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Friday, June 19, 2009

Unemployment: 1/4 of Sates > 10%

"Unless hiring magically picks up, a 10 percent unemployment rate is pretty much baked in." -Mark Vitner, Wachovia Corp.

FN: This is easily the most important news event of the day... as it goes to:

1) Stress Test, both Base Case and Adverse Scenario
2) "Green Shoots" theory...
3) The "Re-flation Trade"...
4) The "Car Industry Bottoming Theory"
5) The "Home Prices Bottoming Theory"
6) The "Equities are in a New Bull Market Theory"

Nuff said.

Unemployment of 10% Spreads, Risking U.S. Recovery (Update1): "More than one-quarter of American states now have unemployment rates higher than 10 percent, and all but two saw a further job-market deterioration in May.

Tennessee and Indiana joined the rank of states, now 13, that have jobless rates exceeding 10 percent, and eight states - - including California, Florida and Georgia -- reached their highest level of joblessness in May since records began in 1976, the Labor Department reported today in Washington.

The figures make it likely President Barack Obama, whose home state of Illinois also passed 10 percent for the first time since 1983, was correct this week in forecasting the national unemployment rate will reach that level this year. With no region escaping the rout, consumers across the country will probably curtail their spending, preventing any boom out of the deepest recession in half a century, analysts said.

“It’s tough everywhere,” said Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina. “Nobody’s really been spared.” The biggest increases in unemployment will be in states most dependent on manufacturing, construction and financial services, he said.

For the country, “unless hiring magically picks up, a 10 percent unemployment rate is pretty much baked in,” Vitner said."

Thursday, June 18, 2009

Mortgage Lift Off: Checkmate Bernanke

FN: This is a really important development if it doesn't immediately reverse... and I mean immediately things will get ugly quickly.

Tyler Durden over at Zero Hedge caught the disaster with pretty pictures in We Have Mortgage Lift Off.

This may have something to do with the fact that the Fed just drained the liquidity swamp some today. Karl Denninger over at the Market Ticker has all the gory details in Fedwatch.

Bernanke is stuck and he doesn't have many options left.

Financials: Charts Say "Decisions Time" Update2

This is an update to the post Financials: Charts Say "Decision Time" Update1.

BKX is now sitting on support at the 50 day EMA (red line). Failure to hold here will result in a pretty steep drop as significant support is quite a ways off.

KRX couldn't get passed the resistance of the both the 20 and 50 day EMAs (blue and red lines) and has now slid below the previous pivot around $39.00.

All this talk of "Green Shoots" and the Philadelphia Mortgage Finance Index (MFX) peaked and rolled over in the first week of May. MFX is now below the 20 and 50 day EMAs (blue and red lines). The 200 day EMA (green line) might as well be on mars.

The fact the KRX and MFX have both already rolled over increases the odds that BKX will follow. When that does occur, the implications for the broader markets are obviously not good.

Put / Call Ratio: Spiking

FN: During extended period of Bullish sentiment, the Put/Call ratio drop significantly and stayed low... with the 20 and 50 period EMAs (blue and red lines) sliding well down to 0.85. When these shorter EMAs move up thru the 200 day EMA (green line) after a prolonged stay below, a trend change in equities is foreshadowed.

During this massive Bear market rally, the Put/Call ratio dropped to significantly and stayed there. It has now pushed decidedly higher and is that much closer to signaling a trend change. The top equities is in.

Tuesday, June 16, 2009

Elections: Storms Brewing as Jobs Disappear

“Those who recommend integration must be considered pea-brained even if they are scholars and scientists. Just try mixing oil and vinegar. Then shake the bottle. After a moment the two substances will separate again. Do you really believe French society could absorb ten million Muslims, who would be twenty million tomorrow and forty million the day after? In fact, my own village would no longer be Colombey-les-deux-Églises but would rather come to be known as Colombey-les-deux-mosques.” -French President Charles de Gaulle, 1959

FN: This quote was used by Geert Wilders (yes, pictured above) in his election victory speech at Copenhagen. Full text here. His Party of Freedom wants to halt immigration from non-western countries. More and more of the Dutch population feels the same... as jobs disappear.

Things will get ugly over the next few years. This Generational Storm and Ethnic Storm is just getting started.

Generational Storm and Ethnic Storm

FN: I've posted about demographics from a variety of different angles. There's the "Generational Storm" argument, which I presented in the post Age Wave Theory: Expect a Long Economic Winter. Then there is the "Ethnic Storm" argument, which I presented in three posts: 1) Hyperinflation First, then Global War, 2) Global Violence, Gold: But Not Yet, 3) Global Protests, Riots, Violence as Economies Unravel.

Some countries face just one of the two demographic problems, such as Japan.

Others face both problems simultaneously. Britain, Germany, Russia and quite a few of the Baltic states must struggle with both. Already elections in Britain, Germany, Hungary, Austria, Romania, Ukraine and France have resulted in, or are projecting scary shifts to the fringe right (as defined by autocratic, xenophobic policies). This is a result of rapidly imploding economies... which ironically are the result of rapidly imploding demographics. The "graying populations" and ridiculously low birth rates of these major economies played no small part in finally ending this massive global credit bubble.

Edward Hugh over at Fistfuls of Euros a detailed "Generational Storm" argument in The Clock Is Ticking Away Under Latvia.

Interestingly enough in Iran the demographic situation is completely reversed. There a obscenely large percentage of the population is young (median again 26.4 years). This makes for a volatile mix all the same. The youth is unemployed and angry. Iran: It's the Economy Stupid.

Related Blogs: (Economics AND Demographics)
The Japan Economy Watch
French Economy Watch
German Economy Watch
Greece Economy Watch
Italy Economy Watch
Spain Economy Watch
Baltic Economy Watch

Major Distribution Day

FN: The up trendline from the March lows was decisively snapped yesterday. Prices closed below both the 20 and 200 day EMAs (blue and green lines). Volume increased slightly but is still low. (Although we are now far enough into June to get into the summer doldrums in terms of volume.)

More importantly, this was a Major Distribution Day. The first since early May.

Iran: It's the Economy Stupid

FN: At great risk to their safety millions of ordinary Iranians are trying to peacefully protest a stolen election. While the catalyst for these demonstrations was an election, the election issues were the economy and unemployment.

Iran May Recount Some Votes After Protesters Killed (Update1): "Iran’s Guardian Council, which supervises elections, may order a recount of some votes in the disputed presidential ballot after the biggest anti-government demonstrations since the Shah was deposed in 1979.

The council, made up of 12 clerics and lawyers, may authorize a second count in areas where President Mahmoud Ahmadinejad’s victory was questioned, state television quoted Abbas Ali Kadkhodaei, the body’s spokesman, as saying in Tehran today. He said all three challengers in the June 12 election had made “vague” complaints and were asked to elaborate. Kadkhodaei didn’t say what proportion of the 39 million votes cast may be reviewed.

Supporters of former premier Mir Hossein Mousavi, who accuse the authorities of vote-rigging, plan a fourth day of demonstrations with a gathering in Tehran’s Valiasr Square, where Ahmadinejad’s supporters also plan to gather. As many as eight people were killed and 25 injured yesterday when security forces fired on protesters, the British Broadcasting Corp. reported, citing state radio."

FN: Iran has a very interesting demographic profile. With nearly 25% of the population under 15 years of age, the country has a median age of 26.4 years. Translation; the population is young AND unemployed. This is a volatile mix.

"The protests are pitting young Iranians and more educated voters who want social freedoms and better ties with the West against the Islamic republic’s clerical rulers. Ahmadinejad is accused by his opponents of wrecking the economy, which suffers from high unemployment and inflation, and driving Iran into international isolation through his confrontation over the nuclear program."

Before the fall of the Shah the country was secular. It was a zealous minority that forced a brutal theocracy upon the masses. Expect more Protests, Riots, Violence as Economies Unravel.

As Bill Clintion would say, "Its the economy stupid." Well, the economy is not good and the people are angry.

Monday, June 15, 2009

Transports Diverge

FN: The DOW Jones Transportation (TRAN) index is stuck at resistance. The supply from Oct to Dec of 2008 is pretty large. The declining 200 day EMA (green line) is further weight and the previous high of 3458 is yet another hurdle.

TRAN was down on Friday when the broader markets "broke out higher" intraday.

TRAN didn't even bother to try. This kind of divergence should not be ignored.

Record Job Losses in Europe

FN: Jobs. There aren't any. No jobs, no "Green Shoots" and nothing but a Bear Market rally in equities. Nuff said.

Europe Payrolls Shrink by Record 1.22 Million Jobs (Update1): "Europe’s economy lost a record 1.22 million jobs in the first quarter as companies cut spending to survive the worst global economic slump in more than six decades.

Employment payrolls in the 16-member euro region fell 0.8 percent from the fourth quarter, when they declined 0.4 percent, the European Union statistics office in Luxembourg said today. The first-quarter drop was the biggest decline since the data series started in 1995. From a year earlier, payrolls contracted 1.2 percent, the first annual decline on record.

The euro-area economy may struggle to gather strength after shrinking at the fastest pace in at least 15 years in the first quarter. Even as indications mount that the worst of the recession may be over, unemployment is near a 10-year high and forecast to rise more as industries from auto makers to airlines reduce output and staffing to weather the economic crisis.

“Companies will continue to cut jobs well into 2010, pushing up unemployment across the region,” said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. “While the economy may start to stabilize, the worst is still ahead in terms of the labor market.”"