TB’s Quotes of the Day – reprised from Friday:
“Bulls get rich, bears get rich, pigs get…blah, blah, blah…but what about sheep? They get shorn! …and if you follow the herd all you find are cow chips! TB
“Trees still do not grow to the sky…despite an article in this week’s Barron’s. TB
TB’s Quotes of the Weekend:
“I swear to you in front of god, you put me in jail if you talk,”…I’m dead if this leaks. I really am…and m career is over. I’ll be like Martha F—ing Stewart.” Danielle Chiesi – co-conspirator in the Galleon Management (hedge fund) insider trading scandal. Trust TB on this – MOST big hedge funds aren’t as smart as they are connected to info!
“This is a simple insider trading case,” Jim Walden, defense attorney for billionaire fund manager Raj Rajarathnam…what else can a defense attorney say/ Meaningless drivel! TB wonders what Martha Stewart (F. is not her middle initial) would have to say!
“Anil Kumar (executive with Intel) is as shocked as everyone else who knows him to see his name on this complaint,” his lawyer, Charles Clayman, “He emphatically denies these charges,” Martha didn’t go to jail for insider trading it was for lying to federal investigators! Couldn’t you send most of Wall Street to jail on that charge? TB
Factoid of the Day (from Barron’s): “America has 5% of the planets population, but 25% of its prisoners.” ….looks like that percentage is about to grow…
The word for today is ‘concern’…it is sprinkled liberally throughout the commentary.
…originally title was to be’ redemption’ only following “…day of reckoning?”, and “…dead reckoning.” Title was amended Friday afternoon following the break on the Galleon story. ‘Suspension’ isn’t the right word although all will likely – if convicted, after all aren’t all Americans innocent until proven guilty? Well, TB says they are disgusting examples of MBA’s and will be convicted. The question however is more about how many other cockroaches out there…as not only are there several here, but there have to be tens? hundreds? thousands? more out there! There is nothing new about greed on Wall Street but this time they took it to Main Street: IBM, Intel, for god’s sake McKinsey & Co! …is nothing sacred?…besides money that is! From the FT today:
“The one thing that never ceases to amaze me is how someone who is so wealthy is willing to take so much risk for what is by comparison quite a small return,” said Sol Waksman, president of BarclayHedge, a US-based hedge fund research firm.
“$20m is for you and me a lot of money. For him it was nothing.”
Now back to ‘redemption’ – for TB and the other bad news bears. What went wrong?
*Dow 10,000 was only of psychological significance…it marked the point where we were down only – only – 30% from the high. As TB has been saying for weeks, here are the only numbers of significance: Dow 10334 and 9422; S&P 500 1121 and 1014. These are the 50% retracements of the entire decline from the 2007 highs to the March 2009 lows, and the 38.2% Fibonacci retracement from the March lows! Penetrate either one and you will see a hailstorm of activity. Which one are you betting on to see first? At the highs on Thursday the Dow and S&P were shy nearly 3% from the 50% line – light years away.
*The Dow and S&P have been LAGGARDS! The movers have been the Nasdaq 100 and Composite, and the Russell 2000 Small Cap (ignore transports and energy as they have been trading off different metrics – inexplicably), and also the Philly Semiconductor Index (SOX) which had a breakout to the upside Thursday only to be negated on Friday!
*TB apologizes for not pointing out Friday’s options expiry – but he missed it as did everyone else – except options traders apparently – due to 2nd being the first Friday of the month being, and the Columbus Day holiday. But it explains a lot: first, there is frequently position squaring on the Tuesday or Wednesday before expiry to avoid being whipsawed, however this was not a major one (quadruple witching), but a minor one accompanied by weak volume all week…and also days that might have had 1 billion or fewer shares –were it not for about 350 million shares EACH day in the final two minutes of trading! That was your position squaring, and TB while pointing it out, missed the reason for the surges. It was also likely the reason for the surge back above 10,000 on Thursday’s close…only to be shattered on Friday. One other point: normally, during the expiry period stocks rally…instead the opened weak, went to down more than 100 points and only came back AFTER expiration – with the Dow still closing -67, S&P -9!
*While new 52 Week Highs impressed rising to 774 from 286 in one day (Tuesday), they plunged back to 350 on Friday, while New Lows were more or less stable around 13. These numbers should be followed not for their raw size but for that rate of change. It indicates the peak in optimism occurred Tuesday-Thursday.
*Advance/Declines and Breadth also impressed – on just one day Wednesday, when the first of the new rally highs was set. Advance/Declines on the NYSE and Nasdaq averaged to more than 3:1 and Breadth 6:1. The other days the were <+/- 2 – except Friday when they were MINUS 2 and MINUS 3 respectively! That part is telling!
*Movers: In terms of index points IBM was the big mover of the week – as it was the prior week…but in different directions. First it gain 12, then 11 on successive days, one an up day and the other down, THEN it was once again the big mover (only one by the way ) on Friday with -18! – 27% of the total decline! Nothing else stood out in either week but they seemed to come in blocks – same stocks in opposite directions. In the Nasdaq indices there were fewer movers each week than TB can recall – they were broadbased moves either up or down…indicative of index buying – not individual stocks and therefore speculative trading not mom and pop trading in their money market funds for stocks (they already did a lot of that into bonds – which are now over-priced.
Now back to the Galleon cabal (the artifices and intrigues of a group of persons secretly united in a plot (as to overturn a government); also : a group engaged in such artifices and intrigues – Webster)…but their purpose was to enrich themselves at the expense of destroying market confidence…something TB is sure never occurred to these wunderkind brats.
This comes at a time that investors are screaming for transparency! Bloomberg has done the best job of coverage since they are 24/7 while the NY Times and WSJ reported it in their Saturday editions. But TB scanned the talk shows Sunday which were predominantly focused on health care again…until Stepanopolous introduced Wall Street as a topic. But nary a mention of Galleon…only the Dow at 10,000. Finally, Peggy Noonan in her most pained of expressions…OK, that is subjective as she always talks like she is passing a kidney stone segued back to the people are more concerned about the federal deficits…for god’s sake Peggy, other than you and the other panelists they are trying to survive while losing their jobs, taking pay cuts or working fewer hours. This then segued back to health care, the cost of the war…and that was that. How tragic!
TB predicts that today they will be more concerned with getting a fair shake than any of the above thanks to Galleon’s greed (while Galleon will likely be fighting for it’s survival as their Chief Investment Officer fights to avoid jail time – which he damned well had better not, right Martha?…after all, she was sent to prison for lying to investigators not the insider trading…and the reason was that she had been a registered rep for a broker and thus could not pretend she didn’t know…that is the point of the Series 7 exam – so you cannot pretend you don’t know the law). We trust IBM, Intel, and firms trust McKinsey & Company for advice but more importantly confidentiality. Sadly, it is not these firms, but their employees who sinned…but won’t they pay for it? IBM was the big loser Friday, gapping down…Intel was also a big mover down…is there a connection? If someone is arrested at their office, the news travels fast…why didn’t they wait till AFTER the close? Wait!…maybe it was a hoax…like the balloon boy???
The good news (although it might be short-term painful) is that finally, someone is looking after our interests…it sure wasn’t the Cox SEC, who eliminated the uptick rule, failed to enforce naked shorts, failed to audit the top five brokers after they were assigned that responsibility after the repeal of Glass-Steagall, ignored information Bernie Madoff, and didn’t prosecute anyone during his tenure. This market cries out for transparency, yet we have “Black Pools,” ‘high frequency/flash trading, bid/offers that are good for a microsecond and can step between legitimate buyers and sellers…this is what capitalism has created and TB doesn’t believe it is the ‘creative destruction’ that Schumpeter envisioned…but doesn’t seem to bother Larry Kudlow and the other supply-siders.
Readers know that TB has been advocating trailing stops and stop losses…over the weekend he tightened those stops – and added limits, which he had not previously felt necessary…but TB predicts a significant down day to day…wait and see…but don’t wait act…or at least that is what he thinks is the wise thing to do…after all it doesn’t cost a thing to do it (unless you are wrong and the market surges higher on this news).
So you decide whether TB is right or wrong but suddenly the stakes got a lot bigger! Overnight Bloomberg story says there are more to follow in similar incidents including lawyers, hedge fund managers, and Wall Street players. Oh and about those hedge funds: A study recently conducted shows that one in five misrepresent facts about performance or their strategy. You wouldn’t know it however from the overnight market…can TB be that wrong?
Barron’s cover story “It’s Time to Raise Rates, Ben” would be scary were it not the Bernanke knows what he is doing whereas Barron’s sounds like the Fed of yore. Some of what they say makes sense but they are not responsible if all goes wrong…terribly wrong. Do you want to gamble that tightening now is the thing to do? Not hardly!
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Saturday evening TB attended the 80th birthday party of a friend at the yacht basin by the Giants stadium in San Francisco. It was a great evening and the man’s son played accordion and flugelhorn with a bassist and keyboardist that was some great jazz.
Also, Saturday was the 20th anniversary of the Loma Prieta Quake…much of the city has been retrofitted – privately, but the Bay Bridge which suffered a partial collapse is still not completed and won’t be until 2012! Imagine if it wasn’t an emergency retrofit! The two Browns, Willy, and Jerry, deserve credit for that squabbling over the design…not to mention Bush who put an embargo on foreign steel to win votes in Pennsylvania despite the fact that no one in America produces bridge steel these days…is this a great country or what? Eat your heart out Boston: the Big Dig is doing better than this!
Yesterday, thank not to the largesse of the Oakland Raiders but due to their inability to sell all the seats, we got to watch Minnesota and Baltimore – definitely more exciting the Raiders play anybody. But someone was punishing Michael Vick even further – he lost to the Raiders…prison is better than that! As for Minnesota, it was down to the wire in a great quarterback battle: Favre vs. Flacco, the veteran vs. the kid…it came down to a missed field goal by the Ravens.
Not only are the talk shows spending too much time on health care but why do they insist on having David Axelrod on…he is nothing more than a hired gun…like Carville and Rove. THEN it was Rove vs. Terry McAuliffe ‘debating if you can call it that on Fox News Sunday. We might as well have lobbyists tell us what is the right thing to do!
Then there is the article about Treasury Secretary Geithner. Who does he talk to first and last? After testifying he made two phone calls…first to Lloyd Blankfein, Goldman’s chairman, then to Jamie Dimon, JPM’s Chairman…THEN he called Obama…and guess what? THEN he called Dimon again. Meanwhile, a Congressman Becerra (D) CA, who serves on tax and budget committees…he was stuck leaving a message. This article was later picked up by Frank Rich in the NY Times. Now one has to understand the the President of the NY Fed has the greatest rolodex (if they still use one) in the world. It is his job to talk frequently with the CEO’s of the nations top banks…Volcker and Corrigan did it on a daily basis if TB recalls correctly and it is the first thing they do in the morning!
But as Treasury Secretary this doesn’t look so good…especially since we bailed out and gave generous gifts to both…JPM in the form of Bear, Stearns and Washington Mutual. It’s all in the phone logs. In the first seven months as Treasury Secretary, according to the AP article by Matt Apuzzo and Daniel Wagner, his calendar shows at least 80 phone calls to Blankfein, Dimon, and Citi’s Chairman Richard Parsons, and CEO Vikfram Pandit. In fact he spoke more with Citi than with Barney Frank! While it all may be legal it begs the question (one we already know the answer to) whether Wall Street is too close to the government? Shall we ask the experts? Axelrod, McAuliffe, and Rove? Remember when TB quoted the former Senior Economist for the IBRD that they had never been called in to a country over financial difficulties that the finance sector hadn’t gotten too close to – read controlled – the government. But don’t worry…it can’t happen here!
Lastly, Bruce Wasserstein, the merger king of Lazard Freres died last week at the age of 61, he is one day short of three years younger than TB! The firm held a moment of silence ending, “now let’s get back to work and make money.” Just as Bruce would have done. Aren’t sharks great creatures?
Today is the anniversary of the ’87 Crash…don’t let them suckerpunch you!
Have some kinda day!
TB
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, © October 19, 2009.
Traderbill's Financial Markets Weblog 
euandus said
God’s work. Yup. That’s Goldman’s CEO’s view of his work. So of course there is no problem with the bonuses (that goes without saying). It is a lot like John D. Rockefeller’s view of himself. I recommend the following if you are interested, http://euandus3.wordpress.com/2009/11/12/goldman-sachs-and-aig/