Traderbill's Financial Markets Weblog

Bloomberg Quote of the Day: “It’s not that I’m afraid to die, I just don’t want to be there when it happens.” – Woody Allen

TB’s Quote of the Day: “How can the market move so much on so little volume?” – TB 7/16/09

…this has not been a good week for TB…not at all. But the good news is all of your portfolios are worth more than they were last Friday…and TB can be happy for that!

This is one of the most perverse rallies TB can recall but isn’t that what makes a grat rally? …and after four straight down weeks too! Now glance at the headlines in the overnight markets section below and see if you can find the ‘green shoots’ because TB can’t! But TB is still shaking his head at how the combination of strong earnings for Goldman Sachs and JPMorgan Chase on trading profits, a ‘buy’ on Goldman by the most bearish of analysts, Meredith Whitney (who called the selloff in financials like Bethany McLean did with Enron) while warning of a good quarter for banks but more trouble to follow, and then Nouriel Roubini who has been the ultimate bear saying the worst is behind us. That is what triggered the rally to the highs yesterday and added   points to the Dow. But here is what he actually said:

“We might be at the bottom or close to the bottom…in many ways the worst is behind us in terms of economic and financial conditions,” he said adding that these comments are consistent with views he “expressed previously” and that he continues to see a “shallow, below-par and below-trend recovery.” At the end of June he said, and TB used it as a quote for the day, that he sees “more yellow weeds than green shoots” and they might turn into “brown manure.” Now get this you raging bulls: “We should continue with the fiscal stimulus and we might need a second one.” (emphasis added by TB)

Ok, that’s reason enough for a rally adding to a rally that had eked out a gain of about 24 points over the June 16 high and then slipped till this hit the tape and then the Dow rose from 8606 to 8739.55 like a rocket with the afterburner kicking in 15 minutes prior to the close. As the table below shows, all of the other indices except Dow Transports and Utilities (which were near the highs to begin with) took out their respective July highs AND the June highs except for the S&P 500 and Russell 2000…pretty impressive.

© TBD Capital LLC

Notes on highlighted dates.

1. The Dow peaked early with both the high and the lower high in June

2. Dow Transports peaked back in May thus not cofirming Dow 30 rally (Dow theory)

3. Both Nasdaq Indices gapped up Wednesday and closed a gap created from 7/1-7/2, a very strong indicator…thus the asterisk! Therefore these indices are the ones to watch!

Even more impressive is that this one done on a day with a total of 1.17 million shares of NYSE volume, 300 million less than average and when the story broke it stood at about 550 million. The afterburner mentioned above was the blast from about 850 million shares 20 minutes prior to the close and 150 million shares at the close. But wait…it gets better! Near bankrupt CIT falling 76.8% in price generated 37% of the total NYSE volume followed by Citi (C) -4.7% with 26% and BofA (BAC) with 25%…add them together and you get 88% of total NYSE volume! What else was going on??? For the second straight session IBM was the top gainer on the NYSE adding a combined 56 points to the Dow Industrials hitting a new high close of $110.64, up 7.2% for the two days on a great quarter thanks to cost-cutting. Note however that the high of $110.97 was just 33 cents above the old high set on June 11 (the rally peak, right?). It’s volume, a mere 15 million shares was just  4.8% of Citi’s and only 3.5% of CIT’s, that is the market we are in! Of course in dollar volume IBM was impressive compared to all those single digit stocks.

Overnight however, BofA reported, making money but only on fees, and beating analysts lowered bar estimates…stock is down. GE bombed in the quarter with a 17% decline in revenue and 47% drop in profits led by finance…yet they are not a financial company, right?…don’t need no stinking regulation. Should be an interesting options expiry today!

Let’s get back to poor old CIT…you know, the one lead by Jeffrey Peek formerly of Merrill Lynch of which TB quipped had he been from Goldman the Treasury would be asking how much do you need?  Just like with the financial debacle where Lehman was left to fail…they shouldn’t have been bailed out they should have been taken over and Dick Fuld kicked out on his ample butt…and where we worried about GM but not the auto suppliers who have a much bigger impact on the country…the government, having had its hand slapped too many times for doling out money says “no way, Jose (Jeffrey)” you can flounder…you have no business plan. Yet the Fed had them in the top category of financial institutions…as they did with 80% of the banks that have had to be taken over! One reader says they did mismanage by borrowing short and lending long! Hello, that is how a finance company operates and how they successfully operated for years but when the crisis hit they were squeezed out…in fact there is no viable commercial paper market any more…it is a pittance compared to what it was. Borrow from the banks? Neither CIT OR the retailers, etc, it finances can do that as the banks are too busy earning fee income. Now here is a question: with Goldman and JPMorgan paying back their TARP funds shouldn’t the government be able to give them a fraction of that…about $3-4 billion is what they need…to prevent more companies going bust and more job losses? One would think so but this is not a thinking government…it is a politicized one and TB stands by his original comment that if the CEO were from Goldman it would be: how much do you need and when?

TB is disgusted and that is growing thanks to hearing Henry Paulson stammer for two hours yesterday…uh…guttural sounds…er…uh…TB swears that if you heard him without seeing him you would think he was in an outhouse.     

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A friend sent a great story yesterday. It seems that in Tampa, Florida Wells Fargo is suing itself along with others over a failed condo development. See WFC held the first and second and so it is suing…theoretically to strengthen the first’s position…but it is the lawyers who are making out…two sets of lawyers…double the fees. Is this a great country or what. (TB will send the article if you are interested)

Here is another great story: California legislators who are holding the entire state hostage since they can’t agree on the budget…business as usual…are urging the Federal government to chip in to keep the NUMMI plant in Fremont open. To those of you not familiar this is a joint venture of GM and Toyota and produced the Pontiac Firebird while Toyota made some of their models there. But since Pontiac is no longer, GM pulled out and Toyota is now seeing this as one costly venture. So the state thinks this is a federal problem…that is called kicking it upstairs. TB’s bet: sorry fella’s if we aren’t bailing out CIT we aren’t going to help a Japanese carmaker. Sayonara Takahashi!

Now get out there and enjoy the sunshine and don’t do any trading until after options expire…watch out in the first couple of hours.

TB

Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries…as he sees it…and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Hope you find it useful. Copyright TBD Capital LLC, © July 17, 2009.