4/25/13…more on the biggest transfer of wealth in history

From the Friar’s Club Encylopedia of Jokes: “Money is better than poverty, if only for financial reasons.” – Woody Allen

Bloomberg Quote of the Day: “Even cowards can endure hardship; only the brave can endure suspense.” – Mignon McLaughlin…yep, that’s what we’ve got: suspense!

Bloomberg Top Stories:

*U.K. Economy grows More Than Forecast Amid Criticism of Osborne Authority

*Pound Strengthens on Economy as Gold Climbs to Two-Week High; Yen Rebounds

*Central Banks Load Up on Equities as Stimulus Measures Destroy Bond Yields

*Fed Policy Debate Shifts to Extending From Tapering QE as Inflation Cools – !!!

*Few $1-Salary CEOs Make a Buck as Oracle’s Larry Ellison Earns $96 Million – sick!

*GE Halts Finance for Firearm Retailers as Gun Lenders Vanish After Newtown – !!!

*UPS Affirms Full-Year Forecast After First-Quarter Profit Beats Estimates

*Blackstone Sidesteps Crowded Auctions With Largest Rental Trade – next bubble?

*Brown Scares California Enough to Bring U.S. Worst to a Surplus Prosperity – is it???

*Italy Led by Letta Brings Berlusconi Back to Government as Biggest Winner – aarrgghh

Monday proved to be just another ‘one-day wonder.’ Tuesday was mixed but very bizarre: the S&P 500 and the two Nasdaq indices were FLAT!!! The Dow declined by 0.3%, Transports ROSE 0.6% and Utilities were +0.4%. But wait, there’s more: The Russell 2000 small cap rose 0.5% and NYSE Financials were up 0.7% led by KBW Banks which rose 1.2% for honors! Some of the blame can be laid on Durable Goods Orders which suffered badly from declining aircraft sales – but they can’t go up forever!

So let’s see what else happened lately:

*Dow Transports +0.6% vs +0.3% vs +1.5% vs -0.3% vs -1.5% vs +2.2% vs -3.8%!!! Russell 2000 +0.5% vs +1.1% vs +1.2% vs -0.6% vs -2% vs +1.8% vs -3.8%!!!; Dow Utilities +0.4% vs flat vs +1.4% vs +0.3% vs -0.6% vs +1.2% vs -1.3%! The S&P 500 was FLAT vs +0.5% vs +0.9% vs -0.7% vs -1.4% vs +1.4% vs -2.3%. Both Nasdaq indices were also flat while NYSE Financials rose by 0.7%.

*Volume, A/D’s and Breadth were only modestly positive especially in comparison to the declines. The VIX rose only slightly to 13.61 +.13 in a narrow range and is now between the 40 and 50 day moving averages

*NYSE Volume ROSE to 3.55B shares vs 2.97B shares – weakest in 11 sessions vs a 4B shares average last week – the two lowest, 3.63B and3.56B coming on the two ‘up’ sessions. REAL NYSE Volume also also rose but just to 706M shares vs a WEAK 620M following SIX 700M+ share days ranging from 975M last Monday (Worst selloff) to 743M Tuesday (rally) Monday with Friday’s options expiry coming in at a solid but not great 914M shares. The average for the week was 859M shares vs the 12-month average of 735M shares. The range since 2/11 is 558M to 1.825B on 3/15’s options expiry and a near 12 month high, second only to 12/21’s 1.88B shares. Note that 3/15’s (options expiry) was the only day since 2/28 to register over 1B shares! There have been just fourteen 800+M shares in 2013 – just THREE up, 11 down and on trades of less than that 68 were up and just 18 down…there have been 18 mixed session…do you see why volume matters???

  1. new 52 week highs have ranged from 121-709, were steady at 400 vs  400 vs 237 vs 228 vs 106 vs 100 vs 155 vs 154. New lows rose slightly to 48 vs 43 vs 96 vs 82 vs 159 vs 237 vs 120 vs 197.
  2. Advance/Declines were positive but…: +1.9x vs +4x vs +1.4x vs +2.6x vs -1.2x vs -3.5x vs +4.4x vs -7.1x on NYSE and +1.3x vs +3.4x vs +1.1x vs +2.2x vs -1.6x vs -4.2x vs +3.5x vs -8.1x on Nasdaq. Breadth was similar: +2.1x vs +3.9x vs +1.6x vs +2.3x vs -1.3x vs -10.5x!!! vs +6.4x vs -7.2x vs -2.2x on NYSE and +1.5x vs +3x vs +2.5x vs +2.3x vs -3x! vs -5.2x vs +6.2x vs -12.8x!!! vs -1.4x vs -1.2x on Nasdaq.
  3. NYSE Financials rose 0.7% vs +1.5% vs +0.3% vs +1.3% vs  -0.8% vs -1.8%! BofA only ‘most active’ financial +2% to close at $12.31 +.24 vs +3% vs +0.5% to 11.72 vs +1.8% vs -2.2%. Note that BofA’s 12 month average volume is 157M shares with a high of 463M shares on 12/5/12 – in other words it is about 5% of total average volume. The high volume ytd of 336M shares on 1/9 was 9% of total volume!!!
  4. Volatility (S&P VIX) rose slightly to 13.61 +.13 a day after plunging to 13.48 -.91 – just 2 points above the low, with a high of 14.87 on the stock plunge and close was lowest since 4/12 – does this seem sensible…nearing time to put those limit/stop orders in again??? The range last week was 12.06 (multi year low) to 18.20, but is now back below the 40/50 day (13.71/13.81) and the 200 day at 15.40…ytd the range is 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.43!!!

Global equities stronger for a 2nd day, Europe for the 8th time in 13 sessions – but losing momentum: UK +0.1% vs +0.2% vs +1.2% vs +0.5% vs +0.3%; France +0.2% vs +0.7% vs +2.4%!!! vs +0.3% vs +0.9%; Germany +0.6% vs +0.5% vs +1.4% vs +0.7% vs -0.1%; Japan +0.6% vs +2.3%!!! vs -0.3% vs +1.9%! vs +0.7%; Hang Seng +1%! vs +1.7%!!! vs -1.1%!!! vs +0.1% vs +2.3%!!!; Korea +0.8% vs +0.9% vs -0.4% vs +1%! vs +0.4%; India +1.2%! vs closed vs +0.1% vs +0.8% vs closed vs +1.5% vs -0.1% vs +2.1%. U.S. stock futures higher at mid range in another narrow trading session: DOW +46; SPX +6.20; NDQ +13.

Bonds closed only slightly weaker but still at lower end of trading range of late and are trading slightly weaker overnight: 10 yr Treasury 1.71% 1/16 (recent range now 2.06% to 1.68%), and the 30 yr’s 3.26% to 2.86%, 2.90% -1/8. The long TIP is now 0.45% -1/8 – after setting a new (record?) low of 0.36% on 4/5, before backing off to 0.52%! The recent high yield was 0.67% on 3/11! Libor update: 0.276% 3 mos., 0.430%!!! 6 mos. Foreign bond yields slightly higher across the board: Germany 1.24% –; UK 1.71% +2; France 1.75% +1, Italy 4.05% +5; Spain 4.32% +5; Portugal 5.71% +3; Greece 11.13% +7 vs 11.05% vs 11.08 vs 11.22% (recent range 10.58%-12.57%!). Japan 0.57% -1.  

Gold closed higher at $1423.70 +$14.90. Last Tuesday’s intraday low of $1321.50 – was lowest since Sept. ’10. The loss over the two weeks is now back to $65. A week ago Monday’s $149 loss to a 52 week low of $1361.10 was disastrous. Resistance remains way above at the 40 day/50 day: $1542-1555 – still dropping! Overnight it is $1444.40 +$20.70 with an overnight high of $1448.50, highest since 4/12. Crude closed STRONG at $91.43 +$2.25, with an intraday high of $91.72, just below first resistance at the now converging 200 day ($91.73), 40 day ($92.34) and the 50 day ($92.79), all declining. Overnight it is $91.38 -.05. but with a session high of $91.98, highest since 4/12! Last Tuesday’s session low of $86.20 was lowest since 12/13/12! The range is now $85.61-$97.80 since June 29, 2012!!!!

 

Some random thoughts:

Yesterday’s column on 401(k)’s omitted a very important point TB wanted to make and that is they were a perfect fit to corporations attempting to rid themselves of the burden of defined benefit pension plans (leaving only government funds for the most part – GE excepted – with those for which we are paying dearly today and will pay even more in the future). More importantly, a fraud was perpetrated on the workers when it was withheld how little they would have at retirement on their IRA’s and 401(k)s. This has been documented by members of Congress and others who worked on them that they never wanted people to know how little they would really have at retirement.

A recently released study from the PewCenter (in this case PeeYew!), shows that the richest 7% of American (8mm) saw their wealth increase by $5.6 trillion from 2009-2011 to $25.4 trillion, an increase of 28%, while the bottom 93% (111mm) LOST $0.6 trillion, a 4% decline to $14.8 trillion. The top 7% now control 63% of the nations wealth. But here is the most important point: in just two years the gap between the two rose to 24:1 from 18:1 and that spells trouble.

The reason given by Pew is that wealthy people have less invested in their homes and more in stocks and bonds…TB would add in offshore accounts sheltered from taxes. They also were the biggest buyers of foreclosed real estate which they are generously renting back to people who lost their homes. Is this a great country or what?

Back in the 80’s on Meet the Press they had a consultant to the CIA who did demographics in foreign countries. He said the best indicator of where the next revolution would be was the Wealth Gap between the top and bottom 10%. Remember a revolution can be peaceful…you just need a leader. Sadly, this is what happened in Germany and allowed Hitler to come to power. I don’t foresee that but I can see a strong leader emerging who unless he is kind could punish everyone from the middle class up. Stupid wealthy people like the Koch brothers can’t see this…perhaps they don’t even care as their wealth is secure somewhere else. Pity.

So congrats to the Koch brothers and all those who made money in the biggest financial crisis in global history yet continue to enrich themselves and pay off Congress to not ‘raise’ their taxes. (Note to Grover Norquist: rescinding part or all of a temporary tax cut is not a tax increase, you self-serving zealot!). You cannot fix the problem by spending cuts alone, not without risking a  – – – – – – – – – -.

All the best from ‘snowy’ Minnesota’ but thin it is finally behind us…hoping and praying!

 

TB

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