Archive for March, 2012

3/30/12…when money talks, people listen

March 30, 2012 at 8:39 am · Filed under economy, financial, markets ·Tagged

Quotes of the Day: “There are three kinds of lies: lies, damned lies, and statistics.” – Benjamin Disraeli

 

“No, Ben, there are four…try political lies.” – TB, but excuse him, he was a politician!

 

*You can always tell a CEO, but you can’t tell him much.” TB after Best Buy released its earnings, beat estimiates, announced closing 50 stores, 400 layoffs at HQ, but CEO said:

 

*I believe I absolutely(?) am the right person to thead the company forward.” AND “ I like our chances very much.” – Brian Dunn, CEO, it was either that or take the golden parachute…and you wonder what is wrong with corporate America!

Bloomberg Top Stories: 

 
Breaking News: Sun Hung Kai Properties Ltd. plunged the most in 14 years and lost $4.9 billion of market value after anti-graft investigators arrested the billionaire brothers who run Hong Kong’s biggest developer. 
 
 Co-chairmen Thomas and Raymond Kwok were detained by the Independent Commission 
Against Corruption, Sun Hung Kai said late yesterday. Rafael Hui, a former No. 2 official in the government, was also arrested, according to a person with knowledge of the matter who asked not to be identified because of the ongoing probe.
 
This bank has been of interest to TB since 1981 when, while at Merrill, they bought a big stake in it and lost millions…then it came back…perhaps now we know why!

*Consumer Spending in U.S> Rose More Than Economists Forecast in February – +0.8%

*Stocks, Euro Rise as Officials Set Bailout Aid Limit; U.S. Futures Advance – is that good?

*Euro Spat Erupts as Finance Ministers Bicker Over Who Talks First to Media – LMAO!

*European Finance Ministers Limit Size of Bailout firewall to $1.1 Trillion – hmmm!

*Ford Increased Chief Mulally’s Pay 11% to $29.5M as Shares Declined – no shame! Sick!

*Italy Bonds Lose Luster as Strikes Tarnish Debt Rally – ain’t that swell?

 *OPEC  Output Rises to Highest Level Since 2008 as Libya Gains, Survey Shows

*Goldman Shorting Housing No More With fund Wagering on Rebound -  or so they say!

*Spain to Slash Spending, Raise Corporate Taxes in Effort to Reduce Debt – Hello, Ryan???

*Obama Campus Fervor Losing Out to Apathy as Students Sour on 2012 Campaign – Sad!

*Atlantic Hurricane Season Will Be Most Quiet Since 2009, CWG’s Rogers Says – but God?

Volume was steady at 3.8Bon NYSE listed stocks. Also, NYSE stocks executed on the Big Board were steady at 817M shares, still about 200M below the 12 month average. Since 2/29 there has only been one 1B+ share day, 3/16’s high for 2012 and the average has been just 830M shares, 200M below average! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 93 of the last 101 sessions have now been less than 1B! Advance/Declines were negative for a THIRD session: -1.5x vs -1.8x vs -1.4x vs +3x vs +2.4x on NYSE and -1.4x vs -1.9x vs -1.6x vs +3.2x vs +2.3x on Nasdaq. Breadth was similar: -1.6x vs -2.4x vs -2.2x vs +5.6x! +3x on NYSE and -1.4x vs -2.2x vs -1.1x vs +4.2x! vs +2x on Nasdaq. New 52 week dropped again to 115 vs 160 vs 366, while new lows rose slightly to 64 vs 54 vs 28! The ratio is now +2x vs +3x vs +12x. The S&P VIX was steady for a third session at  to 15.48 vs 15.47 vs 15.59, although intraday Wednesday hit 17.27, highest since March 9! Friday 3/16’s intraday low of 13.66 was lowest since 6/20/07’s 12.75. Sure looks like a sell-off is a’brewin’.

As predicted, the  quarter end for hedge funds due to T+3 settlement has left the rest of us at their mercy and today is D-Day…do we then plunge into April? Don’t be a ‘fish’!

Here are the results of the last five sessions: Dow UP 0.2% vs -0.5% vs -0.3% vs +1.2% vs +0.3%; Transports FLAT vs -0.3% vs -0.2% vs +1.4% vs -0.1%; Dow Utilities +0.4% vs -0.9%??? vs +0.5% vs +0.7% vs flat; S&P 500 -0.2% vs -0.5% vs +0.5% vs +1.4% vs +0.3%; Nasdaq Composite -0.3% vs -0.5% vs -0.1% vs +1.8% vs +0.2%; Nasdaq 100 -0.3% vs -0.5% vs +0.2% vs +1.8% vs -0.1%; Russell 2000 -0.3% vs -0.7% vs -0.7% vs +1.9% vs +1.1%; NYSE Financials -1.0%!!! vs -0.2% vs -0.8% vs +1.4% vs +0.8%. NYSE Financial Leaders: BAC -2.3%!!! vs +1% vs -3.3%! vs +0.8% vs +2.5%! vs -2.2%!; GE -0.3% vs -0.2% vs -0.1% vs +1.4% vs -0.4%; F +1.5% vs flat.

Here are the results of the last five sessions: Dow UP 0.2% vs -0.5% vs -0.3% vs +1.2% vs +0.3%; Transports FLAT vs -0.3% vs -0.2% vs +1.4% vs -0.1%; Dow Utilities +0.4% vs -0.9%??? vs +0.5% vs +0.7% vs flat; S&P 500 -0.2% vs -0.5% vs +0.5% vs +1.4% vs +0.3%; Nasdaq Composite -0.3% vs -0.5% vs -0.1% vs +1.8% vs +0.2%; Nasdaq 100 -0.3% vs -0.5% vs +0.2% vs +1.8% vs -0.1%; Russell 2000 -0.3% vs -0.7% vs -0.7% vs +1.9% vs +1.1%; NYSE Financials -1.0%!!! vs -0.2% vs -0.8% vs +1.4% vs +0.8%. NYSE Financial Leaders: BAC -2.3%!!! vs +1% vs -3.3%! vs +0.8% vs +2.5%! vs -2.2%!; GE -0.3% vs -0.2% vs -0.1% vs +1.4% vs -0.4%; F +1.5% vs flat.

 

European equity markets finally up, Asia still weak (except India who finally erased 10 sessions of losses!): FTSE +0.6% vs -0.9% vs -0.3% vs -0.1% vs +0.5%; CAC40 +1.2% vs -0.9% vs -0.3% vs -0.3% vs +0.1%; DAX +0.9% vs -1.2%! vs -0.5% vs +0.5% vs +0.6%; Nikkei -0.3% vs -0.7% vs -0.7% vs +2.4%!!! vs +0.1%; Hang Seng -0.3% vs -1.3%! vs -0.8% vs +1.8%! vs flat; Korean KOSPI Flat vs -0.9% vs -0.4% vs +1% vs -0.4%t; Indian Sensex +2%!!! vs -0.4% vs -0.8% vs +1.2% vs -1.8%!!! vs +1% vs -2.3%! U.S. stock futures stronger: DOW +54; SPX +6.40; NDQ +11.50. Bonds slightly better: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.16% +3/8. RECORD low 9/23 of 1.6855%; 30 yr 3.27% +3/4; Long TIP 0.83% +15/16, it was 0.57% at high. The 5 yr TIP yields MINUS 1.29%; 10 yr -.18%. Bills 0.03%! 1 month; 0.07% 3 months, 6 months 0.13%. Reverse Repo 0.21%. 3 mo. Libor 0.47%, and 0.73%, beginning to slowly decline.

Gold closed below $1700 for a 14th straight session, making the hit $124 since 2/28, closing $1654.90 -$5.60. 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, and is now $1670.00 +$12.10! The record high is $1923.70, a buying climax on 9/6. Res is $1690, the 200 day and $1711, the 50 day, then $1712, the 40 day, about to cross! Major support is again $1652, the 1/25/13 low, now res! Crude tanked for a second day and this time plunged thru BOTH the 40 and 50 day m/a’s! Closed  $102.78 -$2.63. The session low of $102.13 is worst since 2/17/12! This is a breakout of the range of $105-110 which has held since 2/21!!! It is now $103.53 +.71, with RESISTANCE now at the 40 day (104.70), the 50 day (103.50), and major support at $95.35, the 200 day…continue to watch as all are rising! Major resistance at $110!

 

Today will put us out of our misery (for this quarter at least as the high frequency traders continue to dominate and drive the market DOWN…their returns now put to bed). But what does this say for April? April ’08, ’10, and ’11 all either saw a top or began a selloff (’11 was the exception rallying until ‘sell in May and go away kicked in). Also, we have a problem since the Q1 ’09 selloff to the bear market lows, falls off three year returns which will distort performance positively. 2012 could be a much tougher year than ‘11/

The best performer was Dow Utilities – the worst Wednesday (+0.4% vs -0.9%!). Worst was NYSE Financials which was the best Wednesday (-1.0%! vs -0.2%). The two Nasdaq indices AND the Russell 2000 were all off 0.3% whilie the S&P 500 fell 0.2%. But HEY, the Dow was up 0.2% – ahem…11 up, 18 down, With Cat adding 13 index points, Coke 9, IBM and CVX each 7! AXP was the big loser at minus9 points. What a crapshoot! AAPL which added +2.7 index points to the 100 subtracted 6.6 yesterday while Google which provided 2.1 lost 1.7! 51 were up, 48 down…go figure!

Now let’s look at Best Buy which provided the quote at the top of this column and was a Bloomberg top story by beating analysts estimates (lowered bar), but also announcing a closure of 50 stores. No mention of how many total cuts, but 400 headquarters jobs, and they plan to cut costs by $250 million this year and a total of $800 million over the next three years! The stock which had been recovering from a $21.79 low on 10/4/11, and was at resistance at $28 for a second time, gapped down on the open by $2.20, bottomed $23.96 before climbing back to a weak $24.77 – a 7% decline! For 50 years they have been putting ‘mom and pop’ big box retailers out of business. This will still leave them with 1050 stores and they now have SIX straight quarters of losses. Since June 2009: WalMart +26%; BestBuy -26%; Target +47%! Gain for the 32 company S&P 500 Retail Index: +39%!

Ah…Ford…CEO Mullally just got an 11% raise while the stock has declined sharply. Over the past 12 months it is off 15.5% counting reinvestment of the puny dividend, but that is with a recovery from -35.9% for 2011 – the period the board is supposed to base the bonus on! Instead, they should have said let’s see how you do in 2012 which is off to a good start: +16.6% – so far but with headwinds coming? Still like stocks??? Egad!

Still looking for a strong recovery, eh, Mr. Ryan?

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…TB has made no bones about his objections to the Supreme Court ruling in Citizens United  (sic) which allowed unlimited contributions to SuperPacs. A recent study showed that CEO donations to PAC’s reflect their interest not the company’s. That is strike one.

Thanks to the baselinescenario (which is authored by James Kwak and Simon Johnson and frequently referenced in this blog as they have strong credentials and no political agenda), and references they made to The Economist and USA Today article last night provided more insight into SuperPac’s (and tax preparers who will stop any changes to the tax code and have run amok). Here is a compilation of all three.

First, FIVE individuals have contributed 25% ($30M) of all SuperPac money raised! Specifically:

  1. of $78M raised, $52M or 675 from super donors of $1,000,000 or more!
  2. 37 donors contributed $500,000 or more

The biggest beneficiaries:

  1. Gingrich 96% of his SuperPac came from one donor, Sheldon Adelson ($16M)
  2. 71% of Santorum’s funds are from SuperPac’s!
  3. Paul, Gingrich and Santorum combined $70M
  4. Obama’s has $2 million – from four donors led by Bill Maher at $1M
    1. Maher’s contribution was later refused (all data is from FERC 2/12)

How about campaign funds?

  1. Obama has $172.7M, 41.2% from small donors; cash on hand $84.7M, Debt 0
  2. Romney $75.6M, 9.9% small donors!
    1. Cash $7.3M – 70.7% from Peter Thiel, SF based, co-founder of PayPal
  3. Gingrich $1.54M, Paul $1.4M, Santorum $2.6M
  4. Debt owed: Obama $30k, Romney/Paul 0; Gingrich $1.55M, Santorum $922M
  5. RNC $113M raised, cash on hand $26.7M

This illustrates the sheer lunacy of the GOP ‘strategy’ (sic) of ‘anyone but Obama.’ Also, if money talks, as Romney campaign shows, Obama is a shoo-in – like it, or him, or not.

The main point of the Baseline story however is how distorted the GOP, the ‘party of business’ has become. It is working against big business who is not opposed to regulation and in fact welcomes it as it gives them an advantage over competitiors, as do tax preparers, accountants, and lawyers as TB has been trying to tell you.

So what does this party want? A small minority…powered by billionaires is dictating policy and wants to reduce government spending while cutting taxes even further for the wealthiest Americans! This will and can only end in lessened economic activity and bigger deficits despite what they say about the Paul Ryan plan. Think about it!

Have a wonderful, fun weekend!

TB

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3/29/12…throwing out the good with the bad

March 29, 2012 at 8:44 am · Filed under economy, financial, markets

Bloomberg Top Stories:

*U.S. GDP Grew 3% in 4th Qtr, Same as Prior Est.; Corp. Profits +7% yoy, smallest in 2 yrs

*Initial Jobless Claims Fell 5,000 to 359,000 Last Week – fewer layoffs but job still weak

*Best Buy Profits Beat Analysts’ Estimates; Retailer Will Close FIFTY Stores – ahem!

*Monti’s Labor Law Overhaul Revives Political Risks for Italy

*Goldman Should Stop Saying It Puts ‘Customers First,’ Advisor Levitt Says – partners first!

*Repeating Top Returns Eludes Yactman as Ericksen Navigates Market Swings – past returns…

*End is in Sight for U.S. Recovery: Bloomberg Businessweek Opening Remarks – nice!

*Branson Virgin Money With Wilbur Ross Seen Disrupting U.K. Retail Banking

*Secret Court Vote Starts U.S. Health Review That May Shape Roberts Legacy

(if you can make sense of the news stories on this, you are better than TB – confusion reigns?)

*Medicare Budget Debate Comes Down to Who Trims the $50 Billion Program

*Boeing Lobbies for $2 Billion in Fighters as Lockheed Delays Leave a Gap – Boeing? Fighters?

*Fuel Shortages Reported in U.K. as Drivers Fill Up on Tanker Strike Threat

Volume rose to 3.85B vs 3.46M shares on NYSE listed stocks. Also, NYSE stocks executed on the Big Board rose to 817M shares vs 730M, still about 200M below the 12 month average. Since 2/29 there has only been one 1B+ share day, 3/16’s high for 2012 and the average has been just 830M shares, 200M below average! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 92 of the last 100 sessions have now been less than 1B! Advance/Declines were negative for a second session: -1.8x vs -1.4x vs +3x vs +2.4x vs -2.8x! on NYSE and -1.9x vs -1.6x vs +3.2x vs +2.3x vs -2.2x on Nasdaq. Breadth was similar: -2.4x vs -2.2x vs +5.6x! +3x vs -7x!!! on NYSE and -2.2x vs -1.1x vs +4.2x! vs +2x vs -2.2x on Nasdaq. New 52 week were halved to 160 vs 366, while new lows nearly doubled to 54 vs 28! The ratio is now +3x vs +12x. The S&P VIX was steady at  to 15.47 vs 15.59, although intraday it hit 17.27, highest since March 9! Friday 3/16’s intraday low of 13.66 was lowest since 6/20/07’s 12.75.

As predicted, the  quarter end for hedge funds due to T+3 settlement has left the rest of us at their mercy until tomorrow…do we then plunge into April? Don’t be a ‘fish’!

Here are the results of the last five sessions: Dow -0.5% vs -0.3% vs +1.2% vs +0.3% vs -0.6%; Transports -0.3% vs -0.2% vs +1.4% vs -0.1% vs -2.1%!; Dow Utilities -0.9% (worst)??? vs +0.5% vs +0.7% vs flat vs flat; S&P 500 -0.5% vs +0.5% vs +1.4% vs +0.3% vs -0.7%; Nasdaq Composite -0.5% vs -0.1% vs +1.8% vs +0.2% vs -0.4%; Nasdaq 100 -0.5% vs +0.2% vs +1.8% vs -0.1% vs -0.2%; Russell 2000 -0.7% vs -0.7% vs +1.9% vs +1.1% vs -1%; NYSE Financials -0.2% vs -0.8% vs +1.4% vs +0.8% vs -1.2%!. NYSE Financial Leaders: BAC +1% vs -3.3%! vs +0.8% vs +2.5%! vs -2.2%! vs +0.1%; GE -0.2% vs -0.1% vs +1.4% vs -0.4%; F flat.

Global equity markets weaker for a second session, three for Europe!now down 2.5% last 9 sessions: FTSE -0.9% vs -0.3% vs -0.1% vs +0.5% vs -0.4%; CAC40 -0.9% vs -0.3% vs -0.3% vs +0.1% vs -0.7%; DAX -1.2%! vs -0.5% vs +0.5% vs +0.6% vs -0.6%; Nikkei -0.7% vs -0.7% vs +2.4%!!! vs +0.1% vs -1.1%!; Hang Seng -1.3%! vs -0.8% vs +1.8%! vs flat vs -1.1%!; Korean KOSPI -0.9% vs -0.4% vs +1% vs -0.4%! vs flat; Indian Sensex -0.4% vs -0.8% vs +1.2% vs -1.8%!!! vs +1% vs -2.3%! U.S. stock futures weak: DOW -38; SPX -4.80; NDQ -8.25. Bonds slightly better: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.16% +3/8. RECORD low 9/23 of 1.6855%; 30 yr 3.27% +3/4; Long TIP 0.83% +15/16, it was 0.57% at high. The 5 yr TIP yields MINUS 1.29%; 10 yr -.18%. Bills 0.03%! 1 month; 0.07% 3 months, 6 months 0.13%. Reverse Repo 0.21%. 3 mo. Libor 0.47%, and 0.73%, beginning to slowly decline.

Gold closed below $1700 for a 13th straight session and tanked, negating two days of progress, making the hit  $18 since 2/28, closing $1660.50 -$27.20!!! 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, and is now $1661.90 +$1.40. The record high is $1923.70, a buying climax on 9/6. Res is $1689, the 200 day and $1711, the 50 day, then $1714, the 40 day, rolling over. Major support is again $1652, the 1/25/13 low, now res! Crude also tanked to $105.41 -$1.92. This cements it in a range of $105-110 since 2/21 – which way will it break? It is now $105.00 -.41, with support at the 40 day (104.40), the 50 day (103.40), and major support at $95.29, the 200 day…watch closely as all are rising! Major resistance at $110!

See what happens when there are two different quarter ends for different classes of investors? Hedge funds, due to leverage, have to close their books early or they could distort performance by buying and not settling on the trades. Others can do this but at their own risk. So it is proper but you have to be aware of it to play this game.

The worst performer was Dow Utilities…very unusual on a DOWN day! Best was NYSE Financials off just 0.2%. But the big story again is the Nasdaq 100 which fell  0.4% losing 11 points (0.2%), but as has been the case of late that was due to AAPL (+2.7 index points) and now Google (+2.1). Taking them out would make it off 16 rather than off 11 points for a loss of  0.7%, more in line with the 16 stocks up, 83 down!

Two more sessions of hell in which everyone’s quarterly performance is at risk. Before you  content yourself with the performance of the indices, the best of course contained Apple which is up 52.5% year to date (76.2% 12 months!), ex-AAPL how would that performance look? TB will address that again on Monday. Place your bets!

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…ah the wonderful U.S. Supreme Court which has fallen from grace due to its political leanings. First, was the Bush/Gore decision which they can only be commended on for ending a mess, but the decision smacked of partisanship (5/4), and although it was later determined that Gore received 500,00 more votes, he still would have lost the electoral vote, the fourth time this has happened. It is also noteworthy that Bush had picked up the phone to call Gore and concede when a reporter interceded and told him not to…hmmm, impartial press? Aren’t they supposed to just observe?

Next came Citizens United. In another partisan 5/4 ruling they opened the floodgates for disinformation and negative campaigning by allowing corporations to spend unlimited amounts of money. The SuperPacs exploded in size and now it is difficult for the candidates to get their story out as they are buying most of the air time. Wait until the real campaign begins. The argument is that unions give unlimited funds…but how much power do they have any more…a poor argument.

Now we are faced with the healthcare issue and hopefully, while it will likely be another 5/4 decision, it will not be thrown out in entirety, or the health insurers will have won again and in a country where the people move from state to state and frequently, portability is essential. Don’t be deceived that there are no good purposes in this bill, but it is truly sad the lengths the opposition has gone to destroy it. The irony is that most of this law was in accord with GOP ideas from before the Dems took control of Congress. It is very similar to Romneycare, which he now says is bad and takes no credit for.

Ah yes, the issue is states rights but given the corruption in insurance at the state level, and limited access in many states to several insurers, it is a license to steal for the insurers, and steal they will. TB has little or no respect for them since they went for profit, leaving only a few, notably Kaiser, that act for their members.

Then there is the despicable action of Billy Tauzin with the blessing of Bush for taking the teeth out of serious health care reform by prohibiting Medicare from negotiating for prescription drugs causing their costs to be 30% higher than Medicaid. Sadly, Obama succumbed to the powerful lobby too, now headed by Tauzin who is paid $11 million!

Capitalism is not dead and it is still the best system yet devised. But we do not have capitalism due to greed (which is rampant in all forms of government), but by caring only about themselves heads of major corporations and their boards have shirked their fiduciary duty to shareholders, and to the future of their companies for their own short term gains. Worse, their business practices have been corrupted and despite Sarbanes-Oxley enacted in the wake of Enron, not one CEO has been prosecuted, the same number as the financial crisis. Now they have destroyed the Volcker Plan, the key element of Dodd-Frank (after they first abolished Glass-Steagall), and fought the establishment of a new consumer protection agency (which Obama did an endrun on, and which may have been the greatest accomplishment of his administration.

The financial sector now controls the entire government of the United States and your vote is meaningless…a hard fact…as they will not allow change. As Simon Johnson, former chief economist for the IMF has stated: in every case where they were brought in to bail out a country it was due to the financial sector getting to close to the government.

It can’t happen here? You decide, but think carefully and beware what you wish for.

Mea Culpa: yesterday in commenting on a movie on Nancy Reagan which cast Jane Fonda to play her, TB said, “Nancy is rolling over in her grave now.” That happened because of the tone of the article. She is still alive which makes it even more of an insult.

Consensus is she is one tough woman…ask Don Regan who she ran out of the cabinet.

 

This happened once before with Lawrence Welk. A friend asked it he was still alive. TB replied, “he’s been dead for years.” Turned out he wasn’t but he died the next day, to which TB got from her, “you killed Lawrence Welk.” That wasn’t, nor is it, the intention.

Lastly, on the Trayvon Martin case, the right is having a great time destroying the character of Martin (a moot point), while ignoring Zimmerman’s being charged with assaulting a police officer and a case of domestic violence for starters. The point remains, had he not been ‘playing cop’ we would not be having this discussion. But that perhaps is a good thing, sadly over the loss of a life. Racism in the U.S. is buried but it still exists. We have all been guilty of it at some point or another, including TB sadly.

Have a wonderful, fun day!

TB

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3/28/12…the tossing of the green – salad

March 28, 2012 at 8:37 am · Filed under economy, financial, markets ·Tagged , , , , , , , ,

Quotes of the Day:

 

“Salus Populi Suprema Lex Esto ultimate …Suum cuique.”  Let the ultimate welfare of the people be to each his own –Cicero 55B.C. – you think we were the first to have budget problems? But he did NOT say: the budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance. This has been making the rounds three years…does TB need to say what group propagated it?

 

Bloomberg Top Stories:

*Orders For Durable Goods in U.S. Climb 2.2% on Demand for Cars, Computers

*Stocks Fall in Europe as U.S. Futures Lose Gains on Durable Goods Report – twice in a row

*Greek Election Gridlock risks Derailing Terms of Bailout Plan – ye gads…again???

*Disposable Incomes in U.K. Plunge Most since 1977 on ENERGY Costs! – growth? Inflation?

*Subprime Bulls Trim Bets as Rally Raises Specter of 2011 Redux – go fish!

*Gross Will Change Ticker Symbol on Month-old Pimco ETF to ‘BOND’ – James Bond?

*China Overtaking U.S. With Power from Coal that Recaptures Carbon – we need to THINK!

*JetBlue Pilot in Onboard Rant Is Called a ‘Consummate Professional’ by CEO – like Bales?

 

Volume was steady at a weak 3.5B vs 3.52M shares on NYSE listed stocks. Also, NYSE stocks executed on the Big Board fell slightly to 730M shares vs 755M, still about 250M below the 12 month average. Since 2/29 there has only been one 1B+ share day, 3/16’s high for 2012 and the average has been just 817M shares, 200M below average! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 91 of the last 99 sessions have now been less than 1B! Advance/Declines were negative: -1.4x vs +3x vs +2.4x vs -2.8x! vs -1.1x on NYSE and -1.6x vs +3.2x vs +2.3x vs -2.2x vs +1.1x on Nasdaq. Breadth was similar: -2.2x vs +5.6x! +3x vs -7x!!! vs -1.1x vs on NYSE and -1.1x vs +4.2x! vs +2x vs -2.2x vs +1.1x on Nasdaq. New 52 week highs dipped to 366 vs 420, while new lows were steady at 28 vs 29. The ratio is now +12x vs +15x. The S&P VIX ROSE to 15.54 +1.97. Friday 3/16’s intraday low of 13.66 was lowest since 6/20/07’s 12.75.

 

Caution: the quarter has ended for hedge funds due to T+3 settlement, the rest of us have to wait till Friday. Note that yesterday, they did little having made their buys on Monday…good luck! They can do whatever they please for the rest of the week!

 

Here are the results of the last five sessions: Dow -0.3% vs +1.2% vs +0.3% vs -0.6% vs -0.4%; Transports -0.2% vs +1.4% vs -0.1% vs -2.1%!!! vs +0.8%; Dow Utilities +0.5% vs +0.7% vs flat vs flat vs -0.2%; S&P 500 +0.5% vs +1.4% vs +0.3% vs -0.7% vs -0.2%; Nasdaq Composite -0.1% vs +1.8% vs +0.2% vs -0.4% vs flat; Nasdaq 100 UP 0.2% vs +1.8% vs -0.1% vs -0.2% vs flat; Russell 2000 -0.7% vs +1.9% vs +1.1% vs -1% vs +0.1%; NYSE Financials -0.8% vs +1.4% vs +0.8% vs -1.2%! vs -0.6%. NYSE Financial Leaders: BAC -3.3%! vs +0.8% vs +2.5%! vs -2.2%! vs +0.1% vs +2.9%; GE -0.1% vs +1.4% vs -0.4%.

 

Global equity markets weaker. India now down 2.1% in 8 sessions: FTSE -0.3% vs -0.1% vs +0.5% vs -0.4% vs -0.8%; CAC40 -0.3% vs -0.3% vs +0.1% vs -0.7% vs -1.5%; DAX -0.5% vs +0.5% vs +0.6% vs -0.6% vs -1.3%; Nikkei -0.7% vs +2.4%!!! vs +0.1% vs -1.1%! vs +0.4%; Hang Seng -0.8% vs +1.8%! vs flat vs -1.1%! vs +0.2% vs -0.2%; Korean KOSPI -0.4% vs +1% vs -0.4%! vs FLAT 2 days; Indian Sensex -0.8% vs +1.2% vs -1.8%!!! vs +1% vs -2.3%! U.S. stock futures little changed : DOW +3; SPX -0.70; NDQ +1.75. Bonds weaker yet again! 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.20% -5/32. RECORD low 9/23 of 1.6855%; 30 yr 3.32% -7/16; Long TIP 0.89% -11/16, it was 0.57% at high. The 5 yr TIP yields MINUS 1.26%; 10 yr -.15%. Bills 0.06% 1 month; 0.08% 3 months, 6 months 0.14%. Reverse Repo 0.21%. 3 mo. Libor 0.47%, and 0.74%, stable.

Gold closed below $1700 for a 12th straight session but hardly changed, making the hit just $91 since 2/28, closing $1687.70 -.50. 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, and is now $1675.40 -$12.30! Another run coming? The record high is $1923.70, a buying climax on 9/6. Res is $1689, the 200 day and $1712, the 50 day, then $1716, the 40 day. Major support is again $1652, the 1/25/13 low, now res! Crude also closed barely changed at $107.33 +.30. It is now tanking at $105.55 -$1.78, with support at the 40 day (104.23), the 50 day (103.30), and major support at $95.25, the 200 day…watch closely– though as all are rising! Resistance remains at $110.

 

What a run-up but why? Economic news was good but not showing signs of picking up. So why such a big rally on low volume – again? Because…

 

VERY IMPORTANT: TUESDAY was the  last day for T+3 settlement for quarter end and it appears  hedge funds were big buyers on Monday and did little on their end of quarter. They could now sell if they choose anytime thru Friday, it happened last September!

 

Note that for the first time TB can recall we had an options expiration that was never mentioned during the week preceding it, and there has been no mention of T+3 settlement in the week the quarter ends. This in a market dominated by high frequency trading (which is primarily hedge funds). Meanwhile the SEC has announced it will “look into” high  frequency trading…don’t expect miracles.

 

Yesterday, only ONE industrial index was up: the Nasdaq 100 while the Composite was down 0.1%. If you, don’t know why, you haven’t been paying attention to this column. Apple gained SIX index points yesterday while the index was up FOUR, 2/3 of the stocks were down. Elementary math says that is a 2 point loss or about 0.1%. Utilities were the big gainer, +0.5% but that is a dividend play.

 

Between now and next week, it is possible that the stock market will decline due to hedge fund selling. If this week, to make their performance look better than conventional managers, if next, to catch them flatfooted going in to the new quarter. Not saying it ‘will’ happen but don’t be surprised if it does. Opinion is strongly bifurcated as to the sustainability of this rally…with some well known players being negative, count TB with them (Grantham, Hussman, Rosenburg for starters). Plan accordingly or strategize. Coming awfully close to ‘sell in May and go away’ which was the best advice anyone could have given you last year.

 

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…ah, yes only it should read ‘the Taussig of the salad (money). Yesterday’s quote by George W. Bush on his plan to protect Medicare led TB to refresh his memory on just what that meant. Bush promoted Medicare Part D and the GOP controlled Congress went along with bipartisan support. While the plans were made the pharmaceutical lobby met with him and expressed their displeasure with Medicare buying prescription drugs. Enter Louisiana’s beloved Billy Taussig a Republican committee chairman who started out as a Blue Dog Democrat. Taussing wrote the bill which included prohibiting Medicare from buying prescription drugs. The reason is obvious. Medicare by not buying on its own pays 30% more than Medicaid…and they couldn’t have that happen. So the largest buyer of prescription drugs had its hands tied. Medicare Part D was passed but funded which gave wonderful ammo to those later trying to blame Obama for the increase in the deficit. See how nice it is to ignore the two biggest tax cuts of our lifetimes and two wars?

 

As for good old boy Billy, he was hired by the Pharma lobby for $6 million a year, along with some of his key staffers…wait, isn’t this a revolving door? Did you hear convicted felon Jack Abramoff tell how easy it is to get a staffer on your side? Merely, indicate an interest in hiring them. That’s the ticket!

 

There are now tens of thousands of lobbyists in D.C. – think what would happen to real estate prices in the area if they were thrown out on their ear…but again, we can’t allow that to happen.

 

Yesterday, a Bloomberg article said the our beloved Billy Tauzin is the highest paid, as well he should be since he went to the White House and ‘negotiated’ with Obama to exclude buying prescription drugs from Obamacare and that along with the health insurance industry made it toothless and not cost effective. Now the Supreme Court and its supreme beings will decide its fate. But if they destroy it we will fall into chaos.

 

Much was made yesterday of the governments failure to provide a strong case for it. But some non-opinionated sources indicate that the justices were not as dissuaded as it appears. But the real point is that the GOP who never offered any alternative methods of controlling medical costs, which can bankrupt anyone except very wealthy millionaires, to insuring that everyone can get treatment.

 

Without negotiating the purchase of prescriptions, controlling spending on elderly patients, and hospital costs (is it a good or bad thing that there are more MRI machines in Boston than in all of Canada – if you have them you have to use them to pay for them), there is no way to contain a ‘disease’ that is infecting and affecting the lives of all Americans. Note also that no one has told of how much it costs to have uninsured citizens…that is because that is a state and local problem, not a federal one.

 

Saying nationalized health care is unconstitutional is a travesty. They are simply passing the buck back to the states. At the time the Constitution was written the states were almost like individual countries…they even had their own currencies and that only changed after several banking failures. Nobody argues that banking should be controlled by the federal government. Healthcare is similar. We no longer are born, live, and die in the same place. People move from state to state often frequently in their lifetimes yet they are subject to state laws of who can offer insurance opening the door to even more pre-existing condition exclusions. Think about it and you decide.

 

As for Billy, the Bloomberg article stated that he was originally offered $1 million to be the motion picture industry’s lobbyist. He made the right choice in accepting Pharma’s offer as he made $11.6 million last year…a 15% increase over the prior year and making him the highest paid lobbyist. If you take the top 30 lobbyists, their combined pay is $63 million or $2.48M average (of the 30, four are women with an average of just $1.43M). Of course Tauzin’s pay skews the average significantly. The second highest paid, the American Petroleum Institute’s is $6.4M while THIRD is the U.S. Chamber of Commerce at $4.75M. If these figures don’t shock you, nothing will and that is truly sad.

So you see, all you have to do is ‘follow the money’ to see what is wrong with this country. As for Wall Street, their lobbyist was interviewed in Inside Job and you never saw a better ‘gofer.’

 

But the greatest thing is the ability to channel public disdain right where they want it. They don’t offer solutions, merely stop anyone or anything that gets in their path.

 

As for Billy, he joined other political luminaries in the Lousiana Political Hall of Fame (shame?), in 2003. You rock, Billy Tauzin!

 

This leads TB to Hannity last night…stumbled on it by accident. His guest was Joe Kernan and his 12 year-old daughter, Anna. First, let TB say that Anna is incredibly precocious and quick as a whip. It seems she came home from school saying her teachers were critical of capitalism…that is all Joe needed, he being in total denial of capitalists ever doing anything wrong that they wrote a book on what teachers should teach. Now TB doesn’t see why teachers are getting into this at such an early age except that perhaps it is the children, many of whom’s parents lost their jobs …or homes in the crisis Wall Street created. She has since spoken at the Harvard Business School where TB can assure you no one needs to preach the beauty of capitalism.

 

Capitalism is the best system that has been devised, BUT it only works when people and corporations don’t put themselves first, without providing for the future of their company and the country. We do not have capitalism now…it is an abomination of the word.

 

But what shocked TB was this comment Anna made that had to have been drilled into her by good old dad: regulation is destroying capitalism. TB asks: how could someone sit in a news room all day and make a statement like that. It was the lack of regulation that allowed the banks (and faux banks like Goldman) to create these implements of mass destruction! Sure some businesses are over-regulated but thanks to the repeal of Glass-Steagall, banking and finance are not one of them. They could never have gotten to the leverage ratios they did without benign neglect.

 

What is Hollywood thinking? They have already biased a movie on Nancy Reagan by casting Jane Fonda to play her. Nancy is rolling over in her grave now. Like Nancy Reagan or not, this is a slap that will make TB for one avoid the movie, and he didn’t much care for her.

 

On yesterday’s TM column a few readers wrote in. One pointed out that under the Florida law the shooter can’t be held civilly liable…if so that is something that should go to the Supreme Court. Also there was talk about Zimmerman being attacked. The timeline will show that had he left it would never have happened. There is also the account by Trayvon’s friend who told him to run and he said he would just walk fast. IF Zimmerman followed him, perhaps it was HE who felt threatened. The point is, taking the law into one’s own hands is a very bad idea.

 

Hope you take the time to think about these issues and decide for yourself because you aren’t going to get the answers you seek on FOX News or CNBC.

 

Hope your day is a good one!

TB

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3/27/12…TM

March 27, 2012 at 8:38 am · Filed under economy, financial, markets ·Tagged , , , ,

Quotes of the Day:

 

“The average person thinks he isn’t.” – Father Larry Lorenzoni

 

“We will set (Medicare) on firm financial ground and make prescription drugs available and affordable for every senior who needs them.” – George W. Bush , 2000 campaign

 

“UNLESS someone like you cares a whole awful lot, nothing’s going to get better: it’s not.” –Dr. Seuss, The Lorax

 

Bloomberg Top Stories:

*Home Prices in U.S. Cities Fall at a Slower Pace, Case-Shiller Index Shows – losing less?

*Taxpayer Bailout Risk Looms at U.S. FHA After Loan Binge – thought prices would rise!

*Bidding Wars Break Out Across U.S. as Inventory of Homes for Sale Shrinks – is this a joke?

*Stocks Rise as Nikkei Erases Quake Loss Before Report on U.S. Confidence – overconfident?

*French Consumer Confidence Unexpectedly Jumps Most in Five Years – selling  fois gras?

*Libor Flatlines as Europe-Wary Traders See Signs of Stress – steady as a rock!

*Deutsche Bank No. 1 in Europe First Time Since ’06 as Leverage Hits Value – overly so?

*MF Global’s Counsel Resisted Giving JPMorgan Assurances on Fund Transfers

*RBS Gains After U.K. Talks to Potential Investors on Stake Sale

*Goldman Diaspora Falters as Flamand, Sze Hedge Funds Decline – a big oops!

*KKR Said Poised to Name Ex-Morgan Stanley CEO John Mack as Senior Advisor – egads!

*Spanish Bond Buys by ECB-Fueled Banks Can’t Cap Funding Costs – but hide them?

*Sleepless in Dubai as Traders Rejoice With World’s Biggest Volume Increase

*Investors Drawn to Speculative Yields Fuel Biggest Muni Bond Rally – but then again…

*Crude Oil Inventories Expand to Six-Month High in Survey – then why is it $107 vs $81?

 

*Oil Sands Firm Sells U.S. Dollar Denominated Debt on Keystone Approval Wager – hmmm?

*Russia-Sized Mistakes Driving Corn Price to Exchange Limits

*Syrian Government Accepts Kofi Annan’s Six-Point Proposal to End Violence – we’ll see

*Romney Gains More Backers as Push Accelerates for Republican Race to End – please!!!

*Trade Lobby CEO’s Score 16% Pay Raise Challenging Obama’s Business Agenda – greed?

 

Volume was steady at a weak 3.52B vs 3..46M shares on NYSE listed stocks. Also, NYSE stocks executed on the Big Board were steady at  755M shares vs 742M, still about 250M below the 12 month average. Since 2/29 there has only been one 1B+ share day, 3/16’s high for 2012 and the average has been just 817M shares, 200M below average! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 90 of the last 97 sessions have now been less than 1B! Advance/Declines were solid: +3x vs +2.4x vs -2.8x! vs  -1.1x vs -2x on NYSE and +3.2x vs +2.3x vs -2.2x vs +1.1x vs -2.2x vs on Nasdaq. Breadth was even better: +5.6x! +3x vs -7x!!! vs -1.1x vs -1.5x on NYSE and +4.2x! vs +2x vs -2.2x vs +1.1x vs -1.5x on Nasdaq. New 52 week highs nearly tripled to 420 vs 149, while new lows slipped to 29 vs 33. The ratio is now +15x vs +5x. The S&P VIX declined again to 14.29 -.53. Friday 3/16’s intraday low of 13.66 was lowest since 6/20/07’s 12.75.

Caution: could be hedge funds diving in as today is last day for T+3 settle in March!

 

Here are the results of the last five sessions: Dow +1.2% vs +0.3% vs -0.6% vs -0.4% vs -0.5%; Transports +1.4% vs -0.1% vs -2.1%!!! vs +0.8% vs -1.2%; Dow Utilities +0.7% vs flat vs flat vs -0.2% vs +0.4%; S&P 500 +1.4% vs +0.3% vs -0.7% vs -0.2% vs -0.3%; Nasdaq Composite +1.8% vs +0.2% vs -0.4% vs flat vs -0.3%; Nasdaq 100 +1.8% vs -0.1% vs -0.2% vs flat vs +0.2%; Russell 2000 +1.9% vs +1.1% vs -1% vs +0.1% vs -1.0%; NYSE Financials +1.4% vs +0.8% vs -1.2%! vs -0.6% vs -0.3%. NYSE Financial Leaders: BAC +0.8% vs +2.5%! vs -2.2%! vs +0.1% vs +2.9%; GE +1.4% vs -0.4%.

 

European equity markets mixed and little changed, Asia strong. India now down 2.1% in 8 sessions: FTSE -0.1% vs +0.5% vs -0.4% vs -0.8% vs +0.1%; CAC40 -0.3% vs +0.1% vs -0.7% vs -1.5% vs flat; DAX +0.5% vs +0.6% vs -0.6% vs -1.3% vs -0.1%; Nikkei +2.4%!!! vs +0.1% vs -1.1%! vs +0.4% vs -0.6%; Hang Seng +1.8%! vs flat vs -1.1%! vs +0.2% vs -0.2% vs -1.1%!!!; Korean KOSPI +1% vs -0.4%! vs FLAT 2 days vs -0.7% vs -0.2% vs +0.6%; Indian Sensex +1.2% vs -1.8%!!! vs +1% vs -2.3%! vs +1.7% vs +0.3% vs -1.1%. U.S. stock futures slidghtly weaker but had been strong in early trading : DOW -14 vs +39; SPX -1.50 vs +4.40; NDQ -1 vs +4.10. Bonds slightly better but still weak: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.23% +3/16. RECORD low 9/23 of 1.6855%; 30 yr 3.33% +1/4; Long TIP 0.89% +1/4, it was 0.57% at high. The 5 yr TIP yields MINUS 1.23%; 10 yr -.14%. Bills 0.05% 1 month; 0.08% 3 months, 6 months 0.14%. Reverse Repo 0.31%. 3 mo. Libor 0.47%, and 0.74%, stable.

Gold closed below $1700 for a 11th straight session but gained $23, making the hit just $91 since 2/28, closing $1688.20 +$23.30. 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, and is now $1692.10 +$4.70, highest since the selloff! Another run coming? The record high is $1923.70, a buying climax on 9/6. Res is $1688, the 200 day and $1711, the 50 day, then $1718, the 40 day. Major support is again $1652, the 1/25/13 low, now res! Crude closed barely up at $107.03 +.16. It is now $107.10 +.07, with support at the 40 day (104.01), the 50 day (103.13), and major support at $95.21, the 200 day…watch closely– though as all are rising! Resistance remains at $110.

 

What a run-up but why? Economic news was good but not showing signs of picking up. So why such a big rally on low volume – again? Because…

 

VERY IMPORTANT: TODAY is last day for T+3 settlement for quarter end and since hedge funds have been big buyers, as they play catch up and ‘might’ just sell after today, it happened last September…CAUTION!

 

While Crude was boring and report today shows inventories at a six month high…interesting as it was just $81 then…now $107? So much for Romney’s claim that Obama is the cause…but what he did was force him to make a statement about possibly releasing the Strategic Petroleum Reserves…as TB said not necessary as there is plenty of oil in U.S. and refineries are not operating anywhere near capacity…think! That goes for you too, Mr. Romney! Gold continued its rally and is now down just $91 for the selloff after being off $146 from the 2/23 close when the selloff began – note all gold selloffs have begun the same day they hit a high it is still below the 40/50 day moving averages, but within $26 of breaking out yet again.

We may now have the smoking gun on the despicable Jon Corzine who tried to rip off everyone from his traders at MF Global by lying to them about the condition of the firm, tried to sell the company when he knew it was going down the tubes to make a big gain for himself, and now it appears he lied to JPMorgan (loyalty among thieves?) about where he was coming up with funds to cover the overdraft when MF’s  counsel had serious reservations about the legality.

Ah, more Goldman alums who left to start hedge funds with GS backing…both of their funds are losing money. Has Goldie lost its ability to have a successful diaspora (the movement, migration, or scattering of people away from an established or ancestral homeland)? Wonder what the ‘other’ big shareholders think of this form of nepotism…it happened before too in the last financial crisis. (after peaking at $251 on 10/31/07, it plunged 81% to $47.41 on 11/21/08, then rallied to $193 before the Rolling Stone article by Matt Taibbi and subsequent events including Blankfein’s ridiculous testimony before the joint committee investigating the crisis. It then fell to $84.27 before recovering to its current level of $128…definitely an ‘E’ ticket ride…and still off 49% from the high! Ouch!

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…not TradeMark, but Trayvon Martin. What happened to him is a tragedy, one that never had to happen and TB feels qualified to comment on this due to his own law enforcement experience as a L.A. County Harbor Patrolman, under the L.A. County Sherriffs. He has waited until today to discuss this case until things came out more in the open. But this is no rush to judgment by anyone as it  is clear that if Zimmerman was a police officer he would have been found guilty and Zimmerman, a wannabe cop, with some form of mental condition, and that he failed to do as instructed by 911 and not pursue him. Had he done this no one would have been harmed.

He graduated from the Academy in 1969 but the experience he learned there has lasted throughout his life and helped shape him…both positively and negatively on law enforcement.

He had already come to question authority from his U.S. Navy experience, first under LTCDR Marcus Aurelius Arnheiter, who went on the be the first captain in the history of the U.S. Navy to be relieved of command at sea. There was a Board of Inquiry but no one was court-martialed; then navy just dropped it even though it was clear that it was he, not the crew that was wrong. TB believes this was done to avoid setting a precedent, the right move as there is nothing more serious than a mutiny at sea.

Later after spending time in Viet Nam, he came home to find out that we had been lied to about the war, although this was not evident at that time and wouldn’t be for four more years.

A few months ago, Minnesota, was trying to pass a law similar to Florida’s and other states with GOP leadership and the support of the NRA. Fortunately, it was vetoed by the governor as no one in law enforcement backed it, including TB as people already had the right to protect themselves in their own homes, now they wanted the right to ‘defend’ yourself against anyone who was seen as a threat…anywhere.

TB posed a scenario of a man hearing a noise in his garage and having just bought a new motorcycle went to investigate…he saw someone and shot him. It turned out to be the son of a neighbor just curious about the new bike. How would he then feel?

Or how about walking down the street and seeing a couple of men or youths walking towards you…especially if black or latino? What do you do? Pull out your gun and warn them? Shoot them?

The first thing we were taught at the Academy was never, under any circumstances draw your weapon unless you are prepared to use it. So if a trained officer, wouldn’t do it, why would you…the reason is obvious…now you become a threat to them and they could take the gun and use it on you.

The second thing was even more ominous: you will make a decision in a split second that will be argued in court years later. Can you then defend your actions, especially when all the facts are out? Very possibly not.

Also, in their zeal to get this legislation done, they were not forthright. Never did they mention one key thing: while you might not be subject to criminal prosecution you ARE subject to civil…which could, and in this case will, destroy Zimmerman’s assets. Remember O.J. Simpson?

None of this was explained because they didn’t want opposition. What is worse is when you empower people to take the law in their own hands…especially when weakened gun control laws enable more people to carry weapons, even in bars! In the wake of the Martin case TB heard of a case where two drug dealers got into a fight…one tried to shoot the other, who returned fire wounding the other. Neither was convicted though as they both claimed self-defense. Without the law, both would likely have been convicted.

It is time to think about who is controlling this country, whether on gun control, or social issues such as referring to people on food stamps as being like ‘fed animals.’ This is in outright denial of the unemployment situation and following a crisis created by the financial sector who WAS bailed out.

Have we become so hardened and selfish as to deny people the right to exist? Given the fight against ANY form of national medical care and a proposed voucher system it appears we have. We even want to interfere in an individuals right to an abortion or marry who they want (as was the case in the south until about 50 years ago). Does that sound like something the framers of the Constitution which is so frequently misquoted intended? You decide.

Have a great day!

TB

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3/26/12…the ‘dumbing down’ of America

March 26, 2012 at 8:59 am · Filed under economy, financial, markets ·Tagged , , , , ,

This week’s economic calendar is fairly light on important, market-moving economic indicators. We will get February Pending Home Sales (Monday), the January Case-Shiller Home Price Index and March Consumer Confidence (Tuesday), February Durable Goods Orders (Wednesday), the third estimate of Q4 GDP (Thursday), and February Personal Income, the March Chicago Purchasing Managers Index, and the final March Consumer Sentiment (Friday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA.

Bloomberg Top Stories:

 

*Hedge Funds Capitulating Buy Most U.S. Stocks Since 2010 as Rally Persists – persists???

*Merkel Says Germany May Allow European Rescue Funds to Run Simultaneously – ???

*Spanish Bonds Gain on EU Bailout Speculation; U.S. Futures Rise

*Business Confidence in Germany Unexpectedly Rises on ECB Stimulus

*Bernanke Hesitates to Extol Economy Knowing Consistent Policy Put at Risk – he don’t know!

*Plosser Says U.S. Economy Doesn’t Need Additional Stimulus to Fan Reococery – just wait…

*JPMorgan Asia Chief Gaby Abdelnour Set to Quit After 14 Years With Company

*Coutts Fined $13.9 Million by U.K. Regulator on Money-Laundering Failures – RBS owns it!

*Speculators Under Fire Reduce Bullish Wagers on Gasoline – see it wasn’t Obama!

*Bond Buyers Displace Banks in Record Emerging-Market Sales – what are banks buying?

*Hungary’s Real Estate Loans Collapse After Forex Loans Slow Up

*Shale Boom in Europe Fading as Exxon’s Polish Wells Come Up Empty

*Pennsylvania Seen Gaining, 575,000 Jobs in Shale-Gas Boom – Banks liquidating

*Record Drop in Volatility Whipsawed Owners of Credit Suisse Note

*Obama Relies on Deceptive Debt Collectors Profiting From Student Loan Woes – 20% commish

*Health-Care Debate at U.S. High Court Weighs 1867 Law That May Halt Case – not in effect yet!

*Iranians Blame Ahmadinejad as Well as Sanctions for New Year of Austerity

*U.S. Gives $50,000 to Relatives of Victims of Afghanistan Shooting

*MF-Global Insurance Isn’t ‘Cash Machine’ to Pay If Claim Made

*Cheney Transplant at 71 Shows Trend Threatening Younger Patients – Didn’t know he had one

Volume fell back modestly to 3.46B from 3.73B shares on NYSE listed stocks. Meanwhile, NYSE stocks executed on the Big Board slipped again to 742M shares vs 746M, still about 250M below the 12 month average. Since 2/29 there has only been one 1B+ share day, 3/16’s high for 2012 and the average has been just 817M shares, 200M below average! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 89 of the last 96 sessions have now been less than 1B! Advance/Declines were positive: +2.4x vs -2.8x! vs  -1.1x vs -2x vs +1.8x on NYSE and +2.3x vs -2.2x vs +1.1x vs -2.2x vs +1.8x on Nasdaq. Breadth was slightly better: +3x vs -7x!!! vs -1.1x vs -1.5x vs +2.1x on NYSE and +2x vs -2.2x vs +1.1x vs -1.5x vs +2.5x on Nasdaq. New 52 week highs jumped to 149 vs 107, while new lows dropped to 33 vs 49. The ratio is +5x vs +3x. The S&P VIX declined to 14.83 -.75. Last Friday’s intraday low of 13.66 was lowest since 6/20/07’s 12.75.

Here are the results of the last five sessions: Dow +0.3% vs -0.6% vs -0.4% vs -0.5% vs +0.1%; Transports -0.1% vs -2.1%!!! vs +0.8% vs -1.2% vs +0.2%; Dow Utilities flat vs flat vs -0.2% vs +0.4% vs -0.4%; S&P 500 +0.3% vs -0.7% vs -0.2% vs -0.3% vs +0.4%; Nasdaq Composite +0.2% vs -0.4% vs flat vs -0.3% vs +0.8%; Nasdaq 100 -0.1%? vs -0.2% vs flat vs +0.2% vs +0.8%; Russell 2000 +1.1%! vs -1%!!! vs +0.1% vs -1.0% vs +0.9%; NYSE Financials +0.8% vs -1.2%! vs -0.6% vs -0.3% vs +0.6%. NYSE Financial Leaders: BAC +2.5%! vs -2.2%! vs +0.1% vs +2.9% vs -2.8% vs +6.1%; GE -0.4% vs -1.1%; F flat vs -2%!

Global equity markets modestly higher. India now down 3.3% in 7 sessions: FTSE +0.5% vs -0.4% vs -0.8% vs +0.1% vs -1.2%; CAC40 +0.1% vs -0.7% vs -1.5% vs flat vs -1.3%; DAX +0.6% vs -0.6% vs -1.3% vs -0.1% vs -1.4%; Nikkei +0.1% vs -1.1%! vs +0.4% vs -0.6% vs +0.1%; Hang Seng flat vs -1.1%! vs +0.2% vs -0.2% vs -1.1%!!! vs -1%!!!; Korean KOSPI -0.4%! vs FLAT 2 days vs -0.7% vs -0.2% vs +0.6% vs -0.5%; Indian Sensex -1.8%!!! vs +1% vs -2.3%! vs +1.7% vs +0.3% vs -1.1%. U.S. stock futures weaker: DOW +45; SPX +4.40; NDQ +13. Bonds selling off again on Europe bailout: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.28% -3/8. RECORD low 9/23 of 1.6855%; 30 yr 3.36% -1 pt!; Long TIP 0.87% -15/16, it was 0.57% at high. The 5 yr TIP yields MINUS 1.20%; 10 yr -.13%. Bills 0.06% 1 month; 0.07% 3 months, 6 months 0.14%. Reverse Repo 0.23%. 3 mo. Libor 0.47%, and 0.74%, stable.

Gold closed below $1700 for a 10th straight session but gained $20, making the hit off $114 since 2/28, closing $1662.40 +$19.90. 2/28’s $1792.70 intraday high was not seen since 11/16! It had been above $1600 since Jan. 31, and is now $1660.50 -$1.90. The record high is $1923.70, a buying climax on 9/6. Res is $1685, the 200 day and $1707, the 50 day, then $1716, the 40 day, rolling over. Major support was $1652, the 1/25/13 low, now res! Crude closed strong at $106.87 +$1.52. It is now $106.84 -.03, with support at the 40 day (104), the 50 day (103.13), and major support at $95.21, the 200 day…watch closely– though as all are rising! Resistance remains at $110.

The indices were led by the Russell 2000 which rose 1.1% vs -1%! The Nasdaq was mixed and little changed with the Composite +0.2% but the 100 off 0.1% – no help from Apple is why (lost 3 index points). NYSE Financials rose by 0.8% vs -1.2% with only BofA gaining 2.5% vs -2.2%. A nothing day.

VERY IMPORTANT: tomorrow is last day for T+3 settlement for quarter end and since hedge funds have been big buyers they might just sell after tomorrow, it happened last September…CAUTION!

Overnight, Dow futures traded as high as 13106 after dropping to 12940 on Friday, now support and lowest since 3/5’s plunge.  

Gold and Crude rallied Friday with the former desperately trying to recover: it gained $20 but is still weak as it is below the support levels – 40/50/200 day moving averages.

 

. . .   – - -  . . .  (SOS)   . . .   – - -  . . .  (SOS)   . . .   – - -  . . .  (SOS)   . . .   – - -  . . .  (SOS)

The GOP budget plan submitted by Paul Ryan is a bad joke on America. He says it will promote fairness by ‘flattening’ the rates…hello??? That is the whole point! Then he says they will reform the tax code this year to fill loopholes…really? In an election year? When your supporters have the most to lose? Who is he kidding? For cover he is using Simpson-Bowles…selectively, by ignoring their tax increase proposals. You cannot lower the deficit by cuts alone especially when we have lost hundreds of billions in revenue from the two Bush tax cuts.

Oh, and the ‘jobs bill’ which makes it easier for companies to lie to consumers/investors by removing more safeguards. There is no doubt who is in control: Wall Street and their lobbyists…far too many now and with too much power. D.C. would probably go into a recession if they reduced them to levels of 1980’s.

Now for some more things: remember when Bernanke said no rate hikes until mid-2014? Now the presidents of the St. Louis Fed and Philly Fed say it will be earlier. Told you whenever someone in government says “as far as the eye can see”- run! TB thinks however the economy will slow or stall before anything happens but these comments are hurting bonds again!

Moving along…can anyone deny that TB was right about Goldman? Now their former Chairman (ousted once the went public), turned senator (making him part of the club), then governor (a trifecta), has shamed himself and now could also be charged civilly – wow could he be the first under Sarbanes-Oxley…not even Citi’s Vikram Pandik has been charged! They have memo’s showing he authorized the transfer of $300 million from clients accounts for company use! Don’t you hate it that they get to use the title Senator or Governor, after the fact and we are supposed to address them as ‘Honorable’?

As for JPMorgan…right on that too…besides the American Century suit where they tried to cover up the $342 million settlement for among other things breach of contract (which they did just a month after entering it into it), and the fact that the guy who crafted it is now head of Investment Banking, there is a whistleblower suit on their credit card unit where they packaged up and sold bad credit card loans without vetting them so some clients who were owed money by JPM were included and harassed by bill collectors.

JPMorgan, along with Goldman Sachs and Credit Suisse were the three biggest complainers about the Dodd-Frank rule to impair banks ability to use proprietary trading, and it shows as Congress has been cowed once again by their loyal contributors. They have no shame.

Moving right along…life insurance companies, including Prudential and Met Life have been keep money where no one claimed the policy…apparently making no effort to find heirs OR turn it over to the states for them to find. This amounts to hundreds of millions of dollars and is going to grow. Interesting, once the states stopped delving into this, they stepped up efforts to contact beneficiaries. This ties in to the prior one where an insurer (Pru?) had the contract for policies on Iraq soldiers. When notified of death they contacted the beneficiary and told them the money had been placed in an interest bearing account so they could write checks on it when they needed it. The rate was 5%  while they invested in low quality securities…add life insurers to your least respected jobs.

Now for politics…on Friday we learned that several Congressmen had misused expense accounts, hired relatives, lent money to their campaigns at 18% interest, and more…finally we may get them but don’t expect them to take strong action…probably do it quietly. Besides, if the ethics committee couldn’t even give Rangel more than a slap, when what he did amounted to tax evasion…and Maxine Waters, (D-CA), promoted her husbands (they have different last names) S&L, including having it included in testimony before the Fed as the ONLY S&L when the bailout was being considered…and they got funds! Finally, over objections of the committee chairman who was the worst offender, they stopped insider trading by Congress (TB likes to think his criticism and letters to Congress helped). If you can’t trust them, and they are bought and paid for by Wall Street, it is one sorry state of affairs!

TB has been irked at government hiring outside contractors. The military now pays more for them then the entire military payroll! Today, we learned that the Obama administration is using outside collectors to handle delinquent student loans…20% commission and they are lying to the borrowers making them pay four times the month payment required…negating Obama’s plan to make it easier to pay them off.

The point is: while Alan Greenspan and others (hopefully not you, dear reader), still believe in ‘free market capitalism’ it is a myth! Worse, we are in something akin to a duopoly or oligarchy, which we haven’t seen since the early 1900’s and which spawned the labor movement and government regulations. Yet the powers that be continue to warn us that in a second term we will ‘lose freedom as we know it’ (Santorum on Face the Nation yesterday). This of course confused social programs with socialism and communism which is exactly what they want to do.

Surveys of the industrialized nations with the happiest people consistently show the Scandinavian countries the happiest and with the least anxiety, led by Denmark which has incredibly high tax rates but medical care etc. is not a problem

This leads to an email from a friend yesterday citing how much better the U.S. is in health care than other countries… it cites an Investors Business Daily story – no date, and that is because it doesn’t exist! Found it on snopes.com and it dates to 2003…it also states that only 8% of people brought in by Obama have private sector experience. Why do these lies continue to be sent out, even years after…and under a different president?

Then there is Romney’s claim that he can solve our problems with his vast private sector experience. He has never run a company…he ran a venture capital firm that had a consulting group to advise the companies…at the expense of the investors and for the benefit of management. By the way Santorum said that electing Romney would be like having Obama for a second term!

You cannot believe a thing they tell you…ever!  Don’t take TB’s word on these things but please: start thinking for yourself…FOX News is not going to tell you anything, or Rush Limbaugh…a former drug user and before that liberal who found it more profitable to be a conservative…and calls a woman a ‘slut’ for testifying before Congress – as requested – and the GOP cannot even strongly decry him? Meanwhile, 35% of Americans still think he was not native born…and they won’t even stop that! Then there is the Muslim issue…or blaming him on the budget deficit which was a combination of Bush II tax cuts, and his Medicare Part D without funding, two wars that have lasted 11 years…and this while the GOP controlled both houses of Congress too.

Obama may not be a leader but show me one in the GOP, or for that matter the Democratic Party that is a true leader…it is an oxymoron. Unless we stop penalizing people for hard work and rewarding passive income we will have nothing…and sooner than you think…except perhaps an even bigger financial crisis!  This is your country, good luck.   

Hope you have a great week! Hope you also will think about the above, then you decide.

TB

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3/23/12…I’m a banker and I’m here to help you

March 23, 2012 at 8:22 am · Filed under economy, financial, markets ·Tagged , , , ,

Bloomberg Top Stories:

 

*China Banks Said to Underestimate Risk of Local Government Loan Defaults – see,  just like us!

*Stocks Fall as Futures Pare Gains Before U.S. Homes Data; Commodities Rise – oh yawn!

*Fed’s Bullard Sees Years of Elevated Inflation From Mistimed Stimulus Exit – but wait? We were told there would be no inflation for as far as the eye can see…at least till mid-2014???

*Hidden Fund Fees Mean U.K. Investors Pay Double U.S. Rate – it could happen here too!*

*Portugal Town Halls Face Default on $12 Billion Debt Without State Rescue – it’s spreading!

*Shrinking Convertibles Spur Best Annual Start Since 2009 – could it be no confidence in stocks?

*Credit Suisse Cuts Dougan’s Pay 55% to $6.37 Million After Earnings Slump –  try that here?

*French Business Sentiment Rises as Sarkozy Lifts Growth Forecast

*Credit Suisse Ends Curb on VIX  Note After Month of Swings Whipsaws Holders – AVOID VIX!

*JPMorgan Sued by Currency Trader Over $3 Million Decimal-Point Trading Error – FX trader??? …says he took job due to a typo in contract which paid him 10 times intended!!!

*UBS Hires BofA’s Orcel to Revive Investment Bank After Losses – they never learn, do they?

*Priceline.Com May Reach $1,000 Stock Price Before Apple – think about this, will you???

*Gasoline Price Drop on Lower Demand Seen in Futures Market – get real Specualation~

*Madoff FBI Files Show How He Hoodwinked Workers to Keep Ponzi Scheme Alive – sick!

*U.S. Sgt. Bales Said to Face 17 Counts of Murder in Afghan Shootings – guilty but so is U.S.!

*Obama Hate-Crime Prosecutions Rise as U.S. Probes Shooting of Florida Teen – and should!       

 

Volume rose modestly to 3.73B fro 3.54B shares after hitting new 2012 highs on BOTH NYSE listed stocks (4.85B) AND on those traded directly on the NYSE (1.65B) last Friday. Meanwhile, NYSE stocks executed on the Big Board dipped to 746M shares vs 766M about 250M below the 12 month average. So far this week it has averaged just 730M shares or 280M  below average. Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 88 of the last 95 sessions have now been less than 1B! . Advance/Declines were NEGATIVE:-2.8x! vs  -1.1x vs -2x vs +1.8x vs -1.2x on NYSE and -2.2x! vs +1.1x vs -2.2x vs +1.8x vs -1.1x on Nasdaq. Breadth was even worse: -7x!!! vs -1.1x vs -1.5x vs +2.1x vs +1.5x on NYSE and -2.2x vs +1.1x vs -1.5x vs +2.5x vs +1.1x on Nasdaq. New 52 week highs slumped to 107 vs 189, while new lows rose slightly to 49 vs 35. The ratio is now +3x vs +6x. The S&P VIX rose modestly to 15.57 +.44. Last Friday’s intraday low of 13.66 was lowest since 6/20/07’s 12.75.

 

Here are the results of the last five sessions: Dow -0.6% vs -0.4% vs -0.5% vs +0.1% vs -0.2%; Transports -2.1%!!! vs +0.8% vs -1.2% vs +0.2% vs flat; Dow Utilities flat vs -0.2% vs +0.4% vs -0.4% vs -0.2%; S&P 500 -0.7% vs -0.2% vs -0.3% vs +0.4% vs +0.1%; Nasdaq Composite -0.4% vs flat vs -0.3% vs +0.8% vs flat; Nasdaq 100 -0.2% vs flat vs +0.2% vs +0.8% vs -0.1%; Russell 2000 -1%!!! vs +0.1% vs -1.0% vs +0.9% vs -0.1%; NYSE Financials -1.2%! vs -0.6% vs -0.3% vs +0.6% vs +0.5%. NYSE Financial Leaders: BAC -2.2%! vs +0.1% vs +2.9% vs -2.8% vs +6.1%; C -2.4%! vs -0.7% vs +2.5% vs +1.3% vs +1%; GE -1.1%; F -2%!

 

Global equity markets weak, especially Asia. India now down 3.3% in 7 sessions: FTSE -0.4% vs -0.8% vs +0.1% vs -1.2% vs -0.3%; CAC40 -0.7% vs -1.5% vs flat vs -1.3% vs -0.6%; DAX -0.6% vs -1.3% vs -0.1% vs -1.4% vs -0.5%; Nikkei -1.1%! vs +0.4% vs -0.6% vs +0.1% vs +0.2%; Hang Seng -1.1%! vs +0.2% vs -0.2% vs -1.1%!!! vs -1%!!!; Korean KOSPI FLAT for a 2nd session vs -0.7% vs -0.2% vs +0.6% vs -0.5% vs -0.1%; Indian Sensex +1% vs -2.3%! vs +1.7% vs +0.3% vs -1.1% vs -1.2%. U.S. stock futures weaker: DOW -26; SPX -1.60; NDQ +.25. Bonds continuing to rally for a third session but still trying to recover from the selloff: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.25% +1/4. RECORD low 9/23 of 1.6855%; 30 yr 3.33% +7/16; Long TIP 0.85%, it was 0.57% at high. The 5 yr TIP yields MINUS 1.20%; 10 yr -.14%. Bills 0.07% 1 month; 0.14% 3 months, 6 months 0.13%. Reverse Repo 0.21%. 3 mo. Libor 0.47%, and 0.74%, stable.

Gold closed below $1700 for an 9th straight session making the hit off $134 since 2/28, closing $1642.50 -$7.80. 2/28’s $1792.70 intraday high was not seen since 11/16! It had been above $1600 since Jan. 31, but is now $1646.50 +$4.00. The record high is $1923.70, a buying climax on 9/6. Res is $1684, the 200 day and $1707, the 50 day, then $1718, the 40 day, rolling over. Major support was $1652, the 1/25/13 low, now res! Crude closed DOWN at $105.35 -$1.92, second major one this week! It is now $105.58 +.23, with support at the 40 day (103.65), the 50 day (102.85), and major support at $95.16, the 200 day…careful though as all are rising! Resistance remains at $110.

 

The indices were led by Dow Transports which fell 2.1%! All other indices were lower with both Nasdaq indices off the least following a day when both were FLAT – rare! Russell 2000 fell by 1% while NYSE Financials fell by 1.2% with both BofA and Citi off more than 2%.

 

Overnight, Dow futures traded down to 12966 (equivalent to about 13020 on the index). Today could be the day we break 13k to the downside? Will CNBC be celebrating that?

 

Gold continues to be very weak but there is some talk it will turn around. If so the specs will charge in to the ETF’s (GLD and IAU) and drive it up sharply…some say to new highs…you decide. Crude though is showing signs of weakness and the support levels – 40/50/200 day moving averages are moving up sharply.

  

. . .   – - -  . . .  (SOS)   . . .   – - -  . . .  (SOS)   . . .   – - -  . . .  (SOS)   . . .   – - -  . . .  (SOS)

You heard TB’s complaints here first, folks! The SEC has awakened from their long sleep and is now investigating high frequency trading…TB is shocked! SHOCKED! Imagine that being an unfair market advantage. But just as that is happening we have proof that technology can trump greed: an article yesterday says they are moving to Ethernet which is even faster than fiber-optics…aw, if so, they would lose hundreds of millions…pity! Not that that would help individuals so GO SEC! Do what you were chartered to do. Oh, and a headline this morning proclaims the end to insider trading by Congress…finally. What does it take to get THEM to work for US??? More money? But the insider trading has become chump change from what Wall Street gives them directly!

 

TB is on a mission to FIX Wall Street, the banks, and Congress. Although not due to him directly he is at least bringing their sins to light. Before it was proven, he challenged Goldman Sachs and JPMorgan.

 

Why Lloyd Blankfein has been allowed to remain CEO is beyond comprehension as he even sickens people within the firm. His testimony (along with the mortgage securities team) should have cost him his job immediately. Under Senator Carl Levin’s cross, he looked like a blithering idiot with his lies and pained facial expressions. Make no mistake both of these men are highly intelligent. Both graduated number one in their class from Harvard Law – a year apart – but one chose public service while the other chose greed. He has made a four-letter word of a fine firm and could care less so long as he benefits. He is one step removed from one of his predecessors Jon Corzine (three steps if you count becoming a senator then governor). What is wrong with him and his board?

 

As for JPMorgan, it has been headlines in corruption in municipal bond underwriting, consulting, and in selling overpriced derivative protection to cities and counties across the nation charging excessive fees. Jamie Dimon is a hero to some…the most brilliant banker in the land…which he most definitely is not. He is shrewd and cunning. He overlooks transgressions from subordinates so long as they make money for him.

 

A story came out in Fortune yesterday on how JPMorgan purchased the Retirement Plan Services division of American Century Insurance in June 2003 under an agreement to continue to promote funds of American Century. Just one month later they reneged by offering their funds instead. Clear breach of contract, fraud, and breach of fiduciary duty,  and a judge thought so too over JPM’s objections (Gip ‘em as sometimes called in the trade). American was awarded $373 million – in 2009 but JPM had the records sealed and never disclosed it publicly hiding the fees in an Asset Management account titled “non-client litigation” (what could be more obscure than that? Get this: JPM says it disagreed with the ruling but paid it anyway…$373 million??? JPM’s defense? Clients were not harmed as some of the JPM funds performed better than Americans. Is this the test of whether it is okay to breach a contract? But here is the best part: J.E. Staley, who at the time was CEO of JPM’s Asset Management division was serving on the board of American Century (at the time JPM owned 40% of American). There is the breach of fiduciary responsibility – to American’ shareholders! So what happened to Mr. Staley? Demoted? Fired? No! He is now CEO of JPM’s investment banking division! This is what is wrong with Jamie Dimon: he has no morals when it comes to business. This is typical behavior by him.

 

But the main reason TB has no respect for Dimon is his defamation of Brooksley Born over derivative regulation (along with Greenspan, Rubin and Summers), and later Elizabeth Warren while he was trying to insure that neither cut into the banks profits by protecting investors under the new consumer protection act. The bank lobby then aimed all of its guns against Warren and anyone else that was nominated, forcing Obama to make an interim appointment of another highly-qualified person, a former state attorney general. You have to look no further than to Sanford Weill and Jamie Dimon to understand how the banks wrested control from the federal government – and Congress! They bought it!…and then were bailed out at your expense, and guess what? It will happen again, sooner than you think! Can we survive it next time? Some say no way.

 

Have a great weekend…weather permitting,

 

TB

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3/22/12…the selling off of America

March 22, 2012 at 7:45 am · Filed under economy, financial, markets ·Tagged , ,

TB’s Quotes of the Day:

“Everyone has his day and some days last longer than others.” – Sir Winston Churchill

At a rally in South Carolina last January, Senator John McCain endorsed GOP presidential hopeful Mitt Romney by saying, “I believe President Obama will turn this country around.” – he meant Romney! You can’t make these things up. To be fair, McCain has been fair about Obama giving him credit for the things he has done right, while Romney can find nothing he has done right and still insists we are worse off than when he took office.

Bloomberg Top Stories:

 

*Stocks in Europe Fall With Commodities on Economy; Euro Drops, Bunds Rally –one more time!

*European Economy Gauge Shows Deeper Contraction Than Economists Forecast –  yep!

*Bank of America Global Markets Chairman Orcel Said to Prepare Move to UBS – rats leaving?

*Ireland Asks ECB Council for Delay in Cash Payment on Bank Debt –lower GDP, exports

*Ireland Enlists Pensioners for Bond Crusade by Prime Minister – tap the pension funds!

*AIJ Beckoned Japanese Pensions Burdened by Return Targets Set 50 Years Ago – like Madoff!

*Credit Suisse Will Meet Latest Standards While Returning 15%, Dougan Says – believe it?

*AMR Is Said to Prepare Bankruptcy-Court Request to Reject Union Contracts –not management

*Israeli Billionaires Put Own Interests Before Bondholders After Debt Glut – just like here!

*Obama Campaign Challenge is Showing He’s Reason for U.S. Economic Rebound

Volume declined slightly again after hitting new 2012 highs on BOTH NYSE listed stocks AND on those traded directly on the NYSE last Friday. 3.54B shares vs 3.65B vs 4.85B shares. Contrast to Friday’s 4.85B shares. Meanwhile, NYSE stocks executed on the Big Board rose slightly to 766M shares vs 711M about 250M below the 12 month average and well blow Friday’s 1.65B shares, highest of 2012 and since 12/16/11…the last quadruple witching! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 87 of the last 94 sessions have now been less than 1B! . Advance/Declines were almost even: -1.1x vs -2x vs +1.8x vs -1.2x vs +1.5x on NYSE and +1.1x vs -2.2x vs +1.8x vs -1.1x vs +2x on Nasdaq. Breadth was identical – never saw this before: -1.1x vs -1.5x vs +2.1x vs +1.5x vs +4x on NYSE and +1.1x vs -1.5x vs +2.5x vs +1.1x vs +2.8x on Nasdaq. New 52 week highs rose to 189 vs 124, while new lows slipped to 35 vs 54. The ratio is now +6x vs +2x. The S&P VIX declined modestly to 15.13 -.45. Friday’s intraday low of 13.66 was lowest since 6/20/07’s 12.75. VIX measures volatility and can be good or bad when up, very high is bad. But when it rises and market is going nowhere or trying to rally it is a lack of confidence.

Here are the results of the last five sessions: Dow -0.4% vs -0.5% vs +0.1% vs -0.2% vs +0.4%; Transports +0.8% vs -1.2% vs +0.2% vs flat vs +3.3%; Dow Utilities -0.2% vs +0.4% vs -0.4% vs -0.2% vs -0.1%; S&P 500 -0.2% vs -0.3% vs +0.4% vs +0.1% vs +0.6%; Nasdaq Composite FLAT vs -0.3% vs +0.8% vs flat vs +0.5%; Nasdaq 100 FLAT vs +0.2% vs +0.8% vs -0.1% vs +0.2%; Russell 2000 +0.1% vs -1.0% vs +0.9% vs -0.1% vs +1%; NYSE Financials -0.6% vs -0.3% vs +0.6% vs +0.5% vs +1.3%. NYSE Financial Leaders: BAC +0.1% vs +2.9% vs -2.8% vs +6.1% vs +4.5%; C -0.7% vs +2.5% vs +1.3% vs +1% vs -0.9%; RF +2% – Regions Financial

European equity markets weak, Asia modestly higher, India now down 4.3% in six sessions: FTSE -0.8% vs +0.1% vs -1.2% vs -0.3% vs +0.4%; CAC40 -1.5% vs flat vs -1.3% vs -0.6% vs +0.2%; DAX -1.3% vs -0.1% vs -1.4% vs -0.5% vs +0.2%; Nikkei +0.4% vs -0.6% vs +0.1% vs +0.2% vs +0.1%; Hang Seng +0.2% vs -0.2% vs -1.1%!!! vs -1%!!! vs -0.2%; Korean KOSPI FLAT vs -0.7% vs -0.2% vs +0.6% vs -0.5% vs -0.1% vs +1%; Indian Sensex DOWN 2.3% vs +1.7% vs+0.3% vs -1.1% vs -1.2% vs -1.4%. U.S. stock futures weak: DOW -65; SPX +8.40; NDQ -13.50! Bonds rallying for a second session but still trying to recover from the selloff: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.25% +3/8. RECORD low 9/23 of 1.6855%; 30 yr 3.35% +5/8; Long TIP 0.86% vs 0.90%!, it was 0.57% at high. The 5 yr TIP yields MINUS 1.23%; 10 yr -.14%. Bills 0.08% 1 month; 0.08% 3 months, 6 months 0.14%. Reverse Repo 0.22%. 3 mo. Libor 0.47%, and 0.74%, stable.

Gold closed below $1700 for an 8th straight session but was up $5 and making the hit off $126 since 2/28, closing $1646.30 +$5.10. 2/28’s $1792.70 intraday high was not seen since 11/16! It had been above $1600 since Jan. 31, but is now $1633.80 -$16.50! The record high is $1923.70, a buying climax on 9/6. Res is $1684, the 200 day and $1707, the 50 day, then $1719, the 40 day, rolling over. Major support was $1652, the 1/25/13 low, now res! Crude closed up at $107.27 +$1.56, following the worst decline since 11/17/11! But it is now $106.19 -$1.08, with support at the 40 day (103.50), the 50 day (102.78), and major support at $95.12, the 200 day…careful though as they are all rising and that is the SUPPORT. Resistance remains at $110.

The indices were weak except Dow Transports which rose 0.8%. All other indices were slightly lower except both Nasdaq indices which were FLAT – rare!  The world’s biggest casino is about to get even bigger when a new fiber optic cable NY-London is completed mid-year! What a title to be proud of…

Overnight, Dow futures traded down to 12983 (equivalent to about 13040 on the index). Will today be the day we break 13k to the downside? Will CNBC  be celebrating that?

Gold rose slightly yesterday gaining $5 but is off $16.50 overnight due to slower growth in EU and that caused the Euro to weaken taking commodities with it. Since 2/28 it is off $142 and trading below major support, at $1652, the 2/28 low! Oil rallied slightly but gave most of it up overnight!

Thanks to the wonders of fiber optics, Jim Barksdale made a household name by Michael Lewis in The Next New Thing (Netscape, MyCFO.com), is the man behind the fiber-optic cable that runs from Chicago-New York, and will soon complete a new one from New York to London…so? Aren’t we awash in fiber-optic capacity? Not for the wonderful world of finance, aka high frequency trading. TB recently learned of the Chicago cable and the big thing is that it is not for humans…only data on trades and only available to those who signed up for the proposal…for a very high fee. All others excluded.

Now the same is being done to London and it could change the landscape of the big players and become an enormous money transfer from the old market leaders such as the banks (think JPMorgan, Citi, Morgan Stanley) to huge hedge funds who were willing to pay dearly for the right to get data six microseconds faster…remember that data already travels at the speed of light which for humans is fast enough but not for computers implanted with trading algorithms. Some of the big players will find they have lost their edge.

Remember, that flash trading is much more than stock! It is bonds, commodities and anything else that is tradeable. When TB was in San Francisco in February he met a young quant who worked for a hedge fund. TB asked him what their style was. He said they are strictly currency traders…hello??? This used to be the realm of the money center banks…exclusively…but now with algorithms anyone with a math/physics background can do it. I asked him if it was harder with everything going on in Greece and the Euro. He said none of that matters. A perfect explanation of high frequency trading…and scary for those of us old enough to have seen crashes.

Originally Goldman (TB believes) paid dearly to have their computer right next to the NYSE trading floor. That worked giving them the advantage. Then, a fiberoptic cable allowed firms to do the same from mid-town and now Chicago and next London. Think of the disadvantage other traders are at? Three milliseconds (.003 seconds) is a lifetime to a computer program geared to take advantage of minor blips in stocks.  Furthermore, it is unequal dissemination of information and is about to be tested in court. If upheld, the principle that has made the U.S. markets the safest and fairest in the world will be negated…although the SEC through neglect already did that!

. . .   – - -  . . .  (SOS)

In 2010, Chicago Mayor Richard Daley made a proposal to sell off the parking meters in Chicago. Not a new thing as many cash-strapped cities and even states have done similar things. But Daley called an emergency meeting of aldermen and said it had to be done immediately, over their objections that they needed time to review it. He forced the issue and it was sold to Morgan Stanley who said they had an investor. First, they bought it, then sold it to an Abu Dhabi syndicate –shock! They lied! The new owners then raised rates, extended metered parking hours, and if there were art fairs etc. that closed off streets, made the townships pay the meter charges! This of course ended those fairs:

“A Morgan Stanley venture may reap $9.58 billion in profit over a 75-year lease of city parking facilities, based on documents from the group. The bank, joined by the Abu Dhabi Investment Authority and Allianz Capital Partners, set up a venture to lease the Chicago operations in 2008. The profit was estimated based on projections in a 2010 offering document.”

 

 Now Morgan Stanley has proposed doing the same for cash-strapped Harrisburg, Pa. See what helpful people these are? …and you can bet the same thing will happen. Of course, history now shows just what they are up to, but Harrisburg is not in a position to negotiate. What is amazing is just a few years ago there was a huge furor about selling off assets to foreigners…but to Morgan Stanley to flip them? Not a whimper. By the way after paying just $1.5 billion for Chicago’s meters, they flipped it for $11 billion due to the revenue increases they initiated…TB wonders how much Daley made?

The GOP has released its new improved jobs bill…whenever you hear that term from inside the beltway, run! Remember the bankrupty act renamed the consumer protection act? Well they are at it again….

“JOBS” disaster looms

By Simon Johnson

The House “JOBS” bill is a thinly disguised repeal of investor protection in the United States.  This legislation would help unscrupulous people in the securities industry but it would be bad for nonfinancial businesses – by raising the risks to investors, it would push up the cost of capital for honest entrepreneurs.   Investment professionals belonging to the CFA Institute have expressed their serious concerns and strong opposition.  Attempts to amend this legislation – and to make it more sensible – failed in the Senate yesterday.

The Senate will vote today on whether to adopt the main provisions of the House bill.   Passing this bill would be a major public policy mistake – akin to the disastrous (and bipartisan) deregulation of the financial sector in the 1990s.  This kind of excessive deregulation leads to disaster – and to fiscal crisis.  (For more background and the historical comparison, see this piece.)

President Obama claims he wants strong investor protection.  Where is he on the specifics of the JOBS bill?  Why is the White House staying so much on the sidelines during this critical Senate process?  The president should rally Democratic Senators against the House bill and press again for an amended and more responsible piece of legislation.

If the Republicans refuse to agree to sensible investor protections – flying in the face of American tradition and established best practice (and lessons learned the hard way in the Great Depression) – that is a great issue for the general election in November.

Think of this: the GOP says fiscal policy doesn’t work. In the last jobs program there were tax incentives to create jobs but those expired and predictably firms reduced the number of employees accordingly…as has happened every time it has been attempted before. But the purpose of this is to cut taxes once again to GOP supporters…aka financial sector and large firms…

Have a great day – Illegitimi non carborundum!

TB

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3/21/12…the fly

March 21, 2012 at 8:42 am · Filed under economy, financial, markets ·Tagged , , ,

Today marks the 1,000th edition (1.5 million words estimated) of TB’s blog (traderbill.com), but there were perhaps 200 more emails before the blog was started…thanks for reading. TB

Bloomberg Top Stories:

 

*Osborne Says U.K. Will Avoid a Recession as He Maintains Austerity Drive – oh really?

*U.S. Stock-Index Futures Little Changed Before Existing-Home Sales Report –mtg apps weak!

*Europe Comeback Seen in Most Company Bond Sales Since 2010 – or is it?

*Hartford CEO Says Paulson’s Plan for Complete Breakup Wouldn’t Make Sense – of course!

*Buffett Seizes Lead in $1 Million Bet on Stock Index Beating Hedge Funds – but the high fees?

*Monti to Impose Italian Labor Market Overhaul as Talks Falter

*Top Junk Beats Treasuries for Safest Profit Since Lehman – of course they do, yields!

*Stocks Will Rise for Several Years as Economy is Priced In, Goldman Says – are they short?

*JPMorgan Claims No.1 for Government Debt After Jefferson Co Failure – oh you rock, Jamie!

(They did it the old fashioned way…they rigged it! Two big scandals yet they are loved???)

*Unemployment Rises for U.S. Military Veterans Serving Since 2001 Attack – some thank you!

Volume declined modestly two days after hitting new 2012 highs on BOTH NYSE listed stocks AND on those traded directly on the NYSE!!! 3.65B shares vs 3.8B vs 4.85B vs an average of 4.4B shares for the three prior sessions. Meanwhile, NYSE stocks executed on the Big Board declined further to 711M shares vs 721M from 1.65B and are about 300M below the 12 month average. Friday’s was the highest of 2012 and highest since 12/16/11…the last quadruple witching! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 86 of the last 93 sessions have now been less than 1B! As promised by TB: “an illusion of liquidity may exhibit itself following the quadruple witching (options expiry). Advance/Declines were negative: -2x vs +1.8x vs -1.2x vs +1.5x vs -2.8x on NYSE and -2.2x vs +1.8x vs -1.1x vs +2x vs -2.2x on Nasdaq. Breadth too was also negative: -1.5x vs +2.1x vs +1.5x vs +4x vs -1.3x on NYSE and -1.5x vs +2.5x vs +1.1x vs +2.8x vs -1.3x on Nasdaq. New 52 week highs dropped nearly 2/3 to 124!!! vs 322, while new lows ROSE to 54 vs 33. The ratio is now +2x!!! vs +10x. The S&P VIX climbed in a mixed session to 15.58 +.54. Friday’s intraday low of 13.66 was lowest since 6/20/07’s 12.75. Not good!

Here are the results of the last five sessions: Dow -0.5% vs +0.1% vs -0.2% vs +0.4% vs +0.1%; Transports -1.2$! vs +0.2% vs flat vs +3.3%!!! vs -1.4%; Dow Utilities UP 0.4% vs -0.4% vs -0.2% vs -0.1% vs -1.4%; S&P 500 -0.3% vs +0.4% vs +0.1% vs +0.6% vs -0.1% vs +1.8%; Nasdaq Composite -0.3% vs +0.8% vs flat vs +0.5% vs flat; Nasdaq 100 +0.2% vs +0.8% vs -0.1% vs +0.2% vs +0.4%; Russell 2000 -1.0% vs +0.9% vs -0.1% vs +1% vs -0.9%; NYSE Financials -0.3% vs +0.6% vs +0.5% vs +1.3% vs -0.1%. NYSE Financial Leaders: BAC +2.9% vs -2.8% vs +6.1% vs +4.5%! vs +4.1% vs +6.3%!!! vs -0.8%; C +2.5% vs +1.3%??? vs +1% vs -0.9%.

GE/F -0.7% – due to large financing operations considered one here.

European equity markets little changed, Asia weaker, India strongest but still down 1.8% last five sessions!: FTSE +0.1% vs -1.2% vs -0.3% vs +0.4%; CAC40 flat vs -1.3% vs -0.6% vs +0.2% vs +0.1%; DAX -0.1% vs -1.4% vs -0.5% vs +0.2% vs +0.3%; Nikkei -0.6% vs +0.1% vs +0.2% vs +0.1% vs +0.7%; Hang Seng -0.2% vs -1.1%!!! vs -1%!!! vs -0.2% vs +0.2% vs -0.2%; Korean KOSPI -0.7% vs -0.2% vs +0.6% vs -0.5% vs -0.1% vs +1%; Indian Sensex UP 1.7% vs+0.3% vs -1.1% vs -1.2% vs -1.4%. U.S. stock futures little changed and mixed ahead of Existing Home Sales: DOW +13; SPX +0.30; NDQ -1.25. Bonds up slightly but still trying to recover from the selloff: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.32% +5/16. RECORD low 9/23 of 1.6855%; 30 yr 3.43% +3/8; Long TIP 0.90% +5/16, it was 0.57% at high. The 5 yr TIP yields MINUS 1.22%; 10 yr -.10%. Bills 0.09% 1 month; 0.09% 3 months, 6 months 0.15%. Reverse Repo 0.22%. 3 mo. Libor 0.47%, and 0.74%, stable.

Gold closed below $1700 for a seventh straight session falling 420 and making the hit off $131 since 2/28, closing $1647.00 -$20.30.  2/28’s $1792.70 intraday high was not seen since 11/16! It had been above $1600 since Jan. 31, and is now $1654.70 +$7.70. The record high is $1923.70, a buying climax on 9/6. Res is $1684, the 200 day and $1706, the 50 day, then $1720, the 40 day, about to roll over. Major support is $1652, the 1/25/13 low! Crude closed DOWN at $105.61 -$2.48, the worst decline since 11/17/11! It is now $106.47 +040, with support at the 40 day (103.29), the 50 day (102.67), and major support at $95.08, the 200 day, all rising. Resistance remains at $110.

Then indices were weak except Dow Utilities which rose 0.4% but remain weak due to the bond selloff. All other indices were down except the Nasdaq 100 which was up 0.2% but that was entirely due to Apple and would otherwise have been flat. We are still relying on flash traders (see comments below on algorithms and what it means to markets), for activity. On Monday TB watched the tape for BofA trades which came across about one a minute or less…how could this be. Yesterday, was similar…but try this if you trade on line. TB got quotes on Schwab…live…on BofA and kept hitting the refresh key…1,000 to 10,000 per second…with bid/offer no more than a penny apart: $9.64-9.65…for five minutes…if you don’t understand this, you have no idea how this market is being manipulated. THAT is not retail trading! TB is sick of this…where is the SEC and other agencies who are supposed to protect our markets…biggest casino in the world! What a title to be proud of…

Gold continues to drop, falling another $20 yesterday. Oil too plunged as the Saudi’s are about to ship all it takes to offset Iran effects. Shame on the GOP for blaming Obama…a simple look at the charts shows that until Iran reared its ugly head recently, the price was well below the end of the Bush administration. Doesn’t anyone hold these people to facts??? Disinformation rules!

. . .   – - -  . . .  (SOS)

…the number of movies in the slug now number NINE…why The Fly? It was a 1956 movie that was remade in 1986 starring Jeff Goldblum. Only the base story was still there but a brilliant scientist working on an experiment turned into half man/half fly.

Yesterday, when talking about Kevin Slavin’s video TB mentioned that algorithms are being used all around us thanks to computers. He mentioned a book that was listed for over $2 million on Amazon, an obscure out of print book called The Making of a Fly, by Michael Eisen. Eisen is a professor at UC Berkeley in environmental biology. He decided to list a few copies of his out of print book on Amazon for $32.95. The story seems so preposterous that TB had to check it out. Here is what showed on Amazon  4/8/12 – 4/14/12: 15 used at $35.44….2 NEW at $1,730,045.91!!! You can’t make this stuff up, folks! So how did it happen and can it happen again…it can and will so be very careful on any bidding site because the site may be inflating prices when you appear on it…like when you return to a page and the price is higher…because it left a cookie and YOU came back! A pigeon, hopefully to them! Actually the price of the book reached an incredible $23,698,655.93 PLUS $3.99 shipping!!! How could this possibly happen after all it isn’t the Mona Lisa?

Two retailers were using algorithms which tracked all their books with one using a factor of 1.27059 times any other price…the other at .9983 times. They locked into a computer loop driving the price higher and higher until someone came to their senses. But note, mind you, that not one book actually traded during that time period…zero, zip, zilch!

Here is how it works…Michael’s $32.95 x 1.27059 = $42.86,

Then the other seller came in at $42.86 x .9983 = $42.78.

Then $54.46, $54.37, $69.08…remember the old riddle about whether you should take $10 a year from now or a penny that doubles each day for a year? When you were a kid it was obvious: take the $10, which was of course the wrong answer.

OK, we get that but how did this happen? First, it is impossible to monitor an entire inventory of books…or anything else a retailer might be selling. Actually the number tops out at 21! Enter a company, or others, called FeedAdvisor who will sell you an algorithm to do just that and it will interface with the website and adjust the price automatically. This plus a search of all the prices offered and constantly updated means you will be competitive…some want to be a little higher and some lower based on their experience of how to maximize profits…i.e. a seller with high positives might go for higher knowing some buyers will pay more for the efficiency, just as you might in choosing which store to shop at.

As TB said yesterday, computers are dumb…they (most) have no ability to think past what they are programmed to do. So when the two computers above got locked into a feedloop, the prices escalated rapidly to nearly $24 million…without a single sale! Look at this: at one point it showed 17 copies for sale; 15 used (Eisen’s) at $35.54, and just 2 new at $1,730,045.91!!! Do you still believe in efficient markets? TB doesn’t!

It was actually Eisen himself who saw it and decided to find out why it was happening.

If you Google the book you will see the articles on this phenomenon.

Follow-up: where is the price now??? 2 new (same two retailers) for $276, and 15 used for $82!!!…perhaps a few have been sold to collectors based on the story, but doubtful.    

Would you believe they are even in movies and other things…they can scan a script and tell you how much money it will make at the box office…or pick a movie for you on Netflix or a song on Pandora. Accuracy about 60% – less for the ones Netflix picks for TB! The flop by Disney of ‘John Carter’ shows just how wrong those projections can be wrong…but nothing can go wrong…can it? $200 million worth! Stay tuned!  Here is the link again: algorithms explained

Remember the ‘flash crash’ of May 6, 2010? The Dow had the largest daily swing ever, 1010 points! …and the largest decline: 996 points. When it began the Dow was off a large 300 points…the rest of the damage occurred in just FIVE minutes by within an hour 600 points had been regained, in other words back about to where it started. Why? There was no sudden news…instead an algorithm feedback loop occurred, although no one has ever determined exactly what caused it. Stocks like Cat, P&G and other solid companies saw their market cap drop by as much as 50%. Eventually, the prices were sorted out and the bad trades removed…but can it happen again? YES…and it surely will…perhaps in a much more damaging way. There is nothing to stop it. We are being controlled by people who have turned loose their computers with no logic safety valve. Perhaps the next terrorist attack will be the financial system…if it were TB that is the way he would do it. Much more effective and would draw less criticism then destroying property and lives.

Have a great day!

TB

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3/20/12…2012, a space odyssey

March 20, 2012 at 8:21 am · Filed under economy, financial, markets ·Tagged , , , , ,

Excerpt  from 2001, A Space Odyssey:

 

Dave Bowman: Hello, HAL. Do you read me, HAL?
HAL: Affirmative, Dave. I read you.
Dave Bowman: Open the pod bay doors, HAL.
HAL: I’m sorry, Dave. I’m afraid I can’t do that.
Dave Bowman: What’s the problem?
HAL: I think you know what the problem is just as well as I do.
Dave Bowman: What are you talking about, HAL?
HAL: This mission is too important for me to allow you to jeopardize it.
Dave Bowman: I don’t know what you’re talking about, HAL.
HAL: I know that you and Frank were planning to disconnect me, and I’m afraid that’s something I cannot allow to happen.
Dave Bowman: [feigning ignorance] Where the hell did you get that idea, HAL?
HAL: Dave, although you took very thorough precautions in the pod against my hearing you, I could see your lips move.
Dave Bowman: Alright, HAL. I’ll go in through the emergency airlock.
HAL: Without your space helmet, Dave? You’re going to find that rather difficult.
Dave Bowman: HAL, I won’t argue with you anymore! Open the doors!
HAL: Dave, this conversation can serve no purpose anymore. Goodbye.

 

Bloomberg Top Stories:

 

*Stocks Drop With Commodities as Growth Slows in China; Treasuries Rebound

*Housing Starts in U.S. Decline From Three-Year High to 698k Annual Rate – volatility happens!

*Greece’s Third Bailout Seen in Debt With Junk Grade Yielding 15% – how naïve have we been?

*Bernanke Returns to Roots to Justify Fed’s Existence as Centennial Nears – one big YAWN!

*Facebook CEO Zuckerberg Is Said to Take Low Profile in Early IPO Marketing – Farcebook?

*Container-Ship Owners Seen Losing After $11.4 Billion Battle for Boxes – owee!!

*Disney Predicts $200 Million Loss From ‘John Carter’ Sci Fi Film – bad algorithm???

*Wal-Mart Suffers Customer Defections to Amazon With Online Booming – aw, so sad…

*Mercedes Record 25% Discount Leads Shrinking Luxury Margins in China – slowing economy!

*Stocks Gain Most When 10-Year Yields Rise to 4% – yep implies low inflation, good for stocks!

*Gold mining Stocks Due for Rebound Against Metal Price – watch this as opposed to Gold ETF!

*Swiss Secrecy Under Seige Makes Banks Fret allure for World’s Money Fading

*Credit Suisse VIX Note Premium Hits Record After Halt in Issuance – avoid all of these types!

 

Volume plunged again after hitting new 2012 highs on BOTH NYSE listed stocks AND on those traded directly on the NYSE!!! 3.8B shares vs 4.85B vs an average of 4.4B shares for the three prior sessions. Meanwhile, NYSE stocks executed on the Big Board plunged to 721M shares from 1.65B or about 300M below the 12 month average. Friday’s was the highest of 2012 and highest since 12/16/11…the last quadruple witching! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 85 of the last 92 sessions have now been less than 1B! As promised by TB: “an illusion of liquidity may exhibit itself following the quadruple witching (options expiry). Advance/Declines were positive: +1.8x vs -1.2x vs +1.5x vs -2.8x vs +4.2x on NYSE and +1.8x vs -1.1x vs +2x vs -2.2x vs +3x on Nasdaq. Conversely, breadth too was positive: +2.1x vs +1.5x vs +4x vs -1.3x vs +12.6x! on NYSE and +2.5x vs +1.1x vs +2.8x vs -1.3x vs +6.2x!! on Nasdaq. New 52 week highs climbed to 322 vs 281, while new lows were steady at 33 vs 31. The ratio is now +10x vs +9x. The S&P VIX climbed despite a positive session to 15.04 +.57. Friday’s intraday low of 13.66 was  lowest since 6/20/07’s 12.75. Beginning to get nervous?

 

Here are the results of the last five sessions: Dow +0.1% vs -0.2% vs +0.4% vs +0.1% vs +1.7%; Transports +0.2% vs flat vs +3.3%!!! vs -1.4% vs +2.1%; Dow Utilities -0.4% vs -0.2% vs -0.1% vs -1.4% vs +0.3%; S&P 500 +0.4% vs +0.1% vs +0.6% vs -0.1% vs +1.8% vs flat; Nasdaq Composite +0.8% vs flat vs +0.5% vs flat vs +1.9%; Nasdaq 100 +0.8% vs -0.1% vs +0.2% vs +0.4% vs +1.9%; Russell 2000 +0.9% vs -0.1% vs +1% vs -0.9% vs +2.1%; NYSE Financials +0.6% vs +0.5% vs +1.3% vs -0.1% vs +3.3%. NYSE Financial Leaders: BAC -2.8$ vs +6.1% vs +4.5%! vs +4.1%! vs +6.3%!!! vs -0.8%; C +1.3%??? vs +1% vs -0.9%. UP? Citi???

 

Global equity markets weaker, except Japan up slightly, India still down 3.5% last four sessions!: FTSE -1.2% vs -0.3% vs +0.4% vs -0.1%; CAC40 -1.3% vs -0.6% vs +0.2% vs +0.1% vs +0.8%; DAX -1.4% vs -0.5% vs +0.2% vs +0.3% vs +1.3%!; Nikkei +0.1% vs +0.2% vs +0.1% vs +0.7% vs +1.5%!; Hang Seng -1.1%!!! vs -1%!!! vs -0.2% vs +0.2% vs -0.2%; Korean KOSPI -0.2% vs +0.6% vs -0.5% vs -0.1% vs +1%; Indian Sensex +0.3% vs -1.1% vs -1.2% vs -1.4% vs +0.6%. U.S. stock futures weak: DOW -70; SPX -8.20; NDQ -12.75! Bonds trying to recover from another down day yesterday, now off for four sessions: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.36% +3/16. RECORD low 9/23 of 1.6855%; 30 yr 3.45% +1/2; Long TIP 0.89% +5/16, on 2/27 it bottomed out at 0.70%. It was 0.57% at high. The 5 yr TIP yields MINUS 1.21%; 10 yr -.07% vs -0.14%. Bills 0.07% 1 month; 0.09% 3 months, 6 months 0.15%. Reverse Repo 0.24% vs 0.30%. 3 mo. Libor 0.47%, and 0.74%, stable.

Gold closed below $1700 for a sixth straight session but rallied to $11 making the hit off $111 since 2/28, and closed $1667.30 $11.50.  2/28’s $1792.70 intraday high was not seen since 11/16! It had been above $1600 since Jan. 31, but is now $1645.90 -21.40. The record high is $1923.70, a buying climax on 9/6. Res is $1683, the 200 day and $1705, the 50 day, then $1721, the 40 day, about to roll over. Major support is $1652, the 1/25/13 low! Crude closed up at $108.09 +$1.03. However, t is now $106.80 -$1.29, with support at the 40 day (103.14), the 50 day (102.59), and major support at $95.06, the 200 day, all rising. Resistance remains at $110.

 

NYSE Financials weren’t the strongest sector yesterday, +0.6%, despite a 2.8% decline in  BofA, offset by a 1.3% rally in Citi.  The high of $10.10, shortly after the open has not been seen since 7/22/11 – but take note that this is potentially the THIRD lower high…will it take out $10 on close – TB doubts it.  It then plunged closing 2 cents of the low at $9.53! Since bottoming on 3/6, financials are up 8.9% and up 20.6% ytd!!! Yesterday, TB was watching the tape move across on CNBC and decided to see how BofA was doing. Despite a volume of 669M shares, highest since 8/25/11 (860M), he only saw it cross the tape a few times….that is indicative of how much of the trading is being done on electronic trading networks (ETN)! Why do they like it so much? It is the same reason as GE: it trades in narrow ranges for long periods of time, has high volume on its own, and has the added advantage of being cheap…not in terms of valuation, but less than $10, which is outside the range of most conventional money managers, and again shows how the ETN’s dominate!

 

Following Friday’s options expiry, the quadruple witching, volume returned to below average after the highest trading volume since the December expiry! Once again, markets barely budged…except for the two Nasdaq indices and Russell 2000, each up 0.9%. Why? For one thing Apple rose $13.30 on the dividend/buyback news, adding 13.3 points to the NDQ 100, without it, the day’s gain would have been just 0.2%!

 

As reported yesterday, the significance of Apple in stock market performance cannot be overstated. Here are the same tables from yesterday but just those where Apple’s share is known. The difference in performance is staggering…especially if you are a manager in these sectors and DIDN’T own Apple. That is why, when choosing a benchmark, you know what the make-up is of that index….especially true for ETF buyers!

 

3/19/12                        YTD/w/o AAPL           12 mos/w/o AAPL

AAPL                              +44.6%!!!                      +77.1%!!!

NYSE Institutional           +11.4%/8.9%          +12.0%/7.1% – 7% of index

NYSE Comp/Tech           +19.8%/5.9%!              +24.8%/6.7%     - 25.7% of Index

CBOE Tech                     +19.9%/10.6%             +25.1%/-1.7%!!! – 35.9% of Index!!!

Russell 1000 Tech          +20.5%/+13.8%           +21.1%/5.8%            -21.4% of index!

(Apple is a member of 88 indices…note some keep weightings proprietary.)

 

Two other things are apparent: whereas modern portfolio theory suggests diversification is a good thing, in volatile markets it can provide mixed, if not inferior results if one is a good stock picker; and a diversified portfolio of just 21 stocks (provided they are not positively correlated, a danger in many ETF’s), can outperform over longer time horizons. Of course, the myth of MPT is that all market information is known to all players and that means that prices take all of these factors into consideration…that was disproven in 2008 when all stocks declined sharply regardless of quality.

This is even more correct now due to the dominance of markets by high frequency traders.

 

TB recently heard of a manager who has a computer scanner searching all financial periodicals for companies names…doesn’t matter if the story is good or bad. From there they take the most frequently mentioned and use them (yep, another algorithm) to ‘place their bets.’ Are you investing or gambling? If your holding period is five years or more (buy and hold), yet the prices are determined by the algorithmic traders you are going to seriously underperform, at least in short time periods, since their average holding period is six seconds!

 

Again, here is the link to the clip that is the best explanation of algorithmic trading TB has seen. It is on TED, and is by Kevin Slavin. It explains volumes about stock market activity and how risks are heightened…not just how it applies to stocks, but currencies, bonds, and commodities…the markets have been turned into a ‘numbers’ game…gambling, not investing and we are the pawns…your retirement is at risk while the SEC stands idly by.

Algorithms explained

 

. . .   – - -  . . .  (SOS)

…the number of movies in the slug now number Eight…today’s could just as easily have been from Jurassic Park, Westworld, Futureworld, you know those sci-fi movies where something that seemed like a good ideal ran amok and threatens to destroy civilization.

 

TB chose 2001, A Space Odyssey, the great 1986 Stanley Kubric movie, because it was the first, and because he loved the name of the computer: HAL 9000 (newbies: each letter in the name is one preceding the initials in IBM – IBM used to be the most powerful computer company).

 

That is the world we live in today. TB recalls in the late 1970’s when bond bids converted to being done by hand to computer generated. A few years later, a syndicate manager could not get theirs in on time because their computer was down…this was actually a desktop that was a programmable calculator. Later, they converted bids to the ‘scientific’ method which required a computer to compute the actual cost in present value terms. If you redid a lot of those old bids awarded, you would see that they actually cost more than some of the other bids!

 

At the same time, TB was hearing stories of estimator’s missing contracts or underbidding due to wrong inputs to their handhelds…garbage in, garbage out…costly garbage.

 

If you listened to the Kevin Slavin video clip (if you didn’t, see above for link), there was a comment that there are now about 2,000 physicists employed on Wall Street! Think about it, 2,000 scientists we could use for productive research instead of trying to game the system. Is that a good idea? No, because investing is much more than a numbers game…because it involves human greed and fear which causes violent swings in the markets and that in turn is amplified when it triggers the algorithms into play.

 

Want an example of an algorithm? In recalculating the index returns that contain Apple. To back them out, TB used a simple algorithm:

  1. multiply Apple’s yield by the weighting in the index,
  2. subtract that from the index return,
  3. multiply that number by (100/Apple weighting).

That produces the adjusted index return…if TB made an error, someone will point it out to him.

 

Now that you understand an algorithm, which is simply a chain of calculations, it is easier to understand. But the algorithms the high frequency traders use are much more complex.

 

The first time TB saw these being used to predict markets (sic) was around 1988, when a team from Goldman Sachs made a presentation to TB’s firm on Monte Carlo simulations for making investment decisions…all of us scoffed at the idea and in the end we were right, Goldman was wrong (of course they didn’t care if they were as all they wanted was someone to do profitable business with them…the results be damned). In truth, Monte Carlo simulations are valuable tools – for scientific testing, but they fail miserably when the human element is factored in because that makes all the testing and backtesting useless in abnormal market conditions…and those happen with some frequency!

 

Long Term Capital Markets (LTCM) in 1998, was arguably the best brain trust in Wall Street history. They calculated probabilities on everything…and the sector they played in was bonds. They figured that if you bought an undervalued bond you were doubly safe…since all bonds mature at par…what they failed to consider is that they can stay well below par right up until just before maturity and more importantly the cost of financing those positions since they were highly leveraged…even more than the brokers in 2008 (perhaps 100:1 or even more)! The founder and CEO was John Merriwether, a former Salomon trader, and graduate of University of Chicago where he studied with…drum roll…Jon Corzine! After the collapse of LTCM he started a hedge fund which also melted down in the 2008 crisis and that was all she wrote for him…now he is a race horse owner…better odds?

 

Think about the above for a while and listen to the Slavin video…TB has done so three times and keeps coming up with scarier thoughts which he will share with you the rest of the week – oh joy! Would you believe they are even in movies and Amazon…see flop by Disney of ‘John Carter.’ Projections must have been very wrong…but nothing can go wrong…can it? $200 million worth! Stay tuned!

 

Have a terrific day!

 

TB

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…apocalypse now

March 19, 2012 at 8:27 am · Filed under economy, financial, markets ·Tagged , , ,

Quotes of yore:

“When E.F. Hutton speaks, people listen” – and lose their money! Actually thru kiting!

“At Smith Barney we make money the old-fashion way, we earn it.” – John Houseman commercial

“Where are the clients yachts?” -  book by Fred Schwed 1955, re-released in 2006

“You can be greedy and still feel good about yourself” – Ivan Boesky, UC Berkeley

*Greed is good” – Gordon Gecko, Wall Street, 1987

“Someone reminded me I once said ‘greed is good’, now it seems it’s legal” – Sequel 2010

“I appreciate [your helping me}. But I just want to know one thing: How are you going to [screw] me? – Steve Eisman quote from The Big Short by Michael Lewis

“Somepin’s wrong,” Tom Joad said. “I can’t put my finger on her. I got an itch that somepin’s wronger’n hell.” – The Grapes of Wrath, John Steinbeck…frequently burned

“Never give a sucker an even break” –W.C. Fields

This week’s economic calendar is fairly light and heavily weighted towards housing. The highlight of the week will be February Housing Starts (Tuesday). We will also get February Existing Home Sales (Wednesday), February Leading Indicators (Thursday), and February New Home Sales (Friday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA

Bloomberg Top Stories:

*Apple Considers First Dividend as Cook Discusses $97.6 Billion Cash Hoard – huge % of assets

*Stocks Fall From Eight-month High in Europe as Slide in Treasuries Halted – about time!

*Greek Debt Insurance Allocated Initial 78.25 Cents pre Euro Payout Value – who is paying???

*VIX Wagers Surge to Record as Volatility Sinks to Five-Year Low – TB warned you!

*Worst Global Bond Rout Since ’10 Sparks Inflation Anxiety – settle down, not the problem!

*Sharp Plunging on LCD TVs as Diverse Samsung, Sony Gain – need more LCD TV’s?

*Three Children Shot Dead at French Jewish School, Echoing Attack on Troops

*Health-Care Challenge Evokes Roosevelt New Deal U.S. Supreme Court Clash – be careful what you wish for…

*Sgt. Bales Faced Losing Two Houses as He Fought 6,700 Miles From Home – there are limits!

 

Volume hit new 2012 highs on BOTH NYSE listed stocks AND on those traded directly on the NYSE!!! 4.85B shares vs an average 4.4B shares for three straight sessions. This is huge in today’s market. Meanwhile, NYSE stocks executed on the Big Board rose to 1.65B from 844M shares, or about 650M more than the 12 month average. This is the highest of 2012 and highest since 12/16/11…the last quadruple witching! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 84 of the last 91 sessions have now been less than 1B! As promised by TB: “an illusion of liquidity may exhibit itself following the quadruple witching (options expiry). Despite this the range on the Dow was just 57 points and it closed down…other indices were mixed. Advance/Declines were NEGATIVE: -1.2x vs +1.5x vs -2.8x vs +4.2x vs -1.2x on NYSE and -1.1x vs +2x vs -2.2x vs +3x vs -1.3x on Nasdaq. Conversely, breadth was slightly POSITIVE: +1.5x vs +4x vs -1.3x vs +12.6x! vs -1.7x on NYSE and +1.1x vs +2.8x vs -1.3x vs +6.2x!! vs -1.6x on Nasdaq. New 52 week highs climbed back to 281 vs 252, while new lows fell to 31 vs 49. The ratio is now +9x vs +5x. The S&P VIX dove again to 14.49 -.93 with an intraday low of 13.66!!! lowest since 6/20/07’s 12.75. Can you spell complacent???

Here are the results of the last five sessions: Dow DOWN 0.2% vs +0.4% vs+0.1% vs +1.7% vs +0.3%; Transports FLAT vs +3.3%!!! vs -1.4% vs +2.1% vs -0.3%; Dow Utilities -0.2% vs -0.1% vs -1.4% vs +0.3% vs +1.1%; S&P 500 +0.1% vs +0.6% vs -0.1% vs +1.8% vs flat vs +0.4%; Nasdaq Composite FLAT vs +0.5% vs flat vs +1.9% vs -0.2%; Nasdaq 100 -0.1% vs +0.2% vs +0.4% vs +1.9% vs flat; Russell 2000 -0.1% vs +1% vs -0.9% vs +2.1% vs -0.3%; NYSE Financials +0.5% (best performer?) vs +1.3% vs -0.1% vs +3.3% vs -0.3% vs +0.3%. NYSE Financial Leaders: BAC +6.1% vs +4.5%! vs +4.1%! vs +6.3%!!! vs -0.8%; RF (Regions Bank) +4.4% vs +6.9%; GE +0.2% vs +1.9% vs +1% vs +2.4%; F -3%.

Global equity markets weaker, except Japan (note how they anticipated a strong U.S. market on Friday), India down 3.8% last three sessions!: FTSE -0.3% vs +0.4% vs -0.1% vs +0.4%; CAC40 -0.6% vs +0.2% vs +0.1% vs +0.8% vs +1.1%; DAX -0.5% vs +0.2% vs +0.3% vs +1.3%! vs +1%; Nikkei UP 0.2% vs +0.1% vs +0.7% vs +1.5%! vs +0.1%; Hang Seng -1%!!! vs -0.2% vs +0.2% vs -0.2% vs +1%; Korean KOSPI UP 0.6% vs -0.5% vs -0.1% vs +1%; Indian Sensex -1.1% vs -1.2% vs -1.4% vs +0.6% vs +1.3%. U.S. stock futures slightly weaker: DOW -11; SPX -1.40; NDQ UP 7.75 – but all due to Apple!!! Bonds up for first time in four sessions: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.28% +5/32. RECORD low 9/23 of 1.6855%; 30 yr 3.39% +5/16; Long TIP 0.83% +3/8, on 2/27 it bottomed out at 0.70%. It was 0.57% at high. The 5 yr TIP yields MINUS 1.29%; 10 yr -.14% vs -0.07%. Bills 0.07% 1 month; 0.08% 3 months, 6 months 0.14%. Reverse Repo 0.30%. 3 mo. Libor 0.47%, and 0.74%, stable.

Gold closed below $1700 for a fifth straight session and is now down off $122 since 2/28, and closed $1655.80 $3.70.  2/28’s $1792.70 intraday high was not seen since 11/16! It had been above $1600 since Jan. 31, and is now $1655.90 +.10. The record high is $1923.70, a buying climax on 9/6. Res is $1682, the 200 day and $1704, the 50 day, then $1721, the 40 day, about to roll over. Major support is $1652, the 1/25/13 low! Crude closed strong at $107.06 +$1.95. It is now $107.19 +.13, with support at the 40 day (102.90), the 50 day (102.46), and major support at $95.02, the 200 day, all rising. Resistance remains at $110.

NYSE Financials were the strongest sector again today, +0.5%, with BofA the habitual most active up another 6.1% vs +4.5% and +4.1%. The high of $9.90 has not been seen since 8/2/11 – but take note that this is potentially the THIRD lower high…will it take out $10 – TB doubts it.  Since bottoming on 3/6, financials are up 7.6% and up 19.2% ytd!!! Now look at 12 months: DOW 4.6% – this despite a humongous rally??? Pullease!!!

Friday’s options expiry was a quadruple witching (stock index futures, stock index options, stock options and single stock futures (SSF) all expire), the first of 2012. NYSE volume including trades on ETN’s hit 4.85B highest since the last quasruple witching on 12/16. Not only that but actual trades on the NYSE ran 1.65B shares, also highest since 12/16. What is remarkable though is how little the market moved and closed showing that this was all algorithmic trading (high frequency), with little retail. Most savvy investors avoid doing anything on options expiry and as much as two days earlier.

The Dow had just a 57 point range hitting the session high shortly after the open at 13289 then changed direction (positive to negative) SIX ties during the session finally closing at 13232, just one point above the session low…there is a lot of information in that statement and it doesn’t bode well. All major indices were little changed (+/- 0.2% to flat).

The significance of Apple in stock market performance cannot be overstated. Look at AAPL year to date and past 12 months vs. the indices:

 3/19/12                        YTD               12 mos.

AAPL                          +44.6%!!!     +77.1%!!!

Dow 30                             +8.3%           +11.6% – AAPL not in index

S&P 500                         +11.7%           +11.3% – in but wtg unknown, mkt wtd index

S&P 500 Computer   +37.7%          +47.5%    -included, wtg unknown

S&P 100                         +11.7%           +12.3%    -included, wtg unknown

Nasdaq Comp                +17.3%           +15.6%    -not included

Nasdaq 100                    +19.1%           +22.1%    -included, wtg unknown

NDQ Computer               +22.1%          +24.4%    -included, wtg unknown

NYSE Institutional       +11.4%          +12.0%  -7% of index

NYSE Comp/Tech         +19.8%           +24.8%  -25.7% of Index

CBOE Tech                        +19.9%           +25.1%    -35.9%!!! of Index

Russell 1000 lg cap       +12.1%             +9.5%  -in but wtg unknown

Russell 1000 Tech         +20.5%           +21.1%  -21.4% of index!!!

Russell 2000 sm cap      -17.6%              +4.5%  -not included

(Apple is a member of 88 indices…note some keep weightings proprietary.)

From the above table, two things are readily apparent: Indices with Apple in them have outperformed, and the difference in weightings shows that the other members are significantly lagging. In other words, we have a market dominated by Apple and a few select stocks.

Is Apple rich or cheap? You decide. Past performance is no indication of future performance. Apple just announced a quarterly dividend of $2.65 a share (0.05% based on Friday’s close! and a $10 billion share buyback. Growth rate has been 19.8% annually last five years. The p/e ratio is 16.7% (13.5% est). P/e to growth rate (PEG) is just 0.7x. The question is can that growth be sustained …the dividend and buyback suggest that they can’t do as well although this was done due to investor demands. Lastly, and this apply to the next section, when the market dives you can’t always sell what you want to sell…you sell what you CAN sell…and that includes Apple. So far in the recovery a one stock portfolio would have served you very well – so long as it was AAPL!  Since stocks bottomed in March 2009, AAPL is up 477% – 79.4% annualized! Incredible, and mostly due to innovation and sound marketing!

A friend sent a clip that is the best explanation of algorithmic trading TB has seen. It is on TED, which is producing some great clips and is by Kevin Slavin. It explains volumes about stock market activity and how risks are heightened…not just how it applies to stocks, but currencies, bonds, and commodities…the markets have been turned into a ‘numbers’ game…gambling, not investing and we are the pawns…your retirement is at risk while the SEC stands idly by.

Algorithms explained

Also there was an interesting column in Barron’s by Beverly Goodman. Some of the worst performing funds over the last three years will see a horrible quarter fall off their books (Q1 2009 just before market bottomed…Q4 is already gone but some managers bought into the selloff early). This will make their performance look better than it actually is and as usual that means inflows to the funds which could be a big mistake by jumping to mediocrity. For example, Legg Mason’s Bill Miller who beat the S&P500 for a record 15 years, then abruptly imploded by being heavy into financials. He is exiting the Value Fund that he ran over that time and going to the Capital Opportunity Fund which will benefit from this phenomenon and make him look good. Has he lost his touch? Time will tell but do you want to invest your money to find out how he does?

. . .   – - -  . . .  (SOS)

…the number of movies in the slug now number SEVEN…ah, the smell of napalm in the morning while Agent Orange wafts over you and into your ships ventilation system eventually causing a large number of the crew to suffer maladies…such was Viet Nam…and that was just from a ship. TB is no hero…he just did his duty. Three of his friends were heroes who gave their lives, along with others in a war based on obsolete thinking.

Why Viet Nam? Because that ill-advised and poorly managed war (even worse than Iraq and Afghanistan), caused protests, which led to riots, which led to burning draft cards, which led to young people fleeing the country some out of conscience and others just not wanting to serve. This was a first for our country and set the stage for what we have today.

Nobody has to do anything for their country…some do and we should be grateful to them…others because they can’t find a job, but either way, they are carrying the load and it isn’t distributed well. If you don’t do any service for your country what loyalty do you feel for it? Couldn’t we be taking people right out of high school and putting them to service like the Israeli’s do? It doesn’t have to be the military, it could be working in hospitals…TB’s only requirement is that it be at least 500 miles from home so they learn what it is like to take care of themselves.

At this point that would be a difficult challenge, since mom and dad have hovered over them (hence the name helicopter parents), ready to stop anyone who gets in their childs way whether coaches, teachers, even the police and bosses. That isn’t teaching responsibility…or is it?

They went to college and those who got MBA’s did as they always have: migrated to the highest paying jobs, which for the past twenty years just happened to be Wall Street. As discussed on Friday though, partnerships turned into publicly held companies and risk taking became in vogue. Excessive risk…products designed not to fill a need but to generate revenues…some, as turned out with interest rate swaps destroyed communities while their advisors, JPMorgan, Citi, Goldman Sachs and others reaped out of line fees for this simple product. The created credit default swaps the fought Sheila Bair who wanted to have them trade on an exchange. Why do that? That would take all the profit for them. This way you can collect oversized fees in and back out while the client stacks up piles of offsetting risks…unless the chain is broken as occurred with AIG. Ah, but Uncle Sam stepped in and saved the day. Now they are back to business as usual after killing or watering down any legislation designed to rein them in. How can we compete with the European banks if we don’t leverage more? Simple, you don’t and then you don’t wind up like them!

Let’s separate the banking and non-banking activities…for Goldman Sachs and Morgan Stanely this is simple: neither of them is a bank nor wishes to be one. JPMorgan and Citi cry that they are banks and need to compete in the non-bank areas. Fine, know what you do? You split it into two companies and spin one off…you choose. The bank will continue to have guarantees, the investment banks none. Wait! Isn’t that what we did with Glass-Steagall which served us well for over fifty years until Sandy Weill, Robert Rubin, Alan Greenspan, and Phil Gramm ‘conspired’ to destroy it and in fact deregulate the largest banks. The only one of this Fab Four that didn’t benefit from it was Greenspan but he was all about ego. The rest got what they wanted and we, the people footed the bill.

JPMorgan Chase started out as two banks…actually more as they merged. In 1935, they split off the two divisions so it was JPMorgan the bank, and Morgan Stanley the investment bank. Similarly FNB Boston became a bank and First Boston. It worked well for half a century until Sandy Weill and others became drunk with power and destroyed the only thing that protected the people. We now know what we have to show for that. It was a disgusting act of treason. Yes, in some countries destroying the banking system is treason.  Here it isn’t even a misdemeanor.

Once the brokers went public and new ones like Salomon Brothers and Goldman Sachs came on the scene the senior partners were the gatekeepers…after all it was their money! AND they couldn’t get it out…only the income generated. Gus Levy of Goldman didn’t tell them not to cheat the clients,…just don’t take too much…that way the company will thrive and no one will get hurt

The boutiques grew in stature while the big guys were more wire houses. It was all good. Then came negotiated stock commissions. In May, 1975 and that was an earthshaking event. Instead of 90% of the revenue coming from stock trades it reversed to it coming from the investment banking side of the business. Upset the balance, and in all things balance is key.

TB could go on but there is no need. You know how this story ends. But what we never expected is that this small group of people could control our government and that is where we are today.

Pity…we used to have the safest and fairest markets in the world. What a price to pay to make them rich.

Hope you have a prosperous week…just be careful!

TB

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