Bloomberg Quote of the Day: “It is easier to fight for one’s principles that to live up to them.” – Alfred Adler
Bloomberg Top Stories:
*Stocks Drop in Europe for Third Day as Spanish Bonds Fall on Debt Concern
*Spain Rattles European Markets as Investors Flee to Francs, German Bonds – it isn’t over!
*Bank of England Keeps Bond-Purchase Program Unchanged With Benchmark Rate
*JPMorgan’s Staley Widens Lead on BofA’s Montag in Compensation – see below!
*Morgan Stanley’s Gorman Got $10.5 Million Pay Package for 2011 Performance –egads!
*Default Swaps Trading Wanes as Debt Rally Quells Hedging – what about Spain???
*Gap-to-Target Retail Sales Top Estimates on Warmest March in 50 Years – sustainable?
*Biggs Reducing Stock Purchases in Anticipation of 5% to 5% S&P 500 Decline
*Ethanol to Miss Consumption Target as U.S. Uses Less Fuel – another boondoggle!
*Nokia U.S. Future at Risk as AT&T Debut Sales Seen Below Million-Unit Mark
*Obama Assails Ryan Budget as Irresponsible Without a Long-Term Alternative – he said, she said
*Syria Clashes Kill More Than 27 People Before Cease-Fire Deadline From UN
*Romney Goes for Knockout in Pennsylvania While Stepping Up Obama Attacks
*Groupon IPO Scandal Is the Sleaze That’s Legal – never buy an IPO after – if in, SELL! SEC???
Volume was steady at 3.8B shares on NYSE listed stocks. NYSE stocks executed on the Big Board rose to 832M from 816M shares, still well below the falling 12 month average (975M), by about 150M shares. Stocks tanked on the open and never got above the feeble first bounce again. Since 2/29 there has only been just two ‘average’ days, including 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. 96 of the last 105 sessions have been less than the 12 month average! Advance/Declines were highly negative: -4x! vs -1.9x vs +3x vs +1.4x vs -1.5x on NYSE and -5x! vs -2.4x vs +2.4x vs -1.2x vs -1.4x on Nasdaq. Breadth was even worse: -6x! vs -2.7x vs +3.9x vs +2x vs -1.6x on NYSE and -8x!!! vs -2.5x vs +2.2x vs +1.4x vs -1.4x on Nasdaq. New 52 week highs fell by 2/3 to 68 from 267, high was 420 on 3/26, while new lows DOUBLED to 126 vs 69. The ratio TURNED NEGATIVE, last time was 3/6!: -1.9x !!! vs +5x, down from a high of +29x! The S&P VIX rose after being steady for five sessions – rare –rising slightly to 16.44 vs 15.64 vs 15.50 vs 15.48 vs 15.47 vs 15.59, while intraday on 3/16 it hit 17.27, highest since March 9! Also, 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 -1%! vs -0.5% vs +0.4% vs -0.1% vs +0.2%; Transports -0.4% vs -0.2% vs +1.0% vs +0.6% vs flat; Dow Utilities FLAT vs flat vs +0.5% vs +0.4% vs +0.4%; S&P 500 -1%! vs -0.4% vs +0.8% vs +0.4% vs -0.1%; Nasdaq Composite -1.5%!! vs -0.2% vs +0.9% vs -0.1% vs-0.3%; Nasdaq 100 -1.4%!! vs -0.1% vs +1.1% vs -0.3% vs -0.3%; Russell 2000 -1.7%!!! vs -0.7% vs +1.2% vs -0.2% vs -0.3%; NYSE Financials -1.6%!!! vs -1% vs +1% vs +0.3% vs -1%. NYSE Financial Leaders: BAC -3.1%!!! vs -2%! vs +1.2% vs +0.4% vs -2.3% vs +1% vs -3.3%!; GE -1.1%! vs -0.3% vs -0.3% vs +0.6% vs -0.3%; F -1.1%! vs +0.2% vs +1.2%! vs +0.2% vs +1.5%. Citi back in with a 3.7% decline! Since peaking at $38.40 on 3/19, it has fallen by 8.7% to $36.87!!! If Financials fail, what happens to rest of market? Hello?
Global equity markets weak for a second session, Europe for a third, 5 of 6 down!: FTSE -0.4% vs -1.1% vs -0.2% vs +0.2% vs +0.6%; CAC40 -0.5% vs -1.2% vs -0.6% vs -0.3% vs +1.2%; DAX -0.9% vs -1.7%! vs -0.2% vs flat vs +0.9%; Nikkei -0.5% vs -2.3%!!! vs -0.6% vs +0.3% vs -0.3%; Hang Seng -1% vs closed vs +1.3% vs -0.2% vs -0.3% vs -1.3%!; Korean KOSPI UP 0.5% vs -1.5% vs +1% vs +0.8% vs flat; Indian Sensex closed vs -0.6% vs +0.7% vs +0.4% vs +2%!. U.S. stocks futures weak for a second session, compare: DOW -40 vs -91; SPX -4.40 vs -10.50; NDQ -0.50? vs -18. Bonds strong for a second session but long bond was up 1-1/2 now 7/8, on top of yesterday’s 1-1/2 point gain after gapping up, still weak though: 10’s and 30‘s still well above 2% and 3% respectively: 10 yr 2.17% +1/2. RECORD low 9/23 of 1.6855%; 30 yr 3.31% +15/16; Long TIP 0.88% +9/16. It was 0.57% at high. The 5 yr TIP yields MINUS 1.23% vs -1.27%; 10 yr -.13%. Bills 0.06% 1 month; 0.07% 3 months, 6 months 0.14%. Reverse Repo 0.28%. 3 mo. Libor 0.47%, and 0.73%.
Gold closed below $1700 for a 18th straight session, losing an incredible $58 and making the hit $167 since 2/28, closing $1614.10 -$57.90!!! 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, and is now $1627.60 +$13.50 – still below major support!!! The record high is $1923.70, a buying climax on 9/6. Res is $1692, the 200 day and $1703, the 40 day, then $1710, the 50 day. Major support is $1632, the 1/13/12 low! Crude plunged again, closing at $101.47 -$2.54!!! The session low of $101.08 was worst since 2/16/12! It is well below the range of $105-110 which had held since 2/21!!! It is now $101.64 +.17, with RES still at the 50 day (103.77), the 40 day (105.13), and major support at $95.50, the 200 day, all still rising.
Wow! What a day! Contrast to Friday’s decline that was a ‘down day’ for everything – stocks, bonds, crude…even Apple! Yesterday, a huge $58 plunge in gold, which closed at $1614, just $1 off the session low and well below the 3/22 low of $1630! So while both the Dow and S&P tanked by 1% and the two Nasdaq indices fell 1.4%, Russell 2000 -1.7% and NYSE Financials dropped 1.6%, bonds rallied by 1-1/2 points and are continuing to gain overnight, up 7/8! Stocks remain weak, both internationally and in U.S. Futures.
NYSE Financials gained nearly 19% in Q1 but are looking weak with BofA off 5% in the last two sessions and Citi, which had fallen off the most actives, back in the fray falling another 3.7%, which is now down 8.7% since the March 16 high. Can this be good for the broad stock market? Not likely.
The drop in the Nasdaq 100 was broad-based with only SIX stocks up (the highest being high-flier Priceline up just 0.1%!) and 94 down (MSFT -5.6 index points, AAPL -4.3, AMZN, CSCO, GOOG all about 2 points…that is 16 points of the 37 point decline. Does what Apple give, take away?
This could be the beginning of a steep 10%+ decline?…you decide.
. . . – - - . . . (SOS) . . . – - - . . . (SOS) . . . – - - . . . (SOS) . . . – - - . . . (SOS)
…may you live long and prosper…so long as you can afford health insurance. That is the message from Washington. Too expensive you say…only under the unworkable conditions given us.
First, Bush Jr. came up with Medicare Part D, then with the able assistance of the pharmaceutical lobby and Committee Chairman Billy Tauzin (R-LA, who later went on to head that lobby and become the highest paid lobbyist, $11 million). Congress passed it without funding it which by Tauzin’s provision that Medicare not be able to negotiate the price on prescription drugs (which is why Medicare pays 30% more than Medicaid and that is a lot of money!). Thus it ranks second only to the two Bush tax cuts in creating the budget deficit. To be fair, the Dems signed off on it too, but to blame Obama for the deficits is disingenuous. The last piece of the puzzle was the financial sector bailout…again before Obama took office.
In January, Blue Cross charged that UCLA Medical Center had a 17% profit margin…why would they do that? They were in contract negotiations with UC at the time.
(In 2004, HMO’s in Calfiornia average about a 5% profit – Blue Cross, the largest, 10%!, while PPO’s averaged about 18%! HMO’s money spent for patient care ranged from 79% – Blue Cross, with 4.6M enrollees- to 93% -Kaiser, 6.6M enrollees…does that tell you something about non-profits? PPO’s? 51% – Blue Cross, to 82% – HealthNet.
PPO Profits, you ask? Blue Cross, 27%, individuals only (showing how they are ripped off), all Blue Cross 18%; HealthNet individuals only 15%; All HealthNet PPO’s 5%!!! Get the picture? Just like they negotiate what they will pay hospitals and doctors, they ‘negotiate’ fees and profits. This shows how they need to be regulated….and this is not free market capitalism or if it is, do we want it?
Cigna Corp. CEO David M. Cordani’s total compensation more than doubled in 2010, his first year as leader of the nation’s fourth-largest health insurer, and a period in which the company’s earnings, revenue and enrollment all climbed.
Cordani, 45, received compensation valued at $15.1 million (that) year from the Philadelphia managed-care company (from $6.2 million but that was for a partial year), according to an Associated Press analysis of a regulatory filing.
That included a $1 million salary, a performance-related bonus totaling more than $7.3 million and stock and option awards adding up to $6.7 million.
- Source: kenmd.com
To TB this illustrates how poorly the states regulate health providers. Here is a pro-active example though from here in Minnesota.
Four health insures refunded $73 million to the state after the state requested them to help with the deficit by accepting just 1% profit – they agreed…for one year only. This was for care to low-income Minnesotan’s. HealthPartners, $31 million, Medica $25 million, Blue Cross and Blue Shield of Minnesota $9 million, and UCare $8 million! See, they need but ask…or put leverage on them if they want to operate in ANY state, but the insurance commissioners have failed to do this. Half of the money received will be returned to the federal government since it came from matching fund grants. This was just for one state…now multiply by 50 and remember there are a lot bigger states! This is why rates and fees should be federally regulated…IMHO. Most are non-profit but want to change to for-profit…in cases where it has happened such as Blue Cross of Missouri, where the CEO was sued improper intercompany dealings, we see what can happen when there is an additional profit motivation (TB had him for a client when he was CEO of Blue Cross of Oakland, CA)..
As for Minnesota, Sen. Charles Grassley (R-Iowa) has sent letters to the state, Justice Department and insurers after he called Minnesota’s record for calculating Medicaid payments ‘questionable. TB bets this will spread and hopefully provide us all relief.
Several years ago TB’s doc told him of a patient who was a senior exec with Cigna. He said that it was company policy to reject all claims by seniors the first time, then pay only on appeal! This disgusted him so much that he retired…fortunately he could, but sadly he didn’t become a whistleblower. ‘Apparently’ that policy has been changed…or has it?
Perhaps insurers…not just health but life…are even worse than used car salesmen and politicians. TB reported a week or so ago about how life insurers were not searching for heirs and worse not turning the money over to the states as required by law. The states then attempt to locate the beneficiaries and if none goes to their fund.
So far, and this was just cursory it is over $300 million, and includes the top insurers, who, when they heard about the investigation, began frantically calling and trying to find the beneficiaries. This is on the heels of a scandal on veteran’s life where the contract insurer (Prudential), opened checking accounts for the beneficiaries then wrote and told them they would earn 5% on it until they needed it. The bad news is they are not a bank and it was under a subsidiary that then invested the funds in high yield bonds. One woman had her checkbook stolen by a relative and they told her tough luck. Still think the states are doing a good job regulating insurers?
In the case of AIG, Texas saw problems early on and demanded additional collateral. The government however convinced them that if they did every other state would too, making a collapse a problem. What they were doing was buying securities then repoing them back to dealers who kept insisting on higher ‘hair cuts’ and they didn’t have the cash to buy them back and then sell them. In the end of course, they went down anyway.
As TB said many times before: this is not capitalism…it isn’t even Milton Friedman’s capitalism where ‘the business of business is making money.’ Friedman believed the long-term survival of the corporation would hold greed in check…he was wrong!
You have to love this! The letter I sent to Ford yesterday questioning Alan Mulally’s compensation? I received this back shortly after thanking me for my inquiry:
Alan Mulally’s leadership during 2011 has been widely recognized as exemplary. Mr. Mulally’s strategic direction significantly increased our Automotive operating-related cash flow, achieved our highest reported net income in more than 10 years and reduced our automotive debt by more than $13 billion. His compensation reflects the company’s commitment to align executive compensation with business performance and long-term shareholder value.
Isn’t free market capitalism…even if regulated by the states…grand?
Asked but not answered TB thinks. Well, they accomplished one of the two objectives: align compensation with business performance, and Mr. Mulally accomplished his, but about the shareholders:
if the stock is off 75% over the past 11 years and off 20% from 12/31/11, how long do we have to wait? Meanwhile, Mr. Mulally isn’t waiting…except for his lower prices shares to depreciate. Capische?
From today’s Bloomberg Top Stories: JPMorgan;s Staley Windes Pay Lon on BofA’s Montag in Compensation – ahem, $16M vs BofA’s Co-COO of Investment Banking fell 25% to $12M – this for a bank WE bailed out. Also for Staley, he negotiated and reneged on the contract with American Century that cost JPM $343M so it didn’t hurt his career…not one iota! Makes TB sick!
How do you feel about voter identification laws? In Minnesota, and amendment to the state constitution would require voter ID’s at elections and for the state to provide them for free. TB agrees with the concept because by law anywhere in the U.S. you are required to be able to provide identification at any time to a police officer. But he disagrees from the standpoint that the idea of this is to limit access to voters just like the John Crow laws and poll taxes did. This is because the GOP voters are more affluent as a group. It also doesn’t stop someone from using another voter’s ID – after all, how closely due election workers check ID’s…not as hard as when buying alcohol and we know that happens!
A votre santé! …is there a Ford in your future?…or health insurance?…or life?