10/30/14…QE is dead…long live QE!!!

Quote of the Day from the Friars Club Encyclopedia of Jokes: “An actors a guy who, if you ain’t talking about him, he ain’t listening.” – Marlon Brando

Bloomberg Quote of the Day: “Work hard, be kind, and amazing things will happen.”

- Conan O’brien…he said that???

Bloomberg Top Stories:

*Economy in U.S. Grew 3.5% in Q3, More than Analysts Estimated – Fed more important!

*Fewest Americans in 14 Years filed for Unemployment Benefits in Last Month

*Stocks in U.S. Decline as GDP, Jobless-Claims Reports Fuel fed Rate Bets – not good!

*Greece’s Euro Dilemma Is Back as Minister Braces for Volatile Bond Markets – already here!

*REIT Pair Trade Pays 1.6% to Investors Anticipating U.S. Economy Will Slow

*Ruble Bears Are Getting Burned for Ignoring Rally Signals; Market Reversal

*Barclays Investment Bank Profit Tumbles 39%, Trailing Its European Rivals

*JPMorgan Directors Best Paid in London, Beating Goldman to BofA Executives – the Whale?

*J&J Seen Settling More Than 1,000 Additional Claims Over ASR Hip Implants

*How Oil’s 29% Tumble Took Investors by Surprise and Why OPEC Is to Blame

*”I’m Proud to Be Gay,’ Apple CEO Tim Cook Writes in Bloomberg Businessweek

*Republicans Aim to Control Two-Thirds of U.S. State Legislative Chambers – good luck folks!

*Kurdiah Peshmerga Cross Into Kobani to Take Up Fight Against Islamic State

*African Union Says a Sixth of Pledged Ebola Workers Are Ready to Deploy

*U.s. Mom Fights for Drug to Save Son From ‘ Slow Motion Death sentence.’

Wednesday’s Market Summary:

Suppose the Fed announced an end to the QE’s…what would happen? Well you got a sampling yesterday: stocks weaker, bonds on the other hand mixed with only the 10-year (basis for mortgages) slightly weaker. Stocks all off – this time including Dow Utilities – from 0.2% to 0.5%, on slightly higher volume. Just a wake-up call…let’s see what happens today.A/D’s and Breadth slightly weak, but S&P VIX had to settle for just ONE close with a ‘14’ handle, closing at 15.15 +.76 with a range high of 16.28! Still don’t believe the rally is sustainable, but that’s just TB.

See commentary for discussion of the impact (sic) of ending the QE’s.

Total NYSE Volume slightly higher again: 3.74B shares vs 3.61B vs 3.47B vs 3.06B vs 3.76B: average volume for October is 3.6B, or about 600M more than the recent average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: for October it is 868M shares and slipping!!! Volume was up at 823M shares vs 785M vs 760M vs 718M vs 919M. For comparison purposes, for the prior 12 months it is a historically weak 710M shares…but thus far in October, 868M shares – from 895M just last Thursday – including that HUGE 1.22B share day – highest since 9/19. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…for October 14, with FIVE 900M+ days. Looks like that is now past.

A/D’s were slightly negative: NYSE: -1.3x vs +4.6x!!! vs -1.3x vs +1.6x vs +3.3x!; Nasdaq -1.2x vs +3.8x! vs -1.1x vs +1.3x vs +2.7x vs -2.8x; Breadth was similar: NYSE -1.6x vs +4.8x!!! vs -2.1x vs +1.8x vs +3.4x vs -3.7x; Nasdaq -1.5x vs +5x!!! vs +1.1x vs +1.9x vs +5.7x vs -2.9x; New 52 Week Highs slightly lower at 312 vs 326 vs 161 vs 142 vs 171 – their range for the year is 39-580!!! New Lows up a tad to 86 vs 80 vs 136! vs 82 vs 89. The 2014 range is 24-1043!!! S&P VIX turned around closing higher at 15.15 +.76 – goodbye 14, and any chance of 13?, still well below those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!). The range not out of danger yet at 14.19-16.28. Remains bearish and well above 9/18’s 12.03 The average of the past 12 months is 13.94, with a low of 10.32!…high close 26.35 on 10/14!

U.S. bond market closed mixed following the FOMC announcement of an end to the QE’s – hah! The 10 year being the loser as it is the benchmark for mortgages. 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 3.05% +5/16; and the long TIP 0.96% +1/2. Rallying overnight: 10’s 2.29% +1/4; 30’s 3.01% +13/16; and long TIP 0.93% +11/16. QE’s may end, but dump $4.3 trillion??? No way!  

Libor update: 0.233% 3 mos.; 0.324% 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 range from 0.00%, one-month, to just 0.10% one year!!! Foreign bond yields mixed, with PIIGS higher. especially Greece!!! (Benchmark is 10yr): Germany 0.85% -5; UK 2.22% -4; France 1.25% -3; Italy 2.49% -1; Spain 2.16% +2; Portugal 3.35% +4; Greece 7.94%!!! +54!!! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.46% –.

Gold closed slightly lower at $1224.90 -$4.30, and remains below the 40/50 day m’a’s, following a new recent high of $1255.60, highest since 9/10/14. There have been just two prints below $1200 since 12/31/13 – 10/3 and 10/6 and soundly rejected! Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is the 40 day at $1229, the 50 day $1238, and the 200 day at $1284. Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is weaker at $1203.70 -$21.20!!!, BUT it is even worse than it looks as the session low is $1199.30 – first time below $1200 since 10/6!!! Silver likewise, falling to $16.53 overnight, taking out 10/3’s $16.64 – lowest since 2/9/10 and very close to $14.65, a multi-decade low!!!

Crude closed higher at $82.20 +.78, but still not negating Monday’s huge header to $79.44 intraday– lowest since 6/29/12. 10/25’s high $84.83, low $79.44, define October’s range. There have been 28!!! handles since peaking at $107.73 on June 13th at $107.73 highest since 9/19/13 (a huge down session which put it in freefall. 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 ($88.58), then the 50 day ($89.74), and lastly the 200 day (98.34), all accelerating to the downside. The range is now $79.44-$112.24 since 3/1/12. Overnight weaker at $81.72 -.48.

Global equities weaker, ex-India/Japan…look at this: UK -0.6% vs +0.6% vs +0.6% vs -0.6% vs -0.2%; France -0.4% vs +0.1% vs +0.6% vs -1.4% vs +0.2% vs -1.3%; Germany -1% vs +0.6% vs -1.6% vs +1.4% vs +0.4% vs -1.4%; Japan +0.7% vs +1.5%! vs-0.3% vs +0.6% vs +1%; Hang Seng -0.5% vs +1.3% vs +1.6% vs -0.7% vs -0.1%; Korea -0.1% vs +1.8%! vs -0.3% vs +0.3% vs -0.3%; India +0.9% vs +0.9% vs +0.5% vs -0.4% vs +0.2%. U.S. equity futures weaker and at session lows following jump in weekly jobless claims, opened higher: Dow -45 (range 55); SPX -6.60 (21!); NDQ -15.75 (23). Should be an interesting day!

 

Some random thoughts:

Reactions to even a whiff of an end to the QE’s have been all over the place since the first one that set the bond market into panic mode and alerted the Fed to the problem of just how to end them. The answer is the taper is over (for now?), but with $4 trillion in overvalued assets on their books how do they bring the balance sheet back to the norm? The answer to that is they don’t, which will bring more allegations from the right and coupled with the failure to regulate by the NY Fed (most notably with JPMorgan’s London Whale),the independence of the Fed is once more in question. Wouldn’t you rather see it under the control of our Congress??? Hell, if that had been the case we would be in a full-blown depression right now, instead of languishing.

The more important issue for the markets however, is how has the Fed financed their buying binge? Simple…by paying the banks 0.25% for the excess reserves, and since that is 15 basis points more than Fed Funds pay them (actually they would be at zero or less if the Fed wasn’t keeping them at equilibrium! Want proof? T-Bills are going at ZERO percent for one month and 0.10% for a year! You tell TB how they could stay positive?

They can’t! That would lead to not disinflation but DE-Flation! Europe is already in the throws of this…it can’t happen here, you say, the biggest consumer nation on the planet…ah but China, like Japan in the 1980’s is rapidly replacing us…and our economies are interdependent.

What the Fed has done is keep the banks from lending and thus putting a ‘floor’ on rates to borrowers. Imagine if the banks had $4 billion in their hot, greedy hands? It wouldn’t be pretty.

So should bondholders be afraid? No, just aware as we are in a state of flux. We have most likely seen the lows in yields…Europe likewise, but another crisis is building in Greece where the 10-year jumped 54 basis points overnight to 7.94%! this from a low of 5.47% on 9/8/14! …with a spike to 8.64% in the interim for one day! All is not well!

Where are we going from here? Dunno, but as the old English translation of a Chinese ‘curse’ goes: “may you live in interesting times.” …and we most certainly do!

Have a great day! Congrats to the Giants especially Baumgarner for an incredible win and thrilling end to a fantastic seven-game series…KC has nothing to be ashamed of…just what could have been.

TB

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10/29/14…when will World Series be over? tonight!

Quote of the Day from the Friars Club Encyclopedia of Jokes: “My uncle was thrown out of a mime show for having a seizure. They thought he was heckling.” – Jeff Shaw

Bloomberg Quote of the Day: “The reward for conformity was that everyone liked you but yourself.” – Rita Mae Brown

Bloomberg Top Stories:

*Stocks Rise as Treasuries Hold gain on Fed Interest Rate Bets (?); Oil Climbs ??? Hello???

*Some Traders Get SEC Filings Seconds Ahead of Website Release, Study Finds – just swell!

*Fiat Chrysler Says It Will Complete Spinoff of Ferrari Auto Unit Next Year – interesting!

*Pimco Replaced at $6 Billion Prudential Fund by BlackRock, Loomis Sayles – no Janus???

*Facebook’s $22 Billion WhatsApp Deal Buys Zuckerberg $10 Million in Sales

*Calls for $100-a-Barrel Oil Show Many Betting Selloff Will Prove Fleeting – wanna bet?

*American Realty Ousts Finance Chief on Accounting Errors Left Uncorrected

*Bond Market Overhaul Requires Patience for Tradeweb Chief Seeking Change

*Trading Turmoil skirted in Biggest Volatility Drop Since April – Currencies that is, but stocks too

*Breathing Cleaner Air Has Cost for Americans as Utility Bills Set to Surge

*German Potholes Threaten Prospects for Economic Growth in Land of Autobahn

*Dubai Vows This Time Is Different as Property Boom Stirs Bubble Memories

*NASA Vows to Continue Commercial Rocket Program After Orbital Explosion

*Iraqi Kurds Arrive in Turkey en route to Battle Islamic State in Kobani

*Nurse Kaci Hickox Says She Won’t Follow Maine’s Ebola Quarantine at Home – a good thing?

*Ukraine Struggling to boos EU Natural Gas Imports as Talks Seen Falling

*Chronic Fatigue All in Your Head as Researchers Find Brain Differences

 

Tuesday’s Market Summary:

Wow! A rally for a lot of reasons but it was a day where only good news was heeded. Sure there was plenty but to place that much emphasis on Consumer Confidence (could be called a ‘lagging’ indicator), when Ebola panic is rising and elections are just a week away and how will people vote? Based on what information? Disinformation! Courtesy of SCOTUS! Volume was a ‘normal’ 3.61B shares…normal for the 12-months but looks good compared to the last six months – until the beginning of October that is. Real trades however slipped to 715M from 760M or about at the 12-month average but compare to October average to date: 875M. A/D’s and Breadth were strong…a rarity these days and the VIX closed at 14.39 9/24 but needs to get to at least 13 to be meaningful. What say you?

The struggling Russell 2000 managed to jump 2.6% with Nasdaq Composite next at +1.8% (note the 100 was up just 1.2%!). Dow Transports were +1.5%. The rest were between +1.1-1.8%. Dow Utilities up 0.8% but still in first place ytd (+19.7%), followed closely by Transports +18.4% (these are price changes only!).

Total NYSE Volume slightly higher again but not by much: 3.61B vs 3.47B vs 3.06B vs 3.76B vs 3.74B: average volume for October is 3.6B, or about 600M more than the recent average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: for October it is 875M shares!!! Volume was up slightly to 785M shares vs 760M vs 718M vs 919M vs 802M vs 815M. For comparison purposes, for the prior 12 months it is a historically weak 710M shares…but thus far in October, 870M shares – from 895M Thursday – including that HUGE 1.22B share day – highest since 9/19. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…for October so far? 14, with FIVE 900M+ days.

A/D’s were solid: NYSE: +4.6x!!! vs -1.3x vs +1.6x vs +3.3x! vs -2.2x; Nasdaq +3.8x! vs -1.1x vs +1.3x vs +2.7x vs -2.8x; Breadth was even stronger: NYSE +4.8x!!! vs -2.1x vs +1.8x vs +3.4x vs -3.7x; Nasdaq +5x!!! vs +1.1x vs +1.9x vs +5.7x vs -2.9x; New 52 Week Highs doubled to 326 vs 161 vs 142 vs 171 vs 161 – their range for the year is 39-580!!! New Lows dropped sharply to 80 vs 136! vs 82 vs 89 vs 68. The 2014 range is 24-1043!!! S&P VIX slightly declined sharply to 14.39 -1.65, well below those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!). The range not out of danger yet at 14.39-15.78. Remains bearish and well above 9/18’s 12.03 The average of the past 12 months is 13.94, with a low of 10.32!…high close 26.35 on 10/14! Still needs a ‘13’ print!

U.S. bond market closed weaker with the long bond remaining over 3%, and off their recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.29% -1/4; 30’s 3.07% -9/16; and the long TIP 0.96% +1/16. Slightly weaker overnight: 10’s 2.30% -1/16; 30’s 3.08% -3/16; and long TIP 0.98% +1/16. Had been up early in the session.  

Libor update: 0.233% 3 mos.; 0.323% 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 range from 0.02%, one-month, to just 0.10% one year!!! Foreign bond yields mixed and little changed overnight, Greece higher; (Benchmark is 10yr): Germany 0.87% –; UK 2.23% –; France 1.26% -2; Italy 2.51% -2; Spain 2.15% +2; Portugal 3.33% +1; Greece 7.35% +10! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.46% +1.

Gold closed slightly higher at $1229.20 +.10, in another nothing session, and remains below the 40/50 day m’a’s, following a new recent high of $1255.60, highest since 9/10/14. There have been just two prints below $1200 since 12/31/13 – 10/3 and 10/6 and soundly rejected! Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is the 40 day at $1230, the 50 day $1241, and the 200 day at $1284. Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is weaker at $1227.40 -$2.00. Silver still holding in low $17’s, after falling to $16.64 on 10/3 – lowest since 2/9/2010 and very close to $15.73, a multi-decade low!!!

Crude closed higher at $81.42 +.42, but meaningless after Monday’s huge header to $79.44 intraday– lowest since 6/29/12. 10/25’s high $84.83, low $79.78, had defined October’s range. There have been 28!!! handles since peaking at $107.73 on June 13th at $107.73 highest since 9/19/13 (a huge down session which put it in freefall. 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 ($88.92), then the 50 day ($89.99), and lastly the 200 day (98.39). The range is now $79.78-$112.24 since 3/1/12. Overnight higher at $82.22 +.80.

Global equities higher, led by Asia: UK +0.6% vs +0.6% vs -0.6% vs -0.2% vs -0.9%; France +0.1% vs +0.6% vs -1.4% vs +0.2% vs -1.3%; Germany +0.06% vs -1.6% vs +1.4% vs +0.4% vs -1.4%; Japan +1.5%! vs-0.3% vs +0.6% vs +1% vs -0.4%; Hang Seng +1.3% vs +1.6% vs -0.7% vs -0.1% vs -0.3%; Korea +1.8%! vs -0.3% vs +0.3% vs -0.3% vs -0.3%; India +0.9% vs +0.5% vs -0.4% vs +0.2% vs +0.8%. U.S. equity futures little changed after being down earlier: Dow +19 (range 49); SPX -0.50 (6); NDQ -4.50 (9). Waiting for more information…

 

Some random thoughts:

Running late today so skipping commentary…definitely a World Series to remember! Go Giants!

Have a great day!

TB

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10/28/14…on stock buybacks, zero corporate tax rate, and dividends

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Playing Shakespeare is tiring. You never get a chance to sit down unless you’re a king.” – Josephine Hull
Bloomberg Quote of the Day: “Too much of a good thing is just that.” – Brian J. Dent

Bloomberg Top Stories:
*Durable Goods Orders in U.S. Unexpectedly Fall for a Second Straight Month – Futures higher?
*European Stocks Rise With S&P Futures (?) as Krona Falls, Treasuries Pare Drop
*Money Markets Split With Economists on Fed Outlook for Increase in Charge
*UBS Rises as Investors Bet Legal Risks to Ease After $1.94 Billion Charge
*Riksbank rejects Calls for Unconventional Steps After Key Rate Cut to Zero – De-flation???
*Euro Outflows Reach Record Pace as ECB Policies Promote Exodus – ditto!
*Amgen Resumes Share Buybacks, Boosts Dividend as 2016 View Tops Estimates
*Ackman’s $5.3 Billion Allegan Bet Scrutinized by Judge in Valeant Fight
*Long National Nightmare of Ackman-Allegan Drags on in Court
*Petrobras Investors Lose Whether Oil Prices Rise of Fall – that’s Brazil!
*Draghi Dliemna Channels Piketty Inequality Concern as ECB Purchases Assets
*U.S. Ebola Monitoring Rules Toughened While Stopping Short of Quarantine-unlike Christy 
*African Nations Pledge 1,000 More Health Workers to Control Ebola Outbreak
*Don’t Park Your Tractor in Houston, U.S. Capital for Heavy-Equipment Theft

Monday’s Market Summary:

A dull and meaningless Monday with only Dow Transports having anything to show for the effort, +0.7%. The rest trapped between -0.2% and +0.1% (and some of that was only thanks to generous rounding!). This after opening lower peaking around 11am EDT, then struggling the rest of the session. No information value! Only thing was the VIX which barely closed lower at a still bearish 16.04 -.07, but the high end of the range was at 17.87! Note there has not been a high below 17 since 10/6! Given that new 12-month high of 31.06 on 10/15, it is not safe to re-enter the water…er market! A/D’s and Breadth told us nothing but after being below 90 for six straight sessions after peaking at 1,043 (ouch!) on 10/15, new 12-month lows roared back to a bearish 136 from 82, while new lows remain feeble at 161. Total NYSE Volume (just 3.14B shares, and trades on the NYSE floor (760M w/ 130M after the bell), not conducive to anything. True, those real trades were 50M above the 12-month average but look at average for October: 875M!!!

Total NYSE Volume plunged – is this the end of the October high volume? Just 3.06B shares vs 3.76B vs 3.74B vs 3.96B vs 3.3B vs 5.05B vs 6.06B: average volume for October is 3.6B, or about 600M more than the recent average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: for October it is 890M shares!!! This to plunged to 718M, just about the 12-month average, vs 919M vs 802M vs 815M vs 742M vs 1.07B For comparison purposes, for the prior 12 months it is a historically weak 709M shares…but thus far in October, 881M shares – from 895M Thursday – including that HUGE 1.22B share day – highest since 9/19. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…for October so far? 14 (this is no time to be superstitious!), including FIVE 900M+ share days.

A/D’s were slightly negative: NYSE: -1.3x vs +1.6x vs +3.3x! vs -2.2x vs +4.5x; Nasdaq -1.1x vs +1.3x vs +2.7x vs -2.8x vs +2.9x; Breadth was little changed and mixed: NYSE -2.1x vs +1.8x vs +3.4x vs -3.7x! vs +5x!!! Nasdaq +1.1x vs +1.9x vs +5.7x!!! vs -2.9x vs +6.3x!!! vs +5x!!! New 52 Week Highs slightly higher at 161 vs 142 vs 171 vs 161 vs 129 – their range for the year is 39-580!!! New Lows sharply higher at 136! vs 82 vs 89 vs 68 vs 56. The 2014 range is 24-1043!!! S&P VIX slightly lower again and remains below those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!) closing at 16.04 -.07 with a range of 16.00-17.87 compared to 16.09-18.06. Remains very bearish and well above 9/18’s 12.03 The average of the past 12 months is 13.94, with a low of 10.32!…high close 26.35 on 10/14!

U.S. bond market closed little changed again weak with the long bond remaining over 3%, and off their recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.26% +1/16; 30’s 3.04% +3/32; and the long TIP 0.96% +1/16. Ah, but weaker overnight: 10’s 2.26% -1/32; 30’s 3.05% -1/4; and long TIP 0.97% -1/16.
Libor update: 0.233% 3 mos.; 0.323% 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 range from 0.01%, one-month, to just 0.10% one year!!! Foreign bond yields mixed and little changed overnight; (Benchmark is 10yr): Germany 0.88% +1; UK 2.22% +1; France 1.29% –; Italy 2.55% –; Spain 2.11% -2; Portugal 3.33% -4; Greece 7.28% -3. 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.45% -1.

Gold closed slightly lower, exactly reversing Friday’s gain at $1229.10 -$2.70, and is again below the 40/50 day m’a’s, following a new recent high of $1255.60, highest since 9/10/14. There have been just two prints below $1200 since 12/31/13 – 10/3 and 10/6 and soundly rejected! Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is the 40 day at $1230, the 50 day $1241, and the 200 day at $1284. Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is weaker at $1228.10 -$1.00. Silver still holding in low $17’s, after falling to $16.64 on 10/3 – lowest since 2/9/2010 and very close to $15.73, a multi-decade low!!!

Crude took a huge header early to $79.44 – lowest since 6/29/12, then came back to close at $81.00 -.01?!?. 10/25’s high $84.83, low $79.78, had defined October’s range. There have been 28!!! handles since peaking at $107.73 on June 13th at $107.73 highest since 9/19/13 (a huge down session which put it in freefall. 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 ($88.92), then the 50 day ($89.99), and lastly the 200 day (98.40) – all declining fast! The range is now $79.78-$112.24 since 3/1/12. Overnight slightly higher at $81.39 +.39 in an inside session.

European equities higher, Asia mixed: UK +0.6% vs -0.6% vs -0.2% vs -0.9% vs +1%; France +0.6% vs -1.4%! vs +0.2% vs -1.3%! vs +2.1%! Germany -+1.6%! vs +1.4%! vs +0.4% vs -1.4%! vs +2%! Japan -0.3% vs +0.6% vs +1% vs -0.4% vs +2.6%! Hang Seng +1.6%! vs -0.7% vs -0.1% vs -0.3% vs +1.4%; Korea -0.3% vs +0.3% vs -0.3% vs -0.3% vs +1.1%! India +0.5% vs -0.4% vs +0.2% vs +0.8% vs +0.8%. U.S. equity futures higher: Dow +44 (range 86); SPX +5.50 (11); NDQ +16 (20).
Some random thoughts:

In Sunday’s MN Star-Tribune an article caught TB’s attention, praising stock buybacks…it was wrong and finally in the last few paragraphs commented on the alternative of raising dividends.
Knowing something about these over the last 42 years plus studying them in grad school, TB felt obliged to comment to the writer of ‘Buying back stock can be the best option’ – oh, really?

First, these are not your grandfather’s stock buybacks for two reasons: back in the day, a buyback meant ‘retiring’ the shares repurchased, thus giving the holder more bang for the buck (like averaging in); second, many of these repurchased shares today, since they are NOT retired, magically are used to offset dilution from exercising stock options, thus concealing their impact!

The best, and only defense for not paying dividends is their double taxation. Go back to the early days of Bush 43, when Larry Kudlow and Jim Cramer, urged Congress as part of the stimulus (sic) tax cuts to reduce the rate on dividends…arguing that 130 million people own shares. That much is true…but those benefitting from the cut are everyone but working individuals! Thus adding to the ‘wealth gap’ which neither believes exists. TB screamed but nobody listened to the fact that those workers are getting them in their IRA/401(k)’s, and thus will be taxed as ordinary income when withdrawn. Shows how stupid (or well compensated) our Congress is! No one raised this point!

Before we continue, TB will recall a conversation with Nobel-laureate Franco Modigliani, who favored a ZERO corporate tax rate. Why? Because no company with a good accountant pays taxes. Instead, they invest in bad investments, or do any number of tax-benefitting things that may actually be detrimental in the long run. Think GE, which hasn’t paid a dime in tax in years.

What about the loss of revenue you say? Well, since the average tax rate of the top 250 companies is less than 10%, that is not a high hurdle. Dr. Modigliani would have eliminated ALL subsidies, AND taxed dividends as ordinary income, thus eliminating the double taxation argument! He died a few years ago, with his daughter continuing the fight, and now some ‘informed’, honest members of Congress have re-introduced the idea. Now try to get past the subsidy ‘benefiters’! ADM’s subsidies exceed their bottom line if you can believe that!

Far and away, the vast majority of hard-working Americans should favor this and it would beat those ‘tax scofflaws’ (ok, opportunists), would look foolish – that alone is worth trying it!

Now back to those stock buybacks. The best argument is they give more bang for the buck – and they do: in the short-run! After all, fewer shares means a higher stock price, ceteris parabus…which it never is! The benefit is taken by short-term investors…hedge funds, etc. who pester management to do just that, rather than boost dividends. This runs parallel to the CEO’s thinking since he is no longer a long-run planner but managing for the short-run: his own tenure, or shorter!

Lastly, some years (a decade or more?) ago, TB read an article by a Goldman Sachs investment banker. He said that when he talked to management that was constructive on the outlook for the company but the stock was declining, he would encourage them to show their confidence and do a stock buyback: not once could he recall them taking him up on it.

Yesterday, on CNBC there was a discussion on stock buybacks. One defended them, the other cited WalMart and Apple, saying that the dividends should be increased…for different reasons: WalMart to temper the greed of the family who refuses to pay workers even a living wage and thus gets a huge subsidy in the form of food stamps and healthcare to employees (bet they weren’t opposed to the ACA!), and Apple which just keeps piling up surpluses while paying a puny 1.7% dividend…and creating more products of less and less value to shareholders.

Thus it appears that buybacks are most often used when the stock is above fair-value, and is an attempt to boost it higher. Not good for the long-term investor. But then…you decide!

Have a great day!

TB

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10/27/14…go figure!

Quote of the Day from the Friars Club Encyclopedia of Jokes: “My son has taken up meditation – at least it’s better than sitting doing nothing.” – Max Kauffmann

Bloomberg Quote of the Day: “In a real dark night of the soul it is always three o’clock in the morning.” – F. Scott Fitzgerald

Next week’s economic calendar is full of important indicators. The highlight of the week will be the Q3 GDP Advance (Thursday) and September Personal Income (Friday). We will also get October Dallas Fed Manufacturing (Monday), September Durable Goods Orders, August Case-Shiller Home Prices, October Consumer Confidence, October Richmond Fed Manufacturing (Tuesday), Q3 Employment Cost, October Chicago PMI and October Consumer Sentiment Final (Friday). In addition, the Federal Reserve FOMC will be meeting on October 28th – 29th with an announcement on the 29th. Courtesy of Economic Advisory Service

Bloomberg Top Stories:
*ECB’s Boost to Bank Shares Fizzles on Outlook for Economy, Tougher Rules – stress tests neg.
*Stocks in U.S. Fall With Oil While Brazil Assets Drop on Rouseff Victory in Brazil
*Bank of America’s August Mortgage Settlement Stalled by SEC Policy Fight
*Nordstrom-Macy’s Pair Trade Rise sa Contrarian Bet to Analysts’ Continues
*Merck Beats Third-Quarter Earnings Estimates as FDA Boost New Cancer Drug
*Commodities Drop to Five-Year Low Led by Sugar, Coffee, on Brazil Currency – Oil hammered!
*Keystone Foes Energized as Tumbling Crude Price dents Oil Sands’ Economics
*Tax Inversions Win When Government Lawyers Quit to Advise Private Practice – beat goes on!
*Mansion Tax That May Never Be Already Depressing London Luxury-Home Market
*Rousseff Says She’s Ready fro Big Changes After Tight Brazil Election Win
*Five-Year-Old Boy Is Tested for Ebola Virus in New York After Africa Visit
*Egypt Army Kills Six Suspected Militant Gunmen After Deadly Sinai Attack
*Arkansas Vote Has Liquor Stores Allied With Churches to Save Dry Counties

Friday’s Market Summary:

What is there left to say about a rumor dominated, volatile ‘speculative’ market. Not much so TB will distill it a bit: BEST performer was Dow Utilities +1.2%!!! Next, Dow Transports +1%. The rest up 0.7-0.8% (again TB hates that!), and the loser was the Russell 2000 up just 0.2% as it attempts to turn this into a respectable year

So, here we go again…stocks making a fool of TB…and perplexing the experts. Get a few positives and the market rallies…negatives, declines…but it is the magnitude of and volatility that is what should get our attention…but not the talking heads…no, sir! They have an answer for anything. So let’s not bother with yesterday other than to say that all indices were up from 2.1% (Transports) to 1.2% (S&P 500), Dow Utilities were still up 0.2% and remain numero uno ytd!
Here goes:
• Total Average Volume: 3.06B shares vs 3.76B shares –
• Volatility: 16.11 -.42 BUT the range rose to 16.09-18.06!!!from 15.68-17.06. Range since 10/6 is 15.04-31.06.the last time it closed above 15 was 8/8/14, then 4/15. The high of 31.06 exceeds the prior highs of the last THREE years. Last time above 30? 11/28/11! In the interim it was 28 once in 2012; and 21.48-22.72 just FOUR times since.
• This month market has been up more than one percent 7 times and down 8 times. But the down days have ruled.
So IF you believe this is a ‘normal’ market and remain bullish, picture all those high frequency traders laughing their fat asses off at your stupidity! And at the heads on CNBC! You want that?

Total NYSE Volume plunged – is this the end of the October high volume? Just 3.06B shares vs 3.76B vs 3.74B vs 3.96B vs 3.3B vs 5.05B vs 6.06B: average volume for October is 3.6B, or about 600M more than the recent average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: for October it is 890M shares!!! This to plunged to 718M, just about the 12-month average, vs 919M vs 802M vs 815M vs 742M vs 1.07B For comparison purposes, for the prior 12 months it is a historically weak 709M shares…but thus far in October, 881M shares – from 895M Thursday – including that HUGE 1.22B share day – highest since 9/19. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…for October so far? 14 (this is no time to be superstitious!), including FIVE 900M+ share days.

A/D’s were positive but slipped to just barely: NYSE: +1.6x vs +3.3x! vs -2.2x vs +4.5x vs +2.8x vs +1.9x vs +2.3x vs -1.1x vs +1.6x vs -3.6x -7.2x!!! vs +4x! vs -3.4x; Nasdaq +1.3x vs +2.7x vs -2.8x vs +2.9x vs +2.2x vs 1:1 vs +2x vs +1.2x vs +1.6x vs -2.7x vs -5.8x vs +2.5x vs -4.2x! Breadth was a bit betterl: NYSE +1.8x vs +3.4x vs -3.7x! vs +5x!!! vs +3.1x vs +2.9x vs +1.7x vs -1.4x vs +1.6x vs -5.8x! vs -12.3x!!! vs +3.8x vs -4.7x!!! Nasdaq +1.9x vs +5.7x!!! vs -2.9x vs +6.3x!!! vs +5x!!! vs +1.8x vs +1.4x vs +1.03x vs +1.1x -7.2x!!! vs -4.4x! New 52 Week Highs fell back to 142 vs 171 vs 161 vs 129 vs 62 vs 83 vs 52 vs 49 – their range for the year is 39-580!!! New Lows also a bit lower at 82 vs 89! vs 68 vs 56 vs 82 vs 67 vs 311 vs 1043!!! The 2014 range is 24-1043!!! S&P VIX lower again and remains below those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!) closing at 16.11 -.42 with a range of 16.09-18.06 both high and low climbed making them more bearish and well above 9/18’s 12.03 The average of the past 12 months is 13.83, with a low of 10.32!

U.S. bond market closed little changed weak with the long bond remaining over 3%, and off their recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closing at 2.26% +1/16; 30’s 3.04%!!! +1/4; and the long TIP 0.96% +5/32. A little better overnight: 10’s 2.26% +1/8; 30’s 3.03% +1/4; and long TIP 0.96% +3/16.
Libor update: 0.233% 3 mos.; 0.323% 6 mos., both just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.08-0.10%. T-Bills range from 0.02%, one-month, to just 0.10% one year!!! Foreign bond yields little changed overnight; except volatile Greece and Portugal which are weaker (Benchmark is 10yr): Germany 0.87% -2; UK 2.22% -1; France 1.29% -2; Italy 2.53% +2; Spain 2.13% -4; Portugal 3.32% +9!; Greece 7.30%! +17!!! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.46% –.

Gold closed slightly higher at $1231.80 +$2.70, and is again between the 40/50 day m’a’s, following a new recent high of $1255.60, highest since 9/10/14. There have been just two prints below $1200 since 12/31/13 – 10/3 and 10/6 and soundly rejected! Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res/Sup is the 40 day at $1231, Res the 50 day $1242, and the 200 day at $1284. Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is weaker at $1230.10 -$1.70. Silver still holding in low $17’s, after falling to $16.64 on 10/3 – lowest since 2/9/2010 and very close to $15.73, a multi-decade low!!!

Crude gave up Thursday’s gain closing at $81.01 in an inside session. Thursday’s low wsa 2nd only to 10/16’s 79.79. 10/25’s high $84.83, low $79.78, defined October’s range. There have been 28!!! handles since peaking at $107.73 on June 13th at $107.73 highest since 9/19/13 (a huge down session which put it in freefall. 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 ($89.17), then the 50 day ($90.26), and lastly the 200 day (98.44) – all declining. The range is now $79.78-$112.24 since 3/1/12. Overnight weaker again at $79.75 -$1.26 with a low of $79.44 – lowest since 6/29/12!

Global equities lower, ex-Japan, Korea: UK -0.6% vs -0.2% vs -0.9% vs +1% vs -0.7% vs -2.8%!!! France -1.4%!!! vs +0.2% vs -1.3%! vs +2.1%!!! vs -1.1% vs -3.6%!!! Germany -1.4%!!! vs +0.4% vs -1.4%! vs +2%!!! vs -0.4% vs -2.9%!!! Japan +0.6% vs +1% vs -0.4% vs +2.6%! vs -2%! vs +4%!!! vs -1.4% vs -2.2%!!! vs -2.4%!!!; Hang Seng -0.7% vs -0.1% vs -0.3% vs +1.4% vs +0.1%; Korea +0.3% vs -0.3% vs -0.3% vs +1.1% vs -0.8% vs +1.6%! vs -1%!; India -0.4% vs +0.2% vs +0.8% vs +0.8% vs +0.6% vs +1.2%! vs +0.4% vs -1.3%. U.S. equity futures lower and market is opening accordingly: Dow -70 (range 135); SPX -10.30 (18); NDQ -12.25 (29).
Some random thoughts:

Not in the mood to write today…too much angst out there already: Ebola scare being used for political purposes – you name the party; Billionaires buying the elections; GOP with no plan for anything looking to control the Senate and thus Congress. Pew Study shows most Americans totally clueless on economy…after all they have been spoon-fed lies on everything…and what does the GOP stand for? Whatever you want it to be…negative ads prevail. What kind of people have we become. Do you honestly think the founding fathers (you know, the ones the GOP talks about all the time), would condone what we have done for their sacrifices? Hardly!

Have a good week!

TB

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10/23/14…today’s column was not meant to be…

Quote of the Day from the Friars Club Encyclopedia of Jokes: “You can do anything with a bayonet except sit on it.” – Napoleon Bonarparte …sure you can…once! TB

Bloomberg Quote of the Day: “Giving up is the ultimate tragedy.” – Robert J. Donovan

Bloomberg Top Stories:

Due to computer problems no headlines today, and market summary was partially deleted.
See Random Thoughts for more explanation. TB

Thursday’s Market Summary:

So, here we go again…stocks making a fool of TB…and perplexing the experts. Get a few positives and the market rallies…negatives, declines…but it is the magnitude of and volatility that is what should get our attention…but not the talking heads…no, sir! They have an answer for anything. So let’s not bother with yesterday other than to say that all indices were up from 2.1% (Transports) to 1.2% (S&P 500), Dow Utilities were still up 0.2% and remain numero uno ytd!
Here goes:
• Total Volume: 3.76B shares – it has been 13 sessions since we saw another sub- 4B share day…hmmm
• Volatility: 16.53 -1.34 with a range of 15.68-17.06!?! Range since 10/6 is 15.04-31.06.the last time it closed above 15 was 8/8/14, then 4/15. The high of 31.06 exceeds the prior highs of the last THREE years. Last time above 30? 11/28/11! In the interim it was 28 once in 2012; and 21.48-22.72 just FOUR times since.
• This month market has been up more than one percent 7 times and down 8 times. But the down days have ruled. MTD, even with yesterday’s rally: Dow -2.1%; Transports +0.4%; S&P -1.1%; Composite -0.9%; Dow Utilties? +4.7%!!! Get the picture???

So IF you believe this is a ‘normal’ market and remain bullish, picture all those high frequency traders laughing their fat asses off at your stupidity! And at the heads on CNBC! You want that?

Total NYSE Volume was steady at 3.76B shares vs 3.74B vs 3.96B vs 3.3B vs 5.05B vs 6.06B: average volume for October is 3.7B, or about 700M more than the recent average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: for October it is 890M shares!!! Trading slightly higher at 919M shares vs 802M vs 815M vs 742M vs 1.07B For comparison purposes, for the prior 12 months it is a historically weak 709M shares…but thus far in October, 895M shares including Wednesday’s HUGE 1.22B shared day – highest since 9/19. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…for October so far? 14 (this is no time to be superstitious!), including FIVE 900M+ share days.

A/D’s were back to positive and solid: NYSE: +3.3x! vs -2.2x vs +4.5x vs +2.8x vs +1.9x vs +2.3x vs -1.1x vs +1.6x vs -3.6x -7.2x!!! vs +4x! vs -3.4x; Nasdaq +2.7x vs -2.8x vs +2.9x vs +2.2x vs 1:1 vs +2x vs +1.2x vs +1.6x vs -2.7x vs -5.8x vs +2.5x vs -4.2x! Breadth was better still: NYSE +3.4x vs -3.7x! vs +5x!!! vs +3.1x vs +2.9x vs +1.7x vs -1.4x vs +1.6x vs -5.8x! vs -12.3x!!! vs +3.8x vs -4.7x!!! Nasdaq +5.7x!!! vs -2.9x vs +6.3x!!! vs +5x!!! vs +1.8x vs +1.4x vs +1.03x vs +1.1x -7.2x!!! vs -4.4x! New 52 Week Highs up a tad to 171 vs 161 vs 129 vs 62 vs 83 vs 52 vs 49 – their range for the year is 39-580!!! New Lows also higher at 89! vs 68 vs 56 vs 82 vs 67 vs 311 vs 1043!!! The 2014 range is 24-1043!!! S&P VIX lower again and back from those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!) closing at 16.53 -1.34 with a range of 15.68-17.06, still bearish and well above 9/18’s 12.03 The average of the past 12 months is 13.83, with a low of 10.32!

U.S. bond market closed weak with the long bond over 3%, and slipping from the new 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closing at 2.27% -1/2; 30’s 3.04%!!! -1-1/16!!!; and the long TIP 0.97% -1-1/4!!! Better overnight: 10’s 2.26% +1/4; 30’s 3.03% +5/16; and long TIP 0.96% +5/16.
Libor update: 0.233% 3 mos.; 0.323% 6 mos., both just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.08-0.10%. T-Bills range from 0.01%, one-month, to just 0.10% one year!!! Foreign bond yields little changed overnight; except volatile Greece (Benchmark is 10yr): Germany 0.88% -2; UK 2.22% -2; France 1.29% -1; Italy 2.52% +2; Spain 2.18% –; Portugal 3.24% -2; Greece 7.14% -5. 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.46% -1.

Gold closed sharply lower at $1229.10 -$16.40, with a low of $1226.30, and is again well below the 40/50 day m’a’s, following a new recent high of $1255.60, highest since 9/10/14. There have been just two prints below $1200 since 12/31/13 – 10/3 and 10/6 and soundly rejected! Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is the 40 day at $1234, Res the 50 day $1245, and the 200 day at $1284. Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is slightly higher at $1233.80 +$4.70. Silver still holding in low $17’s, after falling to $16.64 on 10/3 – lowest since 2/9/2010 and very close to $15.73, a multi-decade low!!!

Crude was hit hard plunged to $80.05 (2nd only to 10/16’s 79.79). before closing at $82.09 +$1.57! Last Thursday’s high $84.83, low $79.78, defining October’s range. There have been 28!!! handles since peaking at $107.73 on June 13th at $107.73 highest since 9/19/13 (a huge down session which put it in freefall. 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 ($89.92), then the 50 day ($90.90), and lastly the 200 day (98.56) – all declining. The range is now $79.78-$112.24 since 3/1/12. Overnight weaker at $81.07 -$1.02 but coming off a low of $80.73.

Global equities lower, ex-India: UK +0.2% vs -0.9% vs +1% vs -0.7% vs -2.8%!!! France +0.2% vs -1.3%! vs +2.1%!!! vs -1.1% vs -3.6%!!! Germany +0.4% vs -1.4%! vs +2%!!! vs -0.4% vs -2.9%!!! Japan +1% vs -0.4% vs +2.6%! vs -2%! vs +4%!!! vs -1.4% vs -2.2%!!! vs -2.4%!!!; Hang Seng -0.1% vs -0.3% vs +1.4% vs +0.1% vs +0.2% vs +0.5% vs -1%! vs -1! Korea -0.3% vs -0.3% vs +1.1% vs -0.8% vs +1.6%! vs -1%!; India +0.2% vs +0.8% vs +0.8% vs +0.6% vs +1.2%! vs +0.4% vs -1.3%. U.S. equity futures little changed after diving following yesterday’s STRONG performance: Dow -8 (range 124); SPX -1.60 (15); NDQ +4.75 (39).
Some random thoughts:
FRUSTRATION!!! Originally was going to write a column on control fraud. TB got interested listening to the Moyers interview with William Black and bought his book The Way to Rob a Bank is to Own One. A very difficult book as it starts right off with the aforementioned topic. But what it it? Control fraud is when someone ‘takes over’ a company, either by buying it as Charles Keating and many others did during the S&L crisis, or becoming CEO and inserting a ‘no questions asked’ board, which to TB is either the Citi under Sandy Weill, Countrywide under Angelo Mozillo, or Weill’s understudy, Jamie Dimon at JPMorgan.

When someone from the outside buys a problem bank/S&L, they are ‘opportunists’ as opposed to the insiders. TB is not accusing Dimon of fraud but it was actions like his (London Whale), that led to the crisis. What is amazing is how quickly speculators see the opportunity, while the regulators still can’t figure it out. True, ever since Ronald Reagan, regulation has been lax and only sporadically leads to meltdowns, but the examiners and their supervisors are either out-gunned or become co-conspirators – willingly or otherwise.

On Monday, will discuss further. The other frustration was that TB wrote an entire piece on market volatility which was to replace contract fraud in the market today…will have to re-create because thanks to the new, improved (sic) Microsoft Word, when trying to copy it to this section it was deleted. Never had that happen with the old Word. Damn…double damn!

Have a great weekend,

TB

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10/23/14…from Hoover to Ellison – the 100 foot journey

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Work is a fine thing if it doesn’t take up too much of your time.” – anon

Bloomberg Quote of the Day: “Roots are not in the landscape or a country, or a people, they are inside you.” – Isabel Allende

Bloomberg Top Stories:

*S&P 500 Futures Rise With Copper After Jobs Claims as Treasuries Decline – see commentary!

*Fewest Americans in 14 Years Filed for Unemployment Benefits in Past Month – but: a BIG but!

*Caterpillar Raises Forecast as Earnings Top Estimates on Building Revival

*Credit Suisse Sees a Mixed Start to Quarter as Volatility Boosts Trading – as TB has said…

*GM Profit Exceeds Estimates as Barra Seeks to Assure Investors of Future – fat chance!

*European Manufacturing Unexpectedly Grows With Risk of Recession Receding – u trust that?

*Saudi Arabia Said to Have cut Oil Supply in September; Brent Rises – why is gas price rising???

*Apple Seeks Edge by Making Mobile Payments Seem Simpler Than a Card Swipe – that’s it?

*UnderArmour Shares Fall on Concern That Apparel Maker’s Growth Is Slowing-drawer demand?

*Goldman Sachs, Citigroup Said Wary of Ergen as He Mulls T-Mobile Takeover

*Ottawa Is Returning to Normal After Shooting Near Parliament Shakes Canada

*Canada Youth From Calgary to Timmins Heed Islamic State’s Twitter Calling – U.S. too…bad!

*Obama’s Response to Crisis Seen as Too Cool for Public’s Emotional Needs – thank GOP!

*Suspected Nigerian Islamists Kidnap Women Days After Government Saw Truce – beat goes on!

Wednesday’s Market Summary:

Just when you were lulled into feeling safe, a down day…true volume was lower but A/D’s and Breadth were solid negatives. Worst was the VIX which partially reversed its four straight declines which had a low of 15.56, still bearish, and the BIG negative: the high of 31.06, not seen since 11/28/11! It closed at 17.87 +1.79 with a range of 15.56-18.43 – heed…high freaks are running the market…don’t you believe it is bulls…closest to that is shorts covering! The big loser was Tuesday’s winner, Dow Transports -2.1% vs +3.1%!!! Next was the Russell 2000 -1.4% vs +1.6%! The Dow, S&P 500 and both Nasdaqs were off from 05% (NDQ 100) to 0.9% (Dow). Meanwhile, Dow Utilities continued their slow and steady rise +0.6% vs +0.3%…their only significant declines was a 1.3% drop on 10/15 and they are now UP 4.6% this month!!! There is a message there folks. YTD they are up in price by 17.4%; now look at total return:20.1%!!! October’s total return is 4.5%: no other index is positive so far this month…even Dow Transports are down 1.6%! – this despite their huge move of 3.1% on Tuesday!

An extremely strong session on higher volume. Even more impressive is the fact that the Dow closed up 215 at 16615 and that was with IBM subtracting 38 points! Even so it managed to close 29 points above its 200 day m/a (note that the 40/50 day are converging on 16900 so that is next resistance. Ditto for the other major indices. Dow Transports +3.1%!!! The NDQ 100 was already above it and closed just shy of the convergence of the 40/50 day at 4011, up 2.6%, Composite +2.4%. Dow +1.3%; S&P 500 +2%Unfortunately, despite gapping up on the open, the Russell 2000 (+1.6%), remains 33 below the 200 day which is now ‘below’ the 40/50 line. Weakest was Dow Utilities +0.3%. The question now is: has this got enough ‘legs’ to resume raising returns for the year? Dow Utilities still lead ytd +16.72% (price only!), followed by Transports +14.7%, the 100 is up 10.6% but the Composite just 5.8%. The Russell 2000 remains in the red at -4.4%. while NYSE Financials are up just 0.8% – ouch! Compare that to Utilities!

Total NYSE Volume was modestly lower at 3.74B shares vs 3.96B vs 3.3B vs 5.05B vs 6.06B: average volume for the first 13 trading days of October was 3.73B, or about 730M more than the recent average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: for October it is 901M shares!!! Trading slightly lower at 802M shares vs 815M vs 742M vs 1.07B twice. For comparison purposes, for the prior 12 months it is a historically weak 709M shares…but thus far in October, 895M shares including Wednesday’s HUGE 1.22B shared day – highest since 9/19. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…for October so far? 13 (this is no time to be superstitious!), including FIVE 900M+ share days.

A/D’s were back to negative: NYSE: -2.2x vs +4.5x vs +2.8x vs +1.9x vs +2.3x vs -1.1x vs +1.6x vs -3.6x -7.2x!!! vs +4x! vs -3.4x; Nasdaq -2.8x vs +2.9x vs +2.2x vs 1:1 vs +2x vs +1.2x vs +1.6x vs -2.7x vs -5.8x vs +2.5x vs -4.2x! Breadth was worse: NYSE -3.7x! vs +5x!!! vs +3.1x vs +2.9x vs +1.7x vs -1.4x vs +1.6x vs -5.8x! vs -12.3x!!! vs +3.8x vs -4.7x!!! Nasdaq -2.9x vs +6.3x!!! vs +5x!!! vs +1.8x vs +1.4x vs +1.03x vs +1.1x -7.2x!!! vs -4.4x! New 52 Week Highs increased to 161 vs 129 vs 62 vs 83 vs 52 vs 49 – their range for the year is 39-580!!! New Lows rose slightly to 68 vs 56 vs 82 vs 67 vs 311 vs 1043!!! The 2014 range is 24-1043!!! S&P VIX staunched it recent declines those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!) climbing back to 17.87 +1.79 with a range of 15.56-18.43, bearish and well above 9/18’s 12.03 The average of the past 12 months is 13.83, with a low of 10.32!

U.S. bond market was unchanged near the new 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closing at 2.22%; 30’s 2.99%; and the TIP 0.92%. Weak overnight: 10’s 2.25% -1/4; 30’s 3.01%! -1/2; and long TIP 0.94% -5/8.  

Libor update: 0.231% 3 mos.; 0.323% 6 mos., both just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.08-0.10%. T-Bills range from 0.03%, one-month, to just 0.10% one year!!! Foreign bond yields little changed overnight; volatile Greece higher (Benchmark is 10yr): Germany 0.88% +1; UK 2.21% –; France 1.29% +1; Italy 2.52% +1; Spain 2.21% +1; Portugal 3.28% -1; Greece 7.20%!!! +9!!! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.47% -1.

Gold closed lower at $1245.50 -$5.50 and is back between the 40/50 day m’a’s, following a new recent high of $1255.60, highest since 9/10/14. There have been just two prints below $1200 since 12/31/13 – 10/3 and 10/6 and soundly rejected! Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! SUP is the 40 day at $1235, Res the 50 day $1247, and the 200 day at $1284. Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is weak at $1235.80 -$9.70, with a low of $1234.50. Silver still holding but near support at $17, after falling to $16.64 on 10/3 – lowest since 2/9/2010 and very close to $15.73, a multi-decade low!!!

Crude was pounded falling to $80.22 before closing at $80.52 -$2.29! Last Thursday’s high $84.83, low $79.78…lowest since 6/27/13!!! There have been 28!!! handles since peaking at $107.73 on June 13th at $107.73 highest since 9/19/13 (a huge down session which put it in freefall. 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 ($90.21), then the 50 day ($91.21), and lastly the 200 day (98.61) – all dropping. The range is now $79.78-$112.24 since 3/1/12. Overnight slightly higher but coming off a low of $80.05 at $81.42 +.90. How come gas went ‘up’ $3.05 vs $2.92 here (MN)???

European equities mixed, Asia weaker ex-India: UK+0.2% vs -0.9% vs +1% vs -0.7% vs -2.8%!!! France +0.2% vs -1.3%! vs +2.1%!!! vs -1.1% vs -3.6%!!! Germany +0.4% vs -1.4%! vs +2%!!! vs -0.4% vs -2.9%!!! Japan -0.4% vs +2.6%! vs -2%! vs +4%!!! vs -1.4% vs -2.2%!!! vs -2.4%!!!; Hang Seng -0.3% vs +1.4% vs +0.1% vs +0.2% vs +0.5% vs -1%! vs -1! Korea -0.3% vs +1.1% vs -0.8% vs +1.6%! vs -1%!; India +0.8% vs +0.8% vs +0.6% vs +1.2%! vs +0.4% vs -1.3%. U.S. equity futures STRONG and gapped on the open again: Dow +129! (range 164 +20gap)); SPX +14.50! (27 +24!); NDQ +30 (43 but gap was down? 4???).

 

Some random thoughts:

…to continue on the vein of prior columns this week, headlines today talk of public being disappointed in Obama’s response. True, it has not been the best, but the hysteria over Ebola defies any rational logic…ask scientists! We do not handle bodies…this is not Africa! Sure it is a very bad disease but chances of getting it are small – here! But thanks to politicizing it as the GOP has (as they are degrading women running for office and using a ‘vote count’ of how many times a candidate voted ‘with O-bama and distortions over O-bamacare), and the news – especially FOX natch – scaring people to death (sic), there is no way the government can look responsive enough to placate the critics…at least for another two weeks!

Survey the other day asked if voters had decided on the candidates yet: a solid number said no. Follow-up question: when will you decide? Night before the election! Watching the World Series last night we were inundated with negative ads for Dem candidates…the Karl Rovian kind – some were on twice, even back to back! That is having money to throw around. You cannot fight it but you can educate yourself to what is worse than mis-information…it is DIS-information, got it?!?

Here’s something else and why the Dems haven’t told their story is beyond belief…are they trying to lose? Is the deficit better or worse than when Obama took office? Surely, its higher, right? WRONG! It is now back to the levels of 2008 according to the CBO…yes, before he took office. Yet the GOP continues to preach austerity…even as our infrastructure crumbles around us. We remain in denial over climate change (god-forbid we call it global warming…a lot of new believers though in the valleys of central California!).

Also, healthcare costs are slowing their increase and yes the ACA is working…and it would be better if the GOP governors – to a man – have refused to create insurance exchanges, thus punishing their constituents over flawed philosophical argument.

As mentioned yesterday, Mitch McConnell fell on his floppy- cheeked face when he said he would repeal the ACA…not even replace…just repeal but when asked about Kentucky’s popular exchange he said he would keep that because the people like it and ‘it’s just a website.’ Out of touch? You bet he is…as much as Harry Reid but at least Reid isn’t mean-spirited, just a fool, which is part of the job description these days, no?

Now let’s look at the smallest amount of new jobless claims in 14 years: of course…at some point you can’t keep laying off and firms ARE hiring…forget the crap about no new jobs due the ACA – that doesn’t make economic sense.

Fear of being laid off remains high (and thus impacts spending and vacations), which is strange since the chances of being laid off are now at a 30-year low…but wait…there’s logic in that because it is taking LONGER to find a new job and trying to earn as much as the old job. Once again, the obscene case against raising the minimum wage – driven by big business and the U.S. Chamber of Commerce is hurting the economy…did they skip the part in economics that says if income increases, so does spending? What’s more most millennials are not taking vacations, either because they can’t afford them or are afraid of it affecting their standing at work. That too is bad for productivity….and isn’t productivity what it’s all about? Not to those overpaid CEO’s who think its all about them. Even in Silicon Valley where execs make huge bucks and get big options, employees are not being paid for the long hours they put in…why not, when Oracle’s Chairman and outgoing CEO, Larry Ellison is the highest paid CEO in the U.S. (the world?). This despite being the largest shareholder with 25% of the company in his hands…think it is safe to call him a narcissist…perhaps the penultimate narcissist (despite selling shares for years…finally shareholders said enough is enough and he is turning over day-to-day control to two men (one HP’s flawed former CEO, Mark Hurd…and note HP is going to split up the company…not a sign of strength).

None of the above will mesh with the Hoover Institute on Stanford’s campus…still can’t figure out why an ‘institute’ is named after a president who stood by while the U.S. plunged into a depression…can you? Perhaps like Hoover, they have enough money that they have lost the connection with the masses…dunno…just a thought.

So don’t believe everything you read…including here…even though TB tries to vet what he writes (after all he is a Vet). Think for yourself…something sorely lacking in America today. Just as realizing that we are all in this together is critical to maintain a democracy.

Have a nice day!

TB

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10/22/14…it’s in the news

Quote of the Day from the Friars Club Encyclopedia of Jokes: “I was in a bar the other day and heard two guys speaking Iranian. I asked them, “why are you speaking Iranian? You’re in America now…speak Spanish.” – Milton Berle ‘Uncle Miltie’

Bloomberg Quote of the Day: “Change your thoughts and you change the world.”

– Norman Vincent Peale

Bloomberg Top Stories:

*Consumer Prices in U.S. Rose 0.1% Last Month as Inflation Remained Muted – CPI +0.1!

*Europe Stocks Rise on Earnings as Dollar Gains After U.S. Inflation Report

*ECB Said to Boost Covered-bond Buying From Spain to Germany in Draghi Plan

*Total Appoints Patrick Pouyanne as CEO WHIle Desmarest Returns as Chairman

*Goldman Sachs Shows Investors Path Out of Economic ‘Alice in Wonderland’

*Credit Suisse Seen Reaping Trading Gain; Deutsche Bank’s Legal Bills Erode

*Coca-Cola and IBM Show Shareholders Punishing CEOs With No-Growth Strategy

*EMC to Absorb VCE Equipment Join Venture with Cisco Keeping a 10% Stake

*Ebola Relief in View as J&J Sees 250,000 Vaccine Doses Set for May Trials

*Iraqi Kurds Will Send 200 Pesmerga Fighters to Kobani With Heavy Weapons

*Nuclear Secrecy Feeds Concern About Rogue States Getting Hands on Weapons

Tuesday’s Market Summary:

An extremely strong session on higher volume. Even more impressive is the fact that the Dow closed up 215 at 16615 and that was with IBM subtracting 38 points! Even so it managed to close 29 points above its 200 day m/a (note that the 40/50 day are converging on 16900 so that is next resistance. Ditto for the other major indices. Dow Transports +3.1%!!! The NDQ 100 was already above it and closed just shy of the convergence of the 40/50 day at 4011, up 2.6%, Composite +2.4%. Dow +1.3%; S&P 500 +2%Unfortunately, despite gapping up on the open, the Russell 2000 (+1.6%), remains 33 below the 200 day which is now ‘below’ the 40/50 line. Weakest was Dow Utilities +0.3%. The question now is: has this got enough ‘legs’ to resume raising returns for the year? Dow Utilities still lead ytd +16.72% (price only!), followed by Transports +14.7%, the 100 is up 10.6% but the Composite just 5.8%. The Russell 2000 remains in the red at -4.4%. while NYSE Financials are up just 0.8% – ouch! Compare that to Utilities!

Volume bounced back to a strong 3.96B shares and once again A/D’s were solid and Breadth was especially strong. New 52 week highest despite doubling are still a low 129 while new lows only dropped from 82 to 56. VIX plunged again but remains elevated at 16.26 -2.11.

Total NYSE Volume came back to 3.96B shares vs 3.3B shares vs 5.05B vs 6.06B : average volume for the first 13 trading days of October was 3.73B, or about 730M more than the recent average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: for October it is 901M shares!!! Trading rose to 815M shares vs 742M vs 1.07B. For comparison purposes, for the prior 12 months it was a historically weak 709M shares…but for the first 13 trading days of October, 933M shares including Wednesday’s HUGE 1.22B shared day – highest since 9/19. Monday was the lowest since 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…for October so far? Twelve, including FIVE 900M+ share days.

A/D’s were solid: NYSE: +4.5x vs +2.8x vs +1.9x vs +2.3x vs -1.1x vs +1.6x vs -3.6x -7.2x!!! vs +4x! vs -3.4x; Nasdaq +2.9x vs +2.2x vs 1:1 vs +2x vs +1.2x vs +1.6x vs -2.7x vs -5.8x vs +2.5x vs -4.2x! Breadth was strong! NYSE +5x!!! vs +3.1x! vs +2.9x vs +1.7x vs -1.4x vs +1.6x vs -5.8x! vs -12.3x!!! vs +3.8x vs -4.7x!!! Nasdaq +6.3x!!! vs +5x!!! vs +1.8x vs +1.4x vs +1.03x vs +1.1x -7.2x!!! vs -4.4x! New 52 Week Highs doubled to 129 vs 62 vs 83 vs 52 vs 49 – their range for the year is 39-580!!! New Lows rose declined to average at 56 vs 82 vs 67 vs 311 vs 1043!!! The 2014 range is 24-1043!!! S&P VIX continues to retreat from those bearish extremes with a high of 31.06 (highest since 11/28/11!!!) to 16.26 -3.11, still bearish and well above 9/18’s 12.03 The average of the past 12 months is 13.83, with a low of 10.32! Needs a 14 print!

U.S. bond market was weaker but remains near the new 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closing at 2.22% +1/4; 30’s 2.99% -1/2; and the TIP 0.92% -5/8. Rallying overnight: 10’s 2.20% +1/4; 30’s 2.97% +7/16; and long TIP 0.90% +5/8.  

Libor update: 0.232% 3 mos.; 0.323% 6 mos., both just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.08-0.10%. T-Bills range from 0.03%, one-month, to just 0.10% one year!!! Foreign bond yields lower, led by Greece and the other PIIGS (Benchmark is 10yr): Germany 0.86% -1; UK 2.17% –; France 1.28% -1; Italy 2.48% -3; Spain 2.18% -2; Portugal 3.24% -13!!!; Greece 6.96%!!! -49!!! from 8.69% last Thursday! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.48% –.

Gold closed higher again at $1251.70 +$7.70 which places it above both the 40/50 day m’a’s, and with a new recent high of $1255.60, highest since 9/10/14. There have been just two prints below $1200 since 12/31/13 – 10/3 and 10/6 and soundly rejected! Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! SUP is the 40 day at $1236 and now the 50 day $1248, and the 200 day at $1284. Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is weaker at $1244.00 -$7.70. Silver still holding in the mid- ’17’s after falling to $16.64 on 10/3 – lowest since 2/9/2010 and very close to $15.73, a multi-decade low!!!

Crude closed little changed for a 3rd day at $82.81 +.10. Last Thursday’s high $84.83, low $79.78…lowest since 6/27/13!!! There have been 28!!! handles since peaking at $107.73 on June 13th at $107.73 highest since 9/19/13 (a huge down session which put it in freefall. 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 ($90.27), then the 50 day ($91.286), and lastly the 200 day (98.62) – all dropping. The range is now $79.78-$112.24 since 3/1/12. Overnight slightly higher and tight at $82.79 +.29.

European equity markets higher, Asia strong, led by the highly volatile Japan: UK+0.2% vs -0.9% vs +1% vs -0.7% vs -2.8%!!! France +0.2% vs -1.3%! vs +2.1%!!! vs -1.1% vs -3.6%!!! Germany +0.4% vs -1.4%! vs +2%!!! vs -0.4% vs -2.9%!!! Japan +2.6%! vs -2% vs +4%!!! vs -1.4% vs -2.2%!!! vs -2.4%!!!; Hang Seng +1.4% vs +0.1% vs +0.2% vs +0.5% vs -1%! vs -1! Korea +1.1% vs -0.8% vs +1.6%! vs -1%! vs -0.4% vs -0.7%; India +0.8% vs +0.6% vs +1.2%! vs +0.4% vs -1.3%. U.S. equity futures slightly higher: Dow +18 (range 94); SPX +1.70 (12); NDQ +5 (20).

 

Some random thoughts:

…so you thought yesterday’s commentary was partisan? If so, you aren’t paying attention to the news…or just listening to FOX NEWS…you know, the one that is ‘fair and balanced’.

Here are some snippets from recent news releases:

*Just announced: CPI +0.1% in September…plunging oil prices mainly!

*Farming

- Just 6% of farmers are under age 35; 33% are 65 and older

-Number of individual farms: 2.1MM 2012; 6.8MM 1935

-Biggest 0.5% produced 32% of value; Bottom 75% just 3%

-Price increases are mainly convenience costs: packaged salad vs lettuce – farmers get nothing!

-Nearly 1/3 of all produce (6B pounds!) is thrown away as not being marketable (bruised, etc.)

-From 1995-2012 govt. provided $256B in subsidies; mainly big farms (ADM,etc), $11M to farms/businesses owned by billionaires (Buffett’s brother gets a huge subsidy on his large farm)

*Energy

-36% of Bakken natural gas is flared off

*Politics

-Republicans are focusing on defeating women running for office – thought they wanted women?

-using stale data from the non-partisan think tanks against their opponents

-blaming everything from ISIS to Ebola on Obama

- distorting data on the ACA so they can destroy it even though a majority thinks it is a good program. Sure, it could be better but they want to repeal and then ‘come up with’ better

-continually saying simplify the tax code knowing full well that that has been tried by every president starting with Reagan. Not unless the lobbyists say so and they say ‘no’!

Just a few of TB’s least favorite things…

Have a nice day!

TB

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