The Wall Street Examiner » Wall Street Examiner Exclusives Get the facts. Sat, 01 Nov 2014 00:46:17 +0000 en-US hourly 1 US Gets A BoJob As Federal Tax Collections Zoom Higher, Treasury Hoards Cash Fri, 31 Oct 2014 18:57:23 +0000 That’s right. Uncle Kuroda, the head of the Bank of Japan is giving US a BoJob and for today at least, the US stock market was feeling it. Of course, markets top out when everything looks magnificent and they couldn’t look much brighter than they do right now.

This post is an excerpt from today’s weekly Professional Edition post on the Federal Government’s cash flows. Each week these reports show in brief the details of those key flows and explains what they tell us about the US economy in real time, as well as  their impact on Treasury supply and the stock and bond markets. 

The big market mover on Friday was the BoJ’s announcement that it would increase its asset purchase rate from around $70 billion per month in US dollar equivalent terms to around $85 billion or so. Simultaneously Japan’s massive public pension fund said it would buy more stocks and fewer JGBs.  Specifically, the fund will buy approximately $150-160 billion of foreign stocks over an unspecified time. Apparently the BoJ will buy bonds from the pension fund, financing the fund’s effort to acquire more stocks. The BoJ is printing money to buy stocks. We don’t have to guess the impact.

So the Fed is quitting QE? Who cares? Japan is giving us a BoJob. As The Last Ponzi Game Standing in the world, US stocks will attract more than their share of that cash. Treasuries may occasionally catch a bid as well.

Fed, BoJ Balance Sheets and US Stocks- Click to enlarge

Fed, BoJ Balance Sheets and US Stocks- Click to enlarge


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GDP- Surprise, Surprise, Surprise…Not Thu, 30 Oct 2014 14:13:19 +0000 The advance number for third quarter GDP came in at 3.5%, surprising the Wall Street conomists, whose consensus guesspectation was 3%.

It should not have been a “surprise.”

The US Treasury reports tax collection data virtually in real time, every day. I publish a chart of the withholding tax data and report the implications of that data for the markets every week in the Wall Street Examiner Professional Edition Money/Liquidity service reports. It showed that the average inflation adjusted growth rate in Q3 was 3.55%. That data is available to the whole world in real time. Remind me again what Wall Street’s excuse is  for not understanding exactly how the economy is doing. And what about the Fed, whose economic growth perceptions are NEVER on the mark. What is its excuse?

Here’s the latest data through October 28.

Federal Withholding Taxes Growth- Click to enlarget

Federal Withholding Taxes Growth- Click to enlarge

This data has also proven to be a good indicator of whether non-farm payrolls will beat or miss conomic guesspectations.Unfortunately the BLS data is manipulated, and the seasonally adjusted headline number is absolute fiction, that gets massively revised in subsequent months and years. The tax data is real, hard data, that is never subject to major revision. If you want to know what the economy is doing, follow the money, in this case, the taxes.  Follow it in real time every week in the Wall Street Examiner Professional Edition.

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Volatility Is Here To Stay, and Here’s Why It Doesn’t Necessarily Mean Bear Market Wed, 29 Oct 2014 19:08:26 +0000 I told CNBC Africa’s Lindsay Williams on his nightly business radio program why volatility is here to stay but doesn’t necessarily spell a bear market for the US, yet. The program was recorded on Monday morning, October 27.  You can listen or download here or use the player below.


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Fed Again Issues Surreptitious SNAP Payments to Bankster Welfare Queens At Taxpayer Expense Tue, 28 Oct 2014 18:52:36 +0000 mh

UPDATE- The Fed renewed its Term Deposit facility a couple of weeks ago initially taking in $110 billion in 7 day deposits paying 26 basis points. That amount rose to $219 billion today from 69 banks.Since these payments reduce the surplus which the Fed returns to the US Treasury, the taxpayer bears the cost of the program. The US taxpayer is now on the hook for a direct subsidy to the banks on excess cash which the Fed handed them for nothing in the first place. This is an outrage. Below are the post and video I originally wrote and produced on this on June 20, 2014.


June 20, 2014 - Here’s something I missed back in May that makes me mad as hell. And it should make you mad as hell too.

The Fed has expanded its Term Deposit Operations, moving more spaghetti around on the plate, the plate being the liability side of its balance sheet- aka “money.” The Fed announced that it would do 8 weekly operations with its member banks beginning on May 19. The first 4 are at approximately 26 basis points, then the next 4 at 30 basis points. These deposits are like bank CDs with a term of 7 days.

This is a direct giveaway to the banks at the expense of US taxpayers. Subject to the $10 billion per bank limit, the banks will shift as much of their excess cash as they can from their regular deposit accounts at the Fed (aka reserves) to these higher interest bearing term deposits. This is cash which the Fed has given them for free in the first place. Earn free income from free money. Nice work if you can get it.

Last week those term deposits grew by $16 billion on the Fed’s balance sheet from an operation conducted June 2. That’s just a drop in the bucket compared to what’s coming. The June 9 operation shifted $78 billion into these giveaways.

Meanwhile the Fed will continue to send them more free cash, week in and week out under QE, even though those amounts are somewhat reduced. The trick there is that the Taper does not reduce the excess cash the dealers get because the Fed has been matching QE to Treasury supply. That’s a whole ‘nother story, however, which I cover in depth in the weekly Fed Report (next one coming up this afternoon).

This will have absolutely no impact on the Fed’s balance sheet or the Primary Dealer Balance sheets. They’re still short term liabilities to the Fed and short term assets of the banks. To the banks, there’s no practical difference between their regular deposits at the Fed and a one week term deposit. It’s all excess liquidity which can be used for mischief making whenever they damn well please. The only impact will be that the additional free income the Fed now literally hands over to the banks will increase the banks’ bottom lines. This cash will subsequently be transferred to the pockets of bank CEOs and executives in the form of increased bonuses and stock option buybacks.

These payments reduce the surplus that the Fed returns to the Treasury each month. The $78 billion of these term deposits which the Fed issued last week will show up on the H41 to be published this Thursday. The interest paid to the banks on that will come right out of taxpayers’ pockets. It’s just more welfare for the banksters at our expense.  It’s an outrage.

Another outrage–this story has gotten virtually no coverage in the mainstream media. Either the Fed snuck this past them, or the media just does not care. I suspect the latter.

The next facility grew to $93 billion. More money for nothing- a gift to the banks from taxpayers. The greatest transfer of wealth in history goes on.

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Existing Home Contract Price Increases Slowed In September on Weaker Demand Tue, 28 Oct 2014 16:38:45 +0000 The Case Shiller index of the 3 month average of April, May, June and some July sales was reported today. I won’t insult you by repeating the mainstream media reports on this number. Does the media report the April-July 3 month average price of the S&P 500? today? Of course not. It’s meaningless.

Several housing price indicators come much closer to the mark in reporting more current market levels and trends. These include the NAR’s report of their closed sales in September. Even that has a lag of 2-3 months from the contract date by the time it’s reported in late October. More timely is Redfin’s report of current contract sales prices for September, which only lags real time by 6 weeks or so.

Looking at September real time prices and trends is a lot better than the ridiculously lagged and smoothed Case Shiller index. I mean, for goodness sakes, it’s almost November! Why should we care where the market was in May?

The Realtor’s measure of September closed sales was down 4% month to month and up 5.6% year to year. There’s always a price decline from August to September. The 4% drop this year was less than the 5.3% drop in September 2013, and more than the 3.6% drop in September 2012. This year’s September drop was unremarkable. This data would typically pertain to properties that went under contract in July with some from August.

The month to month change did not suggest a material slowing in the housing inflation rate and the year to year increase of 5.6% was the strongest year to year change since March. However, this year’s increases are slower than they were last year when they hit double digits. But that’s history. The last 3 months in the NAR data showed an increase in year to year momentum, going from +3.7% to +5.1% . Is housing inflation starting to rise again?

Existing Home Prices - Click to enlarge

Existing Home Prices – Click to enlarge

The answer is “probably not.” Online real estate broker Redfin now reports real time contract prices in 38 US metros from data it collects from the local MLS in each market. These markets tend to be the best in the country, so that price levels are higher than the median for the US as a whole, but the direction of the trend is representative of the entire US. This is the closest data we have to showing us where the market is right now. It showed a month to month drop of 4.4% in September. Again, September contract prices normally show a decline from August. However, the current data was weaker than September 2013, which was down 3.2% and much weaker than September 2012 when the drop was only 2.1%.

The year to year change in September was a gain of 3.4%. Not only was that weaker than the NAR’s closed sales data annual rate of change from September, but it represented a continuation of a slowing inflation rate in Redfin’s data throughout 2014. Redfin’s data is the most current contract data available, and it suggests that as of September, housing inflation was slowing.

The graph at the bottom of the chart shows weakening sales volume. That suggests weakening demand, hence the slowing of price increases.

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The ECB isn’t really printing and the Fed isn’t really stopping Tue, 28 Oct 2014 00:51:39 +0000 Read more →

This is a syndicated repost courtesy of Radio Free Wall Street. To view original, click here.

Lee Adler pulls back the paper curtain of Wall Street propaganda on the really big news of the day that the media ignores, and a couple of charts that suggest potential trouble ahead for the markets, but still more central bank support than investors realize.

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Today’s RFWS was absolutely outstanding. (I’m glad I actually watched this one rather than just listening while running.) When it comes to financial journalism, Lee, you remain an island of sanity in a huge sea of crap. Thanks.


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Here’s Why Median New Home Sale Prices Collapsed In September Fri, 24 Oct 2014 20:46:27 +0000 The median price of new homes sold in the US in September fell to $259,000 from $286,800 in August. That’s an extraordinary drop. It left prices down 4% on a year to year basis. Does that mean that 3 years of breakneck housing inflation have come to an end? Probably not. At least we cannot conclude that from this data.

That’s because the change in median price was due to a huge change in the mix of sales. In August, 48% of sales were in the $300,000 and up range. In September 2013, that ratio was 42%. But last month, sales of $300,000 and above were just 37% of sales. The median price dropped because there were more sales of less expensive homes than is typical. It’s just one month of data, so we’ll have to see if the trend persists. Price gains in existing home sales have moderated in the past year, but there’s been no sign of outright decline yet.

Median New Home Sales Prices Drop- Click to enlarge

Median New Home Sales Prices Drop- Click to enlarge


Even With Growth, New Home Sales Still In A Depression

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Even With Growth, New Home Sales Still In A Depression Fri, 24 Oct 2014 19:22:38 +0000 There seems to be lots of confusion about today’s Commerce Department release on new home sales. The report showed that new home sales were at a seasonally adjusted annual rate of 467,000. Part of the confusions stems from the fact that that is a completely bogus, made up, fictitious number in the first place. Seasonal adjustments are arbitrary attempts to create a smooth curve and they aren’t finalized until years after the fact. In addition, annualizing a single month is insane to begin with. Analysts are trying to make sense out of fiction. In the meantime, the headline number missed the Wall Street conomist guesspectation of 475,000.

The new home sales data has the benefit of being contract data reported just a few weeks after the survey date. It’s the closest thing we have to an official real time measure of the state of the housing market. All of the widely followed existing home sales data suffer from severe lag and the error is compounded by extreme smoothing in worthless measures like Case Shiller. By the time of the Case Shiller release, it represents an idealized market from deals that went under contract 5 months ago, not the market as it is today. The Commerce Department, to its credit, at least measures current contracts, and it does make available the actual, as reported, unsmoothed, unmanipulated data. The mainstream media, to its discredit, completely ignores the actual monthly data and only reports the made up, seasonally adjusted crap.

That being said, the actual data is also severely deficient, primarily because the survey sample is an infinitesimal, and therefore unreliable, slice of the market. As more data comes in during subsequent months, even the unmanipulated raw data is subject to large revisions. This month, the number for August was revised down by a whopping 10%. The July number suffered the same fate.

The data also suffers from the fact that the survey does not take into account contract cancellations. When the market is falling apart, cancellations can be epic. But they’re not subtracted from previous month’s data. We don’t see the impact until sales actually go off the cliff.

All that aside, the number of sales reported for September was 38,000. That’s the actual number of sales extrapolated from the builder survey sample taken early in the month. That number was 22.5% above September 2013. Any way you slice it, it’s a strong rebound after a series of down months on a year to year basis throughout 2014. On the other hand, 22.5% gain or not, compared with historically typical sales levels, single family housing construction remains in a historic depression. There’s just no way around that fact.

New Home Sales- Click to enlarge

New Home Sales- Click to enlarge



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Initial Claims Stay At Bubble Record Lows, Is This Time Different? Thu, 23 Oct 2014 15:27:31 +0000 The headline, fictional, seasonally adjusted number for initial unemployment claims came in at 283,000, very close to the Wall Street conomist crowd consensus guess of 285,000. That was a non event.

The actual, not seasonally finagled numbers, which the Wall Street captured media ignores, shows claims continuing at all time record levels on the basis of claims per million workers. The condition has now persisted for 13 months. I have warned for months that this implied that the central bank financial engineering/credit bubble has been at a dangerous juncture. The media echo chamber continues to present record lows as positive, stubbornly ignoring the historical fact that extremes like this have always led to severe market and economic contractions.

According to the Department of Labor the actual, unmanipulated numbers were as follows. “The advance number of actual initial claims under state programs, unadjusted, totaled 255,483 in the week ending October 18, a decrease of 18,260 (or -6.7 percent) from the previous week. The seasonal factors had expected a decrease of 33,552 (or -12.3 percent) from the previous week. There were 312,037 initial claims in the comparable week in 2013.”

Initial Claims and Annual Rate of Change- Click to enlarge

Initial Claims and Annual Rate of Change- Click to enlarge

The actual week to week change last week was a decrease of around 18,000 which is a less than normal decline for the third week of October. The average of the prior 10 years for that week was a drop of approximately 38,500. It’s too soon to say this represents a change of trend. The previous several weeks had a much stronger than average performance. This week looks like giveback.

Actual first time claims were 18.1% lower than the same week a year ago. The normal range of the annual rate of change the past 3.5 years has mostly fluctuated between approximately -5% and -15%. Over the past 3 weeks the numbers have been at an extreme seen only a handful of times since the bungee rebound of 2010. There are no signs of weakening yet.

New claims were 1,828 per million workers counted in September nonfarm payrolls. This number is far lower than the ratio in the comparable October week at the top of both the housing bubble in 2006 and the internet bubble in 1999.

Initial Claims Per Million Workers- Click to enlarge

Initial Claims Per Million Workers- Click to enlarge

These numbers persisted at extreme levels at the tops of the last two bubbles for a year before the collapses got rolling. The foundations were already beginning to crumble by the time the first anniversary of record readings rolled around. The current condition has persisted for 13 months. Is this time different, or just more extreme?

Initial Claims and Stock Prices- Click to enlarge

Initial Claims and Stock Prices- Click to enlarge

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Homebuilder Sector Leading Rally– Predicting A Housing Boom? Tue, 21 Oct 2014 16:15:02 +0000 Mr Hanky, who posts on, wondered today whether strength in the Homebuilder Index portended a housing boom.

I responded that I doubt it. With the average wage stagnant and median household income in the toilet, new housing demand will remain weak. In the stock market, the housing ETFs are not really about housing. They’re overweighted with home furnishings and accessories retailers, suppliers, and manufacturers. Actual builders are only about 20-25% of the weighting.

Over the 46 years or so that I’ve been observing markets, I’ve concluded that changing stock price levels aren’t predictive of anything but stock price levels. They measure total liquidity and liquidity preferences. Those preferences could be simply a matter of shorts getting squeezed or bots reacting to support and resistance or following momentum.

The mass of traders and trading algorithms knows no more about the future of the economy than you or me. They’re just trying to make a quick buck. The idea that the stock market predicts the future is just another of Wall Street’s many shibboleths designed to suck the public in–including institutional suckers–while the securities dealers who run the show distribute inventory.

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