Monday, April 27, 2009

Bottom Forming? Don't Think So

Good Evening Folks!

I hope everyone had a great Monday. Stocks dropped mildy today after an extremely violent overnight session in the futures.

The GM reorg news this morning helped pull the market out of its overnight futures funk. In my opinion GM is still heading straight to BK. The bondholders get shafted in this deal and its probably safe to say that they will take their chances in BK court. The same thing goes for the Chrysler deal.

Basically, the government was once again successfully able to kick the can down the road when it comes to facing an economic nightmare. Today it was the autos. Whats it gonna be tomorrow? Commercial real estate?

Anyone else sick and tired of the can kicking that seems to be happening in almost every sector of the economy? God forbid we face the music and attempt to fix these problems.

KICK KICK KICK...This seems to be the governments only response to the economic time bombs that we now see throughout our economy. I guess its a lot easier for Ben and Tim to stay in denial and tell us they see signs of recovery then it is to actually work on solutions.

I think Manchester United needs to sign one of these guys up to be their striker. I mean Christ: Pele never kicked as much as these clowns have in the past couple years.

Green Shoots

Is anyone else getting totally annoyed with this saying? Kudlow from CNBC needs to be gagged and thrown into a closet. God that man annoys the piss out of me!

There are no "green shoots" in the economy folks. All I see is a giant dustbowl!

Deflation continues to rule the day as unemployment soars:

Anyone seeing any green shoots above? Yeah me either. I see nothing but a giant collapse that continues to build. CPI actually fell into negative territory at -.4. This was the first time in history that this has ever occurred.

Should we be surprised? When you have no job you cannot consume. When there is no demand for products prices collapse. This is completely devastating to an economy. Ask someone from Japan how it all worked out for them. They are still reeling from a 25 year collapse as a result of deflation.

The "green shooters" have it wrong here folks. Let me explain why:

There are signs that areas of the economy are stabilizing. The problem is the "green shooters" are reading this as a recovery indicator. This is NOT the case.

What we saw late last year was a complete collapse in demand for products. In response to this collapse in demand manufacturers collapsed production and thus supply. Steel producers today running at 40% capacity is a good example of this. They were running over 90% a year ago.

The signs of stabilization that we are seeing are not signs of increased demand. Its a result of dwindling inventories due to pullbacks in production. Consumer demand is still extremely soft, but the difference now is they are not buying off of excess inventories.

Since inventories are now depleted in some areas, manufacturers must now slightly increase production in order to fill new orders. This shows up in the numbers as positive growth but this statistic is deceivingly wrong.

Demand is still dead as a doornail! However, inventories now reflect this. I expect the economic production numbers going forward to be flat to negative after this blip up here in the 1st quarter because inventories now are on par with demand.

Bottom Line:

The "green shoots" will soon be weeds. Futures are in the red after hours and the bounce looks to be losing steam. Lets keep a close eye on the swine flu and treasuries over the next week.


Let me preface this by saying that I pray that the swine flu disappears. I have no desire to see a pandemic.

However, I find it so ironic that a pig virus is developing into a serious threat to our economy. It was the pigs on Wall St that brought us down this road to economic hell.

How fitting would it be if a pig virus turned out to be the "Black Swan" that triggered a stock market collapse?


ryan said...

W$ definitely has its own swine flu.

Jeff said...


They didn't need this virus.

They got sick three years ago!

Joey said...

Enjoyed your last paragraph very much.

Fuzz said...

Goldilocks sez drill drill drill for mustard seeds. Irresponsible moron can wipe his a hole with green shoots.

Jeff said...


Thanks bud.

I gotta admit I liked that too after writing it.

Some nights these thoughts just pop into my head. Other nights I gotta admit its a struggle especially when the market is pretty calm.

Jeff said...


I hear you man.

Imagine how much money Kudblow jerkoff cost people if they stayed in stocks at the top after listening to this tool.

Jeff said...

Holy Sh*t

Treasury plans on borrowing $360 billion in the April to June quarter. The previous record for spending was $60 billion in '03.

This is F'ing ridiculous:

"WASHINGTON, April 27 (Reuters) - The U.S. Treasury Department said on Monday it expects to borrow $361 billion of marketable debt in the April-June quarter, up $196 billion from earlier estimates, as government spending soars in the deepest and longest recession in decades.

The amount is a record for the quarter, in which borrowing usually diminishes because most Americans' annual income taxes are filed by April 15. Borrowing needs include $200 billion to support Federal Reserve liquidity programs aimed at reviving lending after the housing market crash and surge in credit defaults.

The previous record borrowing for the April-June quarter is $60 billion in 2003.

The Treasury cited weak revenues and greater spending to support economic recovery programs as among reasons for greater borrowing needs.

The Treasury said it expects to borrow $515 billion of marketable debt in the July-September quarter. In the January quarter it borrowed $481 billion, slightly less than earlier estimates.

The Treasury on Wednesday announces its quarterly debt refunding needs. (Reporting by Mark Felsenthal; Editing by Neil Stemple"

Jeff said...

Futes down again tonight



Another interesting start to the morning tomorrow.

Jeff said...

WSJ reporting Citi and BofA need to raise more capital.

Futures just dumped on the news.

Stress test results are leaking out folks. I don't think we will need to wait until the 4th to find out who the problem children are!

I would not be surprised to see both of these banks get broken up or put into receivership.

Tomorrow is going to be very interesting.

ES noe -12.25

Anonymous said...

Thank you for the timely updates.

teddy bear said...

American cars (not only BIG3) and Ben (mechanic)


Jeff said...

Post up around 7:30

Jeff said...

Great read Teddy