Bloomberg Quote of the Day: “Feel the fear and do it anyway.” – Susan Jeffers. Sounds like the motto of Wall Street…add: feel the high!
Bloomberg Top Stories:
*Deutsche Bank Net Drops More Than Estimated as Euro Crisis Curbs Trading – bank=trading
*Barclays Investment Banking Rebounds as First-Quarter Profit Tops Estimate
*Stocks in Europe Decline as Economic Confidence Slides; Italian Bonds Drop
*Europe Seen Adding Growth Terms to Rulebook as Focus Shifts From Austerity –oh boy!
*Euro-Area Confidence Declines in Signs Economic Growth Slowing
*Bernanke Rebuts Krugman Criticism He Ignores His Own advice on Inflation – Hello???
*Wall Street Banks Choose Sides as Maiden Lane Battle Looms – CDO’s held by Fed 4sale
*Spanish Bonds at 6% Show Market Risk of banking Bailout – recall when 6% was great?
*Volkswagen First-Quarter Profit Beats Analyst Estimates as Sales Jump 26%
*Raytheon Raises Full-Year Forecast After First-Quarter Profit Climbs 17%
*Natural Gas Prices to Climb as Goldman Predicts Production Cuts – still dirt cheap!
*Colgate-Palmolive First-Quarter Profit $1.24 Per Share, Meeting Estimates – not so hot
*CEOs Earn More Than They Would Without U.S. Boards Showing Bias Over Peers – egad!
*Murdoch Says He Failed to Stop Hacking Scandal That Derailed bid for BSkyB – hah!
*Wall Street Tracks ‘Wolves’ as Occupy Demonstrators Plot May 1 Resurgance – watch!
*Supreme Court Skeptical of Obama’s Use of Federal Power as Campaign Starts
TB was surprised at the resilience yesterday. Dow put in a high of 13105 but still below resistance at 13131, the April 17 high, or 13114 the following day before the plunge began. Support now at 130426 (50 day m/a), 13021 (40 day), then 12153, the 200 day. Also, 12710, the 4/10/12 low. NYSE stock volume rose to 4B shares vs 3.6B shares and close to last Thursday’s 4.17B ahead of options expiry. NYSE shares executed on the Big Board however were LOWER for a THIRD straightsession, 651M (lowest since 3/12) vs 752M vs 785M, Friday’s 959M (highest since 4/10/12) was the first ABOVE average volume day since April 10! 11 of the last 14 sessions have been less than 800M shares! Since 2/29 there have now been just FOUR ‘average’ days, including 3/16’s high for 2012, but average has fallen to 807M shares. Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have now been SIX sessions less than 700M shares. 107 of the last 119 sessions have been less than the 12 month average! Advance/Declines were positive: +3.3x vs +2x vs -3.8x vs +2x vs -1.4x on NYSE and 2.8x vs +1.8x vs -3.1x vs +1.5x vs -1.7x on Nasdaq. Breadth was better: +3.3x vs +2.3x vs -5.5x vs +1.1x vs -2x on NYSE and +5x vs -1.2x vs -4.8x vs -1.2x vs -1.6x on Nasdaq. New 52 week highs nearly doubled again to 239 vs 131 vs 58 (high was 420 on 3/26), while new lows were dipped to 51 vs 75 vs 164. Ratio is positive by nearly 5x vs +2x vs -3x vs +2.5x vs +1.5x vs 1:1 vs +3.5x vs 1:1. The S&P VIX dropped sharply to 16.99 -1.11 after gapping up on the open Monday to 20.27.
Here are the results of the last five sessions: Dow +0.7x vs +0.6% vs -0.8% vs +0.5x vs -0.5%; Transports +0.9x vs +1.2% vs -0.9% vs +0.1% vs -1.4%!; Dow Utilities +0.7% vs +0.7% vs -0.5% vs +.9% vs -0.3%; S&P 500 +1.4%* vs +0.4% vs -0.6% vs +0.1% vs -0.6%; Nasdaq Composite +2.3%!* vs -0.3% vs +1%! vs -0.2% vs -0.8%; Nasdaq 100 +2.7x!* vs -0.6% vs -0.8% vs -0.4% vs -1.1%; Russell 2000 +1.8x! vs +0.8% vs -1.5%!!! +0.6% vs -0.6%; NYSE Financials +1% vs +0.8% vs -1.1%! vs flat vs -0.4%; NYSE Financial Leaders: BAC +0.8% vs flat vs -2.2% vs -4.7%! vs -1.7% vs flat vs +1.5% vs +1.3% vs -5.3%!!!, GE -0.4%; F +3%; Itau Brazil bank ADR -5.7%! Citi not a leader but +0.7% vs +0.5% vs -1.9%! vs -2.8%! and since peaking at $38.40 on 3/19, it is now off 12.2%!!! Stop the insanity! *indices with AAPL which was up 9% on the session!
European equities weaker, Asia little changed: FTSE flat vs +0.1% vs +0.1% vs -1.7%! vs +0.2%; CAC40 -0.9% vs +2%! vs +0.7% vs -2.3%! vs +0.3%; DAX -0.4% vs +1.4% vs flat vs -2.8%!!; Nikkei FLAT vs +1% vs +0.8% vs -0.2% vs -0.3%; Hang Seng +0.8% vs -.2% vs +0.3% vs -1.8%! vs +0.1%; Korean KOSPI +0.1% vs -0.1% vs -0.5% vs -0.1% vs -1.3%; Indian Sensex -0.1% vs -0.3% vs +0.7% vs -1.6%! vs -0.7%. U.S. stock futures a little weaker: DOW -12; SPX -2.20; NDQ -4.50. Bonds rallying with 10’s back below 2% and 30’s still above 3%. 10 yr 1.96% +1/4, RECORD low 9/23 of 1.6855%; 30 yr 3.12% +1/2; Long TIP 0.71% +1/2. It was 0.57% at high. The 5 yr TIP yields MINUS 1.20%; 10 yr -0.31%! Bills 0.07% 1 month; 0.08% 3 months; 0.13% 6 mos. Reverse Repo 0.24%. 3 mo. Libor 0.47%, and 0.73%; steady. European problem sovereign 10 years, Germany-benchmark: 1.69% -5 bp’s; Italy 5.63% +2; Spain 5.82% +7; Greece 20.68% +17; Portugal 10.64% -19; Ireland 6.69% +10.
Gold closed below $1700 for a 31st straight session, -<1, making the hit $149 since 2/28, closing $1642.30 -.50. 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, which remains below major support!!! The record high is $1923.70, a buying climax on 9/6. Res is $1667, the 40 day and $1685, the 50 day, then $1701, the 200 day. It is now $1650.30 +$10. Crude closed little changed again but slightly higer at $104.12 +.57. 4/10’s low of $100.68 was worst since 2/15/12! It remains below the range of $105-110 which held from to 3/28!!! RES at the 40 day (104.90), the 40 day (104.98), and major support at $96.09, the 200 day, 40/50 converging. It is now $104.00 +.12. $101.08, the April 4 low is still minor support.
It’s all about Apple…an Apple rally a day keeps the bears away, right? APPL rose 9% yesterday closing above $600 again, causing major moves in both Nasdaq indices and the S&P 500 of which it has a 4.5% weighting! It was 42 of the 71 point NDQ 100 gain with six others adding about 2 points: INTC, QCOM, MSFT, GOOG, PCLN, AMGN. Think about that, will you?
TB heard gloom and doom on commodities yesterday on CNBC due to the Fed’s failure to push QE3, yet not that much happened to gold, silver, or even crude…perhaps the specs are out. The other evening CNBC had a documentary on coffee…it was quite interesting highlighting Starbucks and how Green Mountain Roasters shot up due to their alliance with Keurig. But the best part…and Michele Bachmann should have heard this, but wouldn’t understand it, was an interview with a floor trader for coffee. He was asked how much supply and demand affect the price…none, he said! It is all speculation (in the highly visible front contract)…and that is the point on crude: Congress, the President, no one has any control over the price which if we had any recall at all would have shown us how it got to $147 in 2008 on unregulated commodities index swaps. Commercials have no control on the front end but they ARE the middle and long end of the market! That is the important thing, not just the first two contracts.
TB’s bet is still for lower stock prices given the mix of earnings. Apple was the catalyst yesterday (profits doubling on China sales of Ipods), while the losers earnings only hurt themselves. Still more and more are missing and annual returns don’t look so hot for most industrials..rather shocking.
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…on Tuesday evening TB watched Frontline on PBS, Money, Power and Wall Street (Part I). If you missed it, here is the link and note that Part II will be on May 1st! TB found Inside Job to be the best documentary on the debacle…this one surpasses it due to the insight into what was happening at the federal government. It also showed how Obama was being briefed, McCain putting his campaign on hold and returning to Washington to solve the problem. Both were invited to a meeting at the White House and asked for their opinions. Obama knew the answers…said we could not let any more firms fail as we did Lehman or the entire global system would implode…he asked McCain for his opinions…he stammered, looked at his cue cards, and offered up nothing. About this point Bush made some silly remark and walked out as he had lost control of the meeting.
Right or wrong, you had better rethink Obama’s abilities – you cannot beat someone by merely mocking them, you need to understand them. Here is the link…TB urges you to listen to this hour-long unbiased report: Frontline
Capitalism is a wonderful thing…in fact it is the best system yet devised. But and this is a very big BUT…man left to his own devices will let greed overcome sound judgment. At no time has it ever been more apparent that big business – especially banking – cannot control its impulses. Trace this loss of self-control back to around 1980 when business broke the contract with labor by cancelling pension plans and replacing them with IRA’s and 401(k)’s knowing that they would never provide for retirement…Congress knew this too but complied.
In the 1970’s there was a word for those who went into civil service: losers. They would make much less than in the private sector. Alas, that theory was demolished as civil servants today retire better off than their private sector counterparts…CEO’s and senior management excepted. A Bloomberg story today tells how CEO compensation is being determined by boards who compare, often to companies twice as large, CEO pay and then jack up their own to match. They provided an example in CBS CEO Lesslies Moonves who earned $69.9 million. Who is worth that much? Also, while the stock is up 37% over the past year, past performance is no predictor of future performance. And the stock is selling at 21x earnings (14x ‘estimated’). The 5 year dividend growth rate is -13% and the p/e to growth rate is 1.3x. Is that growth sustainable in a highly competitive industry? More importantly, is that return directly attributable to the CEO in a business where middle management has tremendous impact on results?
It was Ivan Boesky who, in a speech at UC Berkeley said ‘greed is good.’ This was later to be used by Gordon Gecko in Wall Street. Boesky also was asked about how much is enough. He said it is never enough. The money isn’t the point…it is only a ‘counter’ to assess yourself against others. There you have it. If he makes $1 million, then I want to make $2 million…that is real inflation! Worse, it continues when it becomes billions, not millions…surely someone out there wants to be the world’s first trillionaire!
But what can one do with that money? Like the three winners of the $694 million Super Lotto recently. They have no idea. Remember what Alan Simpson said and TB recounted last week: if you took a penny a second it would take you 5,000 years to reach $1 billion. To reach our national debt you would have to do this all the way back to the Big Bang!
TB does not begrudge those who innovate and produce something. But for a kid with an idea that arguably subtracts from productivity (Facebook), to become one of the wealthiest billionaires is absurd. Or to tax hedge fund operators at 15% when if anything they destroy productivity. Worse, the majority of the wealth is tied up in the financial services industry…the one we bailed out at no cost, civilly or criminally to any of them.
A Bloomberg story today cites three men fined for a thirteen year insider trading scheme. The mastermind was fined $33 million…whatever happened to the punishment suiting the crime? They saw it as a victory, just as the SEC did with Angelo Mozillo’s $51 million fine…a pittance against what they took out of the market…and no jail time, none.
Penalties like this are no penalties at all and worse not a deterrent to others contemplating breaking the law…isn’t that what fines and jail terms are supposed to do? Yet sell a few ounces of marijuana and you wind up in federal prison for 20 years…no parole there either. We are bankrupting ourselves through stupidity like this while the masterminds just keep making more money…a mere cost of doing business.
You ain’t seen nothing yet as the wealth gap is widening exponentially. Almost makes you want Occupy Wall Street to succeed on May Day…although they are sadly misdirected.
It was a wonderful world!…now if only we could restore it. Will try for one more column tomorrow before leaving on trip. Back on May 14th. It will be interesting to return to Ireland. We were last there in 1997 just when the economy was beginning to take off. It will be interesting to see and report on the differences.