11/21/14…if I were a tweeter…but sadly just a blogger

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Conscience is the one thing that hurts when everything else feels great.” – anon…and so true!Bloomberg Quote of the Day: “Music is a higher revelation than all wisdom and philosophy.” – Ludwig van Beethoven

Bloomberg Top Stories:

*China Lowers Interest Rates for First Time Since July 2012 to Boost Growth – weakness!

*Stocks Extend Gains After China Rate Cut as Euro Falls on Draghi Comments – tell me more…

*Citigroup Said to Be Ejected From ECB’s Foreign-Exchange Group After Fine – thieves!

*Multibank Settlement Said to Be Sought by U.S. in Criminal Forex Probes – not enough!

*Obama Shows Limits of His Executive Power by Using It on Immigration Order – and he should!

*Basel Regulator Seen Toughening ABS Capital Rules Over Banks’ Objections – raise them!

*Biden Visits Kiev as NATO Says Russia Bringing Heavy Weapons Into Ukraine–one word:NYET!

*Malaysia Ends Fuel Subsidies as Cheaper Oil Obviates Decades-Old Policy – do it here too!

*Mandated U.S. Defense Cuts Stir Republican Congress Confronting New Budget – millions for…

*China’s Latest Revolution Calls for $2 Trillion Great Leap in Clean Energy – we should too!

*RBD to Shutter Wealth-Management Business in Caribbean Amid Restructuring

*Iran Nuclear Talks (sic) Near Deadline as Diplomats (sic) Say Overtime May Be Needed – DUH!

*Retail Stocks Regain Worldwide Favor Over Energy Shares – oh please! Seasonal, idiots!

*Yes, My Dear Sophia, There Is a Mr. Uber and He’s in Timeout – no clue about treating clients!

*Apple Designer Moves Beer From Man Cave Into Kitchen With Chic Dispenser – just 250 euros!

Thursday’s Market Summary

Happy Options Expiry! Hope it is good for you! Yesterday’s boring, somewhat low volume session, provided not clues to today: Down sharply on the open, then came back ‘slowly‘ the rest of the session closing from +0.2% (Dow/S&P) to +1.1% (Russell 2000), Dow Transports, and the two Nasdaq’s +0.5%+. Only loser was Dow Utilities but just off 0.2%. A/D’s and Breadth were pretty strong, while new highs were slightly higher and new lows gave up a bit – nothing to see here! As for the S&P VIX, while it closed at 13.58 -.38, and still bearish the session high was 15.74! That is bearish, but they then reversed it closing at the session low. Not that unusual pre-expiry.

Total NYSE Volume slipped to 3.1B shares, lowest in more than a week, vs 3.4B vs 3.41B vs 3.13B vs 3.2B vs 3.46B. Average volume since 9/30 is about 3.6B shares and slipping, or about 600M more than the 12-month average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume also posted the lowest in 8 sessions at a weak 662M shares vs 738M vs 731 vs 694M vs 705M. For comparison purposes, for the prior 12 months it is a historically weak 712M shares…but since 10/1: 819B shares and slipping – including that HUGE 1.22B share day – highest since 9/19, followed by two more 1B plus days leading to options expiry!. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 16, and FIVE 900M+ days.

A/D’s were pretty strong: NYSE: +1.9x vs -1.6x vs +1.6x vs -1.3x vs +1.1x; Nasdaq -2.6x! vs +1.5x vs -1.9x vs -1.1x vs -2x. Breadth was even better:: NYSE +2.1x vs -1.6x vs +2x vs 1:1 vs +1.5x; Nasdaq +2.8x! vs -2.2x! vs +2x vs -1.7x vs +1.4x. New 52 Week Highs were slightly higher at 173 vs 135 (weak) vs 304 vs 242 vs 207 – their range for the year is 39-612!!! New Lows were lower at 104 vs 141 vs 117 vs 115 vs 127 vs 146. The 2014 range is 24-1043!!! S&P VIX traded very bearish with a high of 15.74! It then closed at the session low of 13.58 -.35 stukk very bearlike. This is its 18th sub-15 close since peaking on 10/15. Heading back toward those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!)? You decide. The average of the past 12 months is 13.99, with a low of 10.28!…high close of 26.25 on 10/15/14! Put protection is getting expensive again.

U.S. bond market closed higher as it continues its oscillations. The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.34% +1/8; 30’s 3.05% +7/16, and the long TIP 1.04% +3/4. No inflation concerns! Overnight little changed and off session highs: 10’s 2.34% –; 30’s 3.05% +1/8; and long TIP 1.02% +7/16.  

Libor update: 0.231% 3 mos.; 0.325% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.09-0.10%. T-Bills: 0.3%, one-month, 0.00%! 3 mos, 0.12% one year.

Foreign bond yields LOWER – across the board! (Benchmark is 10yr): Germany 0.78% -2; UK 2.07% -3; France 1.11% -2; Italy 2.34% -6!; Spain 2.03% -6!; Portugal 3.02% -9!!!; Greece 8.00% -5 – can it break 8% again? Stay tuned! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.45% -1.

Gold closed slightly weaker for a 2nd day in an ‘inside session’, without a single print above $1200 leaving Tuesday’s new high of $1204.10 – highest since 10/30, intact. It closed at $1190.90 -$3.00. However, it is still hanging on to Friday’s ‘positive key reversal’ and the 40/50 day are coming down to meet it. 11/7’s low was $1130.40, a new recent low!). The last 17 sessions have had prints below $1200 – first time since 12/31/13 Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is at $1200 (psychological), then the 40 day at $1204, the 50 day $1208, then the 200 day at $1277. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. $1130.40. 11/7’s low was $1130.40! Overnight, a high of $1207.60! (highest and only the 2nd time over $1200 since 10/31. Silver traded up $16.64, also highest since 10/31, and back from 11/5’s low of $15.12, more than a five year low.

Crude closed up a buck at $75.58 in another unremarkable session. Just five days ago it set a new recent low of $74.07, lowest since 9/17/10!!! 10/25’s high was $84.83. There have been 33!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($82.33!), then the 50 day ($84.43!), and lastly the 200 day (96.84!), all accelerating to the downside! A failure here could take us to $70! The recent range is now $74.07-$112.24 since 3/1/12. Overnight it rallied to $77.83 but has slipped back to $77.31 +$1.46. Bottom yet?

Global equities higher – especially Europe: UK +1% vs -0.6% vs -0.1% vs +0.5% vs -0.1%; France +2.1%!!! vs -1.1%! vs +0.6% vs +0.7% vs –; Germany +2%!!! vs -0.6% vs +0.7% vs +1.2% vs –; Japan +0.3% vs -0.1% vs -0.3% vs +2.2%! vs -3%!!! Hang Seng +0.4% vs -0.1% vs -0.7% vs -1.1%! vs -1.2%! Korea +0.4% vs -0.5% vs – vs +1.2%! vs -0.1%; India +1%! Vs +0.1% vs -0.5% vs -0.1% vs +0.5% vs +0.4%. U.S. equity futures also rallying: DOW +155 (range 164); SPX +20 (23); NDQ +37 (43). Stocks opening in line…oh, wait…it’s options expiration! Rock and roll!

 

Some random thoughts:

…yesterday listened to a panel of financial bloggers interviewed by Charlie Rose. Pretty interesting comments – too bad I had to turn Charlie down due to a prior commitment…lunch with a friend. All expressed frustration (before they hooked up with a big sponsor), on getting their message out…preaching to the choir! It was an interesting foursome: Josh Brown (Ritholtz); Megan Murphy (Financial Times), Felix Simon (Fusion…kind of counter-culture), and Joe Wiesenthal (Bloomberg – now mostly an editor).

Universally they agreed that ‘content’ is what it once was…in this era of ‘flash traders’ rule, the active traders want what is ‘hot’ that might impact a stock that day…that hour. Thus, rather than blogging, the best way to get your message out (and it better be to the point), is Twitter. TB doesn’t Tweet. All of them said the first thing they do each morning is check it for the breaking stories…Murphy is trying to get the FT to put more emphasis on ‘hot’ news rather than the longer narratives, like Martin Wolf. He is getting old…just two years younger than TB but with as much wisdom.

They also commented on one of TB’s steady themes (we are unable to focus on just one global event at a time). The stock market (most likely due to flash traders) acts on just one main event and gets huge swings in relation to markets in other countries although they too are starting to see increasing volatility. Again, that is simply gambling…Vegas but where you don’t even know the odds. A lot can be learned by watching ‘Texas Hold ‘em’. Where are the regulators? The Fed (banking), the SEC (flash trading and protecting investors), and the lovable FINRA (broker funded organization charged with regulating investment advisors…and now financial advisors…they can’t even determine whether it is better to have an FA that is  your ‘fiduciary’ or loyal to his employer…ask John Bogle if you need clarification!).

FINRA is an offshoot from NASD, a big reason why registered investment advisors (RIA’s), opposed letting financial advisors (FA’s) under the umbrella, fearing they would favor the FA’s since most work for them! Paranoid? Consider that SEC Chairwoman Mary Schapiro came to FINRA from NASD which gave her a multi-million ‘kiss off’ bonus (total compensation was $3.3 million a year, send off, including retirement (? she was just there from 2006-09) was $9 million!!! …to insure her loyalty? You decide, but she succeeded former Representative Christopher Cox (R- Orange County),  who did nothing to protect investors…finally caving to pressure to limit short-selling, but with too little too late. He also followed William Donaldson, who as chair during the ‘destruction’ of Glass-Steagall, and thus bank regulation had a ‘plan’ to conduct random examinations of the biggest banks (brokers too under the ‘broad’ classification). Cox did not order a single…not one…random exam. Oh and the ‘revolving door’ works well as he became a lawyer for a Bingham, McCutchen specializing in securities law…hmmm.

In 2013, Mary Jo White was made chairwoman…a great federal prosecutor who TB is sure has some great ideas…but can they gain traction when Congress keeps appropriating less for investigative work. What? You think that will change with a total GOP-controlled Congress? It all began with Reagan but while government maybe the problem, de-regulating the financial sector was not the answer!

Soooo…since no one will read this…except perhaps the people mentioned (sorry I couldn’t make it, Charlie), will not impart any more words of wisdom.

Off to Wikipedia to find out what ‘tweet’ means.

Beware of the options demons today then get out of here and enjoy your weekend!

TB

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11/20/14…the Fed is going to tighten! They’re going to tighten! NOT!!!

Quote of the Day from the Friars Club Encyclopedia of Jokes: “A guilty conscience is the mother of invention.” – Carolyn Wells

Bloomberg Quote of the Day: “Research has shown that the best way to be happy is to make each day happy.” – Deepak Chapra…and we all know why he is happy!

Bloomberg Top Stories:

*Stocks Drop on Signs of Slowing Economies While Bonds Advance with Dollar – told ya!

*Europe’s Economy Risks Renewed Slump as Manufacturing, Services Weaken – etc.

*Consumer Prices in U.S. Little Changed in October as Fuel Costs Decreased – that they did!

*Fewer Than 300,000 Americans File for Unemployment Benefits for 10dth Week – oh joy!

*Wall Street Banks Gained Unfair Advantage Owning Commodities, Levin says – shocking!

*Goldman Sachs Dismissed Two Employees After Getting Secret Fed Documents – not a first!

*ECB Prepares for Purchase of Asset-Backed Securities by Publishing Rules – we got them!

*BNP Paribas Shuffles Markets Unit as Frederic Janbon Quits Fixed Income

*Bond Record in Sight as Corporate Sales Near $4 Trillion – almost as big as Fed’s portfolio!

*Some Answers Top Mario Draghi’s 41.3 Trillion Quantatative Easing Conundrum – see below

*Iron’s Tumble today Begets Takeover Treasure for Buyers Tomorrow – what about Crude?

*Germany Urges Peace Effort in Eastern Ukraine to Counter Spiraling Tension – please?

*SeaWorld Tries to Save Itself After Backlash Over Tough ‘Blackfish’ Film – where’s Wamu?

*Mike Nichols, Director of ‘The Graduate’, ‘Virginia Woolf’. Is Dead at 83 – nice career!

*Tax cut luring Pimco Shows Columbian Foreign Push Paying Off – for some…

*Cheap Oil Era Shifts Global Geopolitical Power to U.S., Away From Russia – nice tradeoff!

Wednesday’s Market Summary

Setting up very nicely for tomorrow’s options expiration. Round and round she goes where she stops? Who knows? A DOWn day (sorry). Actually, the Dow 30 and Dow Utilities, both flat were the only things that weren’t down: Russell 2000 the big loser -1%; the two Nasdaq’s -0.5%+; Dow Transports -0.3% and the S&P 500 -0.2%…how special. A/D’s and Breadth were negative –especially Nasdaq stocks! New 52 week highs were more than halved to 135 (low), while new lows rose to 141. NYSE Volume was not bad but same as Tuesday. Pattern identical for the last five days…or more?

Continuing on that theme everything was down…well, everything except the S&P VIX which closed at another bearish 13.96 +.10 and with a range of 13.83-14.78! Bonds were down…mainly after the FOMC statement; Commodities were soft too…what’s a mother to do? Pay attention for one thing! As today’s commentary suggests, the market (and TB does not mean ‘investors’ here is merely trying to gain an edge, be it up or down. After all everything headed south ‘after’ the FED release…not in a big way

Total NYSE Volume was steady at 3.4B shares vs 3.41B vs 3.13B vs 3.2B vs 3.46B. Average volume since 9/30 is about 3.6B shares and slipping, or about 600M more than the 12-month average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume was also stable at 738M shares vs 731 vs 694M vs 705M vs 708M. For comparison purposes, for the prior 12 months it is a historically weak 712M shares…but since 10/1: 823B shares and slipping – including that HUGE 1.22B share day – highest since 9/19, followed by two more 1B plus days leading to options expiry!. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 16, and FIVE 900M+ days.

A/D’s were negative: NYSE: -1.6x vs +1.6x vs -1.3x vs +1.1x vs -1.8x; Nasdaq -2.6x! vs +1.5x vs -1.9x vs -1.1x vs -2x. Breadth was similar: NYSE -1.6x vs +2x vs 1:1 vs +1.5x vs -2x; Nasdaq -2.2x! vs +2x vs -1.7x vs +1.4x vs -1.2x. New 52 Week Highs were nearly halved to 135 (weak) vs 304 vs 242 vs 207 vs 249 – their range for the year is 39-612!!! New Lows slightly higher at 141 vs 117 vs 115 vs 127 vs 146. The 2014 range is 24-1043!!! S&P VIX traded in a range of 13.83 – 14.78, then settled at 13.96 +.10 – and well in bear territory. This is its 17th sub-15 close since peaking on 10/15. Heading back toward those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!)? You decide. The average of the past 12 months is 13.99, with a low of 10.28!…high close of 26.25 on 10/15/14! Put protection is getting expensive again.

U.S. bond market closed weaker…it was down slightly then tanked on the FOMC statement. The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.36% -3/8; 30’s 3.08% -3/4; and the long TIP 1.06%! -1-1/2!!! No inflaton concerns! Overnight recovering most of the loss, ex-TIPS: 10’s 2.32% +5/16; 30’s 3.04% +3/4; and long TIP 1.04% +3/4.  

Libor update: 0.232% 3 mos.; 0.326% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.09-0.10%. T-Bills: 0.3%, one-month, 0.00%! 3 mos, 0.12% one year???

Foreign bond yields LOWER, ex-Greece; Japan steady again (Benchmark is 10yr): Germany 0.81% -4; UK 2.10% -4; France 1.16% -3; Italy 2.31% -1; Spain 2.10% -2; Portugal 3.11% -2; Greece 8.09% +11 – couldn’t hold below 8%: 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.46% -1.

Gold closed weaker again and could not take out Tuesday’s new high of $1204.10, highest since 10/30, closing at $1193.90 -$3.20. Still following thru on Friday’s ‘positive key reversal. 11/7’s low was $1130.40, a new recent low!). The recent intraday high of $1255.60, highest since 9/10/14, was rejected. The last 16 sessions have had prints below $1200 first time since 12/31/13 Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is at $1200 (psychological), then the 40 day at $1205, the 50 day $1209, then the 200 day at $1278. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. $1130.40. 11/7’s low was $1130.40! Overnight, weaker in another inside session at $1187.80 -$6.10. Silver holding above $16 (support), also highest since 10/31, and back from 11/5’s low of $15.12, more than a five year low.

Crude closed a tad lower at $74.58 -.03 in an unremarkable session (oil drillers are anything but boring as they have lost nearly half their value). Just four days ago it set a new recent low of $74.07, lowest since 9/17/10!!! 10/25’s high was $84.83. There have been 33!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($82.75!), then the 50 day ($84.78!), and lastly the 200 day (96.92!), all accelerating to the downside. If it fails here we are now looking at $70! The recent range is now $74.07-$112.24 since 3/1/12. Overnight it is slightly weaker in a tight range at $74.47 -.11. CAUTION!

Global equities weaker: UK -0.6% vs -0.1% vs +0.5% vs -0.1% vs -0.1%; France -1.1%! vs +0.6% vs +0.7% vs – vs +0.4%; Germany -0.6% vs +0.7% vs +1.2% vs – vs +0.1%; Japan +0.1% vs -0.3% vs +2.2%! vs -3%!!! vs +0.6% vs +1.1%! Hang Seng -0.1% vs -0.7% vs -1.1%! vs -1.2%! vs +0.3%; Korea -0.5% vs – vs +1.2%! vs -0.1% vs -0.8%; India +0.1% vs -0.5% vs -0.1% vs +0.5% vs +0.4%. U.S. equity futures also weaker: DOW -67 (range 80); SPX -8.30 (11); NDQ -17 (25). Rock and roll!

 

Some random thoughts:

…wonder if Janet Yellen, Mario Draghi, and Shinzo Abe could borrow Camp David for a few days of soul searching…what to do? …also what did they do…as in what have they done?

The Fed unanimously voted to raise rates next year even though inflation is not a problem now or even expected to be anytime soon (note how long U.S. Treasury TIPS took the hit yesterday – who needs inflation protection?), and the funny thing, as First Tennessee’s Chris Low points out last March and at this meeting they supported their decision with the Taylor Rule – but here’s the rub: for opposing reasons!?! Makes you wonder if they know what they are doing because we sure the hell don’t!

The Taylor Rule, named for Stanford economics professor, John Taylor (also a fellow of the Hoover Institute…but not a ‘jolly good’ one – the ‘Hoov’ doesn’t allow that!) says, quoted from Investopedia:

“Taylor’s rule suggests that the Fed increases interest rates in times of high inflation, or when employment is above the full employment levels, and decreases interest rates in the opposite situations. This method of controlling interest rates has been fairly consistent with interest policy decisions, even though the Fed does not explicitly subscribe to the rule.”

Consistent? What about this: in March they said they would not tighten because of low inflation and high unemployment; now they say that they will tighten next year (didn’t leave an out), because of rising inflation and declining unemployment (guess the Fed doesn’t look at the U-6 report which includes discouraged people and those working part-time but wish to work full-time).

This time only Fed Governor Narayana dissented and as Economic Data Service reported:

Mr. Kocherlakota dissented because he believed that, in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer term inflation expectations, the Committee should commit to maintaining the current target range for the federal funds rate at least until projected inflation one to two years ahead has returned to 2 percent and should continue the asset purchase program at its current pace. Mr. Kocherlakota noted that when the Committee first reduced its asset purchases in December 2013, it said in the post-meeting statement that it would be monitoring inflation developments carefully for evidence that inflation was moving back toward its objective over the medium term; Mr. Kocherlakota indicated he saw no such evidence. (emphasis added)

Sooo, it appears to TB that ‘the lady (Yellen?) doth protesteth too much’. Why? Because that’s her job…to paint an ‘image’ of the Fed doing its job despite those dual mandates which remain in conflict. Note that Mr. K. want to continue the QE’s, no tapering and definitely no selling of those inflated assets. Besides, sell them? To whom??? …at what price? As Colin Powell would say, “you break it, you own it.” But in this case Jamie Dimon and friends broke it and we, the people, now own it…that is not quite write, because the Fed is only a ‘quasi-governmental’ agency, but one with power unlike any other entity in the U.S. Why? Because the Fed has the power to act immediately and then answer to Congress after the fact (isn’t that what Obama, rightly or wrongly

is trying to do?).

First, let’s look at those assets: the Fed purchased them from ‘drowning’ financial institutions at face value…isn’t that putting an asset on your books at an inflated value?…and what caused the Keating and friends S&L Crisis? Stop being picky TB! Ok, there are over $4 trillion of them and guess who is financing them? The very banks who caused the problem! See, starting in 2008, the Fed got something it (Greenspan?) wanted for years: to be able to pay the banks interest on excess reserves (currently 0.25% and we would all agree that is cheap).

Then, they got the banks (probably didn’t take much prodding) to maintain excess reserves to finance the QE purchases, thus avoiding ballooning government bond issuance. The banks, especially the big ones since they were not eager to lend back then due to broad credit concerns. What they did lend was mainly on mortgages which the held the required minimum of 60 (?) days, then sold to FNMA/FHLMC who then (and now) bore the risk…oh, and the banks in addition to pocketing origination fees, retained the servicing of the loans…worth another 0.25%! Question: with 3% 30-year mortgages how long would it take you to earn the same as the mortgage would yield and still have no mortgages on the balance sheet…oh and maintain those excess reserves earning another 0.25%. TB calculates about 4-5 turnovers…and you are being patriotic. All of this while the government wants you to make loans…wink, wink.

So here is the quandary: by merely stopping the tapering…let alone outright selling the assets, how can the Fed ‘grow’ the economy? With T-Bills currently yielding 0.15% or less (sometimes even negative returns!), and Fed Funds changing hands at 0.09%, where’s the juice, i.e. incentive for the banks to want to do anything different…especially since their stocks are back near 2008 levels (they peaked in mid-2007), and they are paying paltry dividends to the suckers…oops, shareholders! Quandry? It’s a no-brainer.

But the question is how do you convince Main Street that the economy is doing well? Keep doing what you are doing but you sure as hell don’t want to see interest rates go to zero or, horrors, negative…this said when we are and have been on the cusp since the crisis began! Oh, and you are making the wealthy even richer by driving asset prices higher…that would be stocks!

So, don’t let the gyrations scare you…even if stocks may be overvalued by as much as 25% (Jonathan Clements), because as smart money investor Jeremy Grantham says, you can earn 15% over the next 12 months…sure they are overvalued, he continues, but even with a pullback you have an expected loss of less than 10%…a safe bet?…or do you wait for a correction? Who knows…you decide…but don’t factor a rate increase into your projections…its futile.

That’s how TB sees it…you decide…

Have a great day!

TB

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11/19/14…what do you get if you take the ‘key’ out of Keystone?

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Life is not for everyone.”

- Michael O’Donoghue

Bloomberg Quote of the Day: “Be kind whenever possible. It is always possible.” – Dalai Lama

Bloomberg Top Stories:

*Dollar Strengthens to Seven-Year High as Treasuries Drop, Stocks Advance – not much!

*Putin Said to Surprise With Anti-Corruption Crackdown to Counter Sanctions – not again!

*Rejection of Keystone Bill Sets Up 2015 Showdown in Republican U.S. Senate – OK corral?

*Yellen Inherits Greenspan’s Conundrum as Long-Term Interest Rates Decline – thanks, AG!

*Five Feet of Snow Buries Part of New York State; at Least Five Are Dead – incredible!

*French Prosecutors Begin Investigation Into Insider Trading at BNP Paribas – TB is shocked!

*Russia Blames Ukraine Conflict on Security Needs as Death Toll Tops 4,000 – sure they do!

*Apple-Google Evidence in Employee Poaching Case Triggers Antitrust Frenzy – finally?

*Wages Poised to Rise as Signs Emerge Showing Improving U.S. Labor Market – but wages???

Tuesday’s Market Summary

Just another screwy day…true all indices up from 0.2% (Dow Utilities) to 0.27% (both Nasdaq’s). Volume was up to 3.4B shares – both pretty typical of Tuesday before options expiry. A/D’s and Breadth (especially the latter) were good. New highs climbed back to 304 while new lows were stable at 117. The VIX traded in a tight range (13.13-13.99), but note all in bear territory before closing at 13.86 -.13. Nothing to see here…again!

Total NYSE Volume was higher at 3.41B shares vs 3.13B vs 3.2B vs 3.46B vs 3.25B. Average volume since 9/30 is 3.6B shares and now falling, or about 600M more than the 12-month average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume came back to a slightly above average 731 vs 694M vs 705M vs 708M vs 718M. For comparison purposes, for the prior 12 months it is a historically weak 712M shares…but since 10/1: 825B shares (but falling) – including that HUGE 1.22B share day – highest since 9/19, followed by two more 1B plus days leading to options expiry!. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 16, and FIVE 900M+ days.

A/D’s were positive: NYSE: +1.6x vs -1.3x vs +1.1x vs -1.8x vs +1.2x; Nasdaq +1.5x vs -1.9x vs -1.1x vs -2x vs +1.6x. Breadth was solid: NYSE +2x! vs 1:1 vs +1.5x vs -2x vs 1:1; Nasdaq +2x! vs -1.7x vs +1.4x vs -1.2x vs +1.6x. New 52 Week Highs continued their rise to 304 vs 242 vs 207 vs 249 vs 276 – their range for the year is 39-612!!! New Lows steady at 117 vs 115 vs 127 vs 146 vs 113. The 2014 range is 24-1043!!! S&P VIX traded in a tight range of 13.13-13.99 (Monday’s close), then settled at 13.86 -.13 – still well in bear territory. This is its 16th sub-15 close since peaking on 10/15. Heading back toward those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!)? You decide. The average of the past 12 months is 13.97, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market closed slightly better. The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.32% +3/16; 30’s 3.04% +3/8; and the long TIP 1.00%! +1/2. Overnight back to weak: 10’s 2.36% -3/8; 30’s 3.08% -3/4; and long TIP 1.04% -15/16.  

Libor update: 0.232% 3 mos.; 0.326% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.09-0.10%. T-Bills: 0.3%, one-month, 0.02% 3 mos, 0.13% one year???

Foreign bond yields little changed, Greece lower but still above 8%; watch Japan! (Benchmark is 10yr): Germany 0.83% +4; UK 2.13% +1; France 1.18% +3; Italy 2.32% –; Spain 2.12% +1; Portugal 3.12% –; Greece 8.01% -7: 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.47% -3.

Gold closed strong again with a new high of $1204.10, highest since 10/30 and closed at $1197.10 +$13.60. Still following thru on Friday’s ‘positive key reversal for 2nd time in six sessions. 11/7’s low was $1130.40, a new recent low!). The recent intraday high of $1255.60, highest since 9/10/14, was rejected. The last 15 sessions have had prints below $1200 first time since 12/31/13 Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is at $1200 (psychological), then the 40 day at $1205, the 50 day $1210, then the 200 day at $1278, all declining. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. $1130.40. 11/7’s low was $1130.40! Overnight, slightly weaker in a narrow insides session at it $1194.60 -$2.50. Silver holding above $16, also highest since 10/31 and back from 11/5’s low of $15.12, more than a five year low.

Crude closed lower at $74.61 -$1.03 but the worst part was it had a negative ‘key reversal’. Will that kill it again. Just three days ago it set a new recent low of $74.07, lowest since 9/17/10!!! 10/25’s high was $84.83. There have been 33!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($83.20!), then the 50 day ($85.11), and lastly the 200 day (97.03), all continuing to plunge and accelerating to the downside. If it fails here we are now looking at $70! The recent range is now $74.07-$112.24 since 3/1/12. Overnight it is slightly better at $74.79 +.18 with a low of $74.88. CAUTION!

European equities mostly higher, Asia weaker: UK -0.1% vs +0.5% vs -0.1% vs -0.1% vs -0.1%; France +0.6% vs +0.7% vs – vs +0.4% vs -0.4% vs -1.1%; Germany +0.7% vs +1.2%! vs – vs +0.1% vs -0.2% vs -1.3%; Japan -0.3% vs +2.2%! vs -3%!!! vs +0.6% vs +1.1%! Hang Seng -0.7% vs -1.1%! vs -1.2%! vs +0.3% vs +0.3%; Korea – vs +1.2%! vs -0.1% vs -0.8% vs -0.3%; India -0.5% vs -0.1% vs +0.5% vs +0.4% vs -0.2%. U.S. equity futures little changed in another narrow range session: DOW +3 (range 33!); SPX +0.30 (4!); NDQ -5.50 (18).

 

Some random thoughts:

…yesterday was long so let’s keep it short today…k? The Keystone Pipeline is a myth on so many fronts, but some Dems had to vote for it or risk losing constituents. Here goes:

  1. Those 42k jobs? Sure, but only in construction phase. PBS interviewed the CEO of the company…when questioned about them being ‘temporary’ with only 50 long-term jobs created, he stumbled…tried to say they will keep those 42k of workers! Get real!
  2. Yes there are serious environmental concerns but the sponsors are also correct about offsetting risks of rail transport.
  3. Now the biggie: supposedly this will solve most of our oil importing problems…make us self-sufficient (sic). Really: where does the pipeline lead? Follow the crude…to Oklahoma! Where are the refineries…northeast…capische? That oil will be shipped overseas…why? Because law requires that oil only be carried on U.S. flag ships. When was the last time you saw a U.S. flag oil tanker?

That’s it…you decide…and meanwhile the Senate is back in gridlock! Hmmmm.

TB

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11/18/14…Eric Cantor: loser…or is he?

Quote of the Day from the Friars Club Encyclopedia of Jokes: “I like long walks, especially when they are taken by people who annoy me.” – Fred AllenBloomberg Quote of the Day: “A man who limits his interests, limits his life.” – Vincent Price

Bloomberg Top Stories:

*Abe Tries to Salvage Abenomics With Early Japan Election, Sales-Tax Delay – arigato!

*Abenomics Tries to Shake Up Japan to Wake Up Its Tired Economy – good luck!

*German Investor Confidence Unexpectedly Surges as Economy Skirts Recession – that’s good?

*Stocks Advance With Euro on German Confidence as Gold, Pound Strengthen – some rally!  

*Bank Indonesia Raises Key Interest Rate to 7.75% as Fuel Prices Increase – increase???

*Greek Bailout Review Is Said Stalled as Furious creditors Demand Savings – 10 yr now 8.09%!

*Fed Dual Mandates Collide as Drop in Jobless Rate View With Weak Inflation – 11.2% is low?

*Russia Predicts Recession Next Year If $60 Oil Adds to Tighter Sanctions – good, but ouch!

*China Steps Up Internet Censorship, Blocks Verizon Cloud Before Conference – LMAO!

*Home Depot Third-Quarter Profit Tops Estimates as Customer Traffic Gains – huzzah!

*Wall Street Banks to Reap $316 Million From Actavis, Halliburton Takeovers

*Keystone Vote May be Too Late to Help Democrats Hold Louisiana Senate Seat

*U.S. Said to Pursue More Mortgage-Bond Fraud Cases After Ex-Jeffries Suit

*Eastern European Elections Surprise As Voters Reject Authoritarian Rule

*Thieves Blow Up ATMs in Crime Wave That’s Leaving Chileans Stuck in Lines – hmmm

*Carnival Enlists Public in Marketing Push to Boos Cruise Industry Image – hah!

*Flash Boys Invade $12.4 Trillion Treasury Market in New Era of Volatility – BAD NEWS!!!

*A Witch Hunt in Finance Won’t Make the World a Safer Place – by Mark Gilbert

*Time for Hong Kong’s Protestors to Think Long-Term – not like Occupy Wall Street, sadly!

Monday’s Market Summary

If you had any doubts that this Friday is options expiration, all you had to do was look at yesterday’s markets. The Russell 2000 -0.7%, Dow Transports -0.5%, and whoa…those Dow Utilities surged 1.3% – so much for their selloff last week. The rest? Dow 30 and S&P 500 both up a whopping (sic) 0.1%, while the Nasdaq’s were down 0.4% and 0.3% respectively. NYSE Financials were flat but within that NYSE Brokers -1%; KBW Banks -0.1%; Nasdaq Banks -0.6% (BofA, usually the most active NYSE stock has been 5th the last two sessions. Since 11/6 it is down 2.5% and on the cusp of breaking $17. A/D’s and Breadth were moderately negative; new 52 week highs rose slightly and new lows declined similarly. Ahem, the VIX which had gotten into neutral/slightly bullish territory, corrected rising to 14.73 before settling at 13.99 +.67…don’t think any of this is options related? Think again!

Total NYSE Volume pretty steady at 3.13B shares vs 3.2B vs 3.46B vs 3.25B vs 2.93B. Average volume since 9/30 is 3.6B shares and now falling, or about 600M more than the 12-month average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume dipped below average at 694M vs 705M vs 708M vs 718M vs 614M (lowest since 9/15) – still trending lower. For comparison purposes, for the prior 12 months it is a historically weak 712M shares…but since 10/1: 828B shares (and falling) – including that HUGE 1.22B share day – highest since 9/19, followed by two more 1B plus days leading to options expiry!. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 16, and FIVE 900M+ days.

A/D’s were modestly negative: NYSE: -1.3x vs +1.1x vs -1.8x vs +1.2x vs +1.1x; Nasdaq -1.9x vs -1.1x vs -2x vs +1.6x vs -1.1x. Breadth was strange: NYSE 1:1? vs +1.5x vs -2x vs 1:1 vs +1.1x; Nasdaq -1.7x vs +1.4x vs -1.2x vs +1.6x vs +1.1x. New 52 Week Highs turned around to 242 vs 207 vs 249 vs 276 vs 339 – their range for the year is 39-612!!! New Lows slightly lower at 115 vs 127 vs 146 vs 113 vs 100 vs 85. The 2014 range is 24-1043!!! S&P VIX rose sharply intraday hitting 14.73 (very negative), then closed near the low of 13.99 +.68 and well back in bear territory – bottom of range was a high 13.84. This is its 15th sub-15 close since peaking on 10/15. Heading back toward those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!)? You decide. The average of the past 12 months is 13.97, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market closed slightly lower. The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.34% -1/8; 30’s 3.06% -3/16; and the long TIP 1.01%! -7/8. Overnight slightly better: 10’s 2.33% +1/16; 30’s 3.06% +1/8; and long TIP 1.00% +5/16.  

Libor update: 0.232% 3 mos.; 0.326% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.09-0.10%. T-Bills: 0.1%, one-month, 0.02% 3 mos, 0.14% one year???

Foreign bond yields lower, except Greece, now back above 8%; watch Japan! (Benchmark is 10yr): Germany 0.79% -1; UK 2.12% –; France 1.14% -1; Italy 2.31% –; Spain 2.09% -1; Portugal 3.13% –; Greece 8.09% +23!!!1 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.50% +3.

Gold closed little changed at $1183.50 -$2.10 – but the range was very narrow. Friday’s session high was $1192.90 – highest since 10/31 AND a ‘positive key reversal for 2nd time in six sessions. 11/7’s low was $1130.40, a new recent low!). The recent intraday high of $1255.60, highest since 9/10/14, was rejected. The last 14 sessions have had prints below $1200 first time since 12/31/13 Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is at $1200 (psychological), then the 40 day at $1206, the 50 day $1211, then the 200 day at $1278, all declining. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. $1130.40. 11/7’s low was $1130.40! Overnight, it is STRONG! $1201.80 +$18.30 and near its high of $1204.10 – first time above $1200 since Halloween! Silver also rising to $16.40 – 2nd day above $16, also highest since 10/31 and back from 11/5’s low of $15.12, more than a five year low.

Crude closed slightly lower at $75.64 -.18, two days after setting a new recent low of $74.07, lowest since 9/17/10!!! 10/25’s high was $84.83. There have been 33!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($83.63!), then the 50 day ($85.48), and lastly the 200 day (97.14), all continuing to plunge and accelerating to the downside. If it fails here we are now looking at $70! The recent range is now $74.07-$112.24 since 3/1/12. Overnight it is slightly better at $75.92 +.28 with a high of $76.44.

European equities higher, Asia mixed but Japan/Korea strong!!! UK +0.5% vs -0.1% vs -0.1% vs -0.1% vs -0.4%; France +0.7% vs – vs +0.4% vs -0.4% vs -1.1%; Germany +1.2%! vs – vs +0.1% vs -0.2% vs -1.3%; Japan +2.2%! vs -3%!!! vs +0.6% vs +1.1%! vs +0.5% vs +2.1%! Hang Seng -1.1%! vs -1.2%! vs +0.3% vs +0.3% vs +0.8%; Korea +1.2%! vs -0.1% vs -0.8% vs -0.3% vs +0.2% vs +0.2%; India -0.1% vs +0.5% vs +0.4% vs -0.2% vs +0.4%. U.S. equity futures little changed in a narrow range: DOW -3 (range 41?); SPX -2 (6!); NDQ -5.50 (18).

 

Some random thoughts:

…loser…only if that means earning $1 million a year and a guaranteed $400k bonus! Ah, but that’s next year. He was hired for $400,000, a $400,000 signing bonus and $1 million in restricted stock that vests over five years. Next year, a guaranteed $1 million plus $400,000 in restricted stocks. Moelis says the former college professor turned Tea Party advocate and a House Majority Leader, will add to their boardroom talent (bored room?). Let’s drill down, shall we?

Cantor is a college professor turned Tea Party politician…he has no background in investments (not that that means anything). So while he is licking his wounds from being surprisingly defeated, in the primary no less, by a nobody (a first for a Majority Leader), he gets the deal of a lifetime. Isn’t that special?

Who the hell is Moelis and Company? Founded in 2009 it received accolades from financial publications in 2009-11. But…have you ever heard of them? Not TB, not until now! Well you will hear more starting today as they are doing a secondary offering (IPO was April 15th – interesting date, that)…led by Goldman, Sachs, natch. The IPO wsa priced at $25 and was one of those rarities where it didn’t soar on opening day…high on April 15th was $27.32. It was fallow for about a month then rose to $37.36 on 9/2, closing yesterday at $34.22. So what about today’s offering? Bolster capital? Hardly! The company says the proceeds will allow existing shareholders to sell and while the company will buy some shares, those will be used to buy out employees holdings. Net effect on company – zero…but less equity for management…isn’t OPM great???

So beside Cantor, why the interest in this company by TB? Well…they bill themselves as a ‘boutique’ firm serving international clients…ok…but that word has a lot of bad historical connotations. For instance:

In 1982, when TB was an institutional bond salesman with Merrill Lynch, a firm called Drysdale Securities, ‘couped’ a treasury auction – that is, they bought it driving the price of the bonds high as the other primary dealers were forced to cover. Ah, but then, it came out who owned it and guess what? The bid vanished! (TB knew of Drysdale as a no-impact muni bond dealer so when he was told it was a ‘boutique’ government securities firm, TB was left scratching his head: how does a small firm outsmart Salomon Brothers and Goldman on a huge treasury auction. The answer is: they don’t!) They had to finance it and that was a problem. Hint: when you own most of what there is of anything in a transparent market like U.S. treasuries) more or less. But how?

They tried borrowing but nobody wanted to lend to them…enter Chase: they were ‘retained’ to get repo customers for the paper. Here is what they said to the big banks they called: “would you do a repo with Drysdale?” Answer of course was an emphatic NO! “Okay, would you do it if Chase guaranteed it?” Sure! Why not! So when the firm imploded under the weight of the treasuries, Chase was on the hook (which they tried to deny) for the losses on the repo’s (actually reverse repurchase agreements as the client was putting up the money in return for the bonds as collateral.

Then of course, there was another politician who really turned bad but as a member of two tightly-knit clubs: being a former senator and a governor (NJ): Jon Corzine, former CEO of Goldman Sachs (why does that name always come up???). Interesting as he was preceded by Stephen Friedman who later, while a director of Goldman, and serving as president of the New York Fed, was buying up Goldman shares, even as Lehman was collapsing on insider knowledge that GS would be declared a bank and thus get a bailout…the bailout engineered by Corzine’s successor, now Treasury Secretary Henry Paulson…got it?

Corzine became the CEO of MF Global and with knowledge of its teetering financial condition tried to arrange a sale so he could collect a nice bonus. Failing that, it was shown that client funds were used to inflate the capital of the firm – without their knowledge – which Corzine denied but which the courts held that he was responsible…not that anything happened to him however. What was interesting to TB was that MF was a ‘primary government securities dealer’. TB having worked for two (Merrill Lynch, and LF Rothschild when their application was in to be a primary), and they were closely monitored by the New York Fed. That practice was abandoned by the Fed in the early 1990’s, who said they were not responsible for the financial condition of the primaries. Not responsible??? That is like a bank making a loan with no documentation…an unacceptable excuse! (He was beaten for governor by Chris Christie…who got his own share of scandals).

Back to Friedman, when GS became a ‘bank holding company’ – which is not the same as a bank – he was elected to and served as president of the New York Federal Reserve while a director of GS…a violation of Fed rules, but he got a ‘waiver’. Then while president he began accumulating GS stock claiming it was ‘undervalued’ – this ‘used to be’ known as insider trading. Without admitting guilt he relinquished the shares and disgorged the profits and resigned from the board – of the Fed, not GS! Compare and contrast to Martha Stewart for just one minor infraction!

Enough! How about some other cases of politicians doing well in the private sector:

Let’s start with Sen. Billy Tauzin…ah, another GOP guy. He led the Bush 43 – induced design of the seriously flawed Medicare Part D…insuring that unlike Medicaid, it not be able to contract for prescription drugs. For this he was awarded (after not running again for ‘health’ reasons), was named head of the Pharma lobby and earned several million over the next few years. Nice work if you can get it…and have no morals!

Next, good old boy Sen. Phil Gramm of the great state of TEXAS! Where do we start with him? How about first, his wife Wendy, a former CFTC chair who exempted Enron from commodities regulation, then served on the audit committee of Enron and found nothing wrong, while making a million on the stock. Unbelievable! As for Gramm, he co-authored the Commodities Futures Modernization Act, and then not as a senator violated rules by lobbying on the floor of the Senate. What the Act did was destroy all efforts to regulate derivatives as former CFTC head had attempted, only to be slandered by Rubin, Summers, and of course, Greenspan, who failed to see three bubbles which he oversaw, and never saw a regulation he liked (here is a link to this slime: Phil Gramm/Mother Jones . What did Gramm get?…why to be Chairman of UBS Americas Investment Bank, retiring in 2012.

Getting tired of reading? TB is tired of writing so skipping Larry Summers brief stint being paid by the Wall Street lobby…not as a lobbyist but giving speeches paid for by firms, let’s skip to the wonderful Robert Rubin, former Treasury Secretary…oh yeah and from…Goldman Sachs.

Thanks to the revolving door the Bill Clinton promised to close, he left treasury to become Vice Chairman of Citicorp – without portfolio…and charged with dealing with their biggest accounts (just like Cantor will do!). As a former Citi exec told me, he constantly told them to take more risk…be like Goldman (but Citi really was a bank!), and watched as its assets declined by 70%. Then, when CEO Chuck Prince resigned in the scandal.. Rubin briefly served as Chairman…Sandy Weill stepping aside – wisely! Rubin said he had no idea they were taking risks…despite whistleblowers warning in memos to senior management of undocumented loans!

(Note also that while Treasury Secretary Weill enlisted his support to kill Glass Steagall, which he did and which allowed Citi to do a stock swap for Travelers, which Weill also controlled. Weill, couldn’t even wait for the ink to dry on the bill so he ‘illegally’ did the swap before it died! Nothing, of course, was done.

Get it? Nothing to see here…nothing new…just another quid pro quo…ain’t that special!

TB

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11/17/14….stocks and oligarchs

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Wives are people who feel they don’t dance enough.” – Groucho Marx
Bloomberg Quote of the Day: “Color is my day-long obsession, joy and torment.”
– Claude Monet

Bloomberg Top Stories:
*Halliburton Agrees to Acquire Baker Hughes in $34.6 Billion Transaction. – do they watch crude?
*S&P 500 Index Futures Fall With Crude Oil on Growth Concern as Bonds Climb – see above!
– HELLO!!!
*Japan Unexpectedly Sinks Into Recession as Abe Weighs Tax Delay, Election
*World’s Biggest Wealth Fund Outsmarts Flash Boys as Algorithms Abandoned – follow this!
*Doctor Dies of Ebola in Nebraska After Contracting Virus in Sierra Leone
*Draghi Seen Bypassing Quantatative Easing Qualms to Hit Balance-Sheet Goal
*Pfizer’s Cancer Accord With Merck KGaA May Show Waning AstraZeneca Pursuit
*EU to Blacklist More Ukraine Separatists, Skip wider Sanctions on Russia
*Big Oil Mergers Are Back as Halliburton Makes First Move – and the beat goes on…
*Volvo Said to Be Close to Deal With DHL to Deliver Packages to Parked Cars
*Oil Rout Liberating S&P 500 From Energy Influence as Tech Stocks Reach 20% -see comments
*Mounting Pressure on OPEC Spurs More Wagers on a Crude-Oil Rebound – worth a shot here!
*Russia Seen as Greatest Threat in Global Poll as Oil Erodes Putin’s Power
*London Homebuyers Vanish as Surging Property Prices Outpace Wage Growth
*Money Flows Into Emerging Market ETFs Slide 80% as Investors Avoid China – !!!
*Tax-Break Arms Race Across U.S. Spurs Push to Disclose Deals
*Drugmakers Racing to Get Frozen Ebola Vaccine to Coolers, Kerosene Fridges
*Scott Navigates Republican Climate Politics as Rising Seas Menace Florida

Friday’s Market Summary

Beats TB! The VIX declining in a session that ranged from -0.3% to +0.2%…it had traded as high as 14.15, was 13.55 just before the close and then settled at 13.31 – the session low? Could it be due to options expiry this Friday?…could well be! Volume was a weak of late 3.2B shares and just 705M on the NYSE floor. A/D’s and Breadth were of no consequence but mostly slight positives. New 52 week highs continued their slide to 207 as did new lows to 127 (about average). Financials were weak especially bank stocks. BofA 5th most active -0.5% and could break $17.

Total NYSE Volume fell back to 3.2B shares vs 3.46B vs 3.25B vs 2.93B vs 3.24B. Average volume since 9/30 is about 3.7B shares but now falling, or about 700M more than the 12-month average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume steady for a second day at 705M shares vs 708M vs 718M vs 614M (lowest since 9/15),vs 717M – still trending lower. For comparison purposes, for the prior 12 months it is a historically weak 712M shares…but since 10/1: 832B shares (and falling) – including that HUGE 1.22B share day – highest since 9/19, followed by two more 1B plus days leading to options expiry!. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 16, and FIVE 900M+ days.

A/D’s were minimal and mixed: NYSE: +1.1x vs -1.8x vs +1.2x vs +1.1x vs +1.3x; Nasdaq -1.1x vs -2x vs +1.6x vs -1.1x vs +1.6x. Breadth was slightly positive: NYSE +1.5x vs -2x vs 1:1 vs +1.1x vs +1.1x; Nasdaq +1.4x vs -1.2x vs +1.6x vs +1.1x vs +1.4x. New 52 Week Highs sharply lower again to 207 vs 249 vs 276 vs 339 vs 368 – their range for the year is 39-612!!! New Lows fell back to 127 vs 146 vs 113 vs 100 vs 85. The 2014 range is 24-1043!!! S&P VIX declined but remains in bear territory at 13.31 -.48 with a range of 13.31 (due to call buying at the end of the session which pushed it down from 13.55 near the bell, and a high of 14.15. Friday is another options expiry…heed! This is its 14th sub-15 close since peaking on 10/15. Heading back toward those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!)? you decide. The average of the past 12 months is 13.97, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market closed higher. The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.32% +3/16; 30’s 3.04% +7/16; and the long TIP 0.97%! +5/8. Overnight still rallying but well off session highs: 10’s 2.31% +1/8; 30’s 3.03% +5/16; and long TIP 0.97% +1/4.
Libor update: 0.232% 3 mos.; 0.326% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.09-0.10%. T-Bills still acting screwy: 0.04%, one-month, 0.01% 3 mos, 0.14% +.04 one year???
Foreign bond yields mixed (Benchmark is 10yr): Germany 0.78% –; UK 2.08% -4; France 1.15% +1; Italy 2.35% –; Spain 2.13% +2; Portugal 3.17% +1; Greece 7.88% +5. 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.48% –.

Gold closed strong at $1185.60 +$24.10! Session high was $1192.90 – highest since 10/31 AND a ‘positive key reversal for 2nd time in six sessions. 11/7’s low was $1130.40, a new recent low!). The recent intraday high of $1255.60, highest since 9/10/14, was rejected. The last 13 sessions have had prints below $1200 first time since 12/31/13 Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is at $1200 (psychological), then the 40 day at $1207, the 50 day $1213, then the 200 day at $1279, all declining. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. $1130.40. 11/7’s low was $1130.40! Overnight, it is slightly higher at $1187.20 +$1.60 with a session high of $1193.60! Silver also broke out rising to $16.38, highest since 10/31 and has been as high as $16.46 overnight! This following 5 straight ‘lower highs’ taking it to the low-15’s and near 11/5’s low of $15.12, more than a five year low.

Crude traded down to $73.25 before coming back to close at $75.82 +$1.61 a day after setting a new recent low of $74.07, lowest since 9/17/10!!! 10/25’s high was $84.83. There have now been 33!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($84.03), then the 50 day ($85.82), and lastly the 200 day (97.25), all continuing to plunge and accelerating to the downside. If it fails here we are now looking at $70! The recent range is now $74.07-$112.24 since 3/1/12. Overnight it is slightly weaker at $75.12 -.71.

European equities little changed, Asia weak! UK -0.1% vs -0.1% vs -0.1% vs -0.4% vs +0.2%; France – vs +0.4% vs -0.4% vs -1.1% vs +0.7%; Germany – vs +0.1% vs -0.2% vs -1.3% vs +0.4%; Japan -3%!!! vs +0.6% vs +1.1%! vs +0.5% vs +2.1%!!!; Hang Seng -1.2%! vs +0.3% vs +0.3% vs +0.8% vs +0.3%; Korea -0.1% vs -0.8% vs -0.3% vs +0.2% vs +0.2%; India +0.5% vs +0.4% vs -0.2% vs +0.4% vs +0.1%. U.S. equity futures weaker after ‘gapping down’: DOW -34 (range 62 plus 63 on gap!); SPX +2 (6!); NDQ +4 (9!).
Some random thoughts:

…anyone remember Jonathan Clements, who wrote for the WSJ? He has been back writing for the Sunday edition and yesterday’s column boldly stated how the stock market is overvalued and desperately in need of a 25% correction to provide value. Here is the link to his article and rationale: Clements: why-we-need-stock-prices-to-fall-25%
(Note if they did decline 20-25% you could safely convert your IRA/401(k) to a Roth – if you have the cash to do it! TB)

Lastly, Moyers & Co. had Lawrence Lessig on again along with Zepher Teachout (I kid you not). Lessig has been mentioned in this blog before and is a well-respected lawyer, professor and ethics expert (didn’t know lawyers ever took that course…especially conflicts of interest).
Teachout ran against Cuomo for governor of New York, and while she was soundly defeated she garnered 35% of the vote in the primary scaring him out of his wits! How dare she!
Their fight is against the oligarchs who not only ‘buy’ the elections but determine who their candidate will be before you even have a chance to express your opinon – or vote. Perhaps mom and pop still have a chance…after all, the Tea Party (with the help of the Koch brothers, however), did make it rough for them. Here is the link: Moyers and Lessig and Teachout

That’s enough for one day to digest…enjoy (if you can!),

TB

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11/14/14…is ‘government the problem’ – or an ineffiecent solution?

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Life is a sexually transmitted disease.” – Guy Bellamy

 

Bloomberg Quote of the Day: “There is another life that I might have had, but I am having this one.” – Kazuo Ishiguro – arigato!

Bloomberg Top Stories: (running late so no headlines today)

Thursday’s Market Summary

Sometimes markets make for strange bedfellows and yesterday was one of them. The two worst performers were the Russell 2000 -0.9% and Dow Utilities -0.8%, while the rest ranged from Dow Transports -0.2% (only other negative), to The NDQ 100 +0.4% (1.4:1 advancing). Some big losers including JGWentworth (the broker on your side?) JGW, -11.6% – guess clients didn’t know that as they had a huge earnings miss. Volume rose but on a mixed day not a good thing, A’D’s and Breadth were solidly negative; new 52 week highs down sharply while new lows rose; and lastly, the VIX rose sharply closing bearish again at 13.79 +.77 with a high of 14.31! Particularly noteworthy with options expiry next Friday!

Total NYSE Volume higher for a second day at 3.46B shares vs 3.25B vs 2.93B vs 3.24B vs 3.45B. Average volume since 9/30 is about 3.7B shares but now falling, or about 700M more than the 12-month average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume about even at 708M shares vs 718M vs 614M (lowest since 9/15),vs 717M vs 752M – still trending lower. For comparison purposes, for the prior 12 months it is a historically weak 712M shares…but since 10/1: 836B shares (and falling) – including that HUGE 1.22B share day – highest since 9/19, followed by two more 1B plus days leading to options expiry!. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 16, and FIVE 900M+ days.

A/D’s were negative – a rarity in the last six sessions: NYSE: -1.8x vs +1.2x vs +1.1x vs +1.3x vs +1.6x; Nasdaq -2x vs +1.6x vs -1.1x vs +1.6x vs -1.1xx. Breadth was similar: NYSE -2x vs 1:1 vs +1.1x vs +1.1x vs +1.9x; Nasdaq -1.2x vs +1.6x vs +1.1x vs +1.4x vs +1.1x. New 52 Week Highs slipped again to 249 vs 276 vs 339 vs 368 vs 313 vs 328 vs 390 – their range for the year is 39-612!!! New Lows rose again to 146 vs 113 vs 100 vs 85 vs 114 vs 145. The 2014 range is 24-1043!!! S&P VIX jumped and is again in bear territory at 13.09 +.77 with a session high of 14.31! Next Friday is another options expiry…heed! This is its 13th sub-15 close since peaking on 10/15. Heading back toward those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!)? you decide. The average of the past 12 months is 13.97, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market oscillated then closed higher. The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.35% +5/16; 30’s 3.07% +1/2; and the long TIP 1.00%! +3/8. Overnight weaker: 10’s 2.36% -1/8; 30’s 3.08% -1/4; and long TIP 1.01% -3/8. Where to from here? Dunno…  

Libor update: 0.233% 3 mos.; 0.326% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.08-0.10%. T-Bills still acting screwy: 0.04%, one-month, 0.01% 3 mos???, 0.14% +.04 one year???

Foreign bond yields lower across the board (Benchmark is 10yr): Germany 0.79% -1; UK 2.16% -2; France 1.15% -2; Italy 2.35% -4; Spain 2.11% -2; Portugal 3.18% -1; Greece 7.91% -4. 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.47% -2.

Gold closed slightly higher at $1161.50 +$2.40: note that this was the 4th straight ‘lower high and a somewhat ‘wedge’ is forming. This since Friday’s surprise rally to $1176.70 culminating in a positive key reversal (session low was $1130.40, a new recent low!). The recent intraday high of $1255.60, highest since 9/10/14, was rejected. The last 12 sessions have had prints below $1200 first time since 12/31/13 Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is at $1200 (psychological), then the 40 day at $1208, the 50 day $1214, then the 200 day at $1279, all declining. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. $1130.40. 11/7’s low was $1130.40! Overnight, it’s 5th straight ‘lower high’ and back below $1150 at $1147.50 -$14.00, low $1147.30 – WEAK! Silver also in a wedge with 5 straight ‘lower highs’ taking it to the low-15’s and near 11/5’s low of $15.12, more than a five year low.

Crude was slammed to close at $74.21 -$2.97 and worse setting a new recent low of $74.07, lowest since 9/20/10!!! 10/25’s high was $84.83. There have now been 33!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($84.45), then the 50 day ($86.17), and lastly the 200 day (97.36), all continuing to plunge and accelerating to the downside. So much for $74.95, the 10/4/11 low on a spike down…and we are now looking at $70! The recent range is now $74.07-$112.24 since 3/1/12. Overnight it is little changed at $74.51 +.30 BUT with a low of $73.25 – its 34th handle and lowest since 9/17/10!!!

European equities higher, ex-UK; Asia too, ex-Korea: UK -0.1% vs -0.1% vs -0.4% vs +0.2% vs +0.5%; France +0.4% vs -0.4% vs -1.1% vs +0.7% vs +0.3%; Germany +0.1% vs -0.2% vs -1.3% vs +0.4% vs +0.3%; Japan +0.6% vs +1.1%! vs +0.5% vs +2.1%!!! vs -0.6%; Hang Seng +0.3% vs +0.3% vs +0.8% vs +0.3% vs +0.8%; Korea -0.8% vs -0.3% vs +0.2% vs +0.2% vs +1%!; India +0.4% vs -0.2% vs +0.4% vs +0.1% vs flat. U.S. equity futures slightly higher: DOW +18 (range 60); SPX +2 (6!); NDQ +4 (9!).

 

Some random thoughts:

it wasn’t all Reagan’s fault (“In this present crisis, government is not the solution to our problem; government is the problem.”), he had help…lots of it. How many of you recall William (Bill) Simon, Treasury Secretary appointed by Nixon in his second term (and confirmed again by Ford after the near impeachment), a man as unlike the Fed chairs, William McChesney Martin, Arthur Burns, and Paul Volcker, as possible in knowledge of financial markets. It should not be surprising that this non-intellectual, Salomon Brothers bond trader (hey wasn’t Robert Rubin too? …same occupation different firm (GS), had nothing but contempt for regulation (also note that Salomon was later fined for rigging bids in U.S. treasury auctions).

That attitude was not only to influence Ronald Reagan but may have been responsible for the above quote. Simon said, in his book A Time for Truth, which was to be a blueprint for the Reagan administration (and the UK’s Margaret Thatcher) in testimony before a House subcommittee in April 1976, “(w)hen we se this monstrous growth of government, we must realize that it is not a matter of narrow economic issues… What is at stat is the fundamental freedom n on of the last, and greatest, democracies in the world.” Then…”Just look at what has happened in other countries today, whether it be Italy, or the United Kingdom or Argentina or Uruguay or Ceylon. Look at what has happened there when the so-called “humanitarians” try to create ‘Great Societies” by taxing and promising and spending.” Using the nominal amount of cash and deposits in the economy it was certain that ‘the government was printing money hand over fist to help finance its expenditures’. (he obviously didn’t know the difference between the monetary base and the money supply). ‘From 1956 to 1965’, he pointed out the money supply expanded at an average of 2.3 percent.’ But between 1966 and 1975, as the government engaged in runaway spending (true)…the average annual money growth rate rose to 5.8 percent.”

Both Simon and Milton Friedman agreed that the government should “keep it hands off the economy, to let the free market do its work.” (thanks to Kwasi Kwarteng’s book War and Gold, for the above. Reagan believed heartily in Simon’s ‘theories’.

This brings us to how they were wrong and how that thinking led to the financial crisis. Prior to the Friedman era, the economics profession had little use for investment theory. In fact, ‘Finance’ sprung off of this as one could not even write a thesis or dissertation on the subject.

Interestingly, Accounting, Economics, and Finance (thru the efficient market hypothesis), rely on one human trait: rationality. That is, the consensus view of what rationality is. For example,

- a person would not pay more for something than it is worth, thus the ‘market’ value is the correct value (that of course does not apply to frauds who trade among themselves as they did with the S&L’s to inflate their way out of being insolvent.

- since the market price is the value of a stock there is no need of securities analysis (strong form of the efficient market hypothesis)…but if so, why do Wall Street firms and advisors throw away hundreds of millions a year to have analysts? Just asking…

- the intrinsic value of a security is the market value (meaning the price a willing buyer and seller would agree on for a security…or home, or building. If this were true there would not have been an S&L crisis IF they were truly arms-length transactions.

- a corporation would never do anything that was negative to its long-term survival…if you believe this you don’t read the papers…or realize that the ‘long-term’ is the CEO’s expected tenure, with the blessing of his/her board, while the only long-term holders of stocks are those not in the know.

Thus, it was/is easy to get an accounting firm to give a ‘clean’ opinion on a company even when the numbers have been played with…not only the S&L’s but Enron and others (by the way, why hasn’t Sarbane-Oxley been used to prosecute CEO’s? Because they can always hide behind the auditors opinion. BUT we have whistleblowers who have risked or destroyed their careers and the SEC and Justice Department have ignored them. Worse, regulators like former CFTC head, Brooksley Born, are ridiculed…in her case by Robert Rubin, Larry Summers, and to her dismay by Fed Chairman Alan Greenspan. If her request to regulate derivatives had been approved instead of ‘derided’ (sic), there most likely would not have been a financial crisis…and if the 11,000 real estate appraisers who sent a letter to Congress telling how they were being coerced into providing inflated values for property, the housing crisis wouldn’t have happened…but who should they listen to? Experts or lobbyists for the financial services industry. Uh….

The ‘efficient markets hypothesis’ has been adopted by the industry and drummed into all those young, impressionable CFA (Chartered Financial Analysts). On Monday, some examples of political power being used to override the public good.

Enjoy your weekend!

TB

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11/13/14…government isn’t the problem, who we elect is the problem!

Quote of the Day from the Friars Club Encyclopedia of Jokes: “How many actors does it take to change a lightbulb? One hundred! One to change the bulb and 99 to say “I could have done that.” – Norm Crosby

Bloomberg Quote of the Day: “We are always the same age inside.”–Gertrude Stein–who says?

Bloomberg Top Stories:

*Berkshire Agrees to Acquire Duracell From P&G for $4.7 Billion in Shares

*Jobless Claims in U.S. Increased More Than Economists Forecast Last Week – yawn!

*Oil Drops to a Four-Year Low (support: $74.95!)as Europe Stocks, Ruble Fall; Treasuries Gain

*Wal-Mart’s Earnings Top Estimates After U.S. Sales, Rise; Shares Advance – let’s give a big shout out to America’s riches…and most niggardly family! Support them! …oops we already do!

*Goldman Sach’s New Partner Class Shows Shrinking role of Trading Division – what ‘class’?

*Pound Weakens to 14-Month Low as Housing Slowdown Adds to Gloom on Outlook

*Carney-Yellen Neck-and-Neck on First to Raise Interest Rates – first to cause a recession???

*Oil-Price Slump Tells Goldman Sachs Market Is Moving Away From OPEC Cuts

*Sweden Flaunts Depth of Monetary Tool Box to Show It Can Beat Inflation

*Black of Female in Silicon Valley Taught Unwritten Quiet Code on Diversity – i.e. shut up!

*Your Cash Under Mattress May be Better Idea Than a G-20 Bank – hmmm

*Forex Investors May Face $1 Billion Loss as Popular Trade Website Vanishes – poof!

*EU Split on Russia Sanctions Seen Limiting Steps to Hamper Ukraine Rebels

*Ebola Challenge in West Africa Stuns Even Quick-Strike Guerilla Doctors

*Putin Welcome at Davos as Sanctions Prove No Barrier for Russia Invitation

*U.K. Woman Gets 28 Months in Prison Over Underwear Plot to Fund Terrorists – selling them?

Wednesday’s Market Summary

After those two straight nothing days, what could happen? How about a day that starts out in the tank with the announcement of the fines in the Libor trading scandal dragging down the European stocks and with it U.S.futures. We opened down and then it got really weird (remember this is just one day after more record highs which fizzled), Dow Utilities kept diving closing -2% as the goat for a 2nd straight session (not that it matters ytd), while the S&P 5000 closed -0.1%; the Dow closed flat, and the two Nasdaqs and Dow Transports closed +0.2-0.3%. What do you call that?

Volume got back above 3B shares, A/D’s and Breadth were modestly positive, new 52 week high fell back well below 300, while new lows climbed a tad. The VIX traded entirely with ‘13’ handles (13.04-13.76) and closed up .10 at 13.02…make sense of all that…if you can. Don’t bother!

Total NYSE Volume climbed back above average to 3.25B shares from 2.93B vs 3.24B vs 3.45B vs 3.6B. Average volume since 9/30 is about 3.7B shares but now falling, or about 700M more than the 12-month average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume also rose to 718M shares from 614M (lowest since 9/15),vs 717M vs 752M vs 796M – trending lower. For comparison purposes, for the prior 12 months it is a historically weak 712M shares…but since 10/1: 840B shares (and now falling) – including that HUGE 1.22B share day – highest since 9/19, followed by two more 1B plus days leading to options expiry!. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 16, and FIVE 900M+ days.

A/D’s were moderately positive but better on Nasdaq: NYSE: +1.2x vs +1.1x vs +1.3x vs +1.6x vs 1.3x; Nasdaq +1.6x vs -1.1x vs +1.6x vs -1.1x vs +1.4x. Breadth was similar: NYSE 1:1 vs +1.1x vs +1.1x vs +1.9x vs +1.4x; Nasdaq +1.6x vs +1.1x vs +1.4x vs +1.1x vs +1.5x. New 52 Week Highs dropped to 276 vs 339 vs 368 vs 313 vs 328 vs 390 – their range for the year is 39-612!!! New Lows higher again at 113 vs 100 vs 85 vs 114 vs 145. The 2014 range is 24-1043!!! S&P VIX closed slightly barely higher but gave up the ‘12’ handle at 13.02 +.10 but the range was 12.99-13.76, two days after closing the gap from 9/19/-9/22 and its 12th sub-15 close since peaking on 10/15. Now on the ‘cusp’ of bull/bear from those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!). The average of the past 12 months is 13.97, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market was little changed except TIPs which were hit pretty hard. The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.36% -1/32; 30’s 3.09% +1/16; and the long TIP 1.00%! -11/16. Overnight all doing better: 10’s 2.35% +3/16; 30’s 3.08% +9/16; and long TIP 0.99% +9/16. Where to from here? Dunno…  

Libor update: 0.233% 3 mos.; 0.326% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.08-0.10%. T-Bills acting screwy: 0.05%, one-month, 0.01% 3 mos???, 0.14% +.04 one year???

Foreign bond yields mixed; Greece higher – Japan reversing? (Benchmark is 10yr): Germany 0.79% -2; UK 2.17% -2; France 1.16% -1; Italy 2.37% +1; Spain 2.12% +2; Portugal 3.21% +1; Greece 7.93% +10. 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.49% -3.

Gold closed slightly lower at $1159.100 -$3.90 in another boring and ‘inside’ session following Friday’s surprise rally to $1176.70 culminating in a positive key reversal (session low was $1130.40, a new recent low!). The recent intraday high of $1255.60, highest since 9/10/14, was rejected. The last 11 sessions have had prints below $1200 first time since 12/31/13 Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is at $1200 (psychological), then the 40 day at $1209, the 50 day $1216, then the 200 day at $1279, all declining. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. $1130.40. 11/7’s low was $1130.40! Overnight slightly better in another quiet session at $1162.90 +$3.80. Silver remains weak but a bit higher overnigh from the mid-15’s following 11/5’s low of $15.12, more than a five year low, but with the positive key reversal (higher high, lower low, and close above prior day’s high), that should be at least a near-term floor.

Crude closed lower at $77.18 -.76 in a ‘parallel’ sesson, still proving Friday’s $78.65 an outlier. Still struggling following 10/31’s intraday low of $75.84, lowest since 10/14/11!!! 10/25’s high was $84.83. There have been 32!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($84.91), then the 50 day ($86.57), and lastly the 200 day (97.47), all continuing to plunge and accelerating to the downside. Is there any support? Try $74.95, the 10/4/11 low on a spike down…miss that and we are looking at $70! The recent range is now $75.84-$112.24 since 3/1/12. Overnight it is weaker again at $76.30 -.88 with a low of $76.03…$70??? Hmmm.

 

European equities weaker for a 2nd day; Asia mixed: UK -0.1% vs -0.4% vs +0.2% vs +0.5% vs +0.3%; France -0.4% vs -1.1% vs +0.7% vs +0.3% vs -0.9%; Germany -0.2% vs -1.3% vs +0.4% vs +0.3% vs -0.7%; Japan 1.1%! vs +0.5% vs +2.1%!!! vs -0.6% vs +0.5%; Hang Seng +0.3% vs +0.8% vs +0.3% vs +0.8% vs -0.4%; Korea -0.3% vs +0.2% vs +0.2% vs +1%! vs +0.2%; India -0.2% vs +0.4% vs +0.1% vs flat vs -0.2%. U.S. equity futures slightly higher after gapping down on the open: Dow +15 (range 75); SPX +1.50 (9); NDQ +6.25 (20).

 

Some random thoughts:

“In this present crisis, government is not the solution to our problem; government is the problem.” – Ronald Reagan, First Inaugural Address (note the first four words, not a broad statement although he had no problem applying it to all of government).

With all due respect to ‘The Gipper’, government WAS the problem and continues to be a problem not in spite of Reagan but largely because of him. How can TB say that? Consider:

In his zeal against government, he de-regulated far too much and too fast. We all recall the air controllers strike in which he simply fired 11,500 of them, placing air travelers at risk, as inexperienced controllers were hired to replace them, just nine months after he took office.

He appointed deregulation proponents to every area of government. Consider in his first term, he appointed Larry Kudlow, as economic advisor to the president, Donald Regan, former head of Merrill Lynch, chief of staff, and of course Richard Pratt to head the Federal Home Loan Bank board.

Pratt, immediately began to deregulate the Home Loan Bank resulting in ‘contract fraud’ of massive proportions, When Pratt resigned two years later he was replaced by Reagan campaigner, close friend and confidante Edwin Gray. Gray was grilled on his views on deregulation by Regan and Edwin Meese and pushed to continue with deregulation. Gray acceded to this demand until the Texas S&L scandal and Charles Keating’s Lincoln Federal Savings altered his thinking thanks to attorney for the Home Loan Bank, William K. Black, who along with a few other officials had his ear and caused him to reverse his stand which sent Don Regan howling. He was pressured by the cabinet and Reagan himself to not do this, but he knew it was the right thing to do. Thanks to Charles Keating’s (a republican) contributions to campaign contributions to what became known as the ‘Keating Five’ (Allan Cranston (D), Dennis DeConcini (D), John Glenn (D), John McCain (R), and Donald Riegle (R), he fought Pratt and the Home Loan Bank and almost succeeded. Not only did he have these five under his control but House Speaker Wright (D). Never in history has one person had this much influence over more than ONE congressman…but SIX??? As a result, the S&L crisis in Texas and in California (most notably Keating’s Lincoln Savings), resulting in hundreds of billion dollars in losses to the government…still think regulation was the problem? Had Congress allowed the Home Loan bank to do its job the losses could have been (just) a few billion dollars. Note that Keating was also a friend of Reagan, and was ‘equal-opportunity’ in supporting politicians favorable to him (he was a pioneer in what has become SOP for all corporations who are on the ‘edge’ or downright corrupt. Talk about cheap protection, the total amount involved was $1.3 MILLION to all five of them! Who wouldn’t accept those odds???

Despite this, when Gray’s term expired he was replaced…by a Congressional junkie, Danny Wall, who attempted to circumvent all that Pratt had accomplished. Remember, Pratt was no crusader, he backed into ‘re-regulating’. At the press conference nominating Wall, not only was Pratt not invited, but his name was not even mentioned by Reagan! Unheard of contempt for a man who attempted to protect savers and save the government money.

Then came 1987 (we will skip the rest of the S&L crisis other than to say that despite bilking widows and other unsophisticated investors into buying Lincoln Savings ‘junk bonds’ while promoting them as safe – the proceeds were used to pay off junk bonds issued by Michael Milken – and these people got nothing). President Reagan, disregarding Don Regan, approved the bailout of Continental Illinois, the 7th largest bank in the U.S. at the time. Yes, Reagan himself, created ‘moral hazard’ and we have been paying for it ever since. So the man who said ‘government’ was the problem was in fact the problem! He also slashed taxes creating a record deficit at the time. Due to the implied guarantees the other top banks (1-6) were deemed government guaranteed and drew in money, not only from other global banks but from smaller regional and community banks…nice job, Ron!

What happened to Keating? Sentenced to 3-1/2 years in jail…can’t find that he paid any fines! The poor people who bought his junk bonds lost everything. As for Knapp, he got six years.

The biggest loser was poor Ed Gray. He was a broken man and not much else happened with him after. Some friend Ronnie turned out to be to him.

More odd Reagan homilies…some may shock you: Reagan quotations

Tomorrow: how the economists and accounting firms aided and abetted along with the ‘efficient markets hypothesis’ that has now been drummed into all those young, impressionable CFA (Chartered Financial Analysts). What happened will surprise and shock you, or at least it did TB!

TB

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