This week’s economic calendar has a couple of interesting indicators. The highlights of the week will be March Retail Sales (Monday) and March Housing Starts (Tuesday). We will also get the April Empire State Manufacturing Survey and February Business Inventories (Monday), March Industrial Production (Tuesday), and March Existing Home Sales, the April Philadelphia Fed Survey, and March Leading Indicators (Thursday).
Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA
Dilbert to CEO:
I did a survey of our past business plans and found something.
There’s no correlation between our predicted and actual outcomes.
That might be a problem for you.
Your enormous CEO compensation is based on the myth that you have some control over our profitability.
CEO: HA! (presses button on desk
Dilbert HA! (trap door under Dilbert opens but he jumps, then lands straddling it)
CEO: Is it jut me, or is this awkward?
Dilbert: No, I’m feeling it too.
Of course Dilbert is just a cartoon with no semblance of reality…isn’t it?…well, isn’t it?
Bloomberg Quote of the Day: “All men who have achieved great things have been great dreamers.” – Orisen Swett Marden…oh? What about Grover Norquist? Are wealth and achievement the same things? TB
Bloomberg Top Stories:
*Citi Misses Estimae on Accounting Cost as Trading Rebounds;95c vs $1.02 OUCH!!!
(This is not the year of the banks. JPM missed; Wells made it but a lot was from reserves!)
*Goldman Likes Stocks as Morgan Stanley Extols Caution With Rates at Zero- GS short???
*European Stocks Climb as Spanish Yields, U.S. Futures Rise; Euro, Oil Drop – yawn!
*China Doubles Trading Band for Yuan to 1% in First Widening Since 2007
*Treasuries Gain for Fourth Straight Week on European Sovereign-Debt Crisis
*S&P 500 Has First Back-to-Back Weekly Fall Since November on Jobs, Growth
*Corporate Bond Sales Sink to Lowest of ’12 After Record 1st Quarter – credit? yields?
*Rajoy Says Spain Must Act More Quickly Than He Envisioned When Elected –Obama?
*No Double-Dip Déjà vu Seen for U.S. Showing Strength ’11 Missed – oh? No way?
*Funds Cut Bullish Gasoline Bets as Prices Slide – someone tell Bachmann!
*Nokia’a Debt Cut to Lowest Investment Grade as Moody’s Echoes, SS&P, Fitch!!!
*ABN Amro Shrink to Shadow of 2008 Giant as Dutch Rue Pride of Nation Lost – tulips?
*Merkel Seen Turning to Euro Bond-Backing SPD to Secure Re-Election in 2013 –oops!
Friday the 13th was not a good day for stocks. After recovering about half of the losses on Thursday the April 2 meltdown, we caved. Banks were one reason and also the reason TB gave to question the rally…way overbought in anticipation of broadly higher earnings. That was clearly wrong, and if we take out recoveries from loan loss reserves not a good thing. After the Dow and S&P had come back to or near the 40/50 day moving averages they were highly vulnerable to a technical correction, especially with this Friday’s options expiryl. Volume was slightly lower for a third day at 3.47B shares vs 3.59B shares on NYSE listed stocks (compare to 4.66B on Tuesday’s downdraft). NYSE stocks executed on the Big Board rose slightly after falling for three days to 771M shares from 749M after the surge to 972M on Tuesday’s selloff, still 200M below the falling 12 month average (972M)! Five of the last six ssesions have been less than 800M shares! Since 2/29 there have now been just THREE ‘average’ days, including 3/16’s high for 2012, and the average has fallen to 810M shares. 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. 101 of the last 111 sessions have been less than the 12 month average! Advance/Declines were negative reversing two good days: +-3.3x vs 4.6x vs +3.8x vs -5.8x!!! vs -4x! on NYSE and -3.5x vs +2.1x vs +3.6x vs -4.5x! vs -2.4x on Nasdaq. Breadth was even worse: -6.4x! vs +9.5x!!! vs +3.7x vs -12.9x!!! vs -8x!!! on NYSE and -6.4x vs +4.5x vs +4.3x vs -11.7x!!! vs -5.2x on Nasdaq. New 52 week highs were halved again from a weak: 122 to 53 (high was 420 on 3/26), while new lows more than tripled to 144 vs 43!. The ratio swung back to negative and never was far from even: -2.9x vs +3x vs 1:1 vs -3x!!! vs -2x. The S&P VIX rebounded nearly reversing Thursdays’ big drop: 19.55 vs 17.20 and back above the near convergence of the 40/50 day m/a’s (16.95-17.33) after gapping up Tuesday with a high of 21.06, highest since March 6! March 16’s intraday low of 13.66 was lowest since 6/20/07’s 12.75!!!
Here are the results of the last eight sessions – 6 of 8 down. Dow -1.1% vs +1.4% vs +0.7% vs -1.7% vs -1% vs -0.1% vs -1%! vs -0.5%; Transports -1% vs +2.2% vs +0.9% vs -2.1%! vs -1.7%! vs +0.2% vs -0.4% vs -0.2%; Dow Utilities -0.3% vs +0.5% vs +0.3% vs -1.3%??? vs -0.6% vs -0.5% vs flat vs flat; S&P 500 -1.3% vs +1.4% vs +0.7% vs -1.7%! vs -1.1% vs -0.1% vs -1% vs -0.4%; Nasdaq Composite -1.5% vs +1.3% vs +0.8% vs -1.8%!!! vs -1.1% vs +0.4%? vs -1.5%! vs -0.2%; Nasdaq 100 -1.5% vs +1.2% vs +0.5% vs -1.6% vs -0.8% vs +0.6% vs -1.4%!! vs -0.1%; Russell 2000 -1.5% vs +1.5% vs +1.6% vs -2.4%!!!! vs -1.8%!!! vs -0.3% vs -1.7%!!! vs -0.7%; NYSE Financials +1.9% vs +1.6% vs -2.2%!! vs -1.4%! vs -0.3% vs -1.6%!!! vs -1%. NYSE Financial Leaders: BAC -5.3%!!! vs +3.4% vs +3.8% vs -4.4%!!! vs -3.3%!! vs +0.3% vs -3.1%!! vs -2%! JPM -3.6%; WFC -3.5%? Citi -3.5% and since peaking at $38.40 on 3/19, it is now off 13% almost back to Thursday’s low of -14.4%)!!!
European equity slightly better, Asia weak: FTSE +0.3% vs -0.4% vs -0.3% vs +0.7% vs -0.9%; CAC40 +0.6% vs -1.1% vs -0.5% vs +1.4% vs -1.6%; DAX +0.3% vs -0.9% vs -0.1% vs +1.5% vs -1.1%; Nikkei -1.7%! vs +1.2%! vs +0.7% vs -0.8% vs -0.1%; Hang Seng -0.4% vs +1.8%!! vs +0.9% vs -1.1% vs -1.2%; Korean KOSPI -0.8% vs +1.2% vs -0.4% vs closed vs -0.1%; Indian Sensex +0.3% vs -1.4% vs +0.8% vs -0.3% vs +0.1% vs -1.5%. U.S. stocks futures a little better: DOW +34; SPX +2.70; NDQ +6. Bonds slightly better continuing Friday’s rally with 10’s thru 2% but 30’s still lagging 3%.10 yr 1.97% +3/32 vs low Tuesday of 1.98%! RECORD low 9/23 of 1.6855%; 30 yr 3.12 +3/32; Long TIP 0.73% +3/16. It was 0.57% at high. The 5 yr TIP yields MINUS 1.33%; 10 yr -.30%. Bills 0.06% 1 month; 0.08% 3 months, 6 months 0.12%. Reverse Repo 0.24%. 3 mo. Libor 0.47%, and 0.73%; steady. New section on euro sovereign 10 years, for reference Germany 1.72% -1 bp (benchmark for the matrix); Italy 5.5% +5; Spain 6.01% +7; Greece 20.15% unched; Portugal 11.99% +5; Ireland 6.64 +9! Erin go bragh!
Note that on Friday, Spain CDS rose to a record 498 bp’s! Ouch!!!
Gold closed below $1700 for a 23rd straight session, giving back Thursday’s $20 gain, making the hit $127 since 2/28, closing $1660.20 -$20.40. 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 $1692, the 40 day and $1696, the 200 day, then $1701, the 50 day. It is now $1647.90 -$12.30! Crude declined, closing at $102.83 -.81. Tuesday’s low of $100.68 was worst since 2/15/12! It remains well below the range of $105-110 which had held since 2/21!!! RES still at the 50 day (104.22), the 40 day (105.52), and major support at $95.81, the 200 day, all still rising. Slightly weaker overnight, now $102.35 -.48. $101.08, the April 4 low is still minor support – Tuesday’s low $100.58!!! – lowest since 2/15/12!.
Thursday’s rally was definitely a dead cat bounce, most likely due to the volatility and strong down move since the selloff. Those looking to invest were whipsawed and that could continue for much of the month…wait…doesn’t that take us to ‘sell in May and go away? –Generally very good advice. Be careful of Friday’s options expiry!
As for Dow 13000, it peaked at 12986 on Friday on a ‘double top’ then falling 1.1%…that’s it…must have seen its shadow – does that mean six more weeks of winter? You decide. Only two Dow stocks up (HD and KFT), 28 down! Note that the S&P 500 was off 1.3%, both Nasdaq indices (AAPL knocking 15 points off the 100, followed by GOOG with 6; INTC, MSFT, CSCO, AMGN, AMZN, ORCL all subtracting 1 point while the only winner was SBUX at less than 1 point!)AND the Russell 2000 were all off 1.5%! NYSE Financials fell by 2.2% making that the big loser. Look at the banks:
*JPM-3.6% as Q1 profit fell by 3% despite big recoveries from loan loss reserves
*WFC -3.5% despite a 6% earnings gain from mortgages (sustainable?) and loan loss reserve recoveries
*BAC -5.3% as their gains from mortgages will be less and brokers are leaving
*C –3.5% similar to BofA – reported this morning with a 7 cent a share miss – going down…not a pretty picture for a bank that deserves what it gets!
TB repeats: the ONLY reason to own a bank stock is for the dividends. If it can’t pass that test you are relying on consistent earnings which are always in doubt. Also, loan loss reserves overstate weakness and later overstate strength of recoveries…not a good thing.
The VIX surged again nearly cancelling Thursday’s big 2.82 drop to17.20 – about neutral – with a gain of 2.35 back to 19.55…looks like they are going short again thanks to weaker bank earnings and a less positive outlook for other earnings to come. Last Tuesday’s intraday high of 21.06 – was highest since March 6 but that was before the quarterend rally and TB is convinced that no rational managers wants to add to positions this early in the quarter, especially when lagging due to not holding Apple (which has been in a modest decline since peaking
TB’s feelings on Best Buy are becoming common…except for some analysts who still have buys and obviously don’t read the SEC filings…that is why you should NEVER trust a sell-side (broker) analyst’s forecasts…they are blinded by business opportunities.
TB still recommends either staying sidelined or setting trailing stops…you decide.
. . . – - - . . . (SOS) . . . – - - . . . (SOS) . . . – - - . . . (SOS) . . . – - - . . . (SOS)
…the opening slug today comes from the old Pitney-Bowes commercials. Seems appropriate as these two luminaries seem to be the only intelligent people left in D.C.
Clarification and a mea culpa: Yes, according to Simpson (I believe), the report from the commission that Obama established, was delivered to the White House but Obama left that day for the middle east. He KNEW when it would be delivered, but left rather than study it and do the responsible thing and endorse it. Had he done so the Tea Party would have had a conniption fit and the Ryan Plan would not have become the only choice. It was a matter of fairness. Instead, Obama – who I voted for but have been disappointed with – lost momentum. The report was received by Biden who did all he could for it while Obama washed his hands of it. In fact, both Simpson and Bowles asked this of Obama a month or so ago when they met. Obama said that he felt his endorsing it would doom it due to the animosity in Congress…possibly correct, as they have mocked every proposal he has made…why do you think he hasn’t offered a meaningful budget proposal? Simpson also said he was tricked by Boehner in their meetings since tax increases were never on the table for the GOP…sounds plausible to TB.
Also, here is a link to Charlie Rose interview on 3/29/12 with Simpson and Bowles http://www.charlierose.com/view/interview/12265 Note that BOTH men said however that even had Obama endorsed it the GOP would have balked to embarrass him. Thus, a stalemate. One other point. Bowles commended Paul Ryan as an honest, open and hardworking member of the committee. Interestingly, the worst criticisms of the GOP came from Alan Simpson. This is the type of information we need, not what we get from the news media and partisan websites.
Both said that members of the GOP asked them to save Congress from themselves by putting it into a legislative format identifying each point, rather than an investigative format. Simpson said they have now done it and converted a 600 page report to an 800 page report! Both also said that if the cuts recommended take effect AND the Bush tax cuts are allowed to expire, that will create $5 trillion of NET revenue…they are disgusted with the GOP’s failure to stand up to Grover Norquist – and note that 95% GOP members of BOTH houses have signed his pledge of NO new taxes or increases! He idolizes Reagan but still believes he was wrong in raising taxes 11 times! Three years ago, nobody knew who Norquist was, today he is the most powerful man in America! TB cannot believe the future of America revolves around this political hack and lobbyist who has never worked outside that area. He is the penultimate ideologue and should be dethroned for disinformation! The pledge consists of just two clauses: one, to oppose any and all efforts to increase the marginal tax rate for individuals and businesses, and two, oppose any net reduction of deductions and credits unless matched dollar for dollar by reductions in tax rates. This is what is governing 235 GOP representatives and 41 senators…it is an abomination and a circular document. TB says vote against anyone who signed it and still stands behind it. It is an abomination of a democracy.
Simpson said people don’t understand what a trillion is (nor do they understand the difference between the debt and the deficit). If you spent $1 a second it would take you 32,500 years to reach $1 trillion! If you did that ever since the Big Bang, you still wouldn’t reach the national debt! Think about that! Both Simpson and Bowles believe that IF you speak to the American people with facts rather than rhetoric and ideology they will respond to it. This is pandering to voters!
No wonder presidential speeches end with “God bless the United States of America.” Why? Because we need it!
TB incorrectly stated that Obama did not cast a single vote other than ‘present’ while a senator. This was the result of a disinformation email. Thanks to your letter I researched it and found I had been duped -shows the importance of fact checking. He did abstain from voting 11 times (44%) vs. 3 by Biden and 6 by McCain (24%). Also, when they did vote, only McCain voted against the party – once, on illegal immigration. A possible interpretation of this is the Obama and McCain were running for election and also that they were away a significant amount of the time.
The damage though that Obama did by not supporting the Simpson-Bowles recommendations has allowed the GOP to undermine the legislative process while continuing to support the wealthiest Americans over even those making $250,000 (and the GOP’s traditional base of big business), especially billionaires and not condemning Grover Norquist.
Have a great day! Tuesday, more on Best Buy and corporate irresponsibility – shocking! Wednesday, the Volcker Rule, good or bad?