Henry Paulson | Traderbill's Financial Markets Weblog

Posts Tagged Henry Paulson

11/18/14…Eric Cantor: loser…or is he?

November 18, 2014 at 8:34 am · Filed under banking, economy, financial, Market Regulation, markets, politics ·Tagged Billy Tauzin, Chase Bank, Chris Christie, Drysdale Securites, Enron, Eric Cantor, Goldman Sachs, Henry Paulson, insider trading, Jon Corzine, Larry Summers, Martha Stewart, Medicare Part D, MF Global, Moelis & Company, Pharma lobby, Phil Gramm, Robert Rubin, Sandy Weill, Stephen Friedman, UBS, Wendy Gramm

Quote of the Day from the Friars Club Encyclopedia of Jokes: “I like long walks, especially when they are taken by people who annoy me.” – Fred AllenBloomberg Quote of the Day: “A man who limits his interests, limits his life.” – Vincent Price

Bloomberg Top Stories:

*Abe Tries to Salvage Abenomics With Early Japan Election, Sales-Tax Delay – arigato!

*Abenomics Tries to Shake Up Japan to Wake Up Its Tired Economy – good luck!

*German Investor Confidence Unexpectedly Surges as Economy Skirts Recession – that’s good?

*Stocks Advance With Euro on German Confidence as Gold, Pound Strengthen – some rally!

*Bank Indonesia Raises Key Interest Rate to 7.75% as Fuel Prices Increase – increase???

*Greek Bailout Review Is Said Stalled as Furious creditors Demand Savings – 10 yr now 8.09%!

*Fed Dual Mandates Collide as Drop in Jobless Rate View With Weak Inflation – 11.2% is low?

*Russia Predicts Recession Next Year If $60 Oil Adds to Tighter Sanctions – good, but ouch!

*China Steps Up Internet Censorship, Blocks Verizon Cloud Before Conference – LMAO!

*Home Depot Third-Quarter Profit Tops Estimates as Customer Traffic Gains – huzzah!

*Wall Street Banks to Reap $316 Million From Actavis, Halliburton Takeovers

*Keystone Vote May be Too Late to Help Democrats Hold Louisiana Senate Seat

*U.S. Said to Pursue More Mortgage-Bond Fraud Cases After Ex-Jeffries Suit

*Eastern European Elections Surprise As Voters Reject Authoritarian Rule

*Thieves Blow Up ATMs in Crime Wave That’s Leaving Chileans Stuck in Lines – hmmm

*Carnival Enlists Public in Marketing Push to Boos Cruise Industry Image – hah!

*Flash Boys Invade $12.4 Trillion Treasury Market in New Era of Volatility – BAD NEWS!!!

*A Witch Hunt in Finance Won’t Make the World a Safer Place – by Mark Gilbert

*Time for Hong Kong’s Protestors to Think Long-Term – not like Occupy Wall Street, sadly!

Monday’s Market Summary

If you had any doubts that this Friday is options expiration, all you had to do was look at yesterday’s markets. The Russell 2000 -0.7%, Dow Transports -0.5%, and whoa…those Dow Utilities surged 1.3% – so much for their selloff last week. The rest? Dow 30 and S&P 500 both up a whopping (sic) 0.1%, while the Nasdaq’s were down 0.4% and 0.3% respectively. NYSE Financials were flat but within that NYSE Brokers -1%; KBW Banks -0.1%; Nasdaq Banks -0.6% (BofA, usually the most active NYSE stock has been 5^th the last two sessions. Since 11/6 it is down 2.5% and on the cusp of breaking $17. A/D’s and Breadth were moderately negative; new 52 week highs rose slightly and new lows declined similarly. Ahem, the VIX which had gotten into neutral/slightly bullish territory, corrected rising to 14.73 before settling at 13.99 +.67…don’t think any of this is options related? Think again!

Total NYSE Volume pretty steady at 3.13B shares vs 3.2B vs 3.46B vs 3.25B vs 2.93B. Average volume since 9/30 is 3.6B shares and now falling, or about 600M more than the 12-month average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume dipped below average at 694M vs 705M vs 708M vs 718M vs 614M (lowest since 9/15) – still trending lower. For comparison purposes, for the prior 12 months it is a historically weak 712M shares…but since 10/1: 828B shares (and falling) – including that HUGE 1.22B share day – highest since 9/19, followed by two more 1B plus days leading to options expiry!. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 16, and FIVE 900M+ days.

A/D’s were modestly negative: NYSE: -1.3x vs +1.1x vs -1.8x vs +1.2x vs +1.1x; Nasdaq -1.9x vs -1.1x vs -2x vs +1.6x vs -1.1x. Breadth was strange: NYSE 1:1? vs +1.5x vs -2x vs 1:1 vs +1.1x; Nasdaq -1.7x vs +1.4x vs -1.2x vs +1.6x vs +1.1x. New 52 Week Highs turned around to 242 vs 207 vs 249 vs 276 vs 339 – their range for the year is 39-612!!! New Lows slightly lower at 115 vs 127 vs 146 vs 113 vs 100 vs 85. The 2014 range is 24-1043!!! S&P VIX rose sharply intraday hitting 14.73 (very negative), then closed near the low of 13.99 +.68 and well back in bear territory – bottom of range was a high 13.84. This is its 15^th sub-15 close since peaking on 10/15. Heading back toward those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!)? You decide. The average of the past 12 months is 13.97, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market closed slightly lower. The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.34% -1/8; 30’s 3.06% -3/16; and the long TIP 1.01%! -7/8. Overnight slightly better: 10’s 2.33% +1/16; 30’s 3.06% +1/8; and long TIP 1.00% +5/16.

Libor update: 0.232% 3 mos.; 0.326% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.09-0.10%. T-Bills: 0.1%, one-month, 0.02% 3 mos, 0.14% one year???

Foreign bond yields lower, except Greece, now back above 8%; watch Japan! (Benchmark is 10yr): Germany 0.79% -1; UK 2.12% –; France 1.14% -1; Italy 2.31% –; Spain 2.09% -1; Portugal 3.13% –; Greece 8.09% +23!!!1 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.50% +3.

Gold closed little changed at $1183.50 -$2.10 – but the range was very narrow. Friday’s session high was $1192.90 – highest since 10/31 AND a ‘positive key reversal for 2^nd time in six sessions. 11/7’s low was $1130.40, a new recent low!). The recent intraday high of $1255.60, highest since 9/10/14, was rejected. The last 14 sessions have had prints below $1200 first time since 12/31/13 Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19^th!!! Res is at $1200 (psychological), then the 40 day at $1206, the 50 day $1211, then the 200 day at $1278, all declining. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. $1130.40. 11/7’s low was $1130.40! Overnight, it is STRONG! $1201.80 +$18.30 and near its high of $1204.10 – first time above $1200 since Halloween! Silver also rising to $16.40 – 2^nd day above $16, also highest since 10/31 and back from 11/5’s low of $15.12, more than a five year low.

Crude closed slightly lower at $75.64 -.18, two days after setting a new recent low of $74.07, lowest since 9/17/10!!! 10/25’s high was $84.83. There have been 33!!! handles since peaking at $107.73 on June 13^th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($83.63!), then the 50 day ($85.48), and lastly the 200 day (97.14), all continuing to plunge and accelerating to the downside. If it fails here we are now looking at $70! The recent range is now $74.07-$112.24 since 3/1/12. Overnight it is slightly better at $75.92 +.28 with a high of $76.44.

European equities higher, Asia mixed but Japan/Korea strong!!! UK +0.5% vs -0.1% vs -0.1% vs -0.1% vs -0.4%; France +0.7% vs – vs +0.4% vs -0.4% vs -1.1%; Germany +1.2%! vs – vs +0.1% vs -0.2% vs -1.3%; Japan +2.2%! vs -3%!!! vs +0.6% vs +1.1%! vs +0.5% vs +2.1%! Hang Seng -1.1%! vs -1.2%! vs +0.3% vs +0.3% vs +0.8%; Korea +1.2%! vs -0.1% vs -0.8% vs -0.3% vs +0.2% vs +0.2%; India -0.1% vs +0.5% vs +0.4% vs -0.2% vs +0.4%. U.S. equity futures little changed in a narrow range: DOW -3 (range 41?); SPX -2 (6!); NDQ -5.50 (18).

Some random thoughts:

…loser…only if that means earning $1 million a year and a guaranteed $400k bonus! Ah, but that’s next year. He was hired for $400,000, a $400,000 signing bonus and $1 million in restricted stock that vests over five years. Next year, a guaranteed $1 million plus $400,000 in restricted stocks. Moelis says the former college professor turned Tea Party advocate and a House Majority Leader, will add to their boardroom talent (bored room?). Let’s drill down, shall we?

Cantor is a college professor turned Tea Party politician…he has no background in investments (not that that means anything). So while he is licking his wounds from being surprisingly defeated, in the primary no less, by a nobody (a first for a Majority Leader), he gets the deal of a lifetime. Isn’t that special?

Who the hell is Moelis and Company? Founded in 2009 it received accolades from financial publications in 2009-11. But…have you ever heard of them? Not TB, not until now! Well you will hear more starting today as they are doing a secondary offering (IPO was April 15^th – interesting date, that)…led by Goldman, Sachs, natch. The IPO wsa priced at $25 and was one of those rarities where it didn’t soar on opening day…high on April 15^th was $27.32. It was fallow for about a month then rose to $37.36 on 9/2, closing yesterday at $34.22. So what about today’s offering? Bolster capital? Hardly! The company says the proceeds will allow existing shareholders to sell and while the company will buy some shares, those will be used to buy out employees holdings. Net effect on company – zero…but less equity for management…isn’t OPM great???

So beside Cantor, why the interest in this company by TB? Well…they bill themselves as a ‘boutique’ firm serving international clients…ok…but that word has a lot of bad historical connotations. For instance:

In 1982, when TB was an institutional bond salesman with Merrill Lynch, a firm called Drysdale Securities, ‘couped’ a treasury auction – that is, they bought it driving the price of the bonds high as the other primary dealers were forced to cover. Ah, but then, it came out who owned it and guess what? The bid vanished! (TB knew of Drysdale as a no-impact muni bond dealer so when he was told it was a ‘boutique’ government securities firm, TB was left scratching his head: how does a small firm outsmart Salomon Brothers and Goldman on a huge treasury auction. The answer is: they don’t!) They had to finance it and that was a problem. Hint: when you own most of what there is of anything in a transparent market like U.S. treasuries) more or less. But how?

They tried borrowing but nobody wanted to lend to them…enter Chase: they were ‘retained’ to get repo customers for the paper. Here is what they said to the big banks they called: “would you do a repo with Drysdale?” Answer of course was an emphatic NO! “Okay, would you do it if Chase guaranteed it?” Sure! Why not! So when the firm imploded under the weight of the treasuries, Chase was on the hook (which they tried to deny) for the losses on the repo’s (actually reverse repurchase agreements as the client was putting up the money in return for the bonds as collateral.

Then of course, there was another politician who really turned bad but as a member of two tightly-knit clubs: being a former senator and a governor (NJ): Jon Corzine, former CEO of Goldman Sachs (why does that name always come up???). Interesting as he was preceded by Stephen Friedman who later, while a director of Goldman, and serving as president of the New York Fed, was buying up Goldman shares, even as Lehman was collapsing on insider knowledge that GS would be declared a bank and thus get a bailout…the bailout engineered by Corzine’s successor, now Treasury Secretary Henry Paulson…got it?

Corzine became the CEO of MF Global and with knowledge of its teetering financial condition tried to arrange a sale so he could collect a nice bonus. Failing that, it was shown that client funds were used to inflate the capital of the firm – without their knowledge – which Corzine denied but which the courts held that he was responsible…not that anything happened to him however. What was interesting to TB was that MF was a ‘primary government securities dealer’. TB having worked for two (Merrill Lynch, and LF Rothschild when their application was in to be a primary), and they were closely monitored by the New York Fed. That practice was abandoned by the Fed in the early 1990’s, who said they were not responsible for the financial condition of the primaries. Not responsible??? That is like a bank making a loan with no documentation…an unacceptable excuse! (He was beaten for governor by Chris Christie…who got his own share of scandals).

Back to Friedman, when GS became a ‘bank holding company’ – which is not the same as a bank – he was elected to and served as president of the New York Federal Reserve while a director of GS…a violation of Fed rules, but he got a ‘waiver’. Then while president he began accumulating GS stock claiming it was ‘undervalued’ – this ‘used to be’ known as insider trading. Without admitting guilt he relinquished the shares and disgorged the profits and resigned from the board – of the Fed, not GS! Compare and contrast to Martha Stewart for just one minor infraction!

Enough! How about some other cases of politicians doing well in the private sector:

Let’s start with Sen. Billy Tauzin…ah, another GOP guy. He led the Bush 43 – induced design of the seriously flawed Medicare Part D…insuring that unlike Medicaid, it not be able to contract for prescription drugs. For this he was awarded (after not running again for ‘health’ reasons), was named head of the Pharma lobby and earned several million over the next few years. Nice work if you can get it…and have no morals!

Next, good old boy Sen. Phil Gramm of the great state of TEXAS! Where do we start with him? How about first, his wife Wendy, a former CFTC chair who exempted Enron from commodities regulation, then served on the audit committee of Enron and found nothing wrong, while making a million on the stock. Unbelievable! As for Gramm, he co-authored the Commodities Futures Modernization Act, and then not as a senator violated rules by lobbying on the floor of the Senate. What the Act did was destroy all efforts to regulate derivatives as former CFTC head had attempted, only to be slandered by Rubin, Summers, and of course, Greenspan, who failed to see three bubbles which he oversaw, and never saw a regulation he liked (here is a link to this slime: Phil Gramm/Mother Jones . What did Gramm get?…why to be Chairman of UBS Americas Investment Bank, retiring in 2012.

Getting tired of reading? TB is tired of writing so skipping Larry Summers brief stint being paid by the Wall Street lobby…not as a lobbyist but giving speeches paid for by firms, let’s skip to the wonderful Robert Rubin, former Treasury Secretary…oh yeah and from…Goldman Sachs.

Thanks to the revolving door the Bill Clinton promised to close, he left treasury to become Vice Chairman of Citicorp – without portfolio…and charged with dealing with their biggest accounts (just like Cantor will do!). As a former Citi exec told me, he constantly told them to take more risk…be like Goldman (but Citi really was a bank!), and watched as its assets declined by 70%. Then, when CEO Chuck Prince resigned in the scandal.. Rubin briefly served as Chairman…Sandy Weill stepping aside – wisely! Rubin said he had no idea they were taking risks…despite whistleblowers warning in memos to senior management of undocumented loans!

(Note also that while Treasury Secretary Weill enlisted his support to kill Glass Steagall, which he did and which allowed Citi to do a stock swap for Travelers, which Weill also controlled. Weill, couldn’t even wait for the ink to dry on the bill so he ‘illegally’ did the swap before it died! Nothing, of course, was done.

Get it? Nothing to see here…nothing new…just another quid pro quo…ain’t that special!

Permalink Leave a Comment

8/21/14…have our bankers ever heard of The Four Way Test?

August 21, 2014 at 9:30 am · Filed under banking, economy, financial, markets, politics ·Tagged American Century Funds, Angelo Mozillo, Bank of America, clawbacks, Countrywide Financial, Eric Holder, Four Way Test, Henry Paulson, Ina Drew, Jes Staley, JPMorganChase, London Whale, Martha Stewart, Rotary International, SEC

Quote of the Day from the Friars Club Encyclopedia of Jokes: “My grandfather’s a little forgetful. One day he took me aside and left me there.” – Ron Richards

Bloomberg Quote of the Day: “The welfare of each is bound up in the welfare of all.” – Helen Keller…a woman with incredible ‘foresight;…interestingly it was Plato who said, “he who sees with his eyes is blind.” – a lot of wisdom in both those quotes. TB

Bloomberg Top Stories:

*European Stocks Rise With U.S. Equity Futures on Stimulus Bets; Gold Drops – plunges!

*First-Time Jobless Claims in U.S. Decreased More Than Estimated Last Week

*Millennial Bankers Get 20% Raises as BofA; Goldman Sachs Fight Defections – hear! Hear!

*Argentina’s Defiance in Debt Swap Dims Chances for Bond-Market Redemption – in your face!

*Family Dollar’s Board Rejects Bid From Dollar General, Favors Dollar Tree – still it’s Dollars!

*AstraZeneca Is Tougher Target for Pfizer as Possibility of New Bid Looms

*Bank of America Mortgage Settlement with U.S. Said Coming Soon – just out: $16.67B

*Draghi Gets His Weaker Euro When Reeling Economy Needs It Most

*Allegan Discussions to Acquire Salix in Defensive Move Said to Be Dormant

*Hook-Up Culture at Harvard, Stanford Wanes a Men Confront Assault Alarm

*Hostage Rescue by U.S. Forces Failed Earlier this Year After Ransom Demand

*Retooled Hamas Bloodies Israel in Gaza With a Little Help From Hezbollah

*Cameron Reminds Police of Terror Laws in Hunt for Briton Who Killed Foley

*Ukraine Deaths mount as Fighting With Pro-Russia Separatists Intensifies

(to recap: its an ugly world out there!!!)

Wednesday’s Market Summary:

“Curiouser and curiouser”, said Alice – and that is what this dull and duller market is telling us as “tomorrow and tomorrow and tomorrow creeps on its petty pace.” (the Bard, and the title of a Kurt Vonnegut short story). Ok no more ‘waxing’ poetic for today. This is what happens when you try to follow a market (that isn’t one) too closely, right? Ah, good! You agree!!!

Not much of an ‘up’ session if you can call +0.6% by Dow Transports, +0.4% Dow, +0.3% S&P ‘positives’ – TB can’t…especially when Dow Utilities even rose 0.2%, while the ‘stalwart’(?) Nasdaq indices were both FLAT as boards and the Russell 2000 declined by 0.4%? NYSE Financials rose by just 0.1% (NYSE Brokers flat; KBW Banks +0.2%; Nasdaq Banks -0.2% – but look BofA settles with the Feds for $17 Billion and guess what? The stock, which was unchanged at the time of the announcement ROSE 05% – this is truly a sick society…of investors anyway!

A mixed bag for A/D’s: NYSE 1:1; Nasdaq -1.7x!. Breadth slightly positive on both. New 12-Month highs dropped back by ¼ to 228 while New lows rose slightly to 63. NYSE Volume fairly steady but still below average while NYSE floor trades slipped to an even weaker 542M – contrast to the 12-month average which has been in decline since 4/30 of 542M shares…and since the end of April it is just 664M – incredibly low and long enough to not blame it on the ‘summer doldrums’ – which are acting like global warming (did you see where Siberia is developing sinkholes???).The VIX decline again to 11.78 – clearly in bull (overbought?) territory??? And with a range of just .64 – back to back tight ones! All this on the heels of an FOMC meeting which had more of the ‘non-voting members looking favorably towards ‘tightening’ – at some point but the lone voting dissenter was once again the Dallas Fed’s Plosser…he ain’t no Edward Gramlich…not by a damn sight (ah, another reference to seeing (Merriam Websters’ defines it a damn sight as ‘much’ – one of TB’s grandpa’s favorites!

Total NYSE Volume was flat for a third day at a weak 2.56B shares vs 2.64B vs 2.61B vs 2.96B vs 2.7B vs 2.59B vs 2.76B vs 2.87B. Real NYSE Volume slipped again to a very WEAK 542M shares vs 556M vs 605M vs 758M vs 517M vs 559M vs 543M vs 596M. Last week’s average was just 594M shares! There have been just four sessions above 800M since 4/28! The 12-month average is a historically weak 701M shares. Since 4/30 the average volume has been just 664M shares ranging from 517M to 927B….12 month high is 2.06B shares on 9/20/13!

A/D’s were mixed and minimal: 1:1! vs +1.8x vs +3.6x vs -1.3x vs +2.1x; Nasdaq -1.7x vs +1.2x vs +3x vs +1.2x vs +1.3x. Breadth was slightly positive: NYSE +2.1x vs +4.3x! vs -1.3x vs +1.8x vs +2.1x; Nasdaq +1.3x vs +4.8x vs +1.2x vs +1.6x vs +3x. New 52 Week Highs off by ¼ to 228 vs 294 vs 266 vs 193 vs 141 vs 140 vs 96 – recent range is 46-580!!! New Lows little changed at 62 vs 53 vs 60 vs 99 vs 72 – recent range is 24-260! S&P VIX declined for a 2^nd day to 11.78 -.43 – most bullish (overbought?) since 7/24. The range dipped to 11.60-12.84 – no ‘13’s or ‘14’s for a second day, not seen since 7/25.

Bonds closed modestly weaker again but not far off the ‘old’ 12-month highs: 10 yr closed at 2.403 -1/4; 30 yr 3.22%- 1/16?; the long TIP 0.93% -5/16. Overnight they are in the red again: 10’s 2.44% -1/8; 30’s 3.23% -3/16; and long TIP 0.94% -1/4. Cycle highs yields: 30 yr high was 3.97% on 12/31; the 10 yr recent high 3.03%! Long TIP was 1.64%. The (record?) low of 0.36% was set on 4/5/13.

Libor update: 0.234% 3 mos.; 0.329% 6 mos., both remain near their record lows, set recently: 0.222% and 0.320% respectively! NOTE the Fed Funds rate has averaged 0.09% since 5/22/13 and is at 0.08-0.10% where it has been for weeks! Foreign bond yields mixed…PIIGS lower; all at/near 12-month low yields: Germany 1.00% +1; UK 2.43% +1; France 1.39% +1; Italy 2.57% -2; Spain 2.37% -3; Portugal 3.22%! -7; Greece 5.66% +1; The recent high on selloff was 6.75%. Recently 5.42% to 12.57%. Japan: 0.52% +1.

Gold closed slightly weaker for a 3^rd straight decline, but making another new low of $1288.70 (session high was $1299.30), and with the 3^rd straight sub-$1300 close since 8/6: $1295.20 -$1.50 It remains well below the 40 day AND 50 day while the 200 day is within $9. 7/17’s session high was $1346.60, highest since March 19^th!!! 6/9’s $1240.20 was lowest since 1/31/14!!! First RES is the 50 day $1305, then the 40 day at $1309, leaving the 200 day as sole support at $1286. Note the recent high of $1392.60 on 3/17, highest high since 9/4/13…that too ended the session with a negative key reversal sparking the downturn! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is being slammed to $1280.60 -$14.60 but well off an overnight new low of $1274.90, lowest since 6/18!

Crude finally closed higher but of little import following Tuesday’s new recent low of $94.27, lowest since 1/21/14! It closed at $96.07 +$1.59. 7/22’s high was $105.20, still highest since 7/2. 7/15’s session low was $90.01 – lowest since 3/21. 6/20’s run to $107.73 was highest since 9/19/13 (a huge down session which put it in freefall. 3/2’s session low was $97.37, lowest since 2/4! 1/14’s low was worst since 5/2/13: $91.24! The record high of $114.83 was on 5/2/11, the low since on 10/4/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 200 day ($99.77), then the 40 day ($100.86), then the 50 day ($101.95)…the latter two remain in freefall! The range is $85.61-$112.24 since March 1, 2012. Overnight the lead shifted to October which ‘adjusted’ the close to $93.45 creating a ‘gap down’ on this mornings open where it plunged again to $92.50, lowest since 1/15/14! (why isn’t gasoline following suit? Summer driving?)…it now has had FOURTEEN handles since 6/30! Last print is $92.84 -.61!!!

European equity markets bouncing back and have now been up 3 of last 4 sessions; Asia mixed: UK +0.2% vs -0.5% vs +0.5% vs +0.7% vs +0.8%; France +0.8% vs -0.8% vs +0.4% vs +0.5% vs +1.2% vs +1%; Germany +0.6% vs -0.07% vs +0.9% vs +1.5%! vs +0.9%; Japan +0.9% vs – vs +0.8% vs flat for 2 days; Hang Seng -0.7% vs +0.2% vs +0.7% vs – vs +0.6%; Korea -1.4%!!! vs +0.1% vs +0.9% vs -0.5% vs closed; India +0.2% vs -0.4% vs +0.1% vs +1.1% vs closed. U.S. equity futures higher after being weak early in the session: DOW +35 (range 53); SPX +3 (7); NDQ +4 (13). 10:30am EDS update: Dow is up 50 BUT Transports, yesterday’s big winner are -23! The rest are pretty much unchanged…hmmm.

Some random thoughts:

…how much longer do true shareholders have to endure paying for the sins of the bankers? JPMorgan shareholders have paid dearly more than 400 times since the crisis began, plus one more (arbitration) due to a breach of contract that cost the bank (read: shareholders), $385 Million by buying the managed accounts of American with a promise not to move them out of American Century managed accounts to JPMorgan proprietary funds unless they provided higher returns to investors. In less than six months they had violated it and the man in charge was Jes Staley, who negotiated the contract in the first place? JPM/American Century arbitration Did Staley get fired? Far from it…he was promoted and got a $5 million bonus …same as Ina Drew (she got the same bonus that year and later was the only one to return it – voluntarily!), who took the fall for the ‘London Whale’ experience (Staley was sent over to London as part of ‘Seal Team Six’ to solve the problem…more bonuses until he left to go to another firm (Blue Mountain Capital), good luck to them…and of course to the creative Mr. Staley. Again: who paid for these lawsuits? Shareholders…loyal shareholders (just as with BofA where they earn a just-upped 5 cent a shere dividend – 1.2% annualized… big whoopee! What kind of fools do this…especially when the ‘perps’ face no clawbacks and still hold their jobs while earning more??? Where is the damned SEC? Let’s ask Henry Paulson what he thinks…after all it was he who told the banks to increase bonuses to restore ‘confidence’???

So far there have been just TWO perps that have been singled out: Countrywide’s Angelo Mozilo who paid a $49MM(?) fine without admitting guilt for selling shares while telling investors all was well…didn’t we pass a law to prevent this after Enron (has it ever been used in court?…even once??? The other was the ebullient Ken Lewis who bought the company for BofA saying they sent their examiners in and they looked at every loan…not very long apparently…they spent one week there! He was charged with misinforming shareholders of the true condition and recently fined $25MM by the SEC…TB was ecstatic…that emotion lasted for less than a half hour when it was announced it was covered by the banks D&O insurance…got it? The shareholders will pay yet again in the form of higher insurance!

That’s enough for now folks…TB’s blood pressure is rising…as he is sure Martha Stewart’s must be having been sentenced to five years for lying to investigators about ONE insider trade (an irony to this is that the stock she sold on her friend/CEO’s advice came back and was at a much higher price less than a year later – insult to injury. Why don’t more financial execs face the ‘perp walk’? Guess Holder never read Bonfire of the Vanities…sheesh!

…having a hard time with Rotary’s Four WayTest today!

Have a great day!

Permalink Leave a Comment

6/16/14…a day for truth…through quotes

June 16, 2014 at 8:09 am · Filed under banking, economy, financial, markets, politics ·Tagged Admat Admati, Alfred E. Neuman, Bill Moyers, Chuch Prince, Dick Cheney, Dodd-Frank, Donald Rumsfeld, Eric Holder, George W. Bush, Henry Paulson, Jamie Dimon, Joseph Stiglitz, Larry Summers, Mad Magazine, Pogo, Robert Rubin, Tim Geithner

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Confession is good for the soul. Only in the sense that a tweed coat is good for dandruff. – Peter De Vries

Bloomberg Quote of the Day: “You only live once – but if you work it right, once is enough.’
– Joe E. Brown…didn’t Mae Wast say something similar?

This week’s economic calendar is full of important indicators. The highlight of the week will be the May CPI (Tuesday). We will also get June Empire State Manufacturing and May Industrial Production (Monday), May Housing Starts (Tuesday), Q1 Current Account (Wednesday), June Philadelphia Fed and May Leading Indicators (Thursday). In addition, the Federal Reserve FOMC will be meeting on June 17th – June 18th with an announcement on the 18th. Courtesy of Economic Advisory Service
Bloomberg Top Stories:
*Medtronic Agrees to Buy Covidian for $42.9 Billion to gain Tax Advantage – got that??? FOR TAX PURPOSES the company will be based in Ireland! How long do we let them screw us?
*Stocks in Europe Decline as Gold Rallies on Iraq Violence; Yen Strengthens
*Bond Markets Hidden Liquidity Threat Revealed in Derivatives Trading Boom
*Level 3 Agrees to By TW Telecom in Cash, Stock Deal Valued at $5.7 Billion
*Siemens Said to Be Preparing Alstom Energy Offer With Mitsubishi, Hitachi
*Sandisk Agrees to Buy Fusion-IO in Transaction Valued at About $1.1 Billion
*Credit Suisse Fined for Savings Product With ZERO Chance of Maximum Return – !!!
*New World’s Plan to Go Private Is Rejected by New World China Shareholders
*Porsche’s Le Mans Return Features Racing Version of $845,000 Spyder Hybrid
*Better Get Used to Oil-Price Craziness as Iraq Chaos Deepens – yep, and WE caused it!
*Oil at $125 Seen as Iraq Chaos Brings Back Price Volatility – the Kurds and Ways (sic)
*’BItcoin Jesus’ Wants You to Join Him Living in Tax-Free Earthly Paradise – St. Kitts!
*Iraq Forces Fight Sunni Militants as Maliki Says Army Is Regaining Control – big fat HAH!
*Russia Cuts Gas Supply to Ukraine While Maintaining Flow to European Union – Putin lies!
*California Legislators Increase Spending by 5.8% to Record $156.4 Billion
*Kenya Attack by Suspected Al-Shabaab Gunmen Leaves 48 Dead in Coastal Town
*Davos of Art World Lures Wealthy Trophy Hunters to $4 Billion Base Fairs

Friday’s Market Summary:

It was a strange day and while it was an ‘up’ session, only Dow Transports +0.8% and Dow Utilities +0.6% showed us anything…the rest were up 0.3% – that is across the board! NYSE Financials were flat. Most active BofA was up just 0.1%, that followed -1.1% and -2.1%, while Citi was slammed – down 1.4%! Volume went from a still below average 3.03B shares to 2.58B shares proving once again, TB’s corollary: up on low volume down on higher volume. But in the doldrums who cares? Certainly not TB when you have rigged high frequency trading, dark pools, and you name the market, it has been rigged. Rigged by people whose companies pay fines which, of course, ultimately come from shareholders pockets. Go to jail? You have to be kidding!

Total NYSE Volume reversed again plunging to 2.58B shares vs 3.03B vs 2.67B vs 2.69B vs 2.8B vs 2.84B vs 3.1B. Real trades on the floor of the NYSE also took a header to an extremely weak 575M shares vs 621M vs 532M vs 557M vs 608M. The 12-month average held at a very weak 715M shares.
A/D’s were slightly positive – so what? NYSE +1.3x vs -1.4% vs -1.6x vs -1.4x vs +1.6x; Nasdaq +1.04x vs -1.8x vs -1.5x vs -1.2x vs +2.2x. Breadth was similar: NYSE +2.2x vs -2.2x vs -1.6x vs -1.01x vs +1.7x; Nasdaq +1.8x vs -2x vs +1.05x vs +1.3x vs +1.5x. New 52 Week Highs slipped for a fifth session to 171 vs 186 vs 193 vs 256 vs 515 vs 532 – recent low 71!!! New Lows were slightly higher but remain very weak at 36 vs 30 vs 25 vs 24 vs 25 vs 36 vs 66 vs 96 – recent range is 24-214.
S&P VIX remained above ‘12’ for a third straight session 12.18 -.38 with a range of 11.89-12.69….13 is the key here and the low end is moving higher! There have now been THREE straight closes above ‘12’ in 14 sessions. You do know that the long-term average is ‘20’, right?

Overnight markets:

Bonds closed about even. 10 yr closed at 2.60% -1/16. 30 yr closed 3.41% -1/16. The long TIP, which hit a low of 0.978% on 5/29, closed 1.13% -1/16. Overnight they are rallying! 10’s 2.59% +1/8; 30’s 3.39% +3/8; and long TIP 1.11% +9/16. Cycle highs: 30 yr high was 3.97% on 12/31; the 10 yr recent high 3.03%! Long TIP was 1.64%. The (record?) low of 0.36% was set on 4/5/13.
Libor update: 0.231% 3 mos.; 0.326% 6 mos., both remain just off their record lows, set recently: 0.227% and 0.320% respectively! NOTE the Fed Funds rate has averaged 0.08% since 5/22/13 but is finally slightly higher at 0.09% -0.10%. Foreign bond yields slighltly lower, ex-Greece, which remains strong! Germany 1.35% -1; UK 2.74% -1; France 1.71% -2; Italy 2.75% -2; Spain 2.63% -2; Portugal 3.34% -1; Greece, which took out the old lows is now 5.72% +5. The recent high on selloff was 6.75%. Highly volatile!!! Range is now 5.42% to 12.57%. Japan: 0.59% –.

Gold closed unchanged in a very narrow session with a slightly new high of $1278.10 – highest since 5/27 – but closed at $1273.70 +.10. Last Tuesday’s $1240.20 was lowest since 1/31/14!!! It hit $1304.10 on 5/22 – the last time it saw $1300! It remains way below the 40/50/200 days and the psych support level of $1300 with first res at the 40 day $1281, then the 50 day $1286, and the 200 day $1292 – note convergence and thus formidable resistance! It has fared poorly since the ‘key reversal’ on 3/17, after printing the recent high of $1392.60, highest high since 9/4/13! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is rallying at $1281.30 +$7.20….session high $1285.10 – still highest since 5/27 – a big down day.

Crude took off like a rocket for a second straight session hitting $107.69 on Iraq issue – still highest since 9/19/13 – a huge down day – before settling at $106.91 +.38. 6/5’s low of $101.60 was lowest since 5/16. 3/2’s session low was $97.37, lowest since 2/4! 1/14’s low was worst since 5/2/13: $91.24! The record high of $114.83 was on 5/2/11, the low since on 10/4/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. It is well above all three moving averages: 40 day ($102.35) then the 50 day ($102.41), and 200 day $100.17. The recent range is $85.61-$112.24 since March 1, 2012. Overnight it is slightly higher at $107.02 +.11 in an ‘inside’ session.

Global equity markets weaker: UK -0.3% vs -1.1%!!! vs +0.2% vs -0.5% vs -0.3%; France –0.6% vs -0.8% vs +0.2% vs -0.8% vs +0.1%; Germany -0.3% vs -0.8% vs +0.1% vs -0.9% vs +0.2%; Japan -1.1%! vs +0.8% vs -0.6% vs +0.5% vs -0.9%; Hang Seng -0.1% vs +0.6% vs -0.4% vs -0.3% vs +0.9%; Korea +0.1% vs -1%!!! vs -0.2% vs +0.1% vs +1.1%! India -0.2% vs -1.4%!!! vs +0.4% vs -0.4% vs –; U.S. Stock Index Futures weaker: DOW -40 (range 48); SPX -4.30! (8); NDQ -8.75 (16).
Some random thoughts:

…”the only things that are sure are death and taxes.” That quote has been attributed to many, from Benjamin Franklin to Mark Twain. On the other hand, “the wages of sin is death” Romans 6:23 (also on billboards all over the country at various times). If the latter is true, perhaps the GOP is trying to save you from being damned to hell by not raising the minimum wage or god-forbid imposing a ‘living wage’. How long can this go on…hard to say but it is not only counter-productive but counter-intuitive!

Too big to fail once again rears its ugly head and this time from a Stanford professor, Admat Admati…so much for those liberal freaks who are trying to lead us down the road to communism
Moyers-Admat Admati – too big to fail. This woman is smart, articulate, and cannot accept the way we continue to allow the banks to create crises and then get bailed out by the government, pay token fines, nobody charged or convicted, and do it all over again.

Worse, it is members of Congress who are beholding to the bankers (not to mention the pushover, Eric Holder, along with apologists from Henry Paulson to Tim Geithner (keeping quiet are Robert Rubin and Larry Summers). Worse than apologists, these people aided and abetted them and then when a ‘still weak’ Dodd-Frank was proposed watered it down so as to be ineffective – at best!

Meanwhile, the bankers draw huge salaries and bonuses, have no sense of guilt – or if they do, hide it well. Ever hear Jamie Dimon confess his or his banks sins? Nope, just plead no contest, pay the fines and do it all over again. The closest anyone came to saying anything was wrong – and that was more like ‘everyone else is doing it so we had to’ – was Citi’s Chuck Prince who said “when the music is playing you have to get up and dance.” Guess he never heard of “face the music”. Anyway, for his efforts, was sacked and replaced as temporary chairman….drumroll please…Robert Rubin! Yes, thanks to the ‘revolving door’ he left Treasury, passed GO, and went directly to Citi collecting hundreds of millions – is this a great country or what?

Look at today’s headlines (Medtronic buying Covidian so as to establish Ireland as its headquarters for tax purposes!!!), which trace back to the last Moyers interview of Nobel laureate, Joseph Stiglitz on how we must fix our tax code because in its present form it is driving a wedge between the people (note they are the MAJORITY), and our ‘corporate owned’ Congress. Oh, and those Congressmen, what do they do when they leave office? Head for ‘K’ Street and register as lobbyists…for the financial lobby…an obvious quid pro quo.

TB is sick…disgusted and sick…of libertarians who give the name an odious smell…while watching as the country divides and in a manner only an illusionist can appreciate (you look here when you should be looking there). We are told that so and so will fight for us, they get elected (think Obama), and it is back to business as usual.

That’s enough of a rant…on Obama…while Bush, Cheney, and Rumsfeld have upset the balance of power in the Middle East in their neo-con ways…and we will pay for that for decades. Unlike Gulf War I we had NO business invading Iraq, should have left Afghanistan when we found out Bin Laden was no longer there, and it is inconceivable that there is a solution that will end the secular violence. Cheney and Rumsfeld should be in jail for their actions…but if you like them, don’t worry…noting is going to happen.

Have a great week while the world around us crumbles and our once-admired markets become the laughing stock of Wall Street…sukkahs!!! “What, me worry?” As Alfred E. Neuman would say. Pogo on the other hand said, “we have met the enemy and they are us!”

Permalink Leave a Comment

7/18/13…an open letter to a Senator/Congressman…think about it!

July 18, 2013 at 9:18 am · Filed under banking, economy, financial, markets, politics ·Tagged Alan Greenspan, Angelo Mozilo, Ben Bernanke, Bill Moyers, Brooksley Born, Citigroup, Contintental Illinois, Countrywide Financial. Ronald Reagan, Dodd-Frank, Don Regan, Glass -Steagall, Grover Norquist, Henry Paulson, JPMorganChase, Lawrence Summers, Robert Reid, Robert Rubin, Sanford Weill, Sarbanes-Oxley, Too BIg To Fail, Volcker Rule

From The Friars Club Encyclopedia of Jokes: “Love is like an hourglass with the heart filling up as the brain empties.” – Jules Renard – is that what is meant by brain drain?

Bloomberg Quotes of the Day: “Know how to live the time that is given you.” – Dario Fo

Bloomberg Top Stories:

*Morgan Stanley Earnings Top Analyst’s Estimates on Jump in …TRADING REVENUE!

*Jobless Claims in U.S. Drop to Two-Month Low as Auto-Shutdown Effects Ebb

*Dell $24.4 Billion Buyout Plan Becomes Nail-Biter on Eve of Investor Vote

*Investment Banker’s Pay at Morgan Stanley Reduced to 43% of Unit’s Revenue – think about that…43% of the department’s revenue goes to them…with no RISK to traders???

*Celgene Stops Trial for Expanded Use of Revlimid Cancer Drug After Deaths – !!!

*BlackRock’s Second-Quarter Profit Rises 32% as Stock Markets Lift Assets

*Draghi to Carney Face Test Backing Guidance on Rates With Monetary Action

*Russia Seeks Own Brand of Easing as G-20 Finance Chiefs Talk Stimulus Exit

*Misfit Borrowers Attract Lenders as U.S. Housing Market Revives – but rates rising???

*Schaeuble Suggests Greek Debt Relief Possible After Deficit Target Reached

*Senate Said to Reach Student-Loan Deal to End Doubling of Interest Rates

*Putin Foe Navalny Sentenced to Five-Years in Prison on Evee of Moscow G-20

*South Africans Mark Nelson Mandela’s 95^th Birthday With Charity Campaign

*Federal Reserve Succession Is Clouded by Sexism: Commentary by Ezra Klein – so appoint Larry Summers, a proven sexist and control freak! That’s the ticket!

It was a very strange day with Dow Transports climbing 0.8%, Dow Utilities falling by 0.2% – the only loser, the Dow up just 0.1%, and the rest up from 0.3%-0.5%. In case you forgot about options expiry this Friday the VIX continued its decline falling another .64 to 13.78…on June 24^th it peaked at 21.91, not only bearish but highest since 12/28/12, before closing at a new 2013 high of 21.11, and has fallen by 33% since – bullish stance making put protection CHEAP again (the recent low is13.56 on 5/28, 11.95 on 3/14 was a five year low – on 5/15/08 it bottomed out at 16.25! before surging to an all-time record of 89.53 on 10/24/08!!! Guess we have forgotten the 2008 crash…and then some! The record low is 8.89 on 12/31/93 as we began to rebuild from the dotcom bust!

Yesterday’s Volume barely budged to 3.15B shares from 3.05B vs 2.6B vs 2.97B shares from an average 3.43B shares a week ago. Meanwhile, floor-traded shares rose minimally to a very weak 3.16B shares vs 3.05B vs 562M (lowest since 7/3!) vs 681M vs 742M. The 12-month average is 722M shares. Strangely A/D’s and Breadth were very positive?

…and away we go:

* Dow 30 +0.1% vs -0.2% vs +0.1% vs FLAT vs +1.1%; Dow Transports +0.8% vs -0.7% vs +0.5% vs -0.6% vs +1.2%; Russell 2000 +0.4% vs -0.4% vs +0.7% vs +0.5% vs +1.3%; Dow Utilities -0.2% vs -0.5% vs +1.6%!!! vs +0.4%!!! vs +1.7%!!!; S&P 500 +0.3% vs -0.4% vs +0.1% vs +0.3% vs +1.4%; Nasdaq Composite +0.3% vs -0.3% vs +0.2% vs +0.6% vs +1.6%; NDQ 100 +0.3% vs -0.1% vs FLAT vs +0.6% vs +2%!!!

*NYSE Volume rose slightly to a still below average 3.15B shares vs 3.05B vs 2.6B vs 2.97B vs 3.43B vs 2.99B (1.96B is the lowest of 2013). REAL NYSE Volume rose slightly to another weak 666M (Hex?) shares vs 617M shares vs 562M shares (lowest since 7/3) vs 681M vs 752M. The 12-month average is 722M shares! The average since 6/30 is just 673M shares, ranging from 482M to 906M, 482M being the 2013 low! There have been just SEVEN 1B+ share sessions! There have been 27 800M+ shares in 2013: 10 up, 17 down, but on trades of less than that 89 have been up and 32 down…there have been 26 mixed sessions.

*New 52 week highs have ranged from 33-864. They slipped to 448 vs 456 from 687! vs 574 vs 484 vs 451 vs 606 vs 669. New lows also slipped to 30 vs 37 vs 40 vs 32 vs 29 (a new recent low!).

Advance/Declines were positive: +1.9x! vs -1.8x! vs +1.6x vs +1.1x vs +6.6x! (recent range -17.5x to +4.4x) on NYSE and +1.5x vs -1.2x vs +1.9x vs +1.2x vs +2.5x (recent -3.5x to +3x). Breadth was similar: +2x! vs -1.6x vs +1.8x vs +1.3x vs +6.9x!!! (recent -18.6x!!! to +6.9x!!!) on NYSE and +1.8x vs -1.3x vs +1.7x vs +1.6x vs +4.8x!!! (recent -12.8x to +6.2x)
NYSE Financials rose by 0.5% vs -0.3% vs +0.5% vs +0.3% vs +1.5%. BofA was most active: +2.8%!?! vs +0.4% vs +0.7% vs +1.9%??? vs +1.1% vs -1.2% vs +1.9%. It closed at $14.31 +.39 with a new two year high of $14.44! Brokers +0.2% vs -1.2%!; KBW Banks +0.6% vs -0.8%; Nasdaq Banks +0.4% vs -0.5%. Last 3 days: BAC +3.8% w/12 mo high of $14.44 on earnings…due to ML not banking activities! JPM +0.5%; WFC +2.1% (NH); USB -2.4% BUT from NH; GS +0.9%; MS +1.6%; UBS +2.3%…can this last? Doubtful IMHO!
Volatility (S&P VIX) declined breaking 14 to 13.78 -.64 – on 6/20 it peaked at 20.49, plunged to 18.90 on June options expiry then closed at 20.11 on 6/24 and has been down since – a decline of 33%! 6/24’s session high of 21.91 was highest since 12/31/12 (22.72)!!! The range since April ‘12 is 11.99 (multi year low) to 21.9, It is well below the 40/50 day (15.95/15.32) and the 200 day (15.04)!!!…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

Global equities slightly higher – Korea strong!: UK flat vs flat vs +0.4% vs +0.3% vs +0.6%; France +0.3% vs -0.6% vs +0.4% vs +0.2% vs +0.9%; Germany +0.2% vs -0.3% vs +0.2% vs +0.9% vs +1.1%!; Japan +0.1% vs +0.6% vs closed vs +0.2% vs +0.4%; Hang Seng +0.2% vs flat vs +0.1% vs -0.8% vs +2.6% vs +1.1%; Korea UP 1.1%! vs -0.5% vs +0.3% vs -0.4% vs +2.9%!!! vs -0.3%; India +0.5% vs -0.9% vs +0.4% vs +1.4%!!! vs +2%. U.S. equity futures little changed in another extremely narrow trading range: DOW -2; SPX +0.60; NDQ +5.

Bonds closed higher Wednesday and are little chantged overnight: 10 yr Treasury 2.49% +1/32 (recent range 2.74% to 1.63%!!!), and the 30 yr range of 2.82% to 3.71%, currently 3.58% -1/32. The long TIP is 1.29% -3/8 – still the weakest link since the (record?) low of 0.36% on 4/5. Recent high 1.53%! Libor update: 0.266% 3 mos, 0.398%!!! 6 mos – dropping again! 6 month is almost at the Jan. 2010 record lows (0.245% and 0.382% respectively). Foreign bond yields sharply LOWER led by Portugal and Greece: Germany 1.51% -3; UK 2.25% -4; France 2.17% -2, Italy 4.45% -4; Spain 4.65% -7; Portugal 6.81% -19; Greece 9.93%!!! -13 vs 10.07%vs 10.02% -16!!! vs 10.27% -19!!! vs 10.33% -25!!! vs 10.69% vs 10.85% +28!!! vs 10.52% vs 10.54% +40!!! vs 10.85% -37!!! vs 11.22%. Recent range: 8.04% to 12.57%. Japan 0.80% -1. Note daily changes on Greece!!!

Gold closed weaker at $1278.80 -$13.20 after putting in a new rally high of $1301.70 – highest since 6/24 – BUT it had a NEGATIVE key reversal (higher high, $1301.70, lower low and close below prior session low!). 6/27’s intraday low was $1179.40 – lowest since at least 2011 and now critical support. $1300 is again resistance, then the 40 day/50 day: $1329/1348 – both declining again, and way above, the 200 day – $1576!!! Overnight it is $1282.30 +$3.50. Crude closed at $106.48 +.48. It remains well above the 40/50 day m/a’s (97.84/97.40), while the 200 day ($92.90), is distant support. First support is $104.21-36 – a triple bottom from last week. 4/18’s low of $85.61 was lowest since 12/11! It is slightly higher overnight at $106.60 +.12. The range is $85.61-$107.45 since March 1, 2012.

Some random thoughts:

Yesterday TB commented on an exclusive Bloomberg article on Glass-Steagall. It is now available on the web: Remember why Glass-Steagall was passed

Today’s commentary is an open letter to TB’s (and hopefully your) senators and representative:

Dear ____________:

It is disturbing to have to bring this to your attention but despite the greatest financial crisis in the history of the world, you, the Congress, as well as the Obama administration have failed miserably to find a way to protect the American people from it ever happening again. Not only that, you or your predecessors failed to listen to the few warnings against the repeal of the Glass-Steagall Act by trusting Treasury Secretary Robert Rubin, Asst. Secretary Robert Rubin, and Federal Reserve Chairman Alan Greenspan. Of course, you had reason to believe them, but if you listen to Bill Moyers interview with former Citigroup CEO John Reid, you will realize that this was all for fulfilling one man’s dream – Sandy Weill, Chairman of Citigroup – of creating a ‘financial supermarket.’ Note that while Greenspan gained nothing from this, in fact it sullied his reputation, both Summers, and especially Rubin benefitted financially from it.

Weill has now stated that the financial supermarket was a good idea but is no longer. It was good because it served his interests of combining Traveler’s Insurance and Citigroup, it did nothing for the American people, or ultimately, Citigroup investors.

Then SEC Chairman, William Donaldson, had a plan to keep the big five banks in line (the repeal and subsequent legislation deregulated the top five banks). He planned ‘random audits’ of them which would have been about five years apart. That was thwarted by former GOP Representative Chris Cox, who did not conduct one of those audits in his five year term, among other things like not protecting against ‘naked shorts’ which added dramatically to the decline of bank/broker stocks and facilitated the demise of Lehman Brothers, a company that should have been bailed out due to their vast global exposure to bonds. If so, management should have been replaced as it should have been for the other offenders, but was instead done both sparingly and not forced by the government that provided the bailout protection (which by the way, was grossly misused to inflate profits and thus bonuses, with the blessing of then-Treasury Secretary and former Goldman Sach Chairman Henry Paulson, who by the way let his brother’s firm Lehman Brothers fail while bailing out Bear Stearns, Merrill Lynch, and Wachovia Bank).

‘Too Big to Fail’ was created by President Reagan in the collapse of Continental Illinois in 1984 over the objections of his Treasury Secretary and former Merrill Lynch Chairman, Donald Regan. It produced moral hazard and since Continental was the 8^th largest U.S. financial institution, the implied guarantee of the top eight banks. This caused two things: first global inflows of funds, and second, funds flowing to these banks from smaller U.S. banks. This was clearly wrong, yet nothing was done and despite another banking crisis and savings and loan crisis, it was allowed to stand.

This combined with the 1999 repeal of Glass-Steagall was what created the crisis. I have heard and read of mortgage brokers being threatened by the big brokers that they would go elsewhere to buy mortgages if they didn’t produce more…and worse, lower quality ones to both meet demand and to keep the rates higher. Many of the mortgage companies like Countrywide, paid commissions to brokers that incented them to steer borrowers who could have qualified for conforming loans, in particular minorities, to subprime loans which were variable and as time went on the terms became more extortive.

We often hear ‘everyone was to blame’ – but were they? The realtors too were incented by rising prices, and in many cases told the appraiser what they need to get – threatening them with taking their business to others who would produce the desired result…even banks did this. Worse, they altered financials to make the borrower qualify or get a higher credit score. I know of one instance where Citi inflated a salary from $60,000 to $160,000! This was common practice…and why not? The bank would sell the bank to an underwriter immediately with no more and often less than two months recourse.

That is what created the crisis…because anyone can apply for a loan of $1 million and not be able to make the payments and that is not a crime, but if the lender gives it to them without doing due diligence, that is or should be a crime.

Despite the above, had former CFTC Chairman Brooksley Born, been granted her request to regulate derivatives there still would not have been a crisis. Why? Because trading derivatives that had to conform to standards on a commodities exchange would have eliminated the profit motivation. By not conforming each derivative, which often exceeded three hundred pages, was not only not read, but could not be traded except by going back to the broker who created it. Instead, Born was publicly ridiculed by….Rubin, Summers, and Greenspan!…for doing her job! Who caused the crisis? You decide.

Also, despite the ‘gift’ given to the banks and despite paying them off they are still receiving benefits attributed to it. The big banks, led by JPMorganChase have fought every attempt at financial reform including watering down Dodd-Frank and the Volcker Rule. This insures that we will have another financial crisis and this time we might not be savable.

Look at the number of civil suits the banks have lost over securities dealings with state and local governments. Still, no one has gone to jail…not by the SEC which is pre-occupied with insider trading…poor Martha Stewart…and those record fines? Who pays them? The already punished shareholders while CEO compensation continues to climb.

Meanwhile, the SEC has only fined Angelo Mozilo of Countrywide, $67.5 million, a fraction of the money he made while selling his holdings while telling the public everything was fine. It was a record fine…but without admitting guilt and an agreement to not file criminal charges. The Holder Justice Department has also failed to prosecute anyone on the basis that despite whistleblower memo’s etc, they don’t have enough evidence to convict…whatever happened to the ‘perp’ walk? Again, they point to colleting record fines but the wrongdoer is not fined…only the company…and many of them remain in their jobs. Why did we bother to pass Sabanes-Oxley? It has never been used…not once!

Meanwhile, Grover Norquist has continued to lever his control over Congress due to a ridiculous pledge of no new taxes signed by most of the Republican party. That includes allowing hedge fund operators to become billionaires through the ‘carried interest’ loophole which taxes them at between 15 and 20%. This is unconscionable and along with CEO compensation has contributed greatly to the wealth gap which is dangerously high and growing.

Much of this has been allowed to happen because of a small percentage of Congressmen who see any tax as wrong and have effectively shut down government thereby reducing growth the requiring the Fed to subject us to ‘systemic risk’ (in the words of the Fed’s own advisory committee!), by buying up mortgages…note that the banks create them often collecting an origination fee, then sell most of them to FNMA/FHLMC while retaining the 0.5% servicing fee (on a 4% mortgage?), and they are in turn sold to the Fed which is not only increasing risk but inflating asset prices – both stocks and real estate – since the Fed cannot allow us to slip into deflation. Thus the Fed is the lender of last resort and the only one, rightly or wrongly, that is protecting us while our elected officials stand idly by.

I have been in the financial business for 42 years, ten of those in banking of which I was proud of…then. But even then I said, “banking laws are of the bankers, by the bankers, and for the bankers.” Today that is more true than ever

In closing, please do something for the American people once, not your campaigns.

Have a great day….but do something positive to help yourself and America!

Permalink Leave a Comment

6/18/13…TBTF or TITF?

June 18, 2013 at 8:48 am · Filed under banking, economy, financial, markets ·Tagged CIT, Federal Reserve, Goldman Sachs, Henry Paulson, JPMorganChase, Lehman Brothers, Lloyd Blankfein, Richard Fuld, Simon Johnson, Stephen Friedman, The Baseline Scenario, Too BIg To Fail

From the Friar’s Club Encyclopedia of Jokes: “If penicillin is such a wonder drug, how come it can’t cure bread mold?” – Ron Smith

Bloomberg Quote of the Day: “Never trust a computer you can’t throw out a window.” – Steve Wozniak, one of the founders of Apple…TB would add those that can be thrown out if you believe in GIGO (Garbage In, Garbage Out) – TB

Bloomberg Top Stories:

*Obama Says Bernanke Has Been at Fed Longer Than He Wanted, Signalling Exit – back at ya Barrack. Let’s throw everyone out and start over…couldn’t do any harm. TB

*Housing Starts in U.S. Rose in May to 914,000 Annual Rate as Permits Gain – but interest rates while still low are rising!

*Commercial Building Slowdown in U.S. Weighs on Economic Recovery

*Consumer Prices in U.S. Climbed Less Than Economists Forecast on Food Drop –???

*Yen Weakens With Bonds as S&P Futures Rise With Stocks Before Fed Meeting

*European Car Sales Slump to 20-Year Low as Joblessness Hurst GM Demand – !!!

*Danske Slapped With FSA Order Adding $18 Billion to Risk-Weighted Assets

*Draghi Says ECB Is Keeping an ‘Open Mind’ on Non-Standard Monetary Policy

*Jeffries Second-Quarter Net Income Falls 34% as Trading Revenue Decliens

*Fewer U.S. Workers File Long-Term Disability Claims as Economy Makes Gains

*Detroit Recovery Plan Would Dip Into Retiree Pensions to Keep City Afloat

*GM Vows to Show China that Cadillac of Vehicles Isn’t Audi – but Cadillac!

*Aston Martin Owner ‘Investment Dar’ Said Asking Lenders for 50% Cut on Debt

*Abenomics for Women Undermined by Men Dominating Japan Ruling Politicians

*Virginia Loses Republican Grip of Old Dominion With Newest Voters Emerging – the night they dragged Old Dixie down…all the GOP was crying – turning from red to blue!

Another day and one that could have posted 1% gains had the market closed at the highs. Still it was an ‘up’ day…but…DOWN Friday vs a BIG ‘up’ vs ‘down’. Since June 4^th we have now had EIGHT of these cycles…with a ‘barely changed’ one right in the middle…anyone want to put that rhythm to music? This is the first one where not one single index moved by >1% by at least one index, and almost all have been with virtually every index moving by >1%! Volatility, that’s what TB is talking about! Since May 30^th the S&P VIX has closed between 15.14 and 18.59 with a range of 14.36 to 18.60 – the 40/50/200 day m/a’s are 14.37/14.26/14.98…it remains elevated! It closed back above 17 on Friday then slipped to just under at 16.80 yesterday. New 52 week highs surged again to 264 vs 170 vs 159 vs 140 while new lows declined again to just 62 vs 72 vs 459 vs 507 vs 363. The market is unable to get back to the record highs of late May…still struggling with the 40/50 day m/a’s. Advance/Declines and Breadth were both modestly positive. Volume rose only slightly from one of the lowest levels of the year on the NYSE and actual floor trades to just 679M vs 634M vs 756M, ranging from 595M-756M last week with an average of just 673M shares: compare to the prior week’s 792M-880M with an average of 787M vs the 12 month of just 720M.

We are not ‘waiting for Godot’ but for the FOMC announcement on Thursday afternoon…just a day prior to options expiry. The Fed has made a muck of the markets with their dissent which is raising volatility – fully utilized by the high frequency traders and driving institutional investors nuts with just 9 trading days until quarter end…what’s a mother to do???

NYSE Financials, and the Nasdaq 100 were the two best performers, +0.9% while Dow Transports were the only loser, -0.2%…even the downtrodden Dow Utilities rose by 0.5%! Our continuing Nasdaq 100 watch continues: it rose by 27 points with 8 members combining for half the gain, net was 4:1 advancing! It was led by MSFT +4.1!!! vs -2.3 vs -2 vs -4.5 vs -1.4, AAPL -4.8!!! vs +3.1 vs -1; CSCO +2.8 vs -1.1; GOOG +2.6 ; ORCL +2 vs -2 vs +3 vs -2; AMZN/APPL +1.6; AMGN/QCOM +1. GILD was the only one to lose more than 1 index point (-1.6!).

So let’s see what else happened:

* Dow 30 -+0.7% vs 0.7%vs +1.2% vs -0.8% vs -0.8% vs -0.1% vs +1.4%!; Dow Transports -0.2%! vs -0.5% vs +1.9%! vs -0.7% vs -1% vs -0.3% vs +2.4%!!! vs +1% vs -1.9%!; Russell 2000 +0.7% vs -0.8% vs +1.8%! vs -0.9% vs -1.1%; Dow Utilities +0.5% vs +0.1% vs +1.5%! vs -0.9%! vs -0.7% vs -0.3% vs +0.8% vs +1.3%; S&P 500 +0.8% vs -0.6% vs +1.5% vs -0.8% vs -1% vs flat vs +1.3%; Nasdaq Composite +0.8% vs -0.6% vs +1.3% vs -1.1% vs -1.1%; NDQ 100 +0.9% vs -0.6% vs +1.3% vs -1.1% vs -1%.

*NYSE Volume rose only slightly to 3.08B shares from a very weak 2.91B shares (2^nd lowest of 2013, 2.75B is the 2013 low), vs 3.41B vs 3.21B vs 3.41B. REAL NYSE Volume rose to a still below average 679M shares vs 634M vs 756M vs 692M vs 689M vs 595M (lowest since 5/24). The 12-month average is just 720M 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. May 31^st was only the fourth day this year to register over 1B shares! There have now been just 20 800M+ shares in 2013 – 7 up, 13 down, but on trades of less than that 81 have been up and 30 down…there have been 22 mixed sessions.

*New 52 week highs have ranged from 74-864. They rose to 264 vs 170 vs 159 vs 140 vs 141 vs 278 vs 227 vs 103 vs 74!!! New lows declined again to 62 vs 72 vs 459 vs 507!!! (recent high). Recent range 49-507.

Advance/Declines were modestly positive: +2x vs -1.2x vs +5.6x! vs -4.2x! vs -6.4x! (recent range -7.1x to +4.4x) on NYSE and +1.8x vs -2.5x vs +3.2x! vs -2.3x vs -2.8x (recent -3.5x to +3x). Breadth was similar: +2.6x vs -1.9x vs +6.9x!!! vs -3.8x vs -4.4x! (recent -10.5x to +6.4x!!!) on NYSE and +2.6x vs -2.3x vs +3.9x! vs -3.2x vs -3.6x! (recent -12.8x to +6.2x)
NYSE Financials rose by 0.9% vs 1.2% vs +2% vs -1% vs -1.6%!; Brokers +2%? vs -1.8% vs +2.2%! vs -0.8% vs -1.6%; KBW Banks +0.8% vs -1.6% vs +1.4% vs -1.1% vs -1.7%; Nasdaq Banks +0.5% vs -1.3% vs +1.3% vs -0.8% vs -1.1%. BofA rose by 1.1% vs -1.1% vs -1.2% vs +1.2% vs -1% vs -1.4%….closed at $13.21 +.14 and has a double bottom at $12.97 which is now critical support! C +0.3% vs -2.1% vs -1% vs -3.8%! vs +2.1%; GE +1.1%. No other financial movers – the sector remains near their rally highs but very volatile.
Volatility (S&P VIX) slipped to below 17 and closed at 16.80 -.35 with a range of 16.33-17.62! The high was 5/12 at 18.60, not seen since 2/25. The range since 4/12 is now 11.99 (multi year low) to 18.60, and it remains above the 40/50 day (14.25/14.10) and the 200 day (14.96)…ytd the range is 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.10!

Global equities somewhat weaker, ex-U.K, Korea; UK +0.8%! vs +0.6% vs +0.1% vs -0.8% vs +0.2% vs -1.7%!; France -0.2% vs +1.5%! vs +0.2% vs -0.6% vs +0.5% vs -2%!!!; Germany flat vs +1.3% vs +0.5% vs -1.4%!!! vs -0.1% vs -1.7% vs +1.2%; Japan -0.2% vs +2.7%!!! vs +1.9% vs -6.4%!!! vs -0.2% vs -1.5% vs +4.9%!; Hang Seng flat vs +1.2% vs +0.4% vs -2.2%!!! vs closed vs -1.2%! vs +0.2% vs -1.1%! vs -1%; Korea UP 0.9%! vs -0.3% vs +0.4% vs -1.4%; India -0.5% vs +0.8% vs +1.9%! vs -1.1% vs -0.5% vs -1.5%! U.S. stock futures little changed: DOW +14; SPX +0.80; NDQ +5.75.

Bonds closed weaker again Monday and again overnight: 10 yr Treasury 2.20% -3/16 (recent range 2.25% to 1.63%!!!), and the 30 yr’s 3.37%!!! to 2.82%, now 3.36%!!! -3/16. The long TIP remains well above 1%! Currently 1.19% UP 5/32 – it has lost more than TWENTY points since May 2^nd! – still the weakest link since a new (record?) low of 0.36% on 4/5, 12 mo. ave 0.65%!. Since the Bernanke announcement on May 7^th the high yield has gone from 0.82% set on 5/22 to 1.22%! Libor update: 0.272% 3 mos., 0.409%! 6 mos. Foreign bond yields higher ex-Portugal and continue to be volatile: Germany 1.57% +5; UK 2.12% +4; France 2.13% +6, Italy 4.30% +4; Spain 4.55% -1; Portugal 6.00% -14!; Greece 9.80 -1 vs 9.77% vs 9.86 vs 10% vs 9.94% vs 10.27%!!! Recent range 7.94% to 12.57%.

Gold closed slightly weaker on a nearly parallel session at $1383.10 -$4.50. 6/11’s session low was $1364.50, lowest since 5/23. It has closed above $1400 just once in the past 9 sessions! 5/30’s intraday high was $1417.70, highest since 5/15. It has been down 15 of the last 26 sessions following 5/20’s intraday low of $1338, lowest since 4/18. 5/10’s high of $1487.20 was highest since 4/12. 4/16’s intraday low of $1321.50 – was lowest since Sept. ’10. Resistance remains at the 40 day/50 day: $1414-1423 – slipping again. Overnight it is lower at $1374.40 -$8.70, session low $1370. Crude closed almost unchanged ($97.89 +.12) just a day after a strong finish, +$1.01 with an intraday high of $98.25 – highest high and close since 9/17/12! It remains well above the 40/50 day …just 11 days after putting in an intraday low of $91.26 – lowest since 5/2! It remains well above the 200 day ($92.30) with just one day below since 5/1, making it major support. First support at the 40/50 day (94.73-93.82 – now crossed and rising!). Overnight it is $98.26 +.49…yesterday’s session high of $98.74, highest 9/17/12. 4/18’s low of $85.61 was lowest since 12/11! The range is $85.61-$97.80 since June 29, 2012!!!!

Some random thoughts:

…Too Big To Fail or ‘Too Important To Fail’ – that is the question!

In today’s The Baseline Scenario, Simon Johnson reports on a study by Goldman Sachs that found that TBTF provides no economic value and denied there is any such thing as downside protection provided by the official sector to creditors of TBTF financial conglomerates. Baseline Scenario

While it would be easy to claim a conspiracy as Johnson points out it is more likely a group of players with the same objectives: stifle regulation and thus allow them to create the next financial crisis while enriching management…at shareholder expense of course. As Danny DeVito said in Other Peoples Money …nothing is better than OPM!

TBTF was the ‘brainchild’ of Ronald Reagan in 1985 when, over the objections of his treasury secretary, Don Regan (TB’s former boss as Chairman of Merrill Lynch), and bailed out Continental Illinois, then the 8^th largest bank in the U.S. That simple move created TBTF and by extension created moral hazard for the biggest EIGHT banks in the U.S. This resulted in phenomenal growth as money flowed in from around the world for safety of a government guarantee…and domestically came at the expense of the smaller regional and worse community banks (which the Fed has long seen as a thorn in their side and tried to drastically reduce in number).

Perhaps Goldman could take a lesson and refute the Fed’s misguided conversion of them (along with Morgan Stanley and UBS). It is a disservice to the country and a liability that they be allowed to call themselves a ‘bank.’

One of the first statements out of Lloyd Blankfein’s mouth was ‘we will never make a loan or take deposits.’ Isn’t that the definition of a ‘bank’? Also, it’s interesting the Hank Paulson saw it critical to save Goldman (which enriched him) while letting the much more significant (as we now know), Lehman implode…still, I would not have done it if Dick Fuld had been allowed to remain CEO.

Then there is Stephen Friedman, former Goldman CEO and Chairman of the N.Y. Fed while remaining a director of Goldman (amazingly, it is required that a N.Y. Fed board member be a director of a financial firm). But while the debate was going on about making them a bank, Friedman was busy acquiring more Goldman Sachs stock – even as everyone else was fleeing financial firms. It was deemed a conflict of interest (seriously? …not insider trading???) and he was forced to divest the stock…wait…what about treble damages? If I was Martha Stewart I would be incensed.

In becoming a bank, Goldman had to shift its fiscal year end from November to December as required of all banks. Brokers use staggered months for their fiscal year end in order to keep liquidity from drying up at year end and thus disrupting markets. But it also allowed them to use November to ‘hide’ enormous losses and this misstate their financials. That was due to regulation not Goldman but they managed to utilize it fully to their benefit.

Lastly, this is the first time anyone took the same position I have on CIT Financial. It was more of a bank than Goldman for sure…it was the lender of last resort to hundreds of thousands of small firms and when it was allowed to fail credit dried up for many of these businesses further exacerbating the problem. Their sin: borrowing short and lending long. But it didn’t require one dime of public money to save CIT…merely an ‘obligation’ which would have been created by guaranteeing CIT’s commercial paper – they had no problem doing this for the banks which even profited by underwriting each others government guaranteed bonds…and worse, selling them to hedge funds in what was anything but bonafide public offerings – as an institutional buyer I never saw these offerings until the next day when they were grossly marked up in price. Consider that our guarantee was now costing us more and going directly into the coffers of the banks and the hedge funds they sold them to! True, none of the guarantees ever cost us money but at the time that was anything but a certainty.

Is this a great country or what?

Have a good one, y’all!

Permalink Leave a Comment

4/28/10…FLASHING YELLOW!!!

April 28, 2010 at 6:36 am · Filed under Uncategorized ·Tagged Daniel Sparks, Goldman Sachs, Greek crisis, Henry Paulson, Jon Corzine, Lloyd Blankfein, Robert Rubin, Senator Levin, stock market, technical analysis

Bloomberg Quote of the Day: “Anything too stupid to be said, is sung.” – Voltaire…now I get rap!!!

…if you are bull consider that in one day we wiped out eight days of rally (with one down day in the middle). Thus we are back to the levels of 4/8 on the Dow and 4/7 on the S&P 500. Dow Transports, S&P 500, both Nasdaq indices, the Russell 2000 and AMEX Composite were all down more than 2%. The Barron’s 400, their pick of the best stocks fared only slightly better, -1.9% – so much for safety. NYSE Energy plunged 2.8% for the worst sector (Oil Services were off more than 4%). The SOX was down 3.5% and housing stocks were off more than 5% – it was a rout! But those are just the headlines, look:

*Advance/Declines were -5:1 on NYSE and Nasdaq while up 1.2:1 on AMEX.

*Breadth was -16x on NYSE, -10x on Nasdaq, but up 1.6x on AMEX

*12 month new highs were still 497 but that is down from 1100 on Tuesday, a rally record while new lows were still small at 33 but doubled from Monday

*NYSE Volume was 1.67 billion shares, the 3^rd highest of 2010 and well above the 12 month average of 1.22B shares which has been brought down by the low volumes this year.

*For la piece d’resistance, volatility as measured by the VIX SURGED 30.5% – the biggest since 2008 (you do remember that year don’t you?) taking it from a complacent 16 to 22.81. VXN also rose 16.7% to 21.30. There is your flashing yellow signal!

Now look at some of the movers on the various indices and note the ratio of gainers to losers and magnitude:

Dow Industrials: 28:1 declining, CAT -23.5!!!; CVX -18; UTX -16; IBM/BA -14, DD /JPM/TRV -11; AXP -10…on the upside perhaps two would have two digit gains

Dow Transports: 19:1 declining, FDX -15; OSG/UPS -13….only plus KSU +4.5

Dow Utilities: 15:0 declining…no movers of more than one point

S&P 500: 480:19 declining! (S&P only releases names for a fee…jerks!)

Nasdaq Composite: 2076:486 declining! This is huge. Apple cost it 4, 5 others -2

Nasdaq 100: 95:5 declining! AAPL was -10; 7 others 1 point! No up movers

Russell 2000: 1743:223 even bigger than Nasdaq hit! Movers unavailable

AMEX Composite: 291:134 declining. BTI -23.5!!! AMX -18!!!; IMO -11!!!

NYSE Energy: 149:3 declining- worst TB can recall. BP/XOM -25; CVX -24; TOT -23; SLB -14.5; E/OXY -13; PBR -11 (despite great earnings);12 others lost 5 to 9 points!

SOX: 21:0 declining…very seldom have their been any movers here lately but yesterday 5 lost one index point.

Technically speaking, last Thursday, most key indices had positive key reversals (higher high, lower low, and close above the prior day’s high) – this is the most important technical signal, yet since last November it has given us misleading signals whether it isa positive OR negative reversal. There was no follow thru Friday, Monday was mixed, and now this plunge. A key reversal is supposed to be indicative of a sudden or unexpected change of sentiment. By the way there were no reversals yesterday….only lower highs and much lower lows.

Then there is the case that we had new highs on virtually all indices Friday, then Monday, and to have a setback the next day following an 18 month high is staggering! It like no follow thru to breakouts is not supposed to happen…but we live in interesting times!

It was very timely given TB’s commentary yesterday about underestimating the Greek crisis…indeed, CNBC even cut into the Goldman Sachs hearing to report that the sharp sudden drop was not due to that but to the close of European markets just before which, S&P cut the rating on Greece to JUNK (you do recall that when NY city went bust it still carried an ‘A’ rating from both services, that is how on top of things they are)! Meanwhile as Bloomberg top stories reported yesterday, Germany’s Merkel, caught in a re-election battle reneged on her promise to provide money to Germany, and talk of Portugal and Spain being close to requiring aid, but nary a mention of Italy and Ireland??? The Euro lost 2 cents yesterday and overnight while Sterling lost about 2.5% over concerns of a split in Parliament which as we are seeing here means nothing can be done if we have another problem (also at end of March the UK had the first failed gilt auction since 2002). This as we were cheering a surprise jump in U.S. consumer confidence…how stupid…not even addressing the facts! Confident compared to a month ago and a year ago but still dismally weak…what gives?

As for Goldman, more discussion follows…

Last night, while watching the Goldman hearings, TB caught Larry Kudlow, Jim Cramer, and Rick Santelli…Kudlow was chortling about how people can’t see the strength of the economy and that a wave of job hiring is about to occur…go fish Larry…because that dog of yours has hunted! Cramer…is more bullish than ever…no reservations…guess all he pays attention to are earnings – not risk or the possibility that guidance is too high (remember insiders are continuing to sell!). Santelli was smiling, which is an improvement from his ranting (“nobody on the CBOT wants to pay someone else’s mortgage”)…meanwhile TB says if it smells like B.S. be careful where you step!

…—… …—… …—… …—… …—…

The first question that got TB thinking yesterday in the Goldman Sachs hearing was: didn’t you think it was wrong to sell junk, crap, s%&t to your clients?

That should have been a clue because of the four wise men up there (the best and brightest, right?), only one said yes (sort of) but also said he didn’t believe it was a bad investment. The next time talk of bonuses comes up, the footage of these illuminaries, mostly with blank stares on their faces (perhaps it just hit them at what they had done under intense questioning and with the biggest loose-leaf binders TB has ever seen in front of them…must have been 10 inches thick), it should be asked if this is what you get by paying outsized bonuses. They mostly looked like idiots…especially Mr. Sparks who headed the mortgage marketing unit. This man seemed having trouble understanding a question even when repeated to him several times. He refused to answer even obvious hypothetical questions or those where the words or data were right in front of his eyes. It was humorous, yet tedious, watching him trying to find pages in the binder…frequently asking again which document. He is either a liar (and a poor one), and obfuscator, or stupid…take your pick…and it is not intelligence here that matters but common sense – or the street smarts that Wall Streeters are said to have – they would be no match for gangbangers in that category…they seemed to move and think at the pace of a wounded snail.

TB thought of the three monkeys: see no evil, hear no evil, speak no evil but in this case it was – lie, obfuscate, or fail to understand. In fairness, at times the questions were compound, confusing, or showed a total lack of understanding (which is understandable due to complexity) of derivatives and mortgage backed securities…these guys had been well coached by their lawyers…better to look stupid then be caught in a lie (the last time TB was really involved in a similar situation was the 1994 Orange County bankruptcy where TB (a former ML salesman) knew every one of the people involved on both sides, at least in that case they sounded plausible (except Citron’s mental defect which made it difficult for him to deal with large numbers…his statement).

When TB came into the business, most firms were still partnerships…the motto was think of the client first (after all if you trick them one too many times he will be lost), the firm second (which in a way makes it a tie with the clients interests – in a partnership where the capital is their money, retirement as they only get the income and cannot take out the principal – but now in a world where it is all OPM (other peoples money) in the form of common shareholders who are routinely dissed by the board (who is sworn to protect them), in favor of a CEO making 300-400 times the average employee (up from about 30 times in 1980)…and who usually is the Chairman or at least drives the board.

In 1986, TB went to work for L.F. Rothschild, which later went belly up on management overspending, overextending, and bad bets…it had been one of the finest firms in the industry – until they went from partnership to publicly held corporation! They lasted less than two years after that change! His sales manager, Tim Peters (name mentioned because he clearly didn’t get it), once said on a conference call about commissions “think of the firm first, the client second and yourself last (in GS’s case you only have two things to think about because if the firm doesn’t thrive neither do you…think of this as a shift from being a long-term investor [partner] to short-term [commissioned salesman]).

TB interrupted that this was a recipe for disaster because if you think of the firm first (as Goldman did), you will eventually lose your loyal clients…obviously this failed to impress Mr. Peters, who as far as TB could see had his strongest suit in a pile of resumes.

Then came the final act…Sir Lloyd of Blankfein looking like a smug Wall Street CEO, and with a stare that is like ice…he couldn’t contain his anger at times…but one thing he really looked stupid on was this comment: I never considered that people had to have certain credit ratings in order to purchase securities. Perhaps he can be excused because he is a Harvard Law grad (as is Senator Levin, both very high in their class), and was not a trader…but no…that doesn’t fly…and if it does he had no business being CEO of a securities firm…any more than Chuck Prince should have been CEO of Citigroup. Lawyers are staffers, Hank Paulson (TB just learned that his brother worked at Lehman when the decision was made to let it fail, wiping out his equity) was an investment banker, unlike other former GS CEO’s Jon Corzine and Robert Rubin who were bond traders. But any executive of a firm has to know basics and those are about who your clients are…in this case that means knowing what drives them. For him to say that he had no idea that some investors can only purchase securities with AAA ratings is ludicrous, but judging from the ‘blankfein’ look on his face – he didn’t know.

One question not asked was how Goldman can consider itself a bank (even if they have bestowed that title by the Fed), yet constantly say they do not want or take deposits, to make loans, or issue credit cards. Fire them as a bank will someone…now??? Blanfein also insists they paid back the TARP money but what someone should have asked is what about the savings to Goldman from the TGLP loan guarantees??? Don’t get TB started…

Blankfein also stated that he didn’t care where the money came from to pay off the ‘bet’ with AIG…since if it wasn’t the government it would have been the ‘insurer’ (a counterparty they used to insure that they would collect on their AIG credit default swaps). It was like…sure it was the taxpayers money but that’s not my problem…the same went for them selling bonds that were doomed to investors and shorting the very same issue…one advantage of which was you knew where the bonds were if you in fact needed to cover. Machiavelli would have loved this man as perhaps no other person would (TB suspects he is not loved by his coworkers and underlings).

So what did we learn? That Wall Street is not to be trusted…that financial reform is urgently required…and yet we know that the GOP will fight it…side by side with Wall Street, as if it is the holiest of grails. IF we don’t get financial reform, particularly regulation of ALL derivatives we are doomed to repeat the past crisis and next time we will not survive! Remember there is one and only one reason they do not wish derivatives to be regulated: because if they are traded on an exchange all the firms will earn is the commission on the trade – a pittance compared to an opaque instrument with huge spreads. Without derivatives and the super-leverage they produce, the crisis would not have occurred…it couldn’t have…there would have been no reason to scream to mortgage companies for more ‘bad loans.’ Once they started doing that and the mortgage companies got back the paper when it missed its very first payment (there was just one month of recourse), the pressure was on to create more and lower quality loans. So stop saying “there is plenty of blame to go around” or it is the fault of irresponsible individuals, most of whom had no financial acumen and were ‘conned’ into believing they could and should own a home. Even the stupidest of loan officers knows a loan that has no possibility of being able to make the very first payment! It is sickening!

Sorry for the length of today’s column and the tirade (rant?), but it is necessary!

Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries…as he sees it…and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Hope you find it useful. Copyright TBD Capital LLC, © April 28, 2010.

Permalink Comments (2)

2/10/10…pigs resurrected!

February 10, 2010 at 5:37 am · Filed under Uncategorized ·Tagged Alan Greenspan, Andrew Bary, Anthem Blue Cross, Edward Gramlich, Greg Ip, health insurance, heath care reform, Henry Paulson, Kenneth Feinberg, Lloyd Blankfein, Obama, Warren Buffett

…this gets screwier and screwier…just when you thought the pigs…and the PIIGS were in trouble, rumors are flying that Germany will bailout Greece? Why not the EU, because too many countries (including four of the big PIIGS: Portugal, Ireland, Italy and Spain) are looking bad too. Germany also has a vested interest in Greece as they are the buffer to keep the Turks out…high Turkish/Muslim population in Germany and they don’t want it any larger. That is why Germany fought so hard to keep Turkey out of the EU…if they come in you cannot ban a resident of one EU country from moving to another…get it?

Some have said it was this rumor that stirred the markets Friday afternoon, but a better one was offered up by a former colleague: the weather. Friday, everyone was in a race to get out of NYC and DC. That left few, if any, senior traders…it also left few to short the market (never short a thin market!). So here is how it works. Someone comes in to buy stocks…a trade is done…they trade up…another trade…soon traders (especially junior ones) worry about covering the shares they sold so they raise their offers even more…soon you have a feeding frenzy and you can bet there are senior traders left at hedge funds or they can trade from home. That is what TB believes happened and it was all made possible due to the weather. Storms still persist and getting worse today as DC is shutting down. But it appears that the teeth are out of this trade now…perhaps a bit higher but the highs of ,id Jan will not be an issue…even those around month end. To TB at least, the trend remains down.

	High	Low	Close	Change	40 day	50 day	NYSE Vol.
1/21	1,141.58	1,114.84	1,116.48	Down	1,118.7	1,141.6	1.50B
1/22	1,115.49	1,090.18	1,091.76	Down			1.47B
1/25	1,102.97	1,092.40	1,096.78	Down			1.05B
1/26	1,103.69	1,089.86	1,092.17	Down			1.11B
1/27	1,099.51	1,083.11	1,097.50	Up			1.30B
1/28	1,100.22	1,078.46	1,084.53	Down			1.12B
1/29	1,096.45	1,071.59	1,084.53	Down			1.58B
2/1	1,089.38	1,073.89	1,089.19	Up			1.04B
2/2	1,104.73	1,087.96	1,103.32	Up			1.18B
2/3	1,102.72	1,093.97	1,097.25	Down			1.48B
2/4	1,097.25	1,062.78	1,083.11	Down			1.06B
2/5	1,067.13	1,044.50	1,086.19	Down/UP	1,114.4	1,112.0	1.56B

2/8 1071 1056 1056 Down 1113 1111 1.08B???

2/9 1079 1060 1072 Up 1.24B

Look at the table above and note the highs of the last three sessions…only taking out 1100 would change the game…and TB’s view from bearish to neutral at best.

_________________________________________________________________________________________

Yesterday, TB mentioned the late Fed Governor Ed Gramlich. This was a man who, while dying of cancer wrote a book, following his resignation from the Fed and his failed attempt to get Greenspan off his Ayn Rand, laissez-faire, capitalism knows best, butt. The book, paperback, and more of a scholarly effort (he was a professor of economics), “Subprime Mortgages: America’s Latest Boom and Bust” is available on amazon.com ($26.50)…by the way Amazon is offering free shipping but only if you sign up for a free trial for their supersaver but if you forget to cancel in 30 days it will cost you $70 a year!

If you don’t want to buy the book, here is a link to a Greg IP, WSJ article from 2007, that in retrospect makes Greenspan look very foolish…despite his way of sounding like he knows what he is talking about. Gramlich/Greenspan

Former Treasury Secretary Henry Paulson says that every major economy faces more problems than the U.S. How do we know it’s true? Because we sold them the crap that self-destructed on them…and a major seller of that was his old firm, Goldman Sachs!

Ah, but there is more…he spoke at a luncheon meeting sponsored by Warren Buffett and said “during benign periods (?), I think compensation levels on Wall Street are out of whack.” This wasn’t a one on one comment but before 2,400 people! For the record, Paulson was paid a $18.7 million cash bonus for his final six months with Goldman.

Kenneth Feinberg, the pay czar said yesterday he was pleased with Lloyd Blankfein’s decision to pay members of the management committee at Goldman in restricted stock…but also said he isn’t happy with Blankfein’s $9 million cash bonus. He is also now after middle-management bonuses. The government should stay out of this BUT if not the government who will? The boards of directors who are the representatives of the shareholders (but who are CEO’s themselves and support management even over advisory issues from shareholders, and frequently have the CEO on their board; the CEO is frequently the Chairman – a glaring conflict of interest; and institutional investors for the most part vote WITH the board and then if they don’t like it, sell the stock…which leaves you, the individual, holding the bag, while the rich get richer…how did Andrew Bary miss this two weeks ago when he wrote on executive compensation saying the Obama is right to be angry but it is the board and shareholders who have the responsibility…yeah, right….where have you been for the past twenty or so years?

A friend wrote yesterday that his son is insured by Anthem Blue Cross. Here is what he said:

It’s certainly clear why Greenspan was big pals with Ayn Rand. Why would free market capitalism need excessive regulation? For that matter, why shouldn’t Anthem Blue Cross be able to raise premiums by 39% if they feel like it? After all, there is no regulatory authority to control rates. My 27 year old son got raised by 42% last July by our friends at Blue Shield. He moved his deductible to $4,000 from $2,000 to keep his head above water.

Coincidentally, a Bloomberg article came out yesterday on Anthem:

Over the past 12 years, Josh Libresco’s health insurance premium has increased almost eight-fold for his family of four.
   The 54-year-old San Rafael resident is facing a 39 percent rate hike from Anthem Blue Cross on March 1 that will raise his premium from $858 to $1,192 a month. In 1998, his monthly premium was $151.
   Libresco was one of a number of Anthem policyholders who received a letter last week saying California’s largest for-profit health insurer plans to hike premiums on individual
policies by 30 to 39 percent.
   Anthem has declined to say how many of its 800,000 individual policyholders in California are being affected by the hike. But Health and Human Services Secretary Kathleen Sebelius demanded specifics in a sternly worded letter Monday, saying the insurer has “a responsibility to provide a detailed justification for these rate increases.”
   In a surprise appearance at Tuesday’s White House briefing, President Barack Obama criticized the Anthem rate hike for the second time this week, urging Congress to take up health care reform in earnest.
   “If we don’t act, this is just a preview of coming attractions: Premiums will continue to rise for folks with insurance, millions more will lose their coverage altogether, our deficits will continue to grow larger,” said Obama. “And we have an obligation – both parties — to tackle this issue in a serious way.”
   Anthem did not have immediate response to Obama’s comments. In a statement Monday, the insurer blamed the weak economy and rising health care costs for its rate hike, while pledging to reply to Sebelius’ query promptly.

If you were opposed to health care reform you deserve this…or maybe not because both parties so obfuscated and spread disinformation that nobody knows what is going to happen. Shame on the GOP for stonewalling and shame on the Dems for turning it into a social program. Meanwhile the states are controlling health insurance and like with mortgage companies doing a poor job of it…the corruption must be blatant.

Hope you all have a terrific day – stay out of the storm!

Permalink Comments (1)

1/28/10…a three event day

January 28, 2010 at 5:57 am · Filed under Uncategorized ·Tagged Barrack Obama, Goldman Sachs, Henry Paulson, Neil Barofsky, NY Fed, SOTU, Stephen Friedman, Timothy Geithner

…first it was the Congressional hearings on the AIG bailout which caused the market to go up or down on questions or answers by Geithner (following him were Paulson, Barofsky, and Friedman, the latter two not deemed of media value by both Bloomberg and CNBC, despite the fact that special investigator Barofsky was the only one who knew what happened and could give an unbiased answer); the second event was the Fed statement following the conclusion of the two day FOMC meeting – nothing to see here; and last it was the anticipation of the President’s SOTU speech. So despite being up, down, up, down and finally up, the market breathed a sigh of relief and closed slightly better although still very weak. Volume was 1.3 billion shares or about 50 million below average…it took these three events to even generate this and otherwise would have come in about 1 billion shares. The session was punctuated by, despite the rallies, lower highs and lower lows, and energy the worst performer (-0.5%), while banks (+2%+) and the beaten down SOX the best (+1.2%). We are still clearly in a downtrend and volatility despite declining for the last three sessions is still up 24% over the past 5 sessions (VIX rose 42% in 2 days)!

Bonds had nothing to show for the session and commodities are down 9% since hitting their cycle high on January 6^th – is this the sign of a strong economy? China???

AIG/Geithner/Paulson: Tiny Tim had a good prepared statement and handled the questions well…until the subject of the Dudley email came up, in which he asked his successor in late March 2009 when the AIG settlement would be completed. This was right after he had stated that he had ‘recused’ himself in November as soon as Obama announced that he planned to appoint him Treasury Secretary. He seemed totally unaware of having written it but again stressed the recusal after consulting with several officials.

Recused, Tim, means recused…it doesn’t not mean selectively. Paulson confirmed that he asked him about recusing himself but had no further comment. But a Congressman asked why he didn’t have it in writing (rhetorical). But TB would ask why in the greatest financial crisis of our lifetime did he feel there would be a conflict? He was needed there and it is more likely he didn’t want to taint the new administration with AIG. He also said that the testimony of the Fed’s attorney that he wrote the memo agreeing to pay 100 cents on the dollar and not feeling it was important enough for the chiefs attention (what would have been important enough…and didn’t he know he had recused himself?), was standard and that attorneys act without review frequently (not in any firm that TB has ever worked for …they are a staff position not management). Then came a question about whether the firms who got paid would have gone under if that had not been the case. He said no it wasn’t big enough to any of them??? He could not explain either, why the names of those firms, 30 or so, with UBS being the largest, were not disclosed and to remain classified until 2018…yet he asserts that he is in favor of total transparency! He insisted that had AIG failed, people would have lost their retirements, insurance, etc. Was he not aware that he was bailing out the holding company and that all of the subsidiaries were sound??? This was a gross extension of ‘too big to fail’ as in the first case where it happened, under Reagan, Continental Illinois only the bank was saved (through guarantees not money), and the holding company went down. He continued to be battered and that was all…until the SOTU address when Obama was leaving and Geithner was right on the aisle…he shook hands with some others in his cabinet but his back was to Geithner as he walked up the aisle…left out in the cold?

Paulson never ceases to amaze TB. He speaks impeccably in his prepared statements then resorts to his horrible stammering when asked a tough question. This man was a former chairman of Goldman Sachs, the most powerful financial house on the planet? Bet he didn’t do that there and that is the problem: either he isn’t being totally upfront or he didn’t know what he was doing. In fact, that came up when he said he knew nothing of the AIG negotiations, yet was reminded that Congress held him accountable for how all money was spent…guess he missed that part. He was also asked if he had discussed AIG with Geithner’s chief of staff at the NY Fed. He said he didn’t know him until it was pointed out that he worked on Paulson’s staff at Goldman…and the question than became: if we looked at your phone logs would there be a single call to him. Answer was a weak no.

The right accused the panel of bashing them but they are a reflection of the anger from Main Street and the ties and lack of transparency it was totally acceptable and necessary.

Then the coverage on both stations ended as both networks saw no need to listen to the man who investigated AIG. Barofsky said he thought UBS was at least willing to take less, the Geithner and Paulson should have negotiated AIG payments, and that he was ‘extremely surprised’ some documents were not disclosed and is now going to investigate the New York Fed on those disclosures. So the independence of the Fed may be lost by a man who was supposed to protect it. The last was Stephen Friedman, the ousted (oops, stepped down) chairman of the New York Fed who said he had asked the Fed staff to keep sensitive data from him and was opposed to Goldman getting bank status (he is a former co-chairman and still a director). Also that the Fed staff sought a waiver on his Goldman shares, and that “it wasn’t feasible for him to sell his shares or resign” despite ‘myriad’ conflicts of interest (is that why he bought 400,000 additional shares?).” This is why the appointment system at the NY Fed by the banks governed by them is wrong and must be changed.

FOMC: As usual an overreaction to the policy statement that indicated the economy is doing better than when the last met and they will gradually wind down the mortgage purchase and liquidity programs…was this a reason to take bonds down and rally stocks?

SOTU: An angry Obama gave a boffo speech. Do you know what is the hardest part of being a Republican congressman? Knowing when to applaud, stand and applaud, or sit with a blank expression on your face and do nothing. Obama said that all hated the bank bailout yet that brought no reaction…he at least thought he would get approval from them as most wanted to do nothing and that would have been catastrophic. They had and apparently still have no idea of the magnitude of the problem due to excessive leverage and inadequate capital (guess what? It is still inadequate!). The only enthusiastic response was when he proposed eliminating capital gains for investment in small business…then they were out of their chairs. He also thought his listing of tax cuts for individuals he had enacted would get them to their feet…he was wrong…blank stares and snickering…see they don’t want tax cuts for those who need it…the middle class which happens to be $35,000- 75,000!!! It is totally skewed by the top 5% making a $250,000 or more and the top 2% of $1 million or more…no wonder he warned of unrest by the people if we don’t do something. He pleaded for non-partisanship…not neglecting his own party…and the do-nothing GOP just sat there….stonewalling. They apparently totally misread the Massachusetts upset judging by their rebuttal which was aimed at the Teabaggers. How can any rational person still call themselves a Republican OR a Democrat? Beats the heck out of TB! Liberal and Conservatives have been grossly misapplied terms!

For those of you who might have missed it here are support levels published yesterday.

TB firmly believes that for the S&P and other major indices we will get down to at least the 200 day moving average – and soon. Note that if fear resurfaces we could head for the March lows again! Furthermore, he believes that we will likely over shoot to the mid-July lows. Here are the close of Wednesday, 200 day and mid-July lows for key indices:

Dow Industrials: 10236; 9395; 8093

Dow Transports: 4034; 3646; 3000

S&P 500: 1097; 1009; 869

Nasdaq Comp: 2221; 2000; 1727

Nasdaq 100: 1818; 1624; 1394

Russell 2000: 618; 561; 473

While those mid-July lows look scary they would still be 30% above the March 2009 lows. Also note that above us again is the 50% retracement of the entire selloff – something we fought hard to surpass…finally getting to the September 2008 levels – pre Lehman Brothers…but if you are happy with your portfolio being down 50%…

—————————————————————————————————————————-

TB has been pretty tough on Obama lately. The Massachusetts defeat could be a blessing to him. Sure he squandered a year but Dubya did it for eight years and lowered the standard of living for the first time since World War II. We all need to hope and pray he succeeds. If not, the GOP, as well as the rest of us won’t have a lot to smile about!

All the best,

Permalink Leave a Comment

7/9/09…LHLL

July 9, 2009 at 6:30 am · Filed under Uncategorized ·Tagged commodities, Ernie Voigt, Goldman Sachs, Henry Paulson, Jim Cramer, Matt Tabibbi, Michael Jackson

Bloomberg Quote of the Day: “We don’t know a millionth of one percent about anything.” – Thomas A. Edison

….Lower High Lower Low is what LHLL stands for. A quick skim of the market summary for Tuesday will show that recurring in every single index! Astute readers will recall on Tuesday TB commenting that we missed ‘key reversals’ (higher HIGH, lower low and close below the prior day’s low) by about a point at the top on the major indices. But what is worse is that the ranges have extended dramatically at the low end, frequently into the next 100 or even 1,000 level. Take a look at the Dow Industrials for instance:

7/1 Closed 8504. Range 8580-8447. Broke 40, 50, and 200 day ahead of 3 day weekend

7/2 Closed 8281. Range 8503-8280

7/6 Closed 8324. Range 8328-8206

7/7 Closed 8280. Range 8326-8154

7/8 Closed 8178. Range 8219-8087

Four straight lower closes, four straight ‘two handle days and all after busting thru the 40, 50, and 200 day moving averages. The three now stand at 8487, 8456, and 8397 respectively presenting formidable resistance. Note that the 200 day has been decilining by more than 10 points a day while both the 40 day and 50 day were rising until July 1^st on the 40 day before rolling over, while the 50 day continues to rise but will rollover soon due to the gradual decline since the 8799 high close on June 12 although the high of 8877 was achieved on June 11. This is a market in decline. Now let’s look at the S&P 500:

7/1 Closed 923. Range 932-920

7/2 Closed 896. Range 921-896

7/6 Closed 898. Range 898.72-886

7/7 Closed 881. Range 898.60-879 Broke below the 200 day moving average!

7/8 Closed 879. Range 886-869

Exactly the same it just took longer to break the 200 day, but the 40 day moving average began to decline on July 2, and the 50 day is still rising but about to roll over. Now let TB bore you with one more index, the Barron’s 400, their top 400 stocks based on performance but the composition is not released for proprietary reasons…Dow Jones wants an ETF created so they can collect the fees.

7/1 Closed 211.81 (peak). Range 214-210

7/2 Closed 204. Range 211.80-204…broke below the 40 and 50 day m/a’s

7/6 Closed 202. Range 204-199

7/7 Closed 198. Range 202-198

7/8 Closed 197. Range 199-194 Close is just 7 points above the 200 day

So you have three different sized indexes and we could add the Rusell 2000 Small Cap to the mix with similar results (the Russell broke below the 40 and 50 day on July 2^nd after peaking on July 1^st). The two Nasdaq indices remain well above the 200 day but gapped down on the open on July 2^nd (they peaked back on June 11), and the next day broke both the 40 and 50 day moving averages…now remember those are the two strongest indices!

We have to go back to late May to early June when we first had a rare ‘silver cross’ where the 40 day broke above the 200 day, and an even more difficult ‘golden cross’ a few days later when the 50 day followed suit. These by definition are extremely bullish patterns…but not this time! First after the crosses the indices began to flatten until they are not only totally flat now but beginning to roll over. This is not supposed to happen! It is therefore indicative of a ‘faux’ rally! This is not the dawning of a new bull market!

But to confound things even more is the fact that bonds have remained extremely volatile (even the outperforming junk bond sector has broken down while investment grade corporates are holding on and munis are now volatile thanks mainly to California but other states problems are beginning to enter the equation. Want more? The Dollar can’t seem to get a grip and despite a nice rebound from treacherous territory it is now mired between the 40 and 50 day m/a’s and overnight it is trading just below the 50 day! This has caused gold to break down and like all the others broke below its 40 and 50 day at about the same time. But as it approaches the 200 day ($882) it should again attract buyers.

Once again commodities are a scandal and for the same reason as a year ago. TB does not believe in conspiracy theories but has written about the Plunge Protection Team (PPT) which was a quid pro quo with the government. This group of securities dealers (led by Goldman Sachs…perhaps we should change the America from ‘U.S’. to ‘G.S.’ In a little known act until recently the SEC exempted the big 5 dealers, three of which are gone – two merged into banks, one allowed to drown and the other two given bank status!

TB wrote about the runup in oil prices from 1997 to the explosion in the first half of 2008 and how that move on a lame theory of too much global demand…the only increase was China building huge storage vaults and stocking them ahead of the Olympics! That runup to nearly $5 in gasoline prices in the U.S. brought on fears of runaway inflation…false…and was fueled even further by …you guessed it…Goldman Sachs…with theories of ‘peak oil’ – another sham…when TB was in the sixth grade a publication called the Weekly Reader distributed to elementary schools said we would run out of oil in 50 years…the forerunner to peak oil! This fueled the GOP’s famous ‘drill, drill, drill’ which was absolutely insane as a response but they cuoldn’t bring themselves to recognize global warming or gas guzzlers until Al Gore rammed it down their throats…and then only reluctantly.

But here is a kicker….the reason for the runup was that consultants to pension funds…and who do they listen to but Goldman Sachs convinced the funds to invest in commodities index funds…these funds are modeled on the Goldman Sachs Commodity Index which is heavily weighted towards oil (while the CRB Index is more to grains). Then using an obscure provision that exempted them from position limits (based on the reports out then that were sketchy at best…TB read that only banks had this exemption so he thought JPMorgan and Citi…but no it was actually dealers as we are now finding out. So it was a rigged game and if you doubt that, even Goldman alum, and former hedge fund manager, Jim Cramer called the oil futures market a ‘farce’ …actually something like a farce inside a farce inside a sham or words to that effect. Not only are we paying for this but the entire population of the world…and folks you can blame this squarely on the Bush Administrations ‘anti-regulation of any kind’ stance…with an able assist from Robert Rubin! The CFTC was held hostage and a former exec of it is blowing the whistle and it lands squarely at Goldman’s feet. It is hard to imagine the government allowing this to happen but Goldman is so entrenched in the government that nobody objects, in fact they ask for their opinion!

Cramer got TB going on this but then a friend sent a lengthy conspiracy theory piece by Matt Tabibbi who writes for Rolling Stone…you can google and get it but it blames Goldman for every financial catastrophe since its inception…well supported in theory but whether all is as bad as he suggests (warning he uses expletives after all it is Rolling Stone), TB leaves up to you…but where there is smoke…so even if a quarter of it is true, it is shocking. If you can’t find the article and want to read it TB will forward it to you. Ya gotta hand it to Matt though…he went where TB would not tread after having gone up against former employer Merrill Lynch during the Orange County bankruptcy in 1994. It is hard to defend yourself when Wall Street has been represented by virtually every major law firm in the country…world?…and therefore will not represent you against them! Also, when Lehman failed Paulson told us there was nothing he could do…no doubt he had consulted with Goldman who was more than happy to see their biggest competitor fail…oh well…you decide!

By the way…Pimco has pulled out of the PPIP, toxic asset disposal plan…they who jumped in first. Why pull out? Because they feel it will not work! Yep, another Goldman plan…oh and so is ‘Cap and Trade’ which will likely pass and be a blight on the U.S. economy while Goldie makes even more money trading the credits. What is Goldman’s secret? Get rich…get caught…then settle for a pittance…is this a great country or what?

One last thing…remember when the TARP money was being passed out? Well, CIT got $3 billion and applied for status as a bank…remember Goldman and Morgan Stanley were granted it overnight…arguably they are more of a bank than these two dealers will ever be and they make loans to companies that are not being made by the banks now. The U.S. is holding up on giving them bank status and has been for months…meanwhile they are trying to regulate GE as a bank and they are resisting…now consider that GE is more of a finance company than an industrial but CIT is strictly a financial company and should be accorded the status…but their CEO unfortunately came from Merrill…now if he had been from Goldman…

____________________________________________________________________________

TB reflected a lot at Ernie Voigt’s funeral yesterday…which was attended by several hundred…yes Clint was there. Something that struck a nerve however was how loved he was and respected. Now recall back to Farah Fawcett and Michael Jackson dying the same day. Farah’s tribute came and went. The front page of the paper was black and all about Michael…also included in smaller type was Farah. Since then his story has been all over the news. Then there was that tribute Tuesday that bordered on obscene in its praise of him…not just as a great entertainer which undoubtedly he was but Al Sharpton giving him credit for Obama becoming president and Magic Johnson saying how much he had done for people of color…this for a guy who was no more black than O.J. Simpson and tried to make himself white. TB wouldn’t be writing this if it wasn’t that so many friends and even a commentator (KCBS’ Dave Ross), objected to it…wonder how the vast citizenry of Los Angeles feels having to pick up the tab for crowd control, etc. This at a time when so many people are hurting and for a proven pedophile…the Catholic church has nothing on him.

If TB offended you with this he is truly sorry, but it is worth it if it made you THINK!

Permalink Leave a Comment

6/15/09…don’t ‘bank’ on it!

June 15, 2009 at 6:20 am · Filed under Uncategorized ·Tagged Alternext Composite, Amex Composite, Bank of America, Barron's Alan Abelson, Bear Stearns, Ben Bernanke, Boeing, British American Tobacco, CFTC, Chistopher Cox, Citigroup, Exxon Mobil, Federal Reserve, financial regulation, Henry Paulson, Imperial Oil, Jamie Dimon, JPMorgan Chase, Lehman Brothers, Merrill Lynch, NYSE Energy Index, preferred stocks, S&P 500, SEC, TARP, Wells Fargo

…whew, that was close…we almost lost the global financial system but now amidst cries of ‘we didn’t even need your stinking money’ the banks are all tripping over themselves to pay back the TARP monies…except for BofA and Wells Fargo (and of course Citi but they have a snowball’s chance in hell of doing so), both of whom said they were strong-armed into taking the money in the first place. This is a malaise as to not pay back the money implies that they are weak and worse yet instills confidence in those paying back the money whose primary objective is to get the government off their back…for the benefit of their now-diluted shareholders and uh…oh yes…for the MANAGEMENT!

Let’s go back thru history…way back to last October if you have that ability in this ‘think now’ environment, aka ‘move on’. We are so intent on burying the past that we have rethought those last nine months. While it began with Bear Stearns collapse which TB still attributes to short-selling which began a contagion that wound up with the collapse of Lehman Brothers…an incredible case of corporate mismanagement and neglect by the government (Paulson and Bernanke said their hands were tied yet they showed how it could have been done with the arm-twisting they subjected Ken Lewis to…at least it wasn’t waterboarding), then within a week Merrill Lynch would have fallen by the wayside had not a deal been done over the weekend…fortunately an arms length deal, without the fed meddling (at the onset anyway), that characterized the failed attempt to merge Wachovia into Citigroup…using rationale that only the rating agencies would understand: two bad credits make a stronger credit. Fortunately, in that case Wells screamed loudly and saved an even bigger disaster than the bottomless pit known as Citi.

Here is a hypothetical for you: a company takes out a line of credit due to an acquisition it wants to make…the deal goes thru and the banker comes with his hand out to get paid. Can the company refuse to pay if it didn’t need the money? Of course not. Whether or not it used the line it needed it to complete the merger. Yet, that is what are brilliant, and yes that includes Jamie Dimon, bankers are saying: we didn’t need it, despite the fact that there were runs on the banks as confidence had eroded .Worse it was Citi and BofA that have the smallest percentages of deposits to total assets as they were the most leveraged, yet they were not assessed by the FDIC except on the insured deposits. This is ludicrous as it increased the risk of failure and that burden has been passed down to the well-run smaller banks that did not pose a threat to the financial system but which also worried their depositors.

The Obama administration is about to announce the most wide-sweeping reform of financial regulation since the 1930’s, but politics is still preventing consolidating the SEC and CFTC into one entity, despite overlaps. It is the overlapping that created the problem as multi-sector financial companies sought out the regulator that would be easiest to deal with…read: steamroll. The Fed will assume regulatory control over all financial institutions capable of creating systemic risk…now you know why they were so eager to reclassify Goldman Sachs and Morgan Stanley as banks. Still, that is a good thing. Hopefully, the new improved SEC will bear little resemblance to the Cox-led one, and the CFTC will have the common sense to remove the clause giving banks unlimited position limits in commodities which allowed Citi and JPMorgan Chase to underwrite the flurry of commodities index swaps which resulted in the surge in crude prices (along with all other commodities) from 2/7/08 ($86.24) to 7/11/08 ($147.27) or 171%, 342% annualized after already rising from $49.90 on 1/16/07, a combined gain of 295%! The initial surge caused pension consultants to recommend shifting more than $50 billion to commodities in early 2008. It was that event which then required the commodities swaps which created the spike, in TB’s humble opinion, that broke the back of the already weakened global economy as inflation fears blended with economic concerns caused by the meltdown of the financial markets that began in 2007

Now back to the current financial markets. The most important takeway here is that Friday is options expiry… a quadruple witching and less than one business week before the last day for T+3 settlement in June for the hedge funds. This could not be more important than now due to a market that has been struggling with holding the gains it made for two weeks and now faces, in many instances, either a convergence or very narrow spread between the 40, 50, and 200 day moving averages…talk about RISK!

Note that Friday’s volume was just 856 million shares – the lowest of the year and lowest since December 24, 2008, 403 million on a shortened session! Furthermore. Bank of America (BAC) alone (407 million shares) was 47.5% of that volume and adding Citi (C) (117M), you have 67.4% of the total…in two stocks. Then if you look at the leaders in advances or declines only two had volumes exceeding 10 million shares (14MM and 10MM). This is not a market.

Recall TB’s joke about the two stock index – the AMEX, now Alternext – which is driven by just two stocks due to the weighting system; British American Tobacco (BTI), and Imperial Oil (IMO). On the Dow, only Boeing BA (did they confuse it with BAC?) moved more than 10 index points, a number that has been shrinking In the NYSE Energy index which declined by 1.4% yet only 3 stocks had moves of more than 10 index points with BP being the highest at 16…contrast this to days when XOM alone chalked up 50 points or more (it wasn’t even a mover Friday nor was CVX).

Looking at the S&P 500, three stocks on Thursday (RIMM/MSFT and SBUX) were the only movers of more than one index point and the last time it had a mover before that was June 1! Were it not for the huge run-up from the March lows this could just be attributed to the summer doldrums but we are at critical levels and with quarterend looming it is very possible to see a selloff of major proportions with no volume forthcoming to stage a major rebound…but then, what does TB know…

TB must be doing something right as Barron’s devoted an article to preferred stock dividends…more than a year after TB endorsed them and six months after he suggested swapping out of common stocks of banks into their high yielding preferred…better late than never. But they focused on Citi and BofA preferred…interesting analysis about the differences between their tenders into common…Citi good, BofA, not so much. None to TB’s way of thinking as they ‘fixed’ the tender price…did you expect them to do something right?

_____________________________________________________________________________

Last week, a friend sent an article written by his daughter in a local paper. Besides being very will written it covered a project to rebuild a park in Richmond, California across from abandoned homes and littered with condoms, needles, and dog feces. This has become a community project thanks to the efforts of Toody Maher who made her fortune selling Swatches, etc. You may have heard of her, her resume is impressive…this is one woman who will not take no for an answer! Here is a link to the article, TB thinks it is well worth a read: http://www.eastbayexpress.com/ebx/PrintFriendly?oid=1000976 If you have any comments, TB will gladly forward them.

Listening to Meet the Press Sunday, TB couldn’t help but rejoice at the fact that neither Joe Biden or Mitt Romney won the presidency. At least with Biden, he shows humility, whereas Romney had a very smug look as he criticized the Obama administration. Furthermore, like other GOP leaders he had no problem with the three stooges representing the party. A recent poll of the GOP showed the three leaders (all at no more than 10% to be (Limbaugh 10%, Gingrich 10%, and Cheney 9%), yet Romney said he feels they are getting their story out there and will restore the party’s popularity. Good luck…they are losing Hispanics and college educated Americans in droves.

The more things change, the more they remain the same: Alan Abelson in Barron’s wrote on the ineptitude of the New York legislature…topped only by the Congress. TB can excuse that since he doesn’t live in California. It is déjà vu all over again: the legislature is debating a budget again and now a governor (Schwarzenegger) that replaced another governor (Davis) in a recall election, is guilty of the same thing. The Arnold used smoke and mirrors (mainly debt issuance) to camoflauge a problem, couldn’t get his propositions passed that would have allegedly alleviated the problem, passed…the only one of four that passed was one prohibiting elected officials from raising their own salaries during a budget crisis…TB would have preferred no pay from the time they are past the deadline for a budge until they get it passed.

If you only got one thing from this commentary it should be: quarterend’s approach and that from Tuesday thru at least the following Friday the market is vulnerable to a major selloff…one that could continue into mid-July or longer…that’ how TB sees it!

Have a good one!

Permalink Leave a Comment

	traderbill on 7/23/16 – what this elec…
	traderbill on 4/20/15…the future of Am…
	traderbill on 11/22/16The beginning (end?) o…
	Yarnman on 11/22/16The beginning (end?) o…
	traderbill on 7/23/16 – what this elec…

Traderbill's Financial Markets Weblog

Posts Tagged Henry Paulson

11/18/14…Eric Cantor: loser…or is he?

8/21/14…have our bankers ever heard of The Four Way Test?

6/16/14…a day for truth…through quotes

7/18/13…an open letter to a Senator/Congressman…think about it!

6/18/13…TBTF or TITF?

4/28/10…FLASHING YELLOW!!!

2/10/10…pigs resurrected!

1/28/10…a three event day

7/9/09…LHLL

6/15/09…don’t ‘bank’ on it!

Pages

Recent Posts

Recent Comments