12/20/13…grand ole expiry…and all that glitters…

Joke of the Day from the Friar’s Club Encyclopedia of Jokes: You may not think much of what I have to say, but remember: it’s one six-billion-seven-hundred millionth of the worlds opinion.” – unattributed

Bloomberg Quote of the Day: “Your friend is the man who knows all about you and still likes you.” – Elbert Hubbard, a distant relative…he may even lend money to you!

Bloomberg Top Stories:

*U.S. Economy Expanded at 4.1% Pace in Third Quarter After Data Revised – why? Consumers spent more on HEALTHCARE!!! Businesses invested in software;

*Deutsche Bank Will Pay $1.91Billion in Biggest Mortgage-Case Settlement –to date!

*Stocks Rise With Dollar After U.S. GDP Grows More than Economists Expected

*Goldamn Is Said to Ban Multibank Chats Amid Currency Investigations – CYA!!!

*Wall Street Landlords Unlock Profits From Distress With Rental Revolution – remember it isn’t the ‘average Joe’ that is benefitting from higher prices…he is paying them!!! Both in purchase price AND RENTS!!! Some —-ing Recovery!!!

*U.S. Senate Leader Harry Reid Is Taken to Hospital After Feeling Ill – so are most Americans but they have to go to the ER since they don’t have insurance!!! Don’t worry he will gets lots of sympathy cards, but not many ‘Get Well Soon’ ones from GOP!

*London Theaters Are Checked As 88 Are Injured in Collapse of Ceiling at Apollo!

*How I Became Hooked on E-Cigarettes Hints at $2.3 Trillion Market – never underestimate the ability of tobacco companies to bounce back…addiction substitution!

*Dennis Rodman in North Korea to Prepare for Game on Leader Kim’s Birthday – can’t we deport that idiot and revoke his citizenship? He is an embarrassment to all!

Thursday’s Market Summary:

Not much of a day, but what did you expect with the final options expiration of the year today??? This is not trivial as the high volume came same day in Q3!!! Don’t take any wooden nickels! Yesterday’s NYSE Volume was an average 3.49B shares vs 4.29B (set-up day for today’s expiry), while REAL NYSE Volume fell to a slightly below average 701M shares from 828M tied with the high of 8/26! Advance/Declines and Breadth were modestly negative. As for the indices, the title of ‘goat’ goes to BOTH Dow Utilities and the Russell 2000, small cap – strange bedfellows! Nothing to report on the rest as even the high-flying Dow Transports closed flat! Last item: the VIX: just one day below 14 then rallied back yesterday…to TB this means a down day today…but who knows?

See commentary for gold story…interesting!…at least to the author!

The Nasdaq 100 fell by 11 points vs +40 vs -6.5 vs -19 points vs -4 vs -9 vs -45. Breadth was negative at -2:1 vs +8:1 vs -1.1 vs +2.1 vs 1:1 vs -7:3 vs -11:1!!! Just three members lost more than an index point, while only one gained more than a point: APPL -3.4 vs -2 vs +2.5 vs -4.9 vs -0.7 vs -3.4 MSFT -2.4; QCOM -1; CMCSA +1 vs +2.3…go figure as to what this all means? Oh yeah, forgot, options expiry!

Dow 30 +0.1% vs +1.8%!!! vs -0.1% vs +0.8% vs +0.1%; Dow Transports flat vs +1.2% vs-0.4% vs +0.9% vs +0.4%; Russell 2000 -0.7% vs +1.3% vs -0.1% vs +0.6% vs +0.3%; Dow Utilities -0.7% vs +1.2%!?! vs +0.1% vs +0.7% vs -0.2% vs -0.1% vs -0.9% vs -1.1%; S&P 500 -0.1% vs +1.7%! vs -0.3% vs +0.6% vs flat; Nasdaq Composite -0.3% vs +1.2% vs -0.1% vs +0.6% vs +0.1%; NDQ 100 -0.3% vs +1.1% vs +0.7% vs -0.1% vs -0.3% vs -1.3%.

*NYSE Volume fell back to an average 3.49B shares from 4.29B vs 3.25B vs 3.16B vs 3.06B. The record high (?) is 4.82B shares on Q3 end of quarter while 11/29’s 1.59B is weakest of 2013, replacing 1.96B as the low). REAL NYSE Volume fell sharply to a slightly below average 701M shares vs 828M vs 668M vs 681M vs 633M. Yesterday’s 828M shares tied the 11/26 high of 828M shares. The 12-month average is 722M shares. This year there have been just NINE 1B+ share sessions! There have NOW been 39 800M+ shares in 2013: 17 up, 19 down, three mixed.

*New 52 week highs have ranged from 33-864. They slipped to 304 vs 334 vs 164 vs 223 vs 83!. Recent high is a super-strong 890!!! New lows were stable again at 127 vs 131 vs 135 vs 133 vs 353 vs 239. Recent low is 35!  

  1. Advance/Declines were negative: -1.4x vs +3.6x! vs -1.1x vs +2x vs +1.3x vs -1.4x vs -4x! (recent range -17.5x to +6x) on NYSE and -1.6x vs +2.5x vs -1.2x vs +2.1x vs +1.4x vs -1.1x vs -3.3x! (recent -4x!!! to +3.8x). Breadth was similar: -1.14x vs +4x! vs -1.3x vs +2.4x vs 1.2x vs -1.4x vs -6x!!! (recent -18.6x!!! to +7.2x!!!) on NYSE and -1.3x vs +3.1x vs .+1.1x vs +2.8x vs +1.2x vs -1.3x vs -3.6x! (recent -12.8x to +6.5x).  
  2. NYSE Financials rose just 0.2% vs +2.1%! vs -0.5% vs +1.2%! vs +0.1% vs -0.4% vs -1.3%! BofA back to THE most active: +0.4% vs +0.1% vs -0.5% vs +0.7% vs -0.5%, closing at $15.75 +.06 (misquotes per WSJ last few days???). 11/25’s 12-month high was $15.98, highest since 6/1/10. Brokers -0.6% vs +1.8% vs -0.3% vs +0.3% vs +0.1%; KBW Banks +0.1% vs +2.1% vs -0.8% vs +0.7% vs -0.2%; Nasdaq Banks -0.7% vs +1.4% vs -0.7% vs +1.4%!?! vs -0.2% vs +0.6% vs -1.2% vs -0.9%.
  3. Volatility (S&P VIX) rose a day after plunging (options expiry related no doubt): 14.15 +.35 note just one day below 14! The range was a wide 12-89 to 14.21 High this week was 16.67! It is back above the 40/50 day m/a’s: 13.64/13.87, while the 200 day is 14.37. The recent range is 11.83-21.01!!! Since March 11th the average has been just 14.44…way below the five year average of 23.32. It peaked at 22.79 on 12/28/12…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

Bonds trade lower again yesterday. Touched the high yields again, closing at 3.91% -1/16 on the 30 yr while the 10 yr closed at 2.93% -5/16 – NOTE CURVE FLATTENING!!! Overnight the 10 yr weaker again while the long bond and long TIP are up…more flattening!!! 10yr 2.94% -1/8 (recent range 1.63% to 2.99%), and the 30 yr 3.88% UP 7/16 (recent range 2.67% to 3.92%). The long TIP is 1.60% +7/16 The (record?) low of 0.36% was set on 4/5. NOTE recent high yield: 1.63%! Libor update: 0.248% 3 mos, 0.350% 6 mos. (both near record lows!). Foreign bond yields higher ex-Greece: Germany 1.89% +2; UK 2.98% +2; France 2.49% +2; Italy 4.12% +4; Spain 4.15% +3; Portugal 5.97% –; Greece 8.42% -3 vs -11! Recently: 7.71% – 12.57%. Japan 0.67% +1.

Gold not only TANKED yesterday trading down to $1186 – LOWEST since 12/31/02, for a loss of $64 in THREE days!!! It closed at $1193.60 -$37.40 – see what happens when the CFTC SETTLES it much higher than the last trade as they did twice in two weeks!!! Recent high is $1375.40 on 9/19. Now $1200, added to $1300, is psychological resistance with major res at the 40 day ($1268!) and the 50 day ($1276!). The 200 day is a $1364. Overnight it is slightly higher at $1197.40 +$3.80, BUT the session high hasn’t even hit $1200: $1199!!!

Crude closed higher at $99.04 +$1.10 BUT only because the front contract shifte to Dec. Without that it would have been 98.77 -.03!!! the session high was $99.17 – new contract, following Wednesday’s low of $96.26, lowest since 12/3. Contract shift wiped out the double top at the old high of $98.75. On 11-27 it printed a new low of $91.77, lowest since 6/3!!! The record high of $114.83 was on 5/2/11, the low since on 10/4/11 was $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. It remains above the 40 day m/a ($95.65) and the 50 day (96.63), both dropping and remain major support! The 200 day is $98.82, and very major resistance! 4/18’s low of $85.61 was lowest since 12/11! The recent range is $85.61-$112.24 since March 1, 2012. Overnight it is unchanged at $99.04.

Overnight markets:

Global stocks higher, ex-Hong Kong again! UK +0.3% vs +0.8% vs +0.3% vs -0.4% vs +1%; France +0.1% vs +1% vs +0.7% vs -1% vs +1.3%; Germany +0.5% vs +1.1% vs +1.1% vs -0.4% vs +1.7%; Japan +0.1% vs +1.7% vs +2%! vs +0.8% vs -1.6% vs +0.4%; Hang Seng -0.3% vs -1.1%! vs +0.3% vs -0.2% vs -0.6%; Korea +0.4% vs +0.1% vs +0.5% vs +0.2% vs -0.1%; India +1.8% vs -0.7% vs +1.2% vs -0.2% vs -0.3% vs -1% vs -1.2%. U.S. stock futures little changed in the tightest range TB can recall: DOW +20 (range 31 points!); SPX +3.30 (4 points); NDQ +10 (10 points)….this is of course meaningless right ahead of the final options expiry of the year!!!

Some random thoughts:

(First, since TB recommended Robert Reich’s book, Beyond Outrage, he finished it and the last chapter is why so many Americans dislike progressives. Up to that point TB agreed with all he said, but his tax increases…starting at $1 million would be damaging and TB fears just give Congress more money to spend instead of debt reduction. TB also felt he understated the role of Dems in creating the problem: homes for everyone…later endorsed by Dubya too however, and especially destruction of Glass-Steagall playing into the hands of the bankers AND the GOP. He correctly identifies the flaws with Dodd-Frank..built-in by the financial communities contributions. Still some great facts/figures.)

Now on to gold: all that glitter is not gold…and an ETF is NOT GOLD…it is safe as it is backed by gold but not the real thing. Here’s why: the $64 decline over the past THREE days (and doing nothing today), to the lowest level since 12/31/02, raises some questions as to why…and how we got to that record high of $1794.80 on 10/24/12  Here is how, thanks to TB’s trusty Bloomberg:

                                                                                                12/20/12          12/19/13

(Actual Gold price – high and low)

Holdings of Gold in ETF’s in metric tons:           84.6M tons      57.41M tons   -35%!

ETFGTOTL Index

Price of Gold ETF (GLD)

(High was $174 on 10/4/12):                                       $162                $114.50           -31%

Annual Gold Production 2.7M tons

USMAAUWP Index

(1975: 1200 tons)

Months of production in ETF Holdings:               31.3 mos.         21.3 mos          -32%

Gold Miners Stock Price Index                                 $45.12             $20.40             -55%

GMI Index

What does this tell us? Speculation drove both the price of gold and the ETF to excessive heights           relative to intrinsic value. This was due to the introduction of the Gold ETF’s, which added together produced excessive overvaluations (aka: bubble). Then there is how the ETF’s function: they have to physically hold one ounce of gold for each equivalent share…AND they have to settle up each day which creates more buying when more ETF’s are bought (remember it is open-ended)! This creates an upward spiral as each up tick in the ETF then produces another increase in price of gold…forever – until it doesn’t! When it declines (as was caused when all hedge fund managers except Paulsen turned bearish…and he eventually threw in the towel…too bad he didn’t read this before!), it reverses – creating a downward spiral that insures lower and lower prices until a bottom is reached and the speculators are squeezed out…but are they now? The months of holdings in the ETF’s indicates it is not. Also, note that normally the miners stock prices rise causing interest in ETF shares…that has not yet occurred. So, to TB at least, it is down and downer since we have passed a decade low mark! Think differently, fine…

Have a great weekend and if you are leaving…Merry Christmas and Happy New Year!

TB

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