Baltic Dry Index. 2756 +112
LIR Gold Target by 2019: $3,000.
"Lack of money is the root of all evil."
George Bernard Shaw
While the Baltic Dry Index has managed a rally of a thousand points since mid July, implying improving international trade, will it be enough to prevent a double dip recession, or enough to fend off the arrival next month of crash season? In fact this year round, will crash season arrive early, as early as the run in to the late summer bank holidays? We open this morning with Bloomberg as gloomy as ever. This time it’s different, says Bloomberg, at least in a mainstay sector of the US economy. Below Bloomberg covers the real estate collapse following the ending of subsidies.
“I think we agree, the past is over.”
President George W. Bush.
Housing Slide in U.S. Threatens to Drag Economy Into Recession
Aug. 23 (Bloomberg) -- Housing led the U.S. out of seven of the last eight recessions. This time, it may kill the recovery.
Home sales collapsed after a federal tax credit for buyers expired in April. Since then, the manufacturing-led expansion, which began in the second half of 2009, has been waning, with jobless claims rising and factory orders falling.
“If foreclosures continue to mount and depress home prices, that could send the economy back into a recession,” said Celia Chen, an economist who tracks the industry for Moody’s Analytics Inc. “The housing market and the broader economy are closely intertwined.”
Spending on home construction and items such as furniture and stoves accounted for about 15 percent of gross domestic product in the second quarter, according to West Chester, Pennsylvania-based Moody’s Analytics. Real estate also can influence consumer spending indirectly. When values soared in the mid-2000s, people used the boost in equity to pay for cars and vacations. After prices fell, homeowners lost that cushion and curbed spending.
A report tomorrow by the Chicago-based National Association of Realtors will show July sales of existing homes plummeted 12.9 percent from June, the biggest monthly loss of 2010, according to the median estimate of economists surveyed by Bloomberg.
New-home sales, which account for less than a 10th of housing transactions, stayed at the second-lowest level on record last month, economists predict Commerce Department data will show on Aug. 25.
http://noir.bloomberg.com/apps/news?pid=20601103&sid=a97ljRcJ_fBU
Below a chart worth a thousand words, all negative. The Philadelphia Fed’s hours worked index is plunging. Nothing good for the economy comes from falling hours worked.
"He who tampers with the currency robs labor of its bread."
Daniel Webster
We end for the day with more on commodity inflation. After wheat shot up in price recently due to trouble with the northern hemisphere crops, now its sugar that is surging due a sudden shift in US import policy.
AUGUST 21, 2010
Global Sugar Surges as U.S. Helps Imports
Limits on Foreign Producers Will Ease to Raise Shipments
Global sugar prices soared on Friday after the U.S. said it will ease import restrictions to help avert a national shortage.
The U.S. Department of Agriculture on Thursday said it will give foreign sugar producers a bigger window to send sugar to the U.S. over the next two months.
World prices for raw sugar reached a five-month high on Friday, rising above 20 cents a pound during the day. Sugar for October delivery finished 2.4% higher at 19.95 cents a pound.
The USDA was responding to intense lobbying from sugar users, who claimed the country was in danger of running out of sugar. The USDA this year has twice increased its import quota at the behest of sugar processors and food manufacturers. The sugar users have long been vocal critics of the government's restrictions on sugar imports, which they argue are designed to protect American farmers by keeping U.S. sugar prices inflated.
Farmers counter that the food companies are just seeking ways to boost profits. U.S. domestic sugar prices are at about 34.13 cents a pound, up 30% in 12 months.
Last week, the Sweetener Users Association, which represents large food and beverage manufacturers, sent a letter to Under Secretary James Miller of the USDA requesting early entry of next year's sugar imports, "commencing immediately."
Globally, sugar prices have surged more than 45% since the beginning of May, largely due to weather-related port delays in Brazil, the world's biggest sugar exporter, combined with a spike in demand from the Middle East and Asia during to the month-long Ramadan religious holiday. Also, floods in Pakistan ruined sugarcane crops there.
"Supply remains relatively tight in the U.S.," said Patrick Henneberry, senior vice president of commodities at Imperial Sugar Co., one of the largest refiners in the country. The USDA's decision makes it easier for some smaller exporters to ship more sugar to the U.S., he said.
Sugar is the second-most common ingredient in many bread products, and bakers are distraught over high prices, said Robb MacKie, president and chief executive of the American Bakers Association. The fall is the peak time of sugar use, as many manufacturers start to build up inventories of finished products to go into the winter.
In better commodity news, parts of agricultural Russia got rain over the weekend, brining hope for next year’s crop about to get planted next month if the rain continues. Relief cannot come too soon. The continuing flood disaster in Pakistan has destroyed much of their wheat crop and stocks, and while the world has wheat inventory to replace it, the prospect of back to back problems in northern hemisphere agriculture is worrisome.
At the Comex silver depositories Friday, final figures were: Registered 51.01 Moz, Eligible 60.33 Moz, Total 111.34 Moz.
+++++
Crooks and Scoundrels Corner.
The bent, the seriously bent, and the totally doubled over.
Today, the logical outcome of allowing fat cat front-running of order stream in US stocks. Count me out say thousands of small investors in stock funds. They seem to be putting their money in bond funds instead. With another flash crash highly probable thanks to Wall Street greed, who can blame them, although I’m sure quite a lot see a difficult time ahead for the US economy and with it a difficult time for US stocks. With that view it makes sense to sit out the next year in safer bonds. Below the NY Times covers Wall Street’s killing of its golden goose.
“The world is a place that’s gone from being flat to round to crooked.”
Mad Magazine.
In Striking Shift, Small Investors Flee Stock Market
By GRAHAM BOWLEY Published: August 21, 2010
Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market.
Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.
If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.
Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday.
One of the phenomena of the last several decades has been the rise of the individual investor. As Americans have become more responsible for their own retirement, they have poured money into stocks with such faith that half of the country’s households now own shares directly or through mutual funds, which are by far the most popular way Americans invest in stocks. So the turnabout is striking.
So is the timing. After past recessions, ordinary investors have typically regained their enthusiasm for stocks, hoping to profit as the economy recovered. This time, even as corporate earnings have improved, Americans have become more guarded with their investments.
“At this stage in the economic cycle, $10 to $20 billion would normally be flowing into domestic equity funds” rather than the billions that are flowing out, said Brian K. Reid, chief economist of the investment institute. He added, “This is very unusual.”
The notion that stocks tend to be safe and profitable investments over time seems to have been dented in much the same way that a decline in home values and in job stability the last few years has altered Americans’ sense of financial security.
More.
http://www.nytimes.com/2010/08/22/business/22invest.html?_r=1
"I was part of that strange race of people, aptly described as spending their lives doing things they detest to make money they don't want to buy things they don't need to impress people they dislike."
Emile Henry Gauvreay
The monthly Coppock Indicators finished July:
DJIA: +264 Down. NASDAQ: +427 Down. SP500: +275 Down.
The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. July seems to have confirmed June’s reversal and end of the bull market.
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