Traderbill's Financial Markets Weblog

Quote of the Day from the Friars Club Encyclopedia of Jokes: “I got a job as a short-order cook. I was cooking a chicken on the rotisserie. I was turning the wheel, and I was singing “Arrevederci, Roma,” and a drunk came by and said, “You’ve got a nice voice, but your monkey’s on fire.”

– London Lee

Bloomberg Quote of the Day: “If you’re going through hell, keep going.” – Winston Churchill

 Bloomberg Top Stories:

*Draghi’s Loan Program Missing Estimates Complicates Stimulus Goal for ECB

*Stocks in Europe Advance With S&P Futures on Fed Comment; Commodities Fall? Faux rally?

*U.K. Economy Ready for Battle as Scottish Vote Suspense Masks Resilience

*Bayer Will Spin Off Plastics Unit to Concentrate on Pharmaceuticals, Crops

*’Yes’ or ‘No’, Winner of Today’s Independence Referendum Is Brand Scotland – UK: make nice!

*Markets Don’t Panic as Independence Voting Begins; Scotland Reality Check – see above!

*Alibaba Investors in ‘What, Me Worry?’ Mode as Global Roadshow Lures Bulls – aka: sukkahs!

*UBS’s Weber Says Litigation Is a Bigger Worry to Investors Than ECB Test – they should know!

*Doral Financial Seeks $229.9 Million Tax Refund Through Puerto Rico Trial – no way! Yes, way?

*Top 10 Reasons to Care About the Scotland Independence Vote – well…for one…

*Dirty Secret of $1 Trillion Loan Market Is When Do You Get Your Money Back –leveraged loans!

*Day of Reckoning for U.K. as Scotland Independence Vote Hangs in Balance  

*Obama’s No Combat Pledge Leave Room for U.S. Forces Operating in Shadows – but did you see? HE, like LBJ, wants to pick targets! Bad idea…very bad! Doesn’t trust military!

*London Empire of Finance Seen Outlasting Whatever Scotland Leaves Behind – well…sort of…

*Beheading Plot Thwarted by Police in Australia’s Largest Terrorism Raids

*Air France Risks a Second Week of Strikes as Pilots Threaten Extension

*Virtu’s Viola Reduces Asking Price for ‘Trophy’ Townhouse to $98 Million

 Wednesday’s Market Summary:

Yesterday, TB directed you to Ed d’Agostino, Rational Bear. Some pretty stunning stats there. Today, courtesy of John Mauldin: John Mauldin/d’Agostino…also from Mr. Ed…showing stocks today are the most overvalued since 1929 and 2000! Oh, bull!…you say…but think about it? Nobody believed they were in those other two years…in fact, Irving Fisher, the top economist of the day,declared “stocks have reached a permanently high plateau…two weeks before the ’29 crash, and both he AND John Maynard Keynes…lost their money betting on a quick revival. The market can humble anyone who has ever espoused a belief…bull or bear. Too bad Keynes didn’t follow his own admonition (based on his own humbling experience):”the market can remain irrational longer than you can remain solvent.” So…TB may still be correct…and if so…as in 1998 and 2006 while those around him ‘engorged’ he sidelined it and in the end came out ahead. His own fatal flaw? Not knowing ‘when’ to get back in! Hey, recall Jeremy Siegel’s ‘Dow 50,000? Not only him but in 2010, Forbes predicted 50k by 2015…better hurry up Dow! Oh, and Siegel still says its fair value is 30,000. Want to bet? Oh, you already have…one way or the other!

Despite weakness early, ahead of the FOMC announcement…which was seen as more bullish than it was (for stocks), and more bearish (bonds by the close and overnight), stocks came back closing only slightly higher: +0.1-0.3% except Dow Transports +1% and Dow Utilities -0.2% – still the leaders ytd at +16.9% and 13.5% respectively – about double the S&P and a ‘quad’ above the Dow – the loser? Russell 2000 DOWN 0.8%!!! …and sounding a shrill warning! Oh, and NYSE Financials are down 0.4%! Strange but true! Volume identical at an average 3.14B shares…only the 3^rd time since 8/7 >3B shares. A/D’s and Breadth were only slightly positive…especially in contrast to the magnitude of the negatives of the last two days! VIX declined to 12.62 -.11 but with a range of 11.73-14.53 -both extremes rejected…obviously!

TB can’t wait for tomorrow…are you waiting with ‘baited breath’?

Total NYSE Volume identical to Tuesday at 3.14B shares vs 3.14B vs 2.76B vs 3.2B vs 2.93B. While NYSE shares traded are back to ‘average’, real NYSE Volume barely budged and remains weak at a well below average 668M shares vs 649M vs 591M vs 694M (highest since 8/15’s 758M shares!!!) vs 605M. This markst the 23^rd straight sub-700M share day! The average for the week ended 8/29 was 522M shares – a new 2014 low – average volume at the closing bell was also a new low for the year of 387M shares! Note that the average for the final week of 2013 was 424M! There have been just four sessions above 800M since 4/28! The 12-month average is a historically weak 697M shares. Since 4/30 the average volume has been just 649M shares, and slipping ranging from 517M to 927B….12 month high is 2.06B shares on 9/20/13!

A/D’s barely positive – compare and contrast to the two negatives: NYSE: +1.1x vs +1.8x vs -1.9x vs -3.8x vs +1.3x; Nasdaq +1.3x vs +1.2x vs -3.2x! vs -2.1x vs +1.4x. Breadth was similar:: NYSE +1.1x vs +2.5x vs -1.6x vs -2.6x vs +1.9x; Nasdaq +1.6x vs +1.9x vs -4.8x!!! vs -1.5x vs +1.7x. New 52 Week Highs climbed but to a below average 146 from a weak 84 vs 59 vs 101 vs 113 – recent range is 59-580!!! New Lows declined but to a near average 125 vs 186 vs 185 vs 110 vs 104 – recent range is 24-260! S&P VIX headed below ‘12’ for the first time in13 sessions to 11.73 but couldn’t hold, closing at 12.62 -.11 – session high was 14.53 a double top with Wednesday!

U.S. bond market weaker in the long end due to handwringing over FOMC statement: 10 yr 2.62% -1/16; 30 yr 3.37% -5/16, the long TIP 1.14%! (low was 0.87%!) -3/4. Coming back a tad overnight: 2.61% +1/16; 30’s 3.35% +5/16; and long TIP 1.12% +7/16 – inflation? Zip!  

Libor update: 0.234% 3 mos.; 0.330% 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 remains 0.08%-0.10%, where it has been for weeks! T-Bills range from ZERO, one-month, to just 0.12% one year!!! Foreign bond yields higher mostly following U.S. after FOMC, PIIGS lower ex-Greece (benchmark is the 10yrs): Germany 1.07% +2; UK 2.57% +5!; France 1.43% +3; Italy 2.40% -1; Spain 2.24! -4; Portugal 3.14% -3; Greece 5.73% +8 – after losing ground from the recovery low: 5.42%; Crisis high: 12.57%. Japan: 0.56% +1. Bonds remain ‘risky business’!

Gold closed slightly lower at $1234.90 -.80 but only after dropping to another new low of $1221.10 – lowest since 1/8/14 – this marks it’s 22^nd straight sub-$1300 close. It is way below the 40/50 and 200 day m/a’s. 7/17’s session high was $1346.60, highest since March 19^th!!! 6/9’s $1240.20 was lowest since 1/31/14!!! RES is the 40 day at $1281, then the 200 day at $1284, then the 50 day at $1288 – tight and falling! Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is tanking again with yet another new low of $1216.40 – lowest since 1/6!!! Is now $1224.10 -$11.80 – and the day is young! Silver remains weak and going sideways at $18.50 – lowest since July 2010! Wait…isn’t silver an industrial metal?

Crude closed slightly lower at 94.42 -.46 in an ‘inside session’, and remains weak, a day following a session high of $95.19 – highest since 9/2. Last Thursday’s low of $90.43 was lowest since 6/28/13! There have been SEVENTEEN handles since peaking at $107.73 on June 20^th. 6/20’s run to $107.73 was highest since 9/19/13 (a huge down session which put it in freefall. 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 ($96.16!!!), then the 50/200 day ($97.38), and lastly the 200 day (99.75) – 40/50 falling fast. The range is $85.61-$112.24 since 3/1/12. Overnight it is little changed in a parallel session at $94.48 +.06.

Global equity markets higher, ex-Hong Kong: UK +0.4% vs – vs -0.5% vs -0.1% vs +0.3%; France +0.6% vs +0.7% vs -0.6% vs -0.2% vs –; Germany +1% vs +0.5% vs -0.6% vs +0.1% vs –0.2%; Japan +1.1%! vs -0.1% vs -0.2% vs closed vs +0.3%; Hang Seng -0.9% vs +1% vs -0.9% vs -1% vs -0.3%; Korea +0.2% vs +1% vs +0.4% vs -0.3% vs +0.4%; India +1.7%!!! vs +0.5% vs -1.2% vs -0.9% vs +0.2%. U.S. equity futures strong; DOW and NDQ both gapped up large on the open: Dow +55 (range just 15 BUT plus 66 on gap up following yesterday’s rally!!!); SPX +7.70 (10); NDQ +16.25 (15).

Some random thoughts:

…yesterday’s The Roosevelts, part IV, was the best…THE BEST…so far. TB still has to wonder what the attraction is to the GOP from the ‘have-nots’ or anyone below upper-middle class. Did you ever stop to wonder if there still is a ‘middle class’? Try this…excluding home equity…which we have shown can be fleeting and a long term growth rate that about equals inflation (before brokers fees of course)…and ‘credit card debt’ makes it unlikely that one still exists – except in limited cases. That had been the legacy of of both Teddy and FDR…a middle class didn’t exist before them…just the haves and have nots…like the Bogie Bacall flick written by Hemingway.

This came across TB’s desk…er email…yesterday: seven-charts-explain-todays-billionaires. Pretty interesting characteristics in this study by Wealth X and UBS. Here are a few factoids:

• There are precisely 2,325 in the world today
  • Collective wealth $7.3 trillion!
    • Poor things underperformed last year: wealth increased just 12% – aww
  • Expected to reach 4,100 by 2020 – a 56% increase!
  • Average age is 63
  • 48% founded or co-founded companies
    • Their combined wealth is $4.6 Trillion or 2/3 of total
  • Within the past year those who inherited it decreased to 20%
• Demographics
  • 2,039 male; 286 female
  • Combined ave wealth: $6.36 trillion male; $930B femaile
  • Source: male 60% self-made; female 65,4% inheritance – due to ‘glass ceiling’?
• Education – very interesting:
  • 35% no university (does this explain lack of emphasis on educational funding?)
  • 65% 42% bachelors; 26% masters; 21% MBA; 11% PhD
  • Most graduates (bachelors): University of Penn 25; Harvard 22; Yale 16%
    • 16% earned degree at one of the top 20 schools; 84% elsewhere

Pretty eye-opening…yet many (most?) of these oppose increasing education funding which of course widens the playing field…and student loan assistance? Get real! Article in last Sunday’s WSJ: a college degree is no longer necessary to get ahead…it is to keep you from falling behind. There have been virtually no increases in college grad starting pay since 1982! Ah, but the debt…

Enjoy your weekend! Oops…that’s for tomorrow…after options expire…will you?

TB