TB’s Quote of the Day: “Is it rational to expect a single stock to provide outsized contributions to the index (S&P 500) price return? – Barclay’s analysts on Apple (4.375% of the S&P) delivering 20% of the return for the quarter and 47% for the trailing 12 months! No, it is not!!! TB
Bloomberg Top Stories:
*Economy in U.S. Enters Sweet Spot Spurring Global Growth While China Slows – sweet???
*China’s Ecnomy Grew 8.4% in First Quarter in Estimate Cited by Official – so they say…
*JPMorgan Lead Over Morgan Stanley Seen Widening as Moody’s Downgrades Loom – ouch!
*JPMorgan Ccazenove’s Hannam Quits to Fight $721,000 Fine by U.K. Regulator – inside info!
*Home Prices Seen Declining 10% as Foreclosures Hit Market – will it never end???
*Oil Declines as Stocks, S&P Futures Fluctuate Before U.S. Factory Report – Crude $104.48!
*German DAX Beating S&P 500 by Most Since 2005 on Global Economic Optimism – piffle!
*Cyber War Games Sharpen FICO Attack on Escalating Corporate Hacking – oh boys!
*Muni Revenue-Backed Debt Set for Longest Winning Streak Since 2010 – down with G.O.’s?
*Arab Spring Skips Saudi Arabia as Government Pours Money Into Youth Jobs – unlike U.S.!!!
*Republicans Failing Business Party Role in Resisting U.S. Chamber Wishes – sorry, Abe!
*Japan’s Strongest Storm Since 1959 Forecast to Slam Into Tokyo Later Today – 1959???
*Obama Expresses Confidence U.S. Justices Will Shun Activities on Health Law – could be!
Volume dropped again to 3.5B shares vs 3.6Bon NYSE listed stocks. Also, NYSE stocks executed on the Big Board plunged to 763M from 966M shares, backing away once again from the falling 12 month average (975M), about 200M below the 12-month average. Whereas stocks were weak on higher volume they were up on weak volume, a pattern that has persisted for about a year…or more. Since 2/29 there has only been just 2 ‘average’ days. 3/16’s high for 2012, and the average has been just 817M shares – and falling! 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. 94 of the last 103 sessions have now been less than the 12 month average! Advance/Declines were finally strong: +3x vs +1.4x vs -1.5x vs -1.8x vs -1.4x on NYSE and +2.4x vs -1.2x vs -1.4x vs -1.9x vs -1.6x vs +3.2x on Nasdaq. Breadth was similar: +3.9x vs +2x vs -1.6x vs -2.4x vs -2.2x on NYSE and +2.2x vs +1.4x vs -1.4x vs -2.2x vs -1.1x on Nasdaq. New 52 week highs slipped to 187 from 221, high was 420 on 3/26, while new lows nearly doubled (on an up day?) to 50 vs 28. The ratio rose to +3.5x vs +2x, down from a high of +29x! The S&P VIX was steady for a FOURTH session – rare –rising slightly to 15.64 vs 15.50 vs 15.48 vs 15.47 vs 15.59, while intraday last Wednesday 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. Buckle up!
Here are the results of the last five sessions: Dow +0.4% vs -0.1% vs +0.2% vs -0.5% vs -0.3%; Transports +1.0% vs +0.6% vs flat vs -0.3% vs -0.2%; Dow Utilities +0.5% vs +0.4% vs +0.4% vs -0.9% vs +0.5%; S&P 500 +0.8% vs +0.4% vs -0.1% vs -0.2% vs -0.5%; Nasdaq Composite +0.9% vs -0.1% vs-0.3% vs -0.5% vs -0.1%; Nasdaq 100 +1.1% vs -0.3% vs -0.3% vs -0.5% vs +0.2%; Russell 2000 +1.2% vs -0.2% vs -0.3% vs -0.7% vs -0.7%; NYSE Financials +1% vs +0.3% vs -1% vs -0.2% vs -0.8%. NYSE Financial Leaders: BAC +1.2%! vs +0.4% vs -2.3%!!! vs +1% vs -3.3%! vs +0.8% vs +2.5%! vs -2.2%!; GE -0.3% vs +0.6% vs -0.3% vs -0.2% vs -0.1% vs +1.4%; F +1.2%! vs +0.2% vs +1.5%. What about Citi you ask? Citi is out of play and has been since peaking at $38.40 on 3/19! Since then it has fallen by 4% to $36.87…got it?
European equity markets weak, Asia up, ex-Japan: FTSE -0.2% vs +0.2% vs +0.6% vs -0.9% vs -0.3%; CAC40 -0.6% vs -0.3% vs +1.2% vs -0.9% vs -0.3%; DAX -0.2% vs flat vs +0.9% vs -1.2%! vs -0.5%; Nikkei -0.6% vs +0.3% vs -0.3% vs -0.7% vs -0.7%; Hang Seng +1.3%!!! vs -0.2% vs -0.3% vs -1.3%! vs -0.8% vs +1.8%!; Korean KOSPI +1% vs +0.8% vs flat vs -0.9% vs -0.4%; Indian Sensex +0.7$+0.4% vs +2%!!! vs -0.4% vs -0.8% vs +1.2% vs -1.8%!!! vs +1% vs -2.3%! U.S. stocks futures weak, as they were yesterday: DOW -38; SPX -3.60; NDQ +.50. Bonds better but remain weak: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.17% +3/32. RECORD low 9/23 of 1.6855%; 30 yr 3.31% +5/16; Long TIP 0.82% +1/2 – best of the bunch! It was 0.57% at high. The 5 yr TIP yields MINUS 1.32%!; 10 yr -.22%. Bills 0.05% 1 month; 0.07% 3 months, 6 months 0.13%. Reverse Repo 0.31% vs 0.25%! 3 mo. Libor 0.47%, and 0.73%.
Gold closed below $1700 for a 16th straight session, but rallied for a 2nd session, making the hit $99 since 2/28, closing $1679.70 +$7.80. 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, and is now $1676.30 -$3.30. The record high is $1923.70, a buying climax on 9/6. Res is $1691, the 200 day and $1708, the 40 day, then $1712, the 50 day, they just crossed. Major support is $1652, the 1/25/13 low, now res! Crude rose for a second day after tanking for two days once again taking out BOTH the 40 and 50 day m/a’s, again, in one session! Closed $105.23 +$2.21. Don’t expect it to hold with supplies up! Thursday’s session low of $102.13 was worst since 2/17/12! It is back to the range of $105-110 which has held since 2/21!!! For now! It is now $104.71 -.52, with SUPPORT again at the 40 day (104.88), the 50 day (103.63), and major support at $95.40, the 200 day…all rising. Major resistance at $110!
Happy about that great first quarter performance erroneously billed as the best in 14 years? Look at this story from MarketWatch. It was all about Apple…and what Apple gives it can take away. With a weighting of just 4.375%, yet the highest weighting in the S&P 500 (it will increase to 4.55% and keep growing if the stock keeps going higher which TB fully expects…for now!) and Nasdaq 100. That weighting is up 1.5 times since December 2010! In other words, both the weighting AND price are distorting S&P performance higher.
But the distressing part of this is that it was responsible for 20% of the first quarter gains, not 15%, despite falling for the last two days of the quarter. Of course, it was up yesterday and closed just off a new record high of $618.63…o/n the indication is to open at $622…more on that later.
So yesterday was a strong day with the S&P 500 up 0.8% (0.6% ex-Apple), The Nasdaq 100 was up 1.1% with AAPL providing 16.4 index points of the of the 29 point gain or 56%! The next biggest gainer was Oracle with 1.7 index points!
As managers attempt to determine why they underperformed so badly against the bogey (S&P 500), they will feel compelled (the sheep that is) to buy AAPL, thus pushing it to even more new highs and further distorting performance of the indices it is in, many with very high concentrations as shown yesterday. Once again here are the returns for the indices where the weighting is known.
1st Qtr 12 Mos. AAPL Wt. 1st Qtr 12 Mos.
AAPL +48.0% +72.0% ex-AAPL ex-AAPL
S&P 500 (SPY) +12.6% +8.3% 4.38% +10.1% +5.4%
Nasdaq 100* +21.2% +18.9% 14.9% +16.5% +9.6%
NYSE Inst. +12.6% +9.6% 7.14% +9.9% +4.8%
NYSE Comp +21.7% +22.5% 26.11%! +12.4% +4.7%
CBOE Tech +26.7% +18.9% 36.32%! +13.4% -7.3%!!!
BB Silicon Val +23.2% +22.9% 41.35%! +8.1% -9.7%!!!
Russell 1k Tech +12.9% +7.8% 21.54%! +9.4% -28.4%!!!
*Based on weighting in NASDZ ETF of 14.85%, MSFT #2 at 8.96%
Having determined the approximate weighting from a Nasdaq 100 ETF, AAPL is about 14.9% of the NDQ 100, look what happened to the return, as well as the three minor indices that turned to negative returns for the 12 months. Pathetic risk measurement!
Note that while Apple had a steady upward trajectory from the January 20, 2009 lows to June 23, 2011 of 270% or 72% annualized. At 12/31/10 is was just 2.95%, dipping to 2.7% in Q1. but in Q3 the S&P 500 lost 13.9% while AAPL mirrored it at +13.6% (without Apple, the S&P would have been -14.4%! Conversely, in Q4 as the broad market reversed itself, APPL gained ‘just’ 6.2% vs 11.8%. But this would only have raised the S&P to 12.0%. So while, Apple’s first surge began in June 2011, the steep rise only began in January 2012.
As Barclays warned, “AAPL has offset 40% of the year-to-date decline in ESTIMATED 2012 index (earnings per share). First quarter earnings growth is estimated at just 1.4% year-over-year for the S&P 500, and about zero excluding Apple.” They conclude, On balance, the outlook for first-quarter earnings reports is mixed at best, any slip-ups by Apple could be costly to equity investors.” Yet the market strategists remain the most bifurcated on the outlook for stocks that TB has seen in a long time.
Yesterday, TB wrote: anyone in favor of a one stock index?…one stock portfolio??? This mirrors the comments by Barclay’s. It also highlights the importance of cross-checking weightings in ETF portfolios so they do not become positively correlated. Some rally, eh what? Taking bets on Q2 at the window!
. . . – - - . . . (SOS) . . . – - - . . . (SOS) . . . – - - . . . (SOS) . . . – - - . . . (SOS)
…as TB said on Friday, Benjamin Disraeli left out political lies in his famous quote about lies, damned lies, and statistics. Not being partisan, because TB is no lover of the Democratic Party, but the GOP, having learned well at the feet of the master, Karl Rove, continue to spread lies on everything from the budget to healthcare. This is not the party of Lincoln…in fact it is not even the party of business…big business, as it historically has been. It is the party of the few (not to be confused with the Marines slogan as they aren’t proud and they damned well aren’t brave), those who unlike the vast majority of us work hard for a living or have earned enough to live comfortably in retirement (hopefully), and throw millions around on political campaigns that will perpetuate their greed before we even get to the primaries.
They were for a health care mandate…yes, both Newt, Romney, and other luminaries (sic), until the Dems seized power and then they were wildly opposed. They fought the health care mandate till it is in the hands of the Supreme Beings…er…Court, and who will probably rule 5/4 against it in what will be taking the law into their own hands.
You disagree? What have the states done about it the healthcare crisis so far? Absolutely nothing, nor will they as they are under the thumb of the insurers and pharmaceutical manufacturers just as the federal government is. But we are too dumb to see this.
The cost they say, yet what is it costing us as hospitals lose money treating the poor and then raise their rates, again and again? Meanwhile, those who can’t afford insurance due to losing jobs find themselves uninsurable or only do so by negating pre-existing conditions.
But what is truly amazing is how these few wealthy people (TB will not even call them Americans), have poisoned well-meaning individuals into believing Obama is a socialist or worse, and theirs is the only way of saving America…they even choose names for their SuperPacs that promote patriotism, loyalty, freedom, etc. But they are anything but.
You may choose to disagree and that is your right and privilege…TB respects that, but even those of you who consider yourselves wealthy are chump-change to them. You don’t count…nor do your kids…education? They don’t need it! Healthcare? They don’t need it! But what they do need is your support to keep them going and like a flock of sheep we do as they tell us while they sit back and laugh at our ignorance.
Crime in the cities? Look at it escalating…especially among poor minorities…is it justifiable? NO! But is it understandable and will it continue to grow? You bet it will.
Thanks to supply-side or trickle-down economics, they have engorged themselves and they will continue to do so, while those recently out of ‘B ‘ school try to emulate them. This has been growing for nearly three decades and will continue to do so as we suffer a brain drain from productive professions and occupations to worshipping money. Pity.
TB listened to the psychoanalyst mentioned in the CFA article on psychopaths and sociopaths on Wall Street. He said he sees them come in at around 40, burned out, and having hit bottom with nothing to be proud of but their money…no sense of accomplishment, and he says it is truly sad. He adds that at least one in ten on Wall Street qualify as psychopaths/sociopaths yet they harm no one…physically. No, they are more like rapists who deprive others of their dignity…even those who work with them.
God bless America…please!
Lastly, while Kansas never came close to beating Kentucky last night they put up a valiant fight at the end…just as they won coming from behind on Saturday. But what TB will remember is the awful rendition of the national anthem by The Fray that is the only thing TB can think of that surpassed Stephen Tyler’s at the NFL’s AFC Championship game, except Roseanne Barr’s disgraceful sham. Why do the sponsors allow this when there are so many singers who can make it sound proud and beautiful? Color TB disgusted.
Have an exciting day!