Quote of the Day from the Friars Club Encyclopedia of Jokes: “It’s going to be fun to watch how long the meek can keep the earth after they inherit it.“ – Kin Hubbard
Bloomberg Quote of the Day: “In nature, there are neither rewards or punishments – there are consequences.” – Robert C. Ingersoll
Bloomberg Top Stories:
*ECB Said to Start Covered-Bond Purchase Program With French, Spanish Debt – Bad idea?
*European Stocks Decline With U.S. Index Futures as Earnings Miss Estimates –c’est la vie!
*Leveraged Money Spurs Stock Market Selloff wit Record Trade in Treasuries – a warning?
*Secret Slack Weighs on Job Market as Yellen Fed Ponders When to Lift Rates – not now!
*IBM Abandons 2015 Forecast as Rometty Divests Globalfoundries; Shares Fall
*Value Investors Hoarding Cash See Few Bargains After Worldwide Stock Rout – do tell!
*BlackRock Sales in Best October Since 2001 Show Muni Rally Limits – caution flag!
*Canadian Pacific Says It’s Ended Exploratory Talks With CSX on Rail Merger
*S&P Unmoved by Brazil’s CSN Debt-Cutting Plan as Bonds Post Slump
*Unload or Reload Is Question for Investors as Monday Arrives – TB picks the latter, or hold!
*Oil Workers Earning $179,000 Expose Wealthy Norway to Crude’s Price Crash – $2.85 in MN!
*Nigeria Declared Ebola-Free by WHO With Affirmation Disease Can be Stopped – panic here!
*Russia Vows to Refuse Conditions for Ending Sanctions After Ukraine Talks
*U.S. Military Drops Weapons, Ammunition to Kurd Forces in Besieged Kobani
*Efforts to Contain Ebola’s Spread Show Signs of Working Beyond West Africa
*Spain Ebola Patient Seen Free of Virus After Negative Test, Better Health
*Two Female Japan Ministers Quit on Same Day in Blow to Abe’s Equality Push – stocks rally!?!
*The $2 Trillion Megacity Dividend China’s Leaders Are Undermining – heed this!
*Clinton Super-Pac Spending $1,000 an Hour to Build Database, Court Voters
This week’s economic calendar is full of important indicators. The highlight of the week will be the September Retail Sales and September PPI (Wednesday). We will also get September Treasury Budget (Tuesday), October Empire State Manufacturing, August Business Inventories and Beige Book (Wednesday), September Industrial Production and October Philadelphia Fed Manufacturing (Thursday), September Housing Starts and October Consumer Sentiment Preliminary (Friday). Courtesy of Economic Advisory Service
Friday’s Market Summary:
Oh what an options expiry it was! All indices up from 1% (NDQ 100?) to 1.6% (Dow Industrials), except Dow Utilities which were up 0.7% – wait, doesn’t that tell you something…why utilities? Got a better one for you: VOLUME! Sure it was solid but we finally get a rally and the volume is just 4.45B – ok, not ‘just’ but the lowest since 10/10! Trades on the floor were a still well above average 1.07B shares but volume at the bell was 853M shares…the point is that it appears to be more options related than real buying. Color TB ‘skeptical Perma-bear? Dow Futures are down 90 this morning…also the close at 16,380 and even the session high at 16,427,was a far cry short of even the 200 day m/a at 16,586! S&P 500 closed at 1886, 200 day 1906; Russell 2000 1082 vs 1147…if it is more than ‘Memorex’ there is a lot of heavy lifting to do and overnight market suggests there ‘may’ just be a problem. A/D’s and Breadth were positive but the highest was just 2.9:1 – a pittance compared to those down session. New 52 week highs nearly doubled but only to a WEAK 83, while new lows plunged to a more normal 67 from 311…but it is hard to create new lows on a rally that exploded right out of the chute, no? Lastly, the VIX declined but only to a still very bearish 21.99 -3.21…bears watching…
Total NYSE Volume slipped again to a still high 5.05B shares vs 6.06B : average volume for the first 13 trading days of October is now up to 3.73B, or about 730M more than the recent average. To show that the ‘drought’ of trading has ended one needs to look at shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: for October it is now 920M shares!!! For comparison purposes, for the prior 12 months it was a historically weak 709M shares…but for the last 13 days 933M shares including Wednesday’s HUGE 1.22B shared day – highest since 9/19 while the low was 10/6’s 696M share session. April 30 – September 30 we had nust SEVEN 800M shares…for October so far? ELEVEN, including FIVE 900M plus share days. Yesterday at the bell volume was a high 827M shares but beginning to slip and could return soon to the sub-600M share days of September…worth watching! Nobody said this was going to be easy!
A/D’s were positive but look: NYSE: +1.9x vs +2.3x vs -1.1x vs +1.6x vs -3.6x -7.2x!!! vs +4x! vs -3.4x; Nasdaq 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 little better: NYSE +2.9x vs +1.7x vs -1.4x vs +1.6x vs -5.8x! vs -12.3x!!! vs +3.8x vs -4.7x!!! Nasdaq +1.8x vs +1.4x vs +1.03x vs +1.1x -7.2x!!! vs -4.4x! New 52 Week Highs surged but reamin WEAK at 83 vs 52 vs 49 – their range for the year is 39-580!!! New Lows plunged to a more normal 67 from a high 311 from 1043!!! – lowest for October was 176. But it is hared to get new lows on a strong day like Friday.The 2014 range is 24-1043!!! S&P VIX has gone from ‘put’ protection being cheap on 9/18 at 12.03 to 21.99 vs 25.20 vs 26.25 – remains EXTREMELY bearish as indicated by the high Wednesday of 31.06 – highest since 11/28/11!!! The average of the past 12 months is 13.83, with a low of 10.32!
U.S. bond market was in the red all day – not surprising the strength of stocks on optons expiry but remain near their new 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), closing at 2.20% 10’s -3/8; 2.97% 30’s -13/16; and the TIP 0.89% -3/8 Better overnight: 2.18% +1/16; 30’s 2.95% +5/16; and long TIP 0.87% +7/16.
Libor update: 0.231% 3 mos.; 0.233% 6 mos., both just above new record lows! The Fed Funds rate has averaged 0.09% and is now 0.08-0.10%. T-Bills range from 0.03%, one-month, to just 0.10% one year!!! Foreign bond yields mixed’ Italy, Spain, Portugal weak (Benchmark is 10yr): Germany 0.84%! -1; UK 2.16% -3; France 1.30% –; Italy 2.52% +3; Spain 2.19% +3; Portugal 3.37% +10!; Greece 7.81% +1: from 8.69% Thursday! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.48% +1.
Gold closed slightly lower in a narrow session, two days after gapping up to its highest since 9/11/13 ($1247), closing at $1238.30 -$2.90. Still only two prints below $1200 since 12/31/13 – back to back and rejected! Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! SUP/RES is the 40 day at $1238, then RES at the 50 day $1251, 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 lower at $1236.80 -$150 in another very narrow range. Silver 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 at $82.75 +.05 in a narrow inside session. Thursday’s high $84.83, low $79.78…lowest since 6/27/13!!! There have now 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 ($91.09), then the 50 day ($92.16), and lastly the 200 day (98.79) – all dropping again. The range is now $79.78-$112.24 since 3/1/12. Overnight slightly higher and tight at $8307 +.32.
European equity markets weak. Asia higher, led by the highly volatile Japan along with Korea and India: UK -0.9% vs +1% vs -0.7% vs -2.8%!!! France -1.3%! vs +2.1%!!! vs -1.1% vs -3.6%!!! Germany -1.4%! vs +2%!!! vs -0.4% vs -2.9%!!! Japan +4%!!! vs -1.4% vs -2.2%!!! vs -2.4%!!!; Hang Seng +0.2% vs +0.5% vs -1%! vs -1! Korea +1.6%! vs -1%! vs -0.4% vs -0.7%; India +1.2%! vs +0.4% vs -1.3% vs closed. U.S. equity futures weaker but off session lows after gapping up on the open for a 2nd day? Dow -76 (range 197 +71 gap!!!); SPX -1.60 (20 +7); NDQ +5 (28 +27)
Some random thoughts:
…readers know how disgusted TB has been with the governments decision to fine corporations for their crimes in creating the financial crisis. This has upset me more because of the failure of long term associates in the business to assess blame on OUR industry, instead saying either ‘everyone was to blame’ or denying any culpability of their firms…even those from Lehman and others whose management destroyed them. This is a type of denial on a par with the Germans over the holocaust!
Certainly an obvious ‘culprit has emerged in the retiring Eric Holder, but as the interview with William Black shows…it went up the chain to both Bernanke and Geithner, and even to Obama himself (not that the Bush administration was any better). It is a shocking report by a veteran federal prosecutor of the S&L crisis. How come Paulson preached clawbacks and none have been enforced…none! How come he encouraged banks to pay more in bonuses at a time that investors in the banks were suffering along with Main Street. The answers are all here…and if you want more watch the other interviews shown on the Moyers & Co website…it is a travesty.
As for the ‘record fines’, they are a joke…a pittance compared to the money that was made by the banks, and as Black points out they were to ‘silence’ investigators so no one was prosecuted. Not just the CEO’s but their minions who they feared would testify against THEM! Besides the ‘little people’ (shareholders) paid them while the CEO’s (most notably Jamie Dimon), continued to increase their bonuses…and stock option awards at depressed prices…how sick can it get? Not much sicker…except when you look at the price Martha Stewart paid for just one ‘insider’ trade (which in the end was a bad decision as a year later the stock was higher! Were TB Ms. Stewart – he would be livid.
But the worst part is how Wall Street is using this newfound wealth…to buy Congress and the government…it was this Jamie Dimon-led group that put up the money to get Obama elected (first over Clinton in the primaries, and then over their own brother, Romney!). This has got to stop and we are running out of time. We have forgotten how Sen. John McCain and four others were the Keating Five. Five? Now there are dozens if not hundreds in Congress who owe their well-being to the financial sector. Time is running out.
As Black said, “the biggest enemy of capitalism is…capitalists!” If you doubt this, go on and believe in our stock market being representative of economic well-being…”to the moon, Alice, the moon!!!”
Lastly, Black was asked by Moyers if he thought another financial crisis was possible…possible? He said it was a certainty…the government has encouraged it…and WE, the people, will pay for it…again…and again…until we put the financial sector in its place! This will take a grass roots effort (like the ill-conceived Tea Party and Occupy Wall Street), but do we have the stomach for it? TB finds that dubious…at best.
Correcting Friday’s gold story (thanks to a friend!). When I first mentioned the ‘gold cube’ to our guide in Istanbul I said a 50 foot cube…but she was so skeptical I tried to recall and thought it was either a 100 foot or 150’ cube. We were standing in Hagia Sophia at the time so it was all a blur. Here is a correction of what I wrote…note that part of my confusion was that a lot of gold has been mined since then. Changes are in italics:
When TB was working in Nevada 34 years ago, he attended a meeting of mineralogists. They said that in the entire history of the world, the total amount of gold extracted would fit inside a 50×50 foot cube. Think about that…as TB did when he was in Istanbul. His guide looked at him incredulously (obviously more has been extracted since then but certainly isn’t being horded by governments…especially the UK which is why they always say, “God save the queen!” In the U.S. we use another phrase: ”in God we trust” which of course replaced ‘payable to the bearer upon demand in gold/silver’.
Taking it a step further, a 50 foot cube is125,000 square feet, and if you crammed people (6’ tall) in it, it would hold 3,472 people…or more accurately, ‘bodies’, as no one could breath.
This brings us to the Gold ETF’s. Believe it or not there are now 39 funds that are invested in gold/silver…the largest being the Spyder’s (GLD) with a market cap of $30.33 billion! Taking the price per once at yesterday’s close ($1,233), that is 2,459,854 ounces of gold. At the peak that value was equal to nine years of production!!! See why it has plunged? That is not to say these funds don’t have gold to back them up but it does explain why they have fallen 34% since peaking on 8/19/11! All that glitters is not —-…even if it is!
TB’s friend provided information from Warren Buffett from about two years ago: the cube has now grown to 68 cubic feet or 314,432 cubic feet (8,734 people).
So TB was actually correct in his first assessment…another reason to not over-think a question!
Watching the talk shows, the lead-off story was Ebola…with the Republicans, Bill Crystal, Mary Madeline, and a host of GOP congressmen, calling for a ban on Africans coming here. Today, as the headlines show, the crisis is diminishing. It is shameful to use something like this for political purposes but remember, politicians have no shame. That includes the three former public officials running again for office – all convicted of bribery charges and all saying they were wrongfully convicted….just like all of the others would say in a prison. Shame on the voters if they elect them!
Have a great week!