$75 Billion in New Treasuries this Week

Well, no data yesterday left the markets drifting about the open waters. Stocks rebounded, which gave the risk assets a bias to be bought, but for the most part, the day was much like being adrift in the ocean, with no direction or cares!

That will all change beginning today with the Non-farm Productivity report for the second quarter. Long-time readers know my dislike for this data, as I believe it simply shows that one person works longer hours! The Fed Heads used to be all over this data like a cheap suit, and probably still trip over themselves to see the data when it prints. But to me, it’s not what Big Al Greenspan made it out to be.

Tomorrow is the big data day this week with both the Trade and Monthly Budget Balances printing for July… The Trade Deficit should tick up some, as oil prices have gained in recent weeks, and the Monthly Budget Deficit? Oh my! It is forecast to be $180 billion in the red! Which annualized would be more than $2.1 trillion! But don’t worry about it, folks, no biggie according to the folks in Washington DC. The Treasury will just issue more bonds, and the Fed will buy up any that don’t get bought, and pay for them with money they printed up fresh that day!

You know that I’m be facetious with the “don’t worry” talk. I’ve been talking about this deficit spending for quite a few years now… I like the fact that others have joined in, now that the numbers have gotten so large they are as obvious as a man with a hatchet in his forehead, but at least they’ve joined the “stop the deficit spending movement”.

Speaking of the Treasury issuing bonds… This week alone the Treasury will auction $37 billion of 3-year notes, $23 billion of 10-year notes, and $15 billion of 30-year bonds. Even using “new math” that brings this week’s issuance to $75 billion! That sound? That sound you hear is foreigners choking on all this issuance! Does anyone know how to apply the Heimlich maneuver?

The “got yield” scenario I talked about yesterday didn’t play out, as stocks came back. The Aussie dollar (AUD) saw some selling along with kiwi (NZD), reals (BRL), and any other “high yielder”. The selling wasn’t bad, so we can probably put it down to profit taking.

I’m doing some research on the years around the depression, looking at market movements, and confidence levels. It’s amazing the things that were being said right up to the stock market crash about how everything was fine. Then skip ahead to the ’80s and you had the same things going on with lofty praises for the S&L industry, especially one by Big Al Greenspan, and then the S&L industry circled the bowl. Makes you wonder what’s being said about how great stocks are right now. When the President makes comments about “a good time to buy stocks”, you’ve got to stop and think, folks… Just stop!

I wanted to follow up on the Jobs Jamboree data we talked about yesterday morning. I had a very nice reader tell me that I “hadn’t fallen off the turnip truck” as the participation rate fell! That’s right! As she said to me… “So, all those poor men and women that were hit at the beginning of the recession have the great pleasure of no longer being counted as either employed or unemployed.”

I also wanted to follow up on last week’s talk on the Weekly Initial Jobless Claims that fell for the previous week. I had a reader who recently became unemployed in California tell me the problems with trying to file as unemployed! Let’s listen in…

“I filled out the unemployment application online the day I was laid off.

“About four days later they send you another form to fill out and return. If not returned immediately, you lose your benefits.

“Then I received a letter indicating that they would call me seven weeks after applying, to determine my eligibility. It is scheduled for September 27th 1 PM.

“About two weeks after that, I found that there is no way to speak to an actual human being. The only way to reach them is by email, and that takes another few days to respond. And even the email system gives a canned response: We will contact you on September 27th.”

OK… Enough of that! China came out with some data today… Chinese Industrial Production growth was strong, marking three consecutive months of improvement in Industrial Production. The ongoing recovery of domestic demand is good, while consumer demand keeps holding up well, with July retail sales growth up 15.2% year-on-year.

Now, I fully understand how there can be questions about the validity of Chinese data… But come on! We don’t live there; we have no idea! And they don’t have a John Williams (Shadow Stats) to show everyone that the government’s official data prints are misleading and most times inaccurate!

I saw this report on the Bloomie this morning from Zillow… “Almost one-quarter of US mortgage holders owed more than their homes were worth in the second quarter and that figure may rise to as much as 30 percent by mid-2010 as job losses and foreclosures climb.”

That’s depressing stuff… Very depressing… So! Before I go to the Big Finish, I’ve got to find a “feel good” story… Of course, if I were the government I would have a pocket full of those to pull out whenever the consumers needed one! HA! But, I’m not the government (thank goodness!). Whenever I think of the government, I think of what Ronald Reagan said regarding the scariest words a person can hear… “I’m from the government and I’m here to help”

OK… The euro (EUR) looks to be catching some wind in its sails this morning, as it has gained 1/4 euro since I came in. I know that’s chicken feed, but hey… You’ve got to start somewhere; and after Friday’s bloodletting, the tourniquet was applied on Monday, and today maybe we’ll see it gain back some lost ground… For… It is “Turn-around Tuesday!” (Well hopefully it will be!)

And if the risk assets (like stocks) are rebounding, gold and silver should be on the docket to rally too.

The Daily Reckoning