Pre-Open Update

Well apparently my post on the inverse relationship between the USD and the S&P coming to an end was proved wrong. The European open (3am Eastern) resulted in breaking last weeks lows in the dollar and propelling the S&P up to a high of 13 points or 997 on the sept contract.

Looks like we are still in the midst of commoditizing our market. This is no market for fundamentals people, so consider yourself warned.

The success of universal healthcare: .64 cents on the Dollar

No way this will work on a national scale if it is already failing on a state level.

NYT

— A hospital that serves thousands of indigent Massachusetts residents sued the state on Wednesday, charging that its costly universal health care law is forcing the hospital to cover too much of the expense of caring for the poor.
The suit says the hospital will lose more than $100 million next year.

“We filed this suit more in sorrow than in anger,” said Elaine Ullian, the hospital’s chief executive. “We believe in health care reform to the bottom of our toes, but it was never, ever supposed to be financed on the backs of the poor, and that’s what has happened in Massachusetts.”

The central charge in the suit is that the state has siphoned money away from Boston Medical to help pay the considerable cost of insuring all but a small percentage of residents.

According to the suit, Massachusetts is now reimbursing Boston Medical only 64 cents for every dollar it spends treating the poor. About 10 percent of the hospital’s patients are uninsured — down from about 20 percent before the law’s passage in 2006. But many more are on Medicaid or Commonwealth Care, the state-subsidized insurance program for low-income residents…

SPENDSPENDSPENDSPEND oh yea...

BTW America you know how I promised that I would never raise taxes for 95% of all Americans? Well I lied. I went crazy with all my bailout and handouts and now that I am starting to sober up, I realize I need to pay for this somehow. Apparently foreigners aren't going to continue to buy unlimited amounts of US treasuries, so you know how I promised you I wouldn't tax you.... yea.... sorry about that....

WASHINGTON (AP) -- President Barack Obama's treasury secretary said Sunday he cannot rule out higher taxes to help tame an exploding budget deficit, and his chief economic adviser would not dismiss raising them on middle-class Americans as part of a health care overhaul.
.....
"There is a lot that can happen over time," Summers said, adding that the administration believes "it is never a good idea to absolutely rule things out, no matter what."

And on George Stephanolpolous:

To get the economy back on track, will President Barack Obama have to break his pledge not to raise taxes on 95 percent of Americans? In a “This Week” exclusive, Treasury Secretary Tim Geithner told me, "We’re going to have to do what’s necessary.”

Geithner was clear that he believes a key component of economic recovery is deficit reduction. When I gave him several opportunities to rule out a middle class tax hike, he wouldn’t do it.

We really need to stand up and write to our congressmen/women and let them know that this frivolous spending must stop.

Your Tax Dollars Contributing to Pollution on a massive scale

So let me do some simple math here 1 Billion dollars divided by $4,500 = 222,000 cars taking part in the cash for clunkers program. which means 222,000 cars spewed this kind of pollution out into the atmosphere without the EPA batting an eye....



So what do we do.... Lets let approve another $2 billion so 444,000 cars do some more damage!

More BEA BS

The Bureau of Economic Analysis released its quarterly GDP report on Friday and most news outlets decided to call this release positive.

NYT

The U.S. economy came out of its tailspin in the second quarter and may be poised to resume growing, even as new signs of economic strain showed up in Europe.

U.S. gross domestic product -- a broad measure of the value of goods and services produced -- contracted at a 1% annual rate last quarter, its slowest pace in a year. That was a marked improvement from the first-quarter contraction of 6.4% and the fourth quarter's 5.4% pullback.
....
The U.S. recession appears to be near an end, government figures suggest, even as revisions to prior years' data show that the downturn has been even more severe than previously thought.

Gross domestic product fell at a seasonally adjusted 1.0% annual rate April through June, the U.S. Commerce Department said Friday in the first estimate of second-quarter GDP. That was better than the 1.5% decline Wall Street economists had expected.

See here's the problem. all these news agencies decided to only read the first page of the report and forgot about the other 50 pages. To summarize lets announce headline numbers and then casually revise previous quarters' better than expected headline numbers down to absurdly bad numbers. Instead of shrinking at an annual clip of 5.5%, as originally reported, America's GDP shrunk at a rate of... 6.4%. Justin Lahart (who wrote the NYT article I am linking) curiously has some trouble with math because when I add 0.9% to 1.0% I get a result over 1.5%. On top of that, if we include 2008 with the first quarter of 2009, the BEA revised total GDP "growth" downward by 4.9%

No one seems to care about prior revisions. They only want to hear made up numbers that are most assuredly going to be revised down in the upcoming quarters.

Its a wonder why these print publications are losing to lowly blogs such as mine... they can't even tell the whole story. Why you ask? Because doom and gloom doesn't sell ad space.

Cas For Clunkers hits some more roadbumps.... and questions

From the NYT

With the Senate passing another 2 Billion towards the cash for clunkers program, the questions that are arising are how many more cars will this next 2 billion cover? Also there are far reaching repercussions from totaling the cars and seizing the engines.

Nick Clites, who is in charge of used cars for the dealership, was prepping a 1988 BMW 535IS, with 214,000 miles on the odometer, for its death. He drained the oil, then donned a silky blue protective suit, goggles and gloves and poured a sodium silicate solution into the engine. He revved the car, and within a few seconds, the solution hardened into a glass-like substance, the engine seized up and the car was dead.

So here is one question: With the program now on shaky ground, even with a new infusion of money, what consumer and what dealer will risk rendering an engine irretrievably unusable?
Well, as it turns out, a lot of them are doing so, because unless the dealers can prove to the government that they have killed the engines and scrapped the cars, the government will not reimburse them for the $3,500 or $4,500 discount that they have given the customer on a new, more efficient vehicle.

what happens to these scrapped cars? Usually their is a huge aftermarket for their engines, which can be rebuilt and used in cars for people who cannot afford new ones.

“Oh my God, what a mess today,” Sally Ann Maggio, who co-owns Hackensack Auto Wreckers, also in New Jersey, said on Friday. We visited her car-crushing business on Thursday. She didn’t think much of the program to begin with.

Ms. Maggio said she generally makes her profit by reselling the engines, the most valuable parts of the cars she takes, but that’s not posible with the cars coming to her because of the cash for clunkers program, because they have been rendered unusable. That cuts down the salvage value of the cars — and the incentive for salvage yards and wreckers to take them — to almost nothing, considering the time and energy they must spend in going to the dealer, towing back the dead cars, removing the engines, crushing the bodies and shipping them to a metal scrap shredder and recycler.

And, of course, the process reduces the supply of used engines for people who can’t afford to buy a new car and come to the salvage yard looking to fix up old ones.

In any case, Ms. Maggio said, dealers are “hitting the panic button” today.

“We have been overwhelmed with phone calls from the dealerships,” she said. They have already killed the engines, and want her to pick up the heaps.

Yet another example of our government thinking about immediate appeasement of our situation at the expense of the longer term problems these "solutions" create

Zombie Company AIG in need of more brai....err billions

From NYT

After Rescue, New Weakness Seen at A.I.G.
In the months since A.I.G. received its $182 billion rescue from the Treasury and the Federal Reserve, state insurance regulators have said repeatedly that its core insurance operations were sound — that the financial disaster was caused primarily by a small unit that dealt in exotic derivatives.
But state regulatory filings offer a different picture. They show that A.I.G.’s individual insurance companies have been doing an unusual volume of business with each other for many years — investing in each other’s stocks; borrowing from each other’s investment portfolios; and guaranteeing each other’s insurance policies, even when they have lacked the means to make good. Insurance examiners working for the states have occasionally flagged these activities, to little effect.

Here's the kicker:

"An organization like this one relies on constant, ever-growing premium volume, so it can cover and pay for the deficits," said W. O. Myrick, a retired chief insurance examiner for Louisiana.
If A.I.G.'s incoming premiums shrink, he warned, "the whole thing's going to collapse in on itself.

I don't really have much else to add....

Ho Hum. dollar down buy stocks...

The S&P has been almost perfectly inversely correlated with the dollar for the past couple of weeks if not more. (chart to come soon)



Today we have a break to new lows in the dollar yet the S&P is unable to make new highs.




Is this signaling the end of this rally?

here's a comment by one of my TA friends

we've gotten expansion bars on the dollar down into a test of june's low...on a friday no less...in any other market in my lifetime this would be freaking people out...ho hum dollar down buy stocks

Thank you Mr. Denninger

Politicians: Wake The Hell Up
from Market Ticker by Karl Denninger

From Yahoo News:

On the eve of the August recess, members are reporting meetings that have gone terribly awry, marked by angry, sign-carrying mobs and disruptive behavior. In at least one case, a congressman has stopped holding town hall events because the situation has spiraled so far out of control.

“I had felt they would be pointless,” Rep. Tim Bishop (D-N.Y.) told POLITICO, referring to his recent decision to suspend the events in his Long Island district. “There is no point in meeting with my constituents and [to] listen to them and have them listen to you if what is basically an unruly mob prevents you from having an intelligent conversation.”

Really?

Well Tim, guess what: you work for your constituents, not the other way around.

It would appear to this commentator that the Reps and Senators who feel "besieged" by their constituents in town hall meetings might have paid better attention in September and October when they were told by 300:1 margins not to pass the EESA/TARP bill.

Or when they were told repeatedly to NOT try to advance amnesty for illegal aliens and refuse to enforce our immigration laws.

Or when they were told repeatedly to quit bailing out the irresponsible, looking the other way while the populace is looted systematically by those in the banking and other "coddled" industries.

There are a whole host of issues like this, and Congress seems to think (because it has gotten away with it for years) that ignoring the voters is not only acceptable, but is indeed a good idea.

Let me remind Mr. Bishop, along with the other Congressfolk, that the entirety of our government serves at our pleasure, not the other way around. Specifically, let me cite The Declaration of Independence:

....That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form,uiop as to them shall seem most likely to effect their Safety and Happiness....

Loud voices of dissent and sign-waving constituents are an unmistakable sign that our government has pressed the line of tolerance, and may, if it does not reverse course, exceed it.

And before someone claims that I am some sort of "right-wing nut" or similar, let me point out that the above text is not mine - they are the words of the founders of our nation, who believed that absent consent government does not exist - that's tyranny, not government.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

How close to the line has our government come?

I have no idea, but this much I do know: I do not want to discover that the line has been crossed.

Again:

• Stop the looting and start prosecuting. The bankers, lenders and others in the "bizness side" have been literally robbing the people for over two decades. This includes both so-called "captains of the banking industry" and government officials who have looked the other way and in some cases (e.g. OTS) actively conspired to conceal the truth. Taxpayers have lost hundreds of billions as a consequence yet nobody has gone to prison for it nor are there even outstanding indictments. There is no reason on God's Green Earth why Goldman Sachs should be allowed to keep the roughly $13 billion in AIG pass-through money, nor why they should, having elected to become a bank holding company, be able to keep using their "VaR" risk model (instead of the more-stringent BANK risk limits.) There are dozens of examples; Goldman is hardly alone in this regard.



• Quit voting FOR bills you did not read - end to end! There's no excuse for this. The Stimulus Bill, EESA/TARP and more - this is absolutely common behavior and it's outrageous. Sorry, there is no emergency that demands passing a 1,000 page bill until every member has read it from one end to the other, personally. If you need to pass something fast then it needs to be simple enough that it can be read in the hour you get before the vote! I don't care what the emergency is - if you haven't read the bill cover-to-cover the only acceptable vote is NO.



• Quit spending more than you make. We are here because we have turned into a nation of Madoffs, and nowhere is it more evident than in Washington DC. We cannot have a sustainable economic recovery until the debt-to-GDP ratio is restored to a rational and sustainable ratio. This means much less spending; promising that which cannot be paid for is how we got into this mess.



• Represent your constituents and TELL THE TRUTH. We're tired of being lied to, and government has done a LOT of lying. The idea that "the economy is improving" is just one example; go ask your unemployed constituents what they think of this claim. Fact: The economy stinks and it stinks because Washington DC conspired to blow a bubble after the 2000 tech implosion. You're culpable; take responsibility and do the right thing instead of trying to blow air into a popped balloon!

Our government has become an unacceptable and unaccountable den of liars and thieves, and the people are getting damn tired of it. The evidence of extreme dissatisfaction, which may rise beyond the soapbox and ballot box if this trend is not reversed and soon, is clear. Nobody with a shred of intelligence wants to see the inevitable outcome of a government that refuses to follow the law itself, refuses to prosecute criminal wrongdoing by favored parties, and refuses to listen to the electorate on the issues of the day, instead mollycoddling those who have committed massive fraud upon the public and giving them hundreds of billions of dollars in hand-outs funded by the very people they ripped off in the first place!

Just in Bad Taste

W.H. makes CEOs pay for lunch

From Politico:

Four of the most powerful business leaders in America arrived at the White House one day last month for lunch with President Barack Obama, sitting down in his private dining room just steps from the Oval Office.

But even for powerful CEOs, there’s no such thing as a free lunch: White House staffers collected credit card numbers for each executive and carefully billed them for the cost of the meal with the president.

The White House defended the unusual move as a way to avoid conflicts of interest. But the Bush administration didn’t charge presidential guests for meals, one former official said, and at least one etiquette expert found the whole thing unseemly – suggesting it was a serious breach of protocol.

“I’m sure they have their political reasons for doing that, but I think it’s not what quote, hospitality, unquote is all about,” said Letitia Baldrige, who headed Jacqueline Kennedy’s White House staff in the early 1960s. “We’ve got to relax about this. To have people to the White House and worry about the price of things is laughable.”

Read more: http://www.politico.com/news/stories/0709/25627.html#ixzz0MqmrNESC

Same News 2 Different Headlines

Recession Worse Than Prior Estimates, Revisions Show

Recession eases; GDP dip smaller than expected

Recession worse than estimates (surprise)

GDP Dropped 1.9% vs expectations of a 0.8% decline

Bloomberg

Consumer spending, which accounts for 70 percent of the economy, decreased 1.8 percent in last year’s fourth quarter from the same period in 2007, exceeding the prior estimate of a 1.5 percent drop. Purchases also began sinking sooner than previously projected, registering their first decline at the start of 2008 rather than in the second half.

Residential construction fell 21 percent during the period, almost 2 percentage points more than previously reported, aggravating what was already the worst slump since the Great Depression.

Higher incomes and less spending translated into bigger savings. The savings rate for 2008 was revised up to 2.7 percent from 1.8 percent. The rate shot up to 5.2 percent in the second quarter, the highest level since 1998.