TrimTabs Still Can't Figure Out Who Is Buying Stocks (Zero Hedge)

Great Post By  Zero Hedge

12-23-10

Save this post as we will all be reviewing

it several times throughout 2011

A year after Charles Biderman's provocative post first appeared on Zero Hedge, in which he asked just who is doing all the buying of stocks as the money was obviously not coming from retail investors (and came up with one very notable suggestion), today Maria Bartiromo invited the TrimTabs head once again (conveniently in CNBC's lowest rated show, during Christmas Eve eve, at a time when perhaps 5 people would be watching) in an interview which disclosed that after more than a year of searching, Biderman still has no idea who actually buying.

In response to Bartiromo's question if the retail investor, who left after the flash crash (thank you SEC), Biderman responds what every Zero Hedger has known for 33 weeks: "Retail investors are not coming back to the US. Those investors that are investing are buying global equities and are buying commodities. We are seeing lots money going into commodity ETF funds: gold, silver..." and the even more unpleasant summation: "individuals have been selling, companies are net selling, insider selling and new offerings are swamping any buyback and any cash M&A activity since QE 2 was announced. Pension funds and hedge funds don't really have that much cash to invest.

So what nobody's asking is what happens when QE 2 stops: if the only buyer is the Fed, and the Fed stops buying, I don't know what is going to happen...When I was on your show a year ago I was saying the same thing: we can't figure out who is doing the buying it has to be the government, and people said I was nuts. Now the government is admitting it is rigging the market." Cue Bartiromo jaw dropping.

As for the simple math of where the money is actually going:

"Money flows come out of income, take home pay of everybody plus money that came from real estate is down about $1 trillion a year. It peaked in the 3rd quarter of 2008, at $7 trillion, that's take home pay for everybody who pays taxes plus the money that came from real estate. It has now bottomed at $5.9 trillion. We are still down $1.1 trillion in money that people have to spend each year, that 16%. And some of the money that is leaving equity markets we think is going to pay bills."

Update: Charles has just sent in the following addendum

to his CNBC appearance:

Due to time constraints, what I didn’t get to address on CNBC today is what will happen after the Fed is either successful or not successful with QE2. The Fed is rigging the market by digitally creating money that is used to buy financial institutions assets — currently Treasuries, last year all kinds of toxic waste. What will happen when the Fed stops buying assets?

What the Fed is hoping is that QE2 actually works and the economy starts growing at 3+%. If that happens, unlikely as it is, then the Fed will end its QE activities. But for the stock market, if the only source of buying power, the Fed, withdraws its support, the market is likely to plunge to well below fair value. At that point perhaps some new source of money , i.e., China, et al will be able to buy US assets on the cheap.

The Fed is legally mandated to manage the economy, not the stock market. If the Fed’s QE is successful and the trickle down impact of higher equities creates a sustainable recovery, the Fed will gladly sacrifice the stock market to its legal mandate to manage the economy.

A more likely outcome is that while stocks will be higher by the end of QE2, economic growth will not be sustainable without government aid. That would then require additional QE. Stock prices could then keep rising for a while. At some unknowable now moment in time, unless the economy starts to grow again, no amount of QE can work forever in keeping the current stock market bubble from bursting.

Labor Department Strikes Out Again (Michael Pento)

Thursday, December 23, 2010
By Michael Pento

The Commerce Department reported today that the U.S. savings rate dropped to 5.3% as incomes did not keep pace with spending. Personal income increased $42.3 billion, or 0.3%, while personal consumption expenditures increased $43.3 billion, or 0.4%.

Orders for durable goods fell 1.3% in November and are a sign that the so called economic “recovery” is not only anemic but completely derived by artificial means. More borrowing, increased debt and massive money printing isn’t getting the job done at all. Instead, the repercussions of not recognizing and addressing the real fundamental problems of the economy only guarantee that the situation is getting much worse.

However, the good folks at the Labor Department are doing their best to make things look better than they actually are. Initial jobless claims fell by three thousand to 420k. But that 420k number was exactly the same number they reported last week. Therefore, the Labor Department can “claim” initial claims are down by consistently revising up the prior week. This game is getting way too old and we are all over it! Layoffs are slowly decreasing so there isn’t any need for the BLS to always under report claims. But the important point here is that hiring is absent and the unemployment rate is rising.

The economy is limping along and that is before the excrement hits the fan. Once interest rates rise the real crisis begins. We are starting to see the evidence of that from yesterday’s Mortgage Applications. Applications fell 20%, which were the most in all of 2010. And that was just from a relatively small increase in rates. Just imagine what a normalized rate of 7% on a ten year note would do to not only the real estate market but the borrowing costs of the government. It's game over then. Vigilant Grandpa Link to Jobless Claims

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Obama, the Administration that keeps on giving, $73 million in Homeowner Counseling Grants

OBAMA ADMINISTRATION ANNOUNCES

NEARLY $73 MILLION IN COUNSELING GRANTS

TO HELP FAMILIES FIND AND KEEP HOUSING

12/23/10
Housing and Urban Development

WASHINGTON – In an effort to help families find decent housing and to prevent future foreclosures, the Obama Administration today announced nearly $73 million in housing counseling grants to more than 500 national, regional and local organizations. As a result of the funding announced today, hundreds of thousands of households will have a greater opportunity to find housing or keep the homes they have because of the housing counseling and counseling training grants awarded today by U.S. Housing and Urban Development Secretary Shaun Donovan.

The grants announced today represent a $13 million, or 22 percent increase over last year’s funding level. In announcing the grant awards, Donovan said HUD-approved housing counseling agencies are a critical part of the nation’s housing recovery.

"These organizations are on the front lines of helping families who are desperate to remain in their homes," said Donovan. "Now, more than ever, it’s crucial that we support these agencies that are working with struggling families on a one-to-one basis to manage their money, navigate the homebuying process,　and secure their financial futures."

Housing counseling grants will assist families in becoming first-time homeowners and remaining homeowners after their purchase. HUD-approved counseling agencies not only provide homeownership counseling, but also offer financial literacy training to renters and homeless individuals and families.

"Now, more than ever, it is crucial that Americans better understand how to manage their money, navigate the homebuying process,　and secure their financial future." said Donovan. "This critical funding will help counseling organizations continue to assist families in making more informed choices before they purchase a home and counsel families facing foreclosure."

Nearly $68 million will support the direct provision of housing counseling services by 24 national and regional organizations, 5 multi-state organizations, and 484 state and local housing counseling agencies. In addition, HUD is awarding more than $5 million to three national organizations to train approximately 4,500 counselors who will receive the instruction and certification necessary to effectively assist families with their housing needs.

National and regional agencies distribute much of HUD’s housing counseling grant funding to community-based grassroots organizations that provide advice and guidance to low- and moderate-income families seeking to improve their housing conditions. In addition, these larger organizations help improve the quality of housing counseling services and enhance coordination among other counseling providers.

Counseling agencies will use $9.5 million to help assist senior citizens seeking reverse mortgages or Home Equity Conversion Mortgages (HECM). These agencies will provide counseling for the rapidly growing number of elderly homeowners who seek to convert equity in their homes into income that can be used to pay for home improvements, medical costs, and other living expenses.

The organizations that provide housing counseling services help people become or remain homeowners or find rental housing, and assist homeless persons in finding the transitional housing they need to move toward a permanent place to live. Grant recipients also help homebuyers and homeowners realistically evaluate their readiness for a home purchase, understand their financing and downpayment options, and navigate what can be an extremely confusing and difficult process.

In addition, grantees help combat predatory lending by helping unwary borrowers review their loan documentation, and avoid potential mortgage scams, unreasonably high interest rates, inflated appraisals, unaffordable repayment terms, and other conditions that can result in a loss of equity, increased debt, default, and even foreclosure. Likewise, foreclosure prevention counseling helps homeowners facing delinquency or default employ strategies, including expense reduction, negotiation with lenders and loan servicers, and loss mitigation, to avoid foreclosure. With foreclosures at critical levels nationwide, these services are more important than ever. HUD Press Repease and Links

MI Sentiment up a measly 2.8% Year-Over-Year

The current state of consumers’

financial situations remains grim

Thomson Reuters/
University of Michigan
12/23/10

ANN ARBOR. Consumer confidence improved in December to its best level in six months and its second highest level since the start of 2008. The gain was due to improved employment expectations that made consumers more willing to spend and adopt more favorable prospects for the overall economy.

Consumers reported much more favorable news about recent changes in the job situation, and more frequently expected the unemployment rate to decline during the year ahead. Lessening job uncertainty pushed buying plans for household durables up to their highest level in three years. While holiday sales benefited from the improvements recorded in the past two months, combined with the recent passage of the tax legislation, consumer spending can be expected to increase in 2011. Nonetheless, consumers’ views of their financial situations have remained quite negative due to the widespread expectation of stagnant incomes.

Personal Finances Remain Dismal

The current state of consumers’ financial situations remains grim. Just 23% reported recent gains in their finances, unchanged from last December, as twice as many consumers reported income declines as income advances. Just one-in-four consumers expected their finances to improve in the year ahead, which has remained unchanged for the past six months. The majority of consumers anticipated no income increases during the year ahead, as they have for a record 24 consecutive months. Income constrained consumers favored price discounts, as half of all consumers cited the availability of price discounts on household durables, and two-thirds of all consumers cited discounts on either prices or interest rates on vehicle purchases.
 

Consumer Sentiment Index

The Sentiment Index was 74.5 in the December 2010 survey, up from 71.6 in November and 67.7 in October. While gains over November were recorded by both the Current Conditions Index (+3.9%) and Expectations In-dex (+4.2%), the entire year-over-year gain was in the Current Conditions Index (up by 9.4%). This gain was mainly due to more favorable buying plans for durables. The Expectations Index, a component of the Index of Leading Economic Indicators, worsened during the past year (-2.0%), primarily due to weaker personal financial prospects.

Surveys of Consumers chief economist, Richard Curtin

"The best holiday gift to consumers was news that job gains were on the horizon. Compared with the more favorable prospects for the overall economy, consumers have maintained a very cautious outlook for their own finances. They have good cause to be cautious. This was the second time in 2010 that news of job gains prompted a rally in confidence. Indeed, consumers voiced nearly the same confidence at the end of 2010 as at the start of the year. Given the prominent role of government policies in the reversal and recovery, the coming battles on how to close the deficit will have a significant im-pact on confidence in 2011 and beyond."  Current and Prior Reports

Dept. of Labor Seasonally Adjusts Out 305,541 Initial Jobless Claims in December

Department of Laughter Labor Report
12/23/10
Full DOL Release

Seasonally Adjusted Data

In the week ending Dec. 18, the advance figure for seasonally adjusted initial claims was 420,000, a decrease of 3,000 from the previous week's revised figure of 423,000. The 4-week moving average was 426,000, an increase of 2,500 from the previous week's revised average of 423,500.

The advance seasonally adjusted insured unemployment rate was 3.2 percent for the week ending Dec. 11, a decrease of 0.1 percentage point from the prior week's unrevised rate of 3.3 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Dec.11 was 4,064,000, a decrease of 103,000 from the preceding week's revised level of 4,167,000. The 4-week moving average was 4,155,500, a decrease of 38,250 from the preceding week's revised average of 4,193,750.

Unadjusted data

The advance number of actual initial claims under state programs, unadjusted, totaled 495,587 in the week ending Dec. 18, an increase of 5,311 from the previous week. There were 565,243 initial claims in the comparable week in 2009.

The advance unadjusted insured unemployment rate was 3.3 percent during the week ending Dec. 11, an increase of 0.1 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 4,173,407, an increase of 110,889 from the preceding week. A year earlier, the rate was 4.1 percent and the volume was 5,345,467.

The total number of people claiming benefits in all programs for the week ending Dec. 4 was 8,883,578.

A few observations by Grandpa

The Department of Labor's seasonal adjustments have not remotely accounted for the actual # of people filing initial jobless claims in December. Granted, the U.S. stock market does not care about any "real" figure given the fact that Bernanke has afforded the market manipulators ample capital to push stocks to the moon.

Today, the Department of Laughter Labor reported seasonally adjusted initial jobless claims of 420,000 although the non-seasonally adjusted claims (a.k.a. real people standing in line) was 495,587. For the prior week report (12/11/10), the Department of Laughter Labor reported seasonally adjusted initial jobless claims of 423,000 however the non-seasonally adjusted figure was 490,276. For the prior week ending 12/4/10, the Department of Laughter Labor reported seasonally adjusted initial jobless claims of 423,000 however the non-seasonally adjusted figure was 585,678.   During this three week period, DOL seasonally adjusted out 305,541 Americans.

According to the Department of Labor, 1,266,000 seasonally adjusted initial claims were filed during the first 3 weeks in December however 1,571,541 Americans actually filed claims.

CNBC and every other stock market bull continues to focus on the seasonally adjusted, "once upon a time" figure. Does CNBC and the bulls truly believe 305,541 Americans left out of the headline number has no fundamental impact to our economy?

The DOL seasonally adjusted out the equivalent population of San Bernardino, CA and more than the entire population of Mobile, AL, Grand Rapids, MI or Fort Lauderdale, FL. Salt Lake City, UT would need to add 15,000 to their entire population just to equal the number of people DOL adjusted out of the initial claims report during the prior two weeks.

DOL seasonally adjusted out more than the entire population of Lexington, KY and 31,000 more than the entire population of Plano, TX.