Thursday Thoughts – Waiting on Mitt and the Fed

Good morning!  

Dollar down 0.4% and Futures up 0.4% so you don't have to be Sherlock Holmes to figure this one out.  

81.40 seems to be holding for now and we're back at S&P 1,402.50 (up from 1,397).  Gold is not up ($1,660) and oil is not up ($94.94) with silver still $30.56, copper $3.45, Nat gas $2.75, gasoline $2.92 so no confirmation of the the index moves or even the Dollar drop, which is strange. 

Euro hit $1.258 (up half a point) before being lightly rejected, Pound $1.581 and still 78.50 Yen to the Dollar and Japan did, in fact, run out of money today. 

Eurozone August CPI +2.6% Y/Y vs. +2.4% in July and consensus of +2.5%. The increase takes inflation further away from the ECB's target of just below 2%, and may reduce the chances of the bank cutting rates at a policy meeting next week. (PR) – Inflation fighting is Job #1 for the ECB!

Eurozone unemployment remains at a record high of 11.3% in July – in line with expectations – with 18M out of work. The number of unemployed rises by 88,000. (PR)

Sounds like things are spinning out of control:  Angela Merkel has asked Italian PM Mario Monti to delay making a request for any bailout and will ask Spanish leader Mariano Rajoy to do the same in a meeting next Thursday, El Mundo reports. The report raises the question as to whether Monti was planning to ask for a bailout. For her part, Merkel hopes to resolve a crisis at the Bundesbank, whose president, Jens Weidmann, has considered resigning.

Bundesbank President Jens Weidmann has recently discussed with other senior officials at the bank the possibility of resigning, due to his opposition to Mario Draghi's plans for the ECB to resume the buying of eurozone government debt, Germany's Bild reports. However, unlike his predecessor Axel Weber, Weidmann has stayed so that he can fight the program from within.

Friday's economic calendar:

9:45 Chicago PMI

9:55 Reuters/UofM Consumer Sentiment

10:00 Factory Orders

10:00 Bernanke: ‘Monetary Policy Since the Crisis’ 

3:00 PM USDA Ag. Prices

3:35 AM Asian shares are mostly lower following more weak data out of Japan, particularly industrial production, and as Indian economic growth languishes near three-year lows. And then there's the long-awaited Ben Bernanke speech today at Jackson Hole. Japan -1.6%, Hong Kong -0.3%, China +0.1%, India -0.3%.

4:11 AM European shares buck the overnight trend in the U.S. and Asia and find themselves higher in early trading. Maybe there's new hope that Ben Bernanke will hand out the candy after all, bringing sparkling growth to the U.S., reversing China's slowdown and lifting the eurozone out of its debt-induced haze. Or maybe not. Euro Stoxx 50 +0.6%, London +0.1%, Paris +0.5%, Frankfurt +0.2%, Madrid+1%, Milan +0.8%.

6:00 AM Overseas: Japan -1.60%;. Hong Kong -0.36%. China-025%. India -0.85%. London +0.19%. Paris +0.63%. Frankfurt+0.45%.

Here's The Full Text Of Mitt Romney's Convention Speech. – He did just what I said he should do – stayed totally away from attacks except the Medicare one, which is also a lie.  Biggest mistake was acting like he thought Ryan did them proud last night – makes Mitt own Ryan's comments.  

The Election: It's The Food-Stamps, Stupid!

What sideline money?  If you're looking for signs of a recovery, look no further than your own 401(k) retirement plan. They're back in vogue, with employer participation returning to pre-crisis levels. Nearly 73% of companies are now offering matching contributions their programs, which had dwindled along with performance during the height of the financial meltdown. Participant advice availability has has also soared to 83% of employers, nearly double the 42% in 2005.

Hawkish Charles Plosser says there's no point in another round of Fed easing, in part because it risks future inflation. "Monetary policy today is at an extraordinary level of accommodation never before seen in history, and there are unintended consequences we are likely to face," the Philly Fed president tells CNBC.

Financial crisis: the printing press has reached its limits. Central bankers may have averted outright disaster, but they are powerless to do more.

At pivotal moment, Bernanke low on economic ammo (Washington Post)

China’s fears grow over eurozone crisis. China has expressed deep alarm at the escalating crisis in Europe and warned against austerity overkill as Europe's crumbling demand sends shock waves through Asia.

"Don't Count Your Hahnchen": 40% Chance German Court Does Not Ratify ESM.

Hollande’s Business Policies Slammed by French Corporate Leaders. 

Italians Squeezed by $9.50-a-Gallon Gas Face Costly Drive Home.

Moody's review of Spain's Baa3 rating to continue until end of Sept.

Canada's Consumer Leverage Growth Is Not Going To End Well. (graph)

Japan eyes suspending state spending as money runs out.

Japan's industrial production -1.2% M/M in July vs. +0.4% in June and consensus of +1.7%. The fall was led by declines in the electronic components sector, followed by general machinery. CPI excluding food -0.3% Y/Y, unemployment unchanged at 4.3%, with both figures in line. PMI 47.7 in August, the lowest since April 2011.  In a further sign of trouble ahead, the purchasing managers index for August showed manufacturing activity languished at the lowest level since last year's earthquake as domestic and external demand suffer.Manufacturers said they expect output to rise only modestly in August and then fall again in September, which could increase the chance that the economy will contract in the third quarter. "Exports to China and the European Union have been decreasing, so electronics parts makers are cutting back on production to adjust inventories," said Seiji Adachi, senior economist at Deutsche Securities.

Japan's Government Pension Investment Fund (GPIF), the world's largest public pension fund, posted a negative return of 1.85% in Q2, translating into an investment loss of $26B. With a $1.37T portfolio, the GPIF is closely watched due to its massive size. Its Q2 performance was hurt by the strong yen and stock falls at home and abroad.

China's 2,453 publicly traded companies' combined 1H average EPS fell 28% y/y to .1749 yuan, citing the newspaper's own statistics. 1H combined inventory rose 18.6% y/y to 4.67t yuan, according to the report. – That's close to $1Tn in inventory piled up in a $5Tn economy!

Cheap Chinese steel threatens Japan mills: report. Japanese steel mills are suffering as Chinese competitors ramp up production, even as prices fall, Japan's Nikkei business daily reported Friday. Steel prices have fallen sharply, with hot-rolled coil at a 19-month low, and the influx of inexpensive Chinese steel has forced some Japanese producers to take asset-impairment charges for their mills.

China’s Stocks Head for Longest Monthly Losing Streak Since 2004. China’s benchmark stock index fell, heading for a fourth month of losses, after declining earnings at companies from Citic Securities Co. (600030) to Sany Heavy Industry Co. showed the impact of the nation’s economic slowdown. Signs that China’s economic slowdown is deepening have dragged the Shanghai Composite down 2.5 percent in August, a fourth straight month of declines. That’s the longest streak since August 2004, according to data compiled by Bloomberg. Macquarie Group Ltd. lowered China equities to neutral from overweight, citing the deteriorating outlook for banks amid a “disturbingly” widespread weakness in the economy, according to a note dated yesterday.

China manufacturing seen close to contraction. China's manufacturing activity likely registered zero growth in August, and instead teetered on the brink of contractionary territory where it hasn't been since November, signalling there is still some way ahead before for the world's second-largest economy bottoms out. The official manufacturing Purchasing Managers Index was likely 50.0 in August compared with 50.1 in July, according to the median forecast of 11 economists polled by Dow Jones Newswires.

China’s Growing Economic Crisis. (that everyone is ignoring)

Indian GDP +5.5% Y/Y in Q2 vs. +5.3% in Q1 and consensus of +5.2%. Manufacturing output +0.2%, mining +0.1%, construction +10.9%. The Reserve Bank of India has been hawkish on lowering high interest rates as it seeks to fight inflation, so, says Westpac's Jonathan Cavenagh, "rate cuts are still seem some way off."

Korea Industrial Production Slides as Europe Hits Exports. South Korea’s industrial production fell for a second month in July as a global slowdown undermines growth in Asia’s fourth-largest economy. Output fell 1.6 percent from June when it dropped 0.6 percent, Statistics Korea said today. The median estimate of 12 economists in a Bloomberg News survey was for a 0.9 percent decline.

Steel Slump Sees Aussie Dropping Toward Parity: Chart of the Day. Australia's dollar may fall to parity with the greenback for the first time since June after China's stock gauge and benchmark steel prices plunged to three-year lows, adding to concern that demand for commodities such as iron ore and coal will slump. "There's a risk the Aussie will fall to $1," said Masashi Murata, a currency strategist in Tokyo at Brown Brothers Harriman & Co. "We expect China's growth to slow toward year-end, and once economic data confirms that, it'll be a selling catalyst for the Australian dollar."

Melbourne Hasn’t Seen Worst of Housing Drop as Glut Builds.

With nearly 12% of all mortgages either delinquent or in the foreclosure process, one would think that housing would be at the top of the political agenda for getting the economy moving again – but it's not. Why? Most likely because recent studies show that communities hardest hit by the housing crash aren't likely to have a high voter turnout. Ignoring them could be a risky gambit however, because most of the nation's swing states also have the dubious distinction of holding the highest foreclosure rates.

Banks Now Trying Extra Hard To Avoid Making Rookie Mistakes (Like Getting Caught Committing Fraud) (Dealbreaker)

Buffett Railroad Sees Economy Sapping Pre-Holiday Peak: Freight. North American railroads from Warren Buffett's Burlington Northern Santa Fe to CSX Corp. are bracing for limited increases in pre-holiday shipments as weak consumer sentiment exacerbated shrinking corn and coal loads. BNSF, which moves imported Asian consumer goods from West Coast ports, hasn't seen a measurable gain in holiday-realated volumes, Chief Marketing Officer John Lanigan said this week.

Crop Traders Extend Bull Run as Rain Comes Too Late: Commodities.

Tudor Pickering analysts say energy markets aren't expecting "lasting disruptions" from Hurricane Isaac, but they are "looking for confirmation of this" from oil and gas companies. Phillips 66 (PSX) found some flooding at its 247K bbl/day refinery in Belle Chasse, La., but the markets are mostly reassured: Valero (VLO) and Anadarko (APC) are among firms reporting no damage at their facilities

The United Steelworkers union says it's close to a new four-year labor pact with U.S. Steel (X) but that talks with ArcelorMittal (MT) have stalled. MT, which wants to cut wages and benefits for all workers ~36% from an average $77.40/hour, has started preparing its blast furnaces and other facilities for a strike "as a precautionary measure."

New U.S. auto sales are expected to hit 1.29M in August, a 20% jump Y/Y and 12% M/M, led by sharp gains by Japanese auto makers, according to Edmunds.com. “Sales showed signs of flattening out in the first couple months of summer, so August’s sales figures will come as a nice surprise for everyone in the auto industry," the site's top analyst says.

Supervalu (SVU) says it's successfully completed two debt financing transactions, totaling $2.5B. The debt is structured in a new five-year $1.65B asset-based revolving credit facility, secured by the Company’s inventory, credit card receivables and certain other assets, and a new six-year $850M term loan, secured by a portion of the Company’s real estate and equipment.

Bing (MSFT) is now capable of searching Facebook photosadded by a user's "friends." The feature is the latest in a series of social networking-related enhancements made to give Bing a leg up on Google (GOOG), whose deal-making ability is hurt by its social networking ambitions. But thus far, Microsoft and Bing-powered Yahoo (YHOO) haven't done much to dent Google's search dominance, thanks to their weak mobile position and dependence on Internet Explorer, which is steadily losing ground to Chrome.

At the end of Q2, Verizon Wireless' (VZ, VOD) 4G LTE network covered 230M people. That puts Big Red well ahead of AT&T (T) and (especially) Sprint (

Dow now up almost 100 points from the close.   Dollar 81.30, oil and gold now moving up to confirm.  Silver and copper too.  

2,775 on the Nasdaq (/NQ) is a good line to play long with very tight stops (because we know it's BS)..

Rolling Stone/StJ – The last bastion of actual reporting.  

81.28 – they are just raping the Dollar to get the markets up.   The problem with this is – how are they going to break below 81 on the Bernanke speech?  Doubtful they can so this may be a major flush prior to taking this thing way down.   

Monetary base/Pharm – Incredible, isn't it?  We've more than tripled the base in 3 years.

Big Chart – Ouch!  Major breakdowns (with 2.5% adjustment) on all indexes.  1,314 on S&P is adjusted 50 dma – they have to get back over that to impress anyone.  

JPM/Deano – Only an issue if other banks don't pick up the slack.  

DFS/Vill – I prefer to play V as they are much bigger and a better proxy for the economy.  DFS is still small enough to make deals and gain market share that can move them against the market.  DFS is a very good company when they are cheap.  XLU – I don't see something as oversold just because it pulled back from $38.50 to $36.50 after running up from $34 in April.   Of course Utilities where a flight to safety in the May collapse but people started dumping out of them as QE fever took hold.  If Bernanke fails to deliver, then they should head back up again but, if we get more QE (and the inflation that goes with it) 

Algos/Diamond – I think it knocked volume down but, otherwise, other bots seem to have picked up the slack.  

Daily show was good too: