Latest GDP report shows U.S. economy still drifting. The administration already claimed the last quarter of 2012 and the first quarter 2013 U.S. economy growth were at an annualized rate of 3 percent and the fiscal cliff would hurt the economy. Instead, while Obama was running for re-election the economy was dragging along at 0.4%. The updated estimate released this morning by the Bureau of Economic Analysis was a disappointing annualized rate of 2.5 percent for the latest Quarter. Growth continues to be sluggish and will likely get worse as the Obama tax increases and the infantile administration spending cuts of the most important government programs like transportation finally start to bite.

The main sources of growth were personal consumption but the question is whether this is sustainable given the BEA reports that real disposable personal income collapsed at an annualized rate of 5.3 percent even as real spending increased at an annualized pace of 3.2 percent. The mismatch led the personal savings rate to plunge from 4.7 percent to 2.6 percent.  Consumption won't be able to continue at this pace as incomes are already declining.

An important new essay at the University of Chicago, argues otherwise. The "wealth effect" was always most potent among those with the worst credit and the least wealth outside of housing. For the most part, those people have lost their homes to foreclosure and are in no position to buy new ones. In fact, rising house prices could restrain consumption further. 

The US airlines are suing the FAA and DOT for their infantile behavior on the part of the US federal government bureaucracies.  The airline delays are evidence of the gross stupidity as the Federal Government (Executive branch) cuts off its nose to spite its face (Congress).  Public and corporate anger with the FAA and DOT bureaucrats is now at a boil.

http://www.bloomberg.com/news/2013-04-26/latest-gdp-report-shows-u-s-economy-still-waiting-for-liftoff.html

People are reporting that "Big Brother is Watching You!" signs are appearing in various forms.  Some signs have big eyes.  Others report they get computer messages saying things like "Two people are watching you."  Read Huxley's book "1984" if you don't know what that means. 

Notice that all the current major market indicators failed to set a new high in the latest rally.

http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=20130225,20130426;compare=^dji+^ixic+^gspc;indicator=ema(200,100)+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

 The previous advance was:

http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=20120604,20121115;compare=^dji+^ixic+^gspc;indicator=ema(200,100)+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

 And the rally before that was:

http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=20121115,20130225;compare=^dji+^ixic+^gspc;indicator=ema(200,100)+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

 

Here was the sharp 20% selloff in 2011

http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=20110316,20110825;compare=^dji+^ixic+^gspc;indicator=ema(200,100)+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; 

The World Gold Council said central banks of all nations from Colombia to South Africa bought gold as prices rose in 2011, highlighting the reversal of a three-decade-long bout of central bank selling that cut the world’s biggest bullion hoard by 19 percent.  They added 534.6 metric tons to reserves in 2012 and expect purchases of up to 550 tons this year.

 

Amgen Inc. (AMGN), the world’s largest biotechnology company, declined 6.9% after reporting sales growth that missed estimates.

Qualcomm beat the street in its fiscal second quarter, but a disappointing forward guidance sent its shares down in after-hours trading. 

Commodities were falling because China was contracting.  But it was absurd to believe that China has no business cycle and does not have recessions or depressions.   China can have a recession or a depression just as easily as America or Japan.  China’s new leadership is in place and will concentrate more on internal consumption which means it will grow more internally and import less.  China was in a 50 year great communist depression prior to re-introducing free enterprise.  And with China with massive stockpiles of commodities they could even go into the mode of selling commodities if they rise quickly. Due to quantitative easing increasing national debt the real weakness will ultimately be in the Dollar and the Yen… not gold.   American business has not improved the top line in more than two years and the improving bottom line is unsustainable because talk is cheap and there is no economic growth due to government waste and hyperbole sapping business and consumer confidence.

European and American stock markets rose sharply Tuesday purportedly on investor expectations that new recessionary data out of the euro zone would be so bad that it will force the European Central Bank to cut interest rates next week.

Apple announced its first drop in income in ten years.  That obliterates the justification for the PE multiple that it still has even though it has lost its creator and innovator Steve Jobs.

Demand for durable goods slumped in March by the most in seven months, adding to signs manufacturing in the U.S. cooled at the end of the first quarter.

General Electric and McDonald's Corp extended losses on Monday after posting lackluster earnings.

Caterpillar announced earnings fell 40% and dropped its guidance for the year another 30%.  Caterpillar however is finally set to resume a stock repurchase program that has been inactive since 2008, with up to $1 billion in buybacks in the second quarter.   That means they see this is a good time for them to consolidate and go into more debt.  That is usually a sign of confidence in a resumption of growth in a few years. 

Travelers, the second-largest U.S. commercial insurer said this month that they are focusing on significantly raising insurance rates rather than lamenting how bond yields and recent disasters hurt returns.  Net income rose 15% to $896 million, or $2.33 a share, from $806 million, or $2.02, a year earlier due to rate increases exceeding 20%.  This is the first indication that the consumer will tolerate the high inflation that is coming. 

Oil is under pressure from fracking gas coming on line.  Brent oil dropped to under $100/b and American oil dropped 11% from its high as fracking is breaking up the oil cartel.  China has enormous gas reserves and may become an energy exporter too.

World Economies

http://www.bloomberg.com/news/

http://www.foxbusiness.com/index.html 

The euro region would be able to survive Cyprus leaving the blocs as its members need to ensure rules are adhered to, the head of Finland’s highest parliamentary committee said. 

Thursday Economic Minister Philipp Roesler said Germany’s gross domestic product will expand 0.5 percent in 2013, lifting a prior prediction of 0.4 percent made in January.  Still it is depressing news. 

Britain has avoided a third recession thus far as GDP increased 0.3% canceling out the previous 0.3% decline. 

China’s financial and capital account surplus surged in the first quarter as profligate monetary policies in developed economies and expectations of yuan strength spurred inflows of investment.

China has not acted responsibly with the madman on their border who has enormously increased the costs associated with China trade.  It causes western democracies to wonder about the stability of China’s leadership too.

http://www.bloomberg.com/news/2013-04-23/china-s-manufacturing-growth-slows-as-economic-recovery-falters.html

Spain’s 2012 budget deficit was the largest in the EU last year widening to 10.6 percent of gross domestic product, up from 9.4 percent in 2011.  It is worse than Greece’s 2012 budget gap of 10 percent. A limit of 3 percent of GDP is imposed by the EU on all members.  Crude oil declined on the energy slump due to the slowdown.

In spite of the flooding of the world with US currency, the German market has hit but has still failed to break out from the 2007.  Remember since 2008 we had over 15% inflation when we include food and energy so the market is still 15 off the real high when the high is hit. The German market continues to hit resistance.

http://in.finance.yahoo.com/q/ta?s=%5EGDAXI&t=my&l=on&z=l&q=l&p=&a=&c=

The Greek market indicates stagnation since year 2000.

http://in.finance.yahoo.com/q/bc?s=AEX.AS&t=my&l=on&z=l&q=l&c=

The French market indicates stagnation since year 2000.

http://in.finance.yahoo.com/q/bc?s=%5EFCHI&t=my

The Swiss market indicates stagnation since 2007.  But once again look at the spike up in stock prices with Bernanke’s $85,000,000,000/month gift from America to the stock and bond markets of the world as more people enter poverty, go hungry and lose their jobs under Socialism’s equality of poverty.

 http://in.finance.yahoo.com/q/bc?s=%5ESSMI&t=my

  The NYSE is similar to the British and Swiss and indicates stagnation since 2007 given in excess of 15% inflation but the market no similar market advance. http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined.

 American Economy

The DJI failed to break out.  Now that the Big Brother and the FED is inflating the money supply the new highs don’t even Given the inflation exceeding 15% since the last high in 2008 it has a long way to go to break even in 2008 dollar value.

http://finance.yahoo.com/q/ta?s=%5EDJI+Basic+Tech.+Analysis&t=my

The DJA in 2013 is also now at a record high due to inflation. Look at the spike up this year as $85,000,000,000 flows into markets each month. 

http://finance.yahoo.com/q/ta?s=%5EDJA&t=my&l=on&z=l&q=l&p=&a=&c=  

This week

http://biz.yahoo.com/c/e.html

April 22

Existing Home Sales Mar 4.92M down from 4.98M

April 23

 FHFA Housing Price Index Feb 0.7% up from 0.6%

New Home Sales Mar 417K up from 415K

Apr 24

MBA Mortgage Index 04/20 fell to 0.2% from 4.8% -

Durable Orders Mar fell to -5.7% from 5.6% --

Durable Goods -ex transportation Mar fell to -1.4% from -0.7% --

Crude Inventories 04/20 rose to 0.947M from -1.233M +

Apr 25

Initial Claims 04/20 339K down from 352K

Continuing Claims 04/13 3000K down from 3068K as people are transferred from unemployment to welfare.

Natural Gas Inventories 04/20 30 bcf down from 31 bcf 

Apr 26

GDP-Adv. Q1 2.5% not 3% and the last quarter was 0.4% not the election touted 3% also.

AM Chain Deflator-Adv. Q1 1.2% not 1.0%  
Michigan Sentiment - Final Apr 76.4 improved from 72.3 

The Markets April 26, 2013

It is the Administration's QE3 and sequester incompetence.. not the spending cuts that is hurting the American economy now.  The over supply of materials, oil and gas is due to the declines in the world economies and hides the underlying growth of inflation because people are not working.  Once the economic decline levels off inflation will surge.  Gold is not in a bear market it is only reacting to the current slowdown and the administration attempting to inflict maximum damage for the spending cuts Congress made by making the most stupid choices of what to cut.  That infantile administration strategy of spite is angering businessmen and their customers.  There is plenty of government waste that can be cut that would improve the American economy and a new law should not have been necessary to tell the administration to get smart and to cut duplication in departments and other waste.   For example if the department heads cannot figure out how to intelligently cut waste then Obama should fire the heads because they are a source of waste.   Instead Obama hired 20,000 new IRS agents to piss off everyone they can.  The new Senate bill would not be necessary if the administration thought the department heads, about which Congress knows very little,were competent enough to administer their own departmental cuts.

 

   The market appears to have entered the churning phase that only occurs at market tops when strong hands sell to weak hands and go on the sidelines.  At market bottoms we have what is called the falling dagger that forms when weak hands panic and just when the weak have liquidated, suddenly the strong hands buy in and the market spikes back upward.  It is unwise to try to catch a falling knife at least for a few weeks.  It is unwise to increase margin in a falling market. 

Sometimes in the early stage of a bull market the weak hands actually cause a small recovery when they go 100% invested.  Sometimes in a severe bear market the strong hands may start to buy before the weak hands have been flushed completely out of market trading.  Those different levels become tests of whether the strong want to buy (are optimistic).   The weak have already lost most of their value and have little cash.  Hence a rally of the weak will not sustain a bull market until the market is considered undervalued by the strong hands.  Only those that got out can get back in unless they go on margin.

We think this year will resemble the last two where the market advanced early in the year then lost most of it and then reversed again and gained it back by December.   Bull markets once ran 3 years then 4 years but rarely 5 years.  Ours has already run 4 years so far.  Bear markets follow for 1 to 2 years.

http://finance.yahoo.com/echarts?s=%5ENYA+Interactive#symbol=^nya;range=my;compare=;indicator=ema(200,100)+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; 

Look at the recent Bulls- Bears indicator.  More bulls than bears means more exuberance or topping.  http://www.martincapital.com/index.php?page=graph&view=investors_intel 

Can world trade go any lower or has it flat lined?  Look at the last 5 years.  It still looks close to zero growth.

 http://www.bloomberg.com/quote/BDIY:IND/chart 

Bernanke is pushing on a string.  The FED has run out of leverage at close to 0% short term interest rates. 

http://www.martincapital.com/index.php?page=graph&view=interest_rates_long

The VIX behaved this way in 2006 and 2007when the bubble began to unravel but the market did not collapse until 2008.   Again look at 5 years and you see the worst is yet to come.  The VIX would normally top out above 30 before the bear market ends.

http://finance.yahoo.com/q/bc?s=%5EVIX&t=5y&l=on&z=l&q=l&c=

World market updates:

http://in.finance.yahoo.com/intlindices?e=asia

http://in.finance.yahoo.com/intlindi? cese=europe