Thursday, June 11, 2009

Spots in their eyes

Greetings good citizen,

While the stock market itself seldom makes much ‘sense’ it seems as though not everyone is rolling over and playing dead. Today’s bond sale ‘surprised’ to the ‘upside’ as the “buy all you want, we’ll print more crowd” was forced to pay more interest on their bonds in order to attract buyers.

But you saw that coming, didn’t you?

The stock markets scream and shriek that they need lower interest rates, then the bond market comes back and puts the Treasury’s nuts in a vise.

And so it goes.

Well, tonight’s offering isn’t about today’s bond market sale, it’s about the ‘Happy Talk’ being spouted by the Fed…

Economy Remains Weak, but Fed Sees Bright Spots

Published: June 10, 2009

Economic conditions in the here-and-now may be dreary, but the Federal Reserve said Wednesday that at least one thing is improving: expectations for the future are improving in [too few] scattered areas.

That was one of the conclusions of the Fed’s June beige book, a regular yardstick of local economies in a dozen Fed districts from New York to St. Louis to San Francisco. Although the economic health “remained weak or deteriorated further” from mid-April to May, some less-bad indicators bubbled to the surface. [Now click you heels three times and chant ‘There’s no place like home!’]

Manufacturers reported a slightly better outlook.[?] Home sales bounced back in some markets.[Wherever there has been a glut of foreclosures.] Import and export traffic brightened elsewhere. And some parts of the country even said the abysmal job market was leveling out or improving slightly.

Retailers in Boston were “cautiously optimistic” about an economic recovery, the Fed said, while those in Philadelphia expected sales to “gain strength slowly.” Employers in New York expect job losses to level off in coming months.

Of course, 18 months into the worst downturn since the Depression, any signs of improvement are relative, and hope does not translate into jobs or profits.

More than six million jobs have vanished since the recession began, home prices are still falling in many markets, and businesses faced with continued losses and smaller profits are not expected to increase their hiring or investment anytime soon.

Although businesses and others in 5 of the 12 Fed districts said the sharp pace of economic declines was tapering off, that does not mark much improvement since April, when the beige book noted that 5 of the 12 noted a similar moderation. And even those who are more hopeful “do not see a substantial increase in economic activity” this year.

The economic landscape across the country remained grim. [But there’s no reason for you to be ‘grim’ as well, it’s all about ‘hope’.]

In Cleveland, manufacturers predicted that demand this year would be even lower than last, and they said they continued to make layoffs and reduce their capital spending. Commercial real-estate and development remained abysmal in different parts of the country as vacancies rose and credit stayed tight. Tourism spending fell in Atlanta. In Chicago, construction was weak, and property values fell.

The economy shrank at an annual pace of 5.7 percent during the first three months as businesses cut their costs and consumers slashed their spending in response to the financial crisis last year on Wall Street. Many economists expect the economy to contract at a slower and slower rate, before it begins to grow slightly toward the end of the year. [If there’s any evidence of this they have yet to show it.]

“While the rate of decline in economic output has slowed, there have been very few, if any, signs of an overall turnaround in consumer spending, business investment and the economy at large,” Dan Greenhaus, an analyst in the equity strategy group at Miller Tabak & Company, wrote in a note. “Stabilization, at some point, becomes stagnation.” [Yes, just because things stop falling doesn’t mean they will automatically improve, even though they will declare the ‘recession’ over.]

The Fed said that retail spending was still shaky, and that consumers seeking to stretch their budgets continued to shop for bargains and avoided luxury purchases. Discounters reported an uptick in sales — mirroring reports of strong sales at stores like Wal-Martwhile luxury hotels suffered.

Purchases of new cars were still depressed across much of the country, although auto sales picked up in Chicago as a result of sales and promotions, the Fed said.

One, count ‘em, one freaking city and these asshats are doing handsprings and cheering!

Didn’t the title of this piece claim the Fed saw ‘bright spots’ as in more than one?

Today’s bond sale was bad enough that Mr. Market finished down today, albeit not down as much as it would have been if not for that late day rally (literally the last ten minutes of trading) that’s been happening every freaking day!

It’s been so reliable that you can bet traders have been selling into it, driving down what has become an overly optimistic rally as the big trading desks attempt to ‘paint the tape’ at the end of the day.

Yves over at Naked Capitalism has noted four distinct incident over the past two weeks, I think it is more frequent than that…and I think they got their heads handed to them today!

Yeah, not everybody is rolling over and playing dead, the traders are watching.

Other articles that focused on today’s bond sale noted that rising bond prices ‘have the potential’ to nip a recovery in the bud as mortgage prices leap back up into the ‘unaffordable’ range.

So the ‘bright spot’ of higher car sales in Chicago was most likely due to disenfranchised dealers trying to ‘liquidate’ inventory.

A ‘bright spot’ that won’t be there when the next ‘Beige Book’ report is released.

But at least sales are ‘up’ at the largest employer in the US…Wal-Mart! We can all bet that China is pretty pleased with that news.

In other news it appears the Obama administration has appointed a ‘salary czar’ to oversee enforcement of executive pay in companies that have received taxpayer funds…and there was Timmy, on the radio, talking about how ‘counterproductive’ salary caps would be.

It is the wide held belief that lower profits will ‘rein in’ run-away executive pay without the need for Federal oversight…Ha!

In other ‘rumblings of the ground’ questions/comments have surfaced regarding why our financial sector remains ‘unregulated’ almost two years after it melted down…

Disturbingly, the answers aren’t pretty, it seems certain big time former investment banks would lose their shirts if more ‘transparency’ were added to the markets.

I’ve got places to be in the AM so I’ll cut it here,

Thanks for letting me inside you head,


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