange as a result of this news that broke this morning. Lake Shore Gold has acquired West Timmins Mining and all will be managed from one entity.  See the OFFICIAL PRESS RELEASE HERE All these happenings are shaping up well in forming a new Gold Camp in the West Timmins area. Whether or not this story is related at all to the action that saw

From the Financial Times: ‘Cash-for-clunkers’ sales disappoint Detroit (ht James)

[S]igns are already emerging that overall sales will fall back sharply now that the incentives have expired.
...
[Edmunds.com] estimates that, based on visits to its websites, “purchase intent” is down 11 per cent from the average in June ...
excerpted with permission

It now appears that sales in August were at about a 16 million SAAR (auto sales for August will be released next week).

This follows an 11.22 million SAAR in July. The Cash-for-clunkers program started on July 24th.

If sales in September are 11% below June - that would put sales at under 9 million SAAR - the lowest sales for this cycle, and perhaps at the lowest rate since the early '70s. Of course the program just ended, but it will be interesting to see how much Cash-for-Clunkers cannibalized future sales.

1,000 Banks to Fail In Next Two Years: Bank CEO - Private Equity and Hedge Funds * US * News * Story - CNBC.com Shared via AddThis

I recently posted about some interesting features on the FinViz site; as a reader perceptively noted, another useful feature is its tracking of S&P 500 sector groups in real time.

Above we see a one day and one week tracking for the groups. Note how "Basic Materials", which in their scheme includes both oil-related and other raw materials stocks, has been lagging in performance, mirroring commodity weakness. That commodity weakness, in turn, has been sensitive to lagging performance in emerging market stocks and currencies.

I'm watching this theme carefully, as the emerging market story--and aggressive emerging market stimulus--has led the risk rally since March.
.

by Rebecca Wilder

Thrill. The Conference Board reported that the August consumer confidence index (CCI) jumped 14% in August to 54.06. In contrast, the August University of Michigan Consumer Sentiment index (CSI) fell; but the two generally trend together, and the CSI is subject to revisions reported tomorrow.

Confidence can be swayed by current political agenda or asset prices, but nevertheless, it is a coincident measure of the business cycle. And broken down into its two components – the present economic situation index and expectations index – the August report was quite positive (as positive as can be coming off of record lows).

The expectations index surged almost 16% in August to 73.48, its highest level since December 2007 and 2.7% over its previous high in May 2009. The current conditions index grew around 7%, but is hovering at low levels with no strong sign of improvement.

Clearly, the expectations index is making much more headway than the present situation index. And this is why that information is important: historically, the expectations index, rather than the current conditions index, is a good indicator of consumer spending growth.



The chart illustrates annual personal consumer spending growth and the two components of the CCI, with associated simple correlation coefficients. The correlation between the overall CCI and annual PCE spending growth spanning June 1977- June 2009 is 0.63. However, the biggest weight is coming off of the expectations component of the CCI, correlation = 0.69, rather than the present situation component of the CCI, correlation = 0.45.

On the other hand, the present-situation component of the CCI is a decent indicator of current labor market conditions.



The chart illustrates annual employment growth (measured by the nonfarm payroll), and the two components of the CCI. The simple correlation between the overall CCI and employment growth is 0.59 (noticeably smaller than the PCE correlation), which according to its correlation, is more heavily weighted by the present situation component of the CCI.

Based on this simple analysis, the CCI reading is consistent with an oncoming surge in spending growth over the next six months. Even in the recovery after the 1991 recession, when the expectations index improved quickly while spending growth was sluggish to rise, spending growth jumped from essentially 0% annual growth to almost 3.6% in just four months - after the surge in expectations index and before the bottom in the current conditions index.

Yes, there are plenty of credit-related issues why this might not happen. And there is an obvious economic link between employment, income, and spending. However, for those indicators that are critical to recovery, i.e., consumer spending (housing and inventories are important, too - see the second chart on this post), the expectations index is certainly a positive signal for spending events to come.

In a story I’ve continued to keep my eyes on, the FDIC reported today that they are essentially broke, going RED this quarter after the number of failed institutions this year reached 81. The FDIC also reported the number of problem US banks and thrifts rose sharply to 416 in the second quarter of 2009 from 305 in the prior quarter. The FDIC fund plunged 20% and they see the rate of troubled

In the last few days, we have noted how short interest is at multi-year lows and newsletter writers are more bullish than at any other time since the start of 2008. While the so-called pros are bullish, individual investors apparently need more convincing. According to this week's survey of the American Association of the Individual Investors (AAII), only 1/3 of...

Yesterday we noted that 93% of stocks in the S&P 500 were trading above their 50-day moving averages. That number has come in slightly with today's declines, but it's still above 90%. Below we highlight where the sectors stand using this indicator. As shown, Financials and Energy have the highest percentage of stocks above their 50-days at 95%, followed closely...

The Litany of Lies has once again appeared from a government agency:

"While challenges remain, evidence is building that the U.S. economy is starting to grow again," said FDIC Chairman Sheila Bair.

Bullshit.  The economy is not growing; capacity utilization is not expanding, hours worked have no durable upward trend, job loss is continuing and consumer spending and borrowing are both contracting.  This is a flat lie.

Chairman Bair went on to say, "The FDIC was created specifically for times such as these. No matter how challenging the environment, the FDIC has ample resources to continue protecting depositors as we have for the last 75 years. No insured depositor has ever lost a penny of insured deposits...and no one ever will."

Alan Greenspan disagreed in 2003 that "The FDIC was created specifically for times such as these."  Indeed, it was his opinion that The FDIC in many ways CREATED times such as these!

The benefits of deposit insurance, as significant as they are, have not come without a cost. The very process that has ended deposit runs has made insured depositors largely indifferent to the risks taken by their depository institutions, just as it did with depositors in the 1980s with regard to insolvent, risky thrift institutions. The result has been a weakening of the market discipline that insured depositors would otherwise have imposed on institutions. Relieved of that discipline, depositories naturally feel less cautious about taking on more risk than they would otherwise assume. No other type of private financial institution is able to attract funds from the public without regard to the risks it takes with its creditors' resources. This incentive to take excessive risks at the expense of the insurer, and potentially the taxpayer, is the so-called moral hazard problem of deposit insurance.

Of course you wouldn't expect Sheila Bair to admit to this little problem.....

"Deteriorating loan quality is having the greatest impact on industry earnings as insured institutions continue to set aside reserves to cover loan losses," Chairman Bair noted. "Of all the major earnings components, the amount that insured institutions added to their reserves for loan losses was, by far, the largest drag on industry earnings compared to a year ago."

And yet its not enough.  The failures this year have shown repeatedly that banks have been chronically under-reserving and claiming "values" for assets that are the work of either pure magical thinking or outright fraud - take your pick.  The outcome is the same - hideous losses to the FDIC's DIF that should not take place and hundreds if not thousands of banks that, while operating today, are in fact insolvent and remaining open only due to hiding the true "value" of their so-called "assets."

The number of institutions on the FDIC's "Problem List" rose. At the end of June, there were 416 insured institutions on the "Problem List," up from 305 on March 31. This is the largest number of institutions on the list since June 30, 1994, when there were 434 institutions on the list. Total assets of "problem" institutions increased during the quarter from $220.0 billion to $299.8 billion, the highest level since December 31, 1993.

According to Chris Whalen the number is more than four times your claimed number.  I believe Chris.  Readers may believe whatever they would like, but given the FDIC's record of refusing to close clearly-insolvent banks, including those who declare negative Tier 1 ratios in public filings, I wouldn't believe anything that comes out of the FDIC.

Additions to the contingent loss reserve during the second quarter caused the fund balance to decline from $13.0 billion to $10.4 billion.

And yet the true losses keep turning out to be much higher than estimated.  Worse, these balances reflect only cash paid out, not estimates - which of course are not realized losses until the so-called "resolution" is complete and contingent liabilities are either realized or extinguished.

We've broken below the overnight lows from 8/25, as risk aversion themes--selling in commodities, buying of Treasuries, buying USD--are weighing on stocks (ES futures above). Selling pressure is significant, with no NYSE TICK readings even making it to +500 so far this morning. I am watching to see if we accept value below those 8/25 lows; if so, we're setting up a short-term downtrend, which is following the many non-confirmations that I have been blogging about.
.

The FDIC released the Q2 Quarterly Banking Profile today. The FDIC listed 416 banks with $299.8 billion in assets as “problem” banks in Q2, up from 305 banks with $220.0 billion in assets in Q1, and 252 and $159.4 billion in assets in Q4 2008.

Note: Not all problem banks will fail - and not all failures will be from the problem bank list - but this shows the problem is significant and still growing.

The Unofficial Problem Bank List shows 391 problem banks - and will probably increase this week.

Click on graph for larger image in new window.

This graph shows the number of FDIC insured "problem" banks since 1990.

The 416 problem banks reported at the end of Q2 is the highest since 1993.

There has been some concern that the FDIC has been slow to add banks to the problem list - and a number of failed banks were apparently never on the official list.

The second graph shows the assets of "problem" banks since 1990.

The assets of problem banks are the highest since 1993.

And the banking industry posted a net loss for the quarter:

Burdened by costs associated with rising levels of troubled loans and falling asset values, FDIC-insured commercial banks and savings institutions reported an aggregate net loss of $3.7 billion in the second quarter of 2009. Increased expenses for bad loans were chiefly responsible for the industry’s loss. Insured institutions added $66.9 billion in loan-loss provisions to their reserves during the quarter, an increase of $16.5 billion (32.8 percent) compared to the second quarter of 2008. Quarterly earnings were also adversely affected by writedowns of asset-backed commercial paper, and by higher assessments for deposit insurance.

On the Deposit Insurance Fund:

On June 30, 2009, a special assessment was imposed on all insured banks and thrifts. For 8,106 institutions, with assets of $9.3 trillion, the special assessment was 5 basis points of each institution’s assets minus Tier 1 capital; 89 other institutions, with assets of $4.0 trillion, had their special assessment capped at 10 basis points of their second quarter assessment base.

The Deposit Insurance Fund (DIF) decreased by $2.6 billion (20.3 percent) during the second quarter to $10.4 billion (unaudited). Accrued assessment income from the regular and the special assessment increased the fund by $9.1 billion. Interest earned, combined with realized gains on securities and debt guarantee surcharges from the Temporary Liquidity Guarantee Program added $1.1 billion to the fund. Unrealized losses on available-for-sale securities combined with operating expenses reduced the fund by $1.3 billion.

The reduction in the DIF was primarily due to an $11.6 billion increase in loss provisions for bank failures. Twenty-four insured institutions with combined assets of $26.4 billion failed during the second quarter of 2009, the largest number of quarterly failures since the fourth quarter of 1992, when 42 insured institutions failed. For 2009 through the end of the second quarter, 45 insured institutions with combined assets of $35.9 billion failed at an estimated current cost to the DIF of $10.5 billion.

The DIF’s reserve ratio was 0.22 percent on June 30, 2009, down from 0.27 percent at March 31, 2009, and 1.01 percent one year ago. The June figure is the lowest reserve ratio for the combined bank and thrift insurance fund since March 31, 1993, when the reserve ratio was 0.06 percent.

by Bruce Webb

Yeah well Marc Antony was not quite telling the truth, either. You could see this particular re-write of history coming a mile away and it is time to stop this one in its tracks. Both Parties Mourn Loss of Kennedy in Health-Care Debate

Three GOP senators suggested in their remembrances of Kennedy that Democrats will need more than respectful conversation to gain bipartisan support for a health-care bill. Sens. John McCain (Ariz.), Orrin Hatch (Utah) and Judd Gregg (N.H.) lamented Kennedy's absence in the negotiations.

"I think we may have made progress on this health-care issue if he had been there," McCain told CNN. "He had this unique capability to sit people down at a table together -- and I've been there on numerous occasions -- and really negotiate, which means concessions. And so, he not only will be missed, but he has been missed."

"I believe if he had been active the last few months, we would have some sort of consensus agreement," said Gregg, a passionate advocate of Medicare reform who has sat out Senate deliberations on perhaps the most extensive revisions ever to that program.

"We would have worked it out. We would have worked it out on a bipartisan basis," Hatch, who co-authored numerous health-care bills with Kennedy over the years, said on CNN. "I'll be happy to work in a bipartisan basis any day, any time . . . but it's got to be on something that's good and not just some partisan hack job."

This is complete and utter bullshit, and a blatant attempt to rewrite the history of the last eight weeks. To see why follow me under the fold.


Kennedy did his part on health care, his Committee, Senate Health, Education, Labor and Pensions or HELP, passed its bill out of Committee on July 1st. My blog post on this was here: Kennedy-Dodd HELP Bill w/CBO Scoring For convenience lets throw the CBO tables in here:



The response to the HELP bill was almost immediate. Max Baucus declared it DOA and announced that Senate Finance would re-write the ENTIRE bill including the parts not normally under the jurisdiction of his Committee. Moreover in doing so he formed what was originally a Gang of Seven that included four Republicans but froze out Kennedy ally Rockefeller who was actually was and is the Chairman of the Finance Sub-Committee on Health. The whole process was a big ol' F-U to Kennedy and everybody knew it.

Now Republicans are trying to claim that if only Kennedy had been around he would have been able to work out a compromise, apparently in the form of throwing away ever principle it had ever held by making "concessions" which in the context of how Senate Finance has been handling things means complete and total surrender to the Republicans and the Insurance Companies.

It is Bullshit. Full Stop. Kennedy already made tremendous concessions in the course of issuing the HELP Bill. It cost were scored out at a third less than the preliminary version sent for scoring to CBO, a severe trimming that was accomplished by covering a much smaller proportion of the population than that of the House Tri-Committee Bill. Whereas the latter bill is projected to cover 97% of the total LEGAL NON-ELDERLY population, Kennedy's HELP Bill only scored as covering 90% of that same population and leaving 34 million uninsured. If anything Kennedy-Dodd bent over backwards to accomodate the fiscal concerns of the Blue Dogs and Republicans and STILL got spat in the face by Baucus for their trouble.

Republicans are already, and predictably trying to re-write history to suggest that Kennedy 'obviously' would of given up even more than he did. Well too bad, that was never going to happen, and certainly shouldn't happen now. The answer for Democrats is to take the HELP Bill off the table, replace it with the much stronger Tri-Committee Bill and tell these hypocritical, crocodile tear crying Republicans to piss up a rope while Dems pass a real Kennedy-Dingel Bill.
______________________
By the way you will see reporting that Kennedy's bill covered 97% of the population while costing $350 billion less than the Tri-Committee. This is apples and oranges reporting. If you examine the table above the Kennedy bill leaves 10% of legal American residents uninsured and 34 million people total, about twice what the House bill does as seen below.

rdan


REMARKS BY THE VICE PRESIDENT
ON THE PASSING OF SENATOR EDWARD M. KENNEDY
The Department of Energy
Washington, DC

THE VICE PRESIDENT: Well, Mr. Secretary, thank you and your staff for the privilege of being with you today on what, as I prepared last night, was to be a joyous occasion, announcing another step in the direction of energy independence. And you said the President made a wise choice. The wisest choice the President made was asking you to be -- I mean that sincerely -- to be the Secretary to the Department of Energy. You've assembled a first-rate staff, and you've taken on a role that is going to be a -- is going to, in large part, determine the success of these next three-and-a-half years, whether or not we make a genuine dent, genuine progress in moving toward an energy policy that can help America lead the world in the 21st century as it did in the 20th century.

Some suggest we're trying to do too much. But my response is, is there any possibility of America leading the world in the 21st century without a radically altered energy policy? It is not possible. And that charge has been given to one of the most remarkable men to serve in a President's Cabinet, a Nobel laureate who is as articulate as he is obviously bright, and a man who has assembled a staff that can corral the bureaucracy -- and we're all -- deal with bureaucracy, we're all part of it -- in a way that I haven't seen in awhile.

And I had planned on speaking to the Clean Cities Program as one of the several initiatives we have to begin to reshape our energy policy. But as if Teddy were here, as we would say in the Senate, if you'd excuse a point of personal privilege, I quite frankly think it's -- would be inappropriate for me to dwell too much on the initiative that we're announcing today and not speak to my friend.

My wife Jill, and my sons Beau and Hunter, and my daughter Ashley -- and I don't say that lightly, because they all knew Teddy, he did something personal and special for each one of them in their lives -- truly, truly are distressed by his passing. And our hearts go out to Teddy Jr., and Patrick and Kara, and Vicki, with whom I spoke this morning, and the whole Kennedy family.

Teddy spent a lifetime working for a fair and more just America. And for 36 years, I had the privilege of going to work every day and literally, not figuratively sitting next to him, and being witness to history. Every single day the Senate was in session, I sat with him on the Senate floor in the same aisle. I sat with him on the Judiciary Committee next -- physically next to him. And I sat with him in the caucuses. And it was in that process, every day I was with him -- and this is going to sound strange -- but he restored my sense of idealism and my faith in the possibilities of what this country could do.

He and I were talking after his diagnosis. And I said, I think you're the only other person I've met, who like me, is more optimistic, more enthusiastic, more idealistic, sees greater possibilities after 36 years than when we were elected. He was 30 years-old when he was elected; I was 29 years-old. And you'd think that would be the peak of our idealism. But I genuinely feel more optimistic about the prospect for my country today than I did -- I have been any time in my life.

And it was infectious when you were with him. You could see it, those of you who knew him and those of you who didn't know him. You could just see it in the nature of his debate, in the nature of his embrace, in the nature of how he every single day attacked these problems. And, you know, he was never defeatist. He never was petty -- never was petty. He was never small. And in the process of his doing, he made everybody he worked with bigger -- both his adversaries as well as his allies.

Don't you find it remarkable that one of the most partisan, liberal men in the last century serving in the Senate had so many of his -- so many of his foes embracing him, because they know he made them bigger, he made them more graceful by the way in which he conducted himself.

You know, he changed the circumstances of tens of millions of Americans -- in the literal sense, literally -- literally changed the circumstances. He changed also another aspect of it as I observed about him -- he changed not only the physical circumstance, he changed how they looked at themselves and how they looked at one another. That's a remarkable, remarkable contribution for any man or woman to make. And for the hundreds, if not thousands, of us who got to know him personally, he actually -- how can I say it -- he altered our lives as well.

Through the grace of God and accident of history I was privileged to be one of those people and every important event in my adult life -- as I look back this morning and talking to Vicki -- every single one, he was there. He was there to encourage, to counsel, to be empathetic, to lift up. In 1972 I was a 29 year old kid with three weeks left to go in a campaign, him showing up at the Delaware Armory in the middle of what we called Little Italy -- who had never voted nationally by a Democrat -- I won by 3,100 votes and got 85 percent of the vote in that district, or something to that effect. I literally would not be standing here were it not for Teddy Kennedy -- not figuratively, this is not hyperbole -- literally.

He was there -- he stood with me when my wife and daughter were killed in an accident. He was on the phone with me literally every day in the hospital, my two children were attempting, and, God willing, thankfully survived very serious injuries. I'd turn around and there would be some specialist from Massachusetts, a doc I never even asked for, literally sitting in the room with me.

You know, it's not just me that he affected like that -- it's hundreds upon hundreds of people. I was talking to Vicki this morning and she said -- she said, "He was ready to go, Joe, but we were not ready to let him go."

He's left a great void in our public life and a hole in the hearts of millions of Americans and hundreds of us who were affected by his personal touch throughout our lives. People like me, who came to rely on him. He was kind of like an anchor. And unlike many important people in my 38 years I've had the privilege of knowing, the unique thing about Teddy was it was never about him. It was always about you. It was never about him. It was people I admire, great women and men, at the end of the day gets down to being about them. With Teddy it was never about him.

Well, today we lost a truly remarkable man. To paraphrase Shakespeare: I don't think we shall ever see his like again. I think the legacy he left is not just in the landmark legislation he passed, but in how he helped people look at themselves and look at one another.

I apologize for us not being able to go into more detail about the energy bill, but I just think for me, at least, it was inappropriate today. And I'm sure there will be much more that will be said about my friend and your friend, but -- he changed the political landscape for almost half a century. I just hope -- we say blithely, you know, we'll remember what we did. I just hope we'll remember how he treated other people and how he made other people look at themselves and look at one another. That will be the truly fundamental, unifying legacy of Teddy Kennedy's life if that happens -- and it will for a while, at least in the Senate.

Mr. Secretary, you and your staff are doing an incredible job. I look forward to coming back at a happier moment when you are announcing even more consequential progress toward putting us back in a position where once again can control our own economic destiny.

Thank you all very, very much. (Applause.)

Since 1900, the Dow has had 130 seven-day winning streaks. The average change on day 8 has been 0.10%, while the average change for all days since 1900 has been 0.02%. The average change over the next week following 7-day winning streaks has been 0.59%, while the average change for all weeks since 1900 has been 0.12%. Below we highlight...

With the stock trading above $40 in the pre-market and up 409% since its lows in July, one would think that AIG would be at its highs for the year. However, the stock still needs to rally an additional $2 from current levels to eclipse the $43.80 level it reached in early May. While highs for the year are currently...

Nothing to like here....

In the week ending Aug. 22, the advance figure for seasonally adjusted initial claims was 570,000, a decrease of 10,000 from the previous week's revised figure of 580,000. The 4-week moving average was 566,250, a decrease of 4,750 from the previous week's revised average of 571,000.

Yeah, ok - a quick look at the table shows the following:

There has been no meaningful change.  Today's number was 570k, last week 580k, August 8th 561k.  Right up the middle.  Oh, last year was 433k.

The insured total dropped to 6,133,000, a drop of 119,000.  But it looks like (we don't have current-week numbers) most of that "drop" was in fact people rolling off onto extended benefits, where they're no longer in the headline number.

The bottom line remains that the employment situation remains extremely weak and shows no real sign of improvement.  Yes, it is leveling off - but we're more like flat on our back than anything else.

No consumer, no economic recovery.  No jobs, no consumer.

Its pretty simple folks.

Recent asset class reviews have focused on grains, industrial metals, Treasury debt, and crude oil, gold, and the U.S. dollar. In this look, we will examine U.S. corporate bonds: investment grade (LQD; top chart) and high yield (JNK; bottom chart).

Note that bond prices plunged during the late 2008 crisis, as investors fled riskier debt and sought safe haven in Treasury instruments. Interestingly, one tell for the market bottom in March was the fact that we made new lows in high yield bond prices, but not investment grade.

Since that time, investment grade bonds have steadily moved higher, retracing much of their decline from 2008. High yield bonds have retraced only a portion of their total declines, but note that their percentage gain from the March lows has been higher than that for investment grade bonds. This, like the rally in emerging market equities, is an example of how we have seen riskier assets lead the way during the 2009 recovery.

Most recently, the new highs in LQD have not been confirmed by JNK. That is just another one of the non-confirmations on my radar, as riskier assets have recently underperformed safer ones. I am watching these intermarket themes closely to see if the dynamics of the market recovery are changing or if this is simply an August pause that refreshes the risk rally.
.

With the S&P going nowhere for the last 3 days, traders may want to review this study from July.

I don't have time for a new study right now, but will hopefully get something out later today related to trading this type of environment.

The DOL reports weekly unemployment insurance claims decreased to 570,000:

In the week ending Aug. 22, the advance figure for seasonally adjusted initial claims was 570,000, a decrease of 10,000 from the previous week's revised figure of 580,000. The 4-week moving average was 566,250, a decrease of 4,750 from the previous week's revised average of 571,000.
...
The advance number for seasonally adjusted insured unemployment during the week ending Aug. 15 was 6,133,000, a decrease of 119,000 from the preceding week's revised level of 6,252,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims decreased this week by 4,750 to 566,250, and is now 92,500 below the peak in April. It appears that initial weekly claims have peaked for this cycle.

The number of initial weekly claims is still very high (at 570,000), indicating significant weakness in the job market. The four-week average of initial weekly claims will probably have to fall below 400,000 before the total employment stops falling.

You knew it wouldn't be that easy.....

Aug. 27 (Bloomberg) -- The Federal Reserve argued yesterday that identifying the financial institutions that benefited from its emergency loans would harm the companies and render the central bank’s planned appeal of a court ruling moot.

"Harm the companies" eh?  You mean reveal that they are and have been insolvent, and The Fed has been engaged in covering them up?

“What has the Fed got to hide?” said Senator Bernie Sanders, a Vermont independent who sponsored a bill to require the Fed to submit to an audit by the Government Accountability Office. “The time has come for the Fed to stop stonewalling and hand this information over to the public,” he said in an e-mail.

The Fed is hiding the insolvency of banks.  They, along with their handmaidens in Congress (which is where you work Mr. Sanders) even went further and twisted the arm of FASB to legalize intentional accounting distortions that I argue amount to fraud.

The truth of what has been done keeps peeking around the corner in the form of bank failures and FDIC deposit insurance fund losses, with the latest charade being Colonial Bank that was carrying assets thirty seven percent above where its acquiring bank believes is a reasonable mark on the day prior to being taken over, and which in the FDIC's last published release was considered "well-capitalized!"

These losses and the costs of this cover-up are being forcibly extracted from The American People literally at gunpoint through the issuance of hundreds of billions of Treasury Debt which we, our children and grandchildren will have to repay - a staggering total that the CBO and Obama Administration now admit will total nine trillion dollars over the next ten years.

“Experience in the banking industry has shown that when customers and market participants hear negative rumors about a bank, negative consequences inevitably flow,” Norman Nelson, vice president and general counsel for the group, said in the document.

Experience in the banking industry has shown that when you countenance false and inflated marks on assets losses inevitably flow (to the taxpayer) and the longer and more-involved the conspiracy to cover up these losses continues, the worse they are.

We did this in the 1980s with the S&Ls.  Now the banking industry and Federal Reserve have the gall to try to defend an identical outrage in the courts.

May Judge Preska deny the motion for a stay.

I hate to be the bearer of bad news, but as I'm sure you're already aware, almost all data seems to be indicating a bottom in housing.

Despite the claims of the Calculated Risk blog (which I have echoed), the bottom appears to have occurred simultaneously in permits, starts, sales, and prices.

The bottom also appears to have occurred simultaneously in nearly all parts of the country. The S&P/Case-Shiller seasonally-adjusted home price index shows month-over-month increases in price for 15 of the 20 metropolitan areas it tracks, including here in the Washington, DC area.

The bottom in housing is coinciding with the bottom of the economic cycle (i.e. the end of the recession).

Housing permits:


Housing starts:


Housing prices (via Rebecca Wilder):

There is a somewhat strong possibility that the $8,000 first-time home buyer tax credit, which ends November 30, is creating a false housing bottom.

By transferring wealth from some taxpayers to others (apparently a Democratic Party specialty), the tax credit is creating artificial housing demand. As confirmation of the effect of this wealth transfer, we can observe a similar pattern in auto sales due to the Cash For Clunkers program. Cash For Clunkers artificially stimulated auto sales by rewarding gas guzzler owners with a $3,500-$4,500 tax credit to buy slightly less gas guzzling vehicles. (We fuel-efficient car owners get to pay the tab via our taxes.)

Low mortgage rates are also stimulating housing demand. Mortgage rates today are lower than they were earlier in this decade when they helped fuel the housing bubble. These historically low mortgage rates are likely to remain low for some time, as the Fed and Treasury do everything they can to strengthen the economy.

Just as the Fed happily encouraged a housing bubble to stimulate the economy after the 2001 bubble burst-caused recession, I fear it will happily encourage another bubble to stimulate the economy after this one. As the stock market demonstrated earlier this decade, a new bubble can form before the previous one completely deflates.

Stock market double-bubble:


The big question is, what is the primary driver of current housing activity? Is it the $8,000 tax credit, which will go away soon, or is it the historically low interest rates, which won't?

The Cash For Clunkers program, and the fact that housing activity is much stronger at the low end of the market, suggest that perhaps the $8,000 tax credit is the primary driver. Low mortgage rates should equally encourage sales of all conforming mortgages, regardless of price. By contrast, the tax credit should heavily favor low-end sales. This is because an $8,000 tax credit is 10% of the cost of an $80,000 house, but only 2% of the cost of a $400,000 house. The fact that new home buyers are currently making up a disproportionately large percentage of home buyers is further evidence of the first-time home buyer tax credit's effect.

That said, as the tax credit stimulates housing activity and prices, it may change market psychology. Rising prices and low mortgage rates may then encourage others to jump on the bandwagon, causing yet another housing bubble before the current one has fully deflated. I can't predict the future, but this is a possibility that worries me.

What could prevent such a scenario? If Nouriel Roubini's warning that the economy may experience a double-dip recession comes to pass, then that will likely knock the wind out of the housing market a second time. However, the upward sloping Treasury yield curve—the most reliable and far-sighted leading economic indicator—suggests this will not happen.

Rebecca Wilder expects home sales to surge in the next few months as the end of the tax credit nears. Due to data lag, we likely won't know until spring 2010 whether home prices continue falling after the tax credit expires.

Many thanks once again to Damon Pavlatos and FuturePath Trading for hosting my recent webinar on best practices for traders. I know many traders could not attend the live event; thanks to FuturePath, the archived presentation is now available. Alternatively, you can find the link on the right side of FuturePath's home page. As always, I appreciate the interest. I look forward to the next free webinar, hosted by IOAMT. I'll have registration info posted shortly. Brett

From Reuters: U.S. mortgage delinquencies up in July: Equifax

Among U.S. homeowners with mortgages, a record 7.32 percent were at least 30 days late on payments in July, up from about 4.5 percent a year earlier and 7.23 percent in June, according to monthly data from the Equifax credit bureau.

There numbers aren't directly comparable to the MBA quarterly numbers, but this shows that delinquencies are still rising.

Public Service Announcement: I am leaving for San Diego tomorrow morning - so this will be my last post until Monday morning. Fujisan is back in the good ole’ U.S. of A. and has volunteered to occasionally put up a comment cleaner. I will check in every once in a while but don’t expect any charts or analysis - I’m taking the rest of the week off. Subscribers know where to find me - I have set the Zero and all trading signals on auto-pilot and with some luck it won’t all blow up in my absence

Here’s one more for the road: As you have you been painful witness to - the tape is painting some complex sideways fourth wave in my estimation - tough to read. All three scenarios are still in play and I do expect more upside before she breaks for good. It is possible that we will paint the the final leg of Primary {2} in my absence - which is just fine by me as I’m well positioned at this point. I will of course monitor the tape whenever I can - with good luck we touch 1045 and I get to go on my final shopping spree.

I think I have made myself fairly clear by now - but in case you have been spending the past week in an Al Quaeda cave somewhere here’s Mole’s motto for the end of August: Sell The Rips!

May the market daemons have mercy on your soul!

Cheers,

Mole