International Forecaster Weekly

Apologies But No Change At The Banks

Big apologies but no change in behavior, a rise in consumer confidence, a rise in scandals, a shaky us earnings season, negative corporate outlooks, HSBC in a flaky apology, Barclays takes one for the team.

Matt Gilloti | July 14, 2012

As we moved through the week we saw another decrease in consumer confidence along with the price of gas rise and a jump in the cost of food as the price paid to producers rose. It is beyond the humorous point of stupidity that reports released said that the rise was unexpected. With the Eurozone debt crisis increasingly expanding affecting US markets, heavily damaged Midwest corn crops that will surely affect future food and feed costs, summer gas prices rising due mostly in part over the uncertainty with Iran which will in turn affect transport costs and these report posting morons act as if there was no prior economic signs that would signal a rise in the price of consumer staples such as food and gas with their rise in costs posted as unexpected is an absolute disgrace.

The world in which we live today has seemingly traded common sense for ignorance and stupidity. We now see that the manipulative market rigging that has been screamed from the bell tower is now beginning to rapidly play out in the public forum and yet we still see the majority of people turn their heads in disbelief and continue, along with life as usual... while the big companies that are brought to the forefront in huge manipulation scandals, are continuing with business as usual while being made to conform to minimal punishment practices... really HSBC found to be laundering money for drug cartels and possible terrorists and their course of action is to apologize at a hearing in front of the US Senate.

Are those not possibly the same drug cartels and terrorists killing people by beheading them and dumping their body parts on the side of the highway or those killing tourists and ICE agents or the terrorists who would so readily attack American soldiers? And what we get is a we are sorry from HSBC, as if the socialist run public media circus is not insulting enough on a daily basis as to our intelligence and understanding of how things really play-out in the world of the untouchable elitists.

It only helps to reassure us that the interconnection of power amongst the Fed, US government, Big Bankers, billionaire elitists and so on is completely untouchable as if the thought of doing so would be insulting to the remaining power parties. It would seen as we have seen lately that these socialistic global power players seem to look on with admiration instead of disgust at how long one another can play out their hand and how much wealth they can steal or degrade before getting caught.

As it would seem the continual attack against our personal wealth and severe degradation of our constitutional rights will continue on until public outrage outweighs the current head in the sand complacency we now see within fearful citizens struggling to get by while misguidedly trusting their future survival to the same group of people who so willingly to date have placed most of them in the position in which they now reside.

US Markets

J.C. Penney Co Inc announced another 350 job cuts at its Plano, Texas headquarters, completing a reorganization of its home office designed to help it bring costs in line with those of rivals.

The department store chain, which is involved in a radical transformation including a new pricing strategy and the remodeling of its fleet of 1,100 stores, said the cuts will contribute to its previously announced plan to reduce costs by $900 million a year by the end of 2012.

The Plano, Texas-based retailer said in April it would lay off 600 workers at its headquarters. As of January 28, 2012, the company had 159,000 employees.

Inventories at U.S. wholesalers increased only mildly in May as sales showed the largest drop in more than three years on declining petroleum prices.

U.S. wholesalers' inventories increased by 0.3% from the prior month to a seasonally adjusted $484.13 billion, the Commerce Department said Wednesday. Economists surveyed by Dow Jones Newswires had forecast a 0.4% gain.

Sales for wholesalers were down 0.8% in May to $409.63 billion. That was the steepest decline since March 2009.

Fuel prices abated in May after a run up earlier in the year. Wholesale petroleum purchases fell 4.7% and wholesale petroleum inventories dropped 3.6%, as measured in dollars.

Total non-durable goods inventories moved down 0.2% as declining fuel stockpiles offset increased inventories of drugs and groceries.

Meanwhile, inventories of durable goods increased by 0.6% in May, led by restocking of autos, up 1.3% during the month, and machinery, up 1.4%.

Wholesalers must carefully monitor their inventory levels as consumer spending appears to be weakening. Those businesses don't want warehouses of goods they can't sell, but also want to be able to meet demand of shoppers who have proven to be resilient, despite a rocky overall recovery.

Consumer spending was flat in May for the first time in six months, a government report released last month said. The pullback could reflect consumers becoming more skittish amid weak job creation, the ongoing debt crisis in Europe and the possibility of dual tax hikes and spending cuts in the U.S. early next year.

Still, consumer spending has been major a driver of overall economic growth since the middle of 2009. But a slower build up of private inventories contributed to the gross domestic product growing at only a 1.9% rate in the first quarter compared to a 3.0% annualized gain in the fourth quarter of 2011.

The government's first estimate of second quarter growth is due out later this month.

Wednesday's report showed the amount of wholesale goods on hand relative to sales in May was 1.18, the highest level in 10 months. April's inventory-to-sales ratio was 1.17. The ratio measures how many months it would take for a firm to deplete its current inventory.

In April, overall wholesale inventories increased 0.5%, according to revised data. A 0.6% gain was initially reported. Sales for that month were revised down to a 0.6% gain versus the prior reading of up 1.1%.

The U.S. budget deficit grew by nearly $60 billion in June, remaining on track to exceed $1 trillion for the fourth straight year.

The Treasury Department says the deficit through the first nine months of the budget year totaled $904.2 billion.

President Barack Obama is almost certain to face re-election after running trillion-dollar-plus deficits in each year during his first term in office.

The Congressional Budget Office predicts the deficit for the full year, which ends on Sept. 30, will total $1.17 trillion. That would be a slight improvement from the $1.3 trillion deficit recorded in 2011.

The imbalance for the budget year, which began Oct. 1, is 6.8 percent below the level for the same period a year ago. Revenues are up 5.2 percent so far this year.

 

The number of U.S. workers filing applications for jobless benefits fell to the lowest level in more than four years, as some factories skipped their typical summer shutdown.

Initial jobless claims fell by 26,000 to a seasonally adjusted 350,000 in the week ended July 7, the Labor Department said Thursday. It was the biggest drop since January, sending claims to their lowest level since March 2008.

Economists surveyed by Dow Jones Newswires had forecast 370,000 new applications for jobless benefits last week.

Jobless claims--a measure of layoffs--have fallen for three consecutive weeks, offering hope that the labor market could be improving after slowing sharply in recent months. The four-week moving average of claims, considered a more-reliable measure because it smoothes out weekly volatility, fell by 9,750 to 376,500--the lowest level since late May.

Last week's sharp drop appeared to be due largely to seasonal factors, and not necessarily a new surge of momentum in the jobs market. Many auto factories typically shut down in early July, usually leading to a sharp rise in claims. This year, there have been fewer shutdowns, in part because of high demand for new cars, a Labor Department economist said. On a non-seasonally adjusted basis, claims rose last week.

Still, the seasonally adjusted drop in claims in recent weeks offers hope that the labor market might be slowly improving. Last week, the government reported that the economy added just 80,000 jobs in June, only slightly better than May's job growth. The unemployment rate remained stuck at 8.2%. Thursday's report showed the number of continuing unemployment benefit claims--those drawn by workers for more than a week--fell by 14,000 to 3.3 million in the week ended June 30. Continuing claims are reported with a one-week lag.

The number of workers requesting unemployment insurance was equivalent to 2.6% of employed workers paying into the system in the week ended June 30, the same as the prior week.

US equities buyers should not bet on QE3 While another round of QE may please traders and bullish Wall Street analysts with lofty year-end targets on the S&P, it may do little to shift investment flows that ultimately underpin any market. More than $500bn in domestic US mutual fund equity outflows have occurred since May 2007, according to the Investment Company Institute. If two prior rounds of QE couldn’t stem the equity fund outflow, it’s hard to see why a third round will.

The problem for traders is that the prospect of QE3 is already acting to limit the downside for stocks.

With the data not sufficiently weak, the only thing that will compel the Fed to act sooner is a pronounced drop in equities. http://www.ft.com/intl/cms/s/0/bdc6e4f0-c6d8-11e1-95ea-00144feabdc0.html#axzz1ztarjVXq

 

Investors brace for shaky U.S. earnings season

Earnings season begins on Monday with U.S. companies facing a litany of issues that could make second quarter reports look dismal. Corporate outlooks are at their most negative in nearly four years and companies that have already reported have shown lackluster growth…more than 85 members of the Standard & Poor's 500 .SPX lowered expectations in the last several weeks and the quarter's expected earnings growth of 5.8 percent is entirely due to Apple Inc and a big earnings gain for Bank of America Corp due to a mortgage settlement last year.

Europe accounts for about 15 percent of S&P 500 sales…telecommunications, which has no sales exposure to Europe…technology…has the highest exposure at about 25 percent. But much of that sector's earnings growth will come from Apple. Without Apple, tech-sector growth is estimated at 3.1 percent, compared with 7.9 percent with Apple included, according to Thomson Reuters data.

Earnings growth is estimated to decline 0.4 percent without the benefit of Apple and Bank of America. Revenue is seen up just 1.7 percent, down from 5 percent growth in the first quarter, the data showed. http://www.reuters.com/article/2012/07/08/us-markets-earnings-idUSBRE8670AK20120708

 

 Bob Rinear

As has been spoken in these pages, it's become clear that the LIBOR rate has been manipulated for years by member banks. While it's Barclays that's taken one for the team so far, the fact is that the way LIBOR is accounted for, "several" banks and hence their precious CEO's have had to have been in on this.  To quote: "The FSA has identified pricerigging dating back to 2005, yet some current and former traders say that problems go back much further than that. Fifteen years ago the word was that LIBOR was being rigged, says one industry veteran closely involved in the LIBOR process. It was one of those well kept secrets, but the regulator was asleep, the Bank of England didnt care and [the banks participating were] happy with the reference prices. Says another: Going back to the late 1980s, when I was a trader, you saw some pretty odd fixings. With traders, if you dont actually nail it down, theyll steal it.


While the news is telling us that it "may" have gone on since 2007, we saw hints of it in 2005, but like everything else it was swept under the rug. So perverse is our capital structure now, that a recent Wall Street poll said that 25% of them feel fraud is "Necessary" in the modern financial world.  Now here's the sad part. 15 years ago this would have been front page, front story news on every alphabet soup news outlet on earth. Day after day the screams for justice and rolling heads would have dominated the 6 pm news for weeks. Yet despite the LIBOR affecting something like 700 trillion dollars in commerce, it has had about zero exposure. The single greatest monetary fraud of all time, a fraud that has actually affected each and every one of you, is ousted so we can hear more Cruise Holmes saga. This is certainly not by accident folks.

Do you see the pattern? The debt problem is accelerating, the political response to go the wrong direction is accelerating, the instance of fraud and theft is accelerating, the desire to ignore it in the media is accelerating. We are flying down the tracks on a run-away train. Faster and faster we're going and a colossal wreck lies ahead.

Don't let yourself get mangled in the carnage. Once more they will carpet bomb the globe with fiat dollars to stave off disaster, and the markets will run up, gold will run up, materials and oil will run up. What I have suggested for many months is that they will coordinate a massive monetary push, consisting of IMF money, along with "US and European bank" money.  Consider this...many believe Bernanke can't go on a wild printing spree simply because it would look too political just months from the election. Well, He doesn’t have to. He knows that banks have approximately 1.4 trillion dollars in excess reserves sitting idle, parked at the Fed. They'll tweak the rules, allowing Sovereign debt to be a tier one asset, with NO reserve requirement necessary. The banks will pour that trillion into buying up sovereigns, and that coupled with all the "donation money" the IMF has been collecting from Countries like Canada, China, etc, will be unleashed in one final orgy of monetary stimulus. It will be a tremendous sum. It will move everything higher. They will declare victory. They will declare the problems finished, the system fixed. Nothing will be further from the truth.

Don't be fooled. It will be the last grand hurrah before the train runs out of track. When it hits, take the market returns and learn how to go short. Continue to add to your physical gold holdings on pull backs. Like the Libor that everyone said was too big to be manipulated, gold's been held down by the same criminal banksters. One day that will end, and gold will be set free. You'll want to be part of that party for sure. 

The train wreck we've been predicting for some 7 years is here folks. We're on that very train right now and it's speeding faster and faster. Nothing will stop it, and few will survive intact. Be a survivor. Plan ahead.