2/23/11…on being rich

…yesterday’s volume was 1.32B shares…the second highest of 2011…barely under January 28’s 1.33B share day. Nothing else is even close..in fact the average volume of the year so far is a meager 1.02B shares…contrast to 2010 at this point with 1.16B shares. Some think TB focuses too much on volume but virtually every big down day has been on well above average volume and only a few rallies are on even average volume.

But volume of course is not all that concerns TB…consider that yesterday decliners beat advancing issues by 9:1…on most of the up days it has been 2:1 or less. Then there are the new 52 week highs and lows where the highs have been running 350 to more than 500 a day, and new lows have been single or low double digit…people…there are not that many companies that are doing that well…it just looks that way! Yesterday there were just 53 new lows! TB would also point to the near 16x multiple on the S&P 500 which is high and the incredibly low level on the VIX which surged more than 4 points to nearly 21 (still not a high number but the 40/50 day moving averages were down to less than 17 and the 200 day is at 22.70 – contrast to the five year average of 23.57, which included a record high of 89!

Look at the indices: Dow -178, -4%…and that was 36 points off the session low!; Transports -3.8, the biggest loser; S&P -2.1%; Nasdaq Composite -2.7%; 100 -2.9%;Russell 2000 -2.9%…and the KBW Bank Stock Index -3.5%! Now those are moves! But Europe was a loser for a second day so our President’s saved us from that but we sure tried hard to catch up. Overnight Europe, and this time Asia are following suit (China seems to have a mind of its own…for now). Emerging markets are being pummeled both in stocks and bonds due to the turmoil.

To those who believe inflation is a concern…which is not rising bond yields due to increased treasury supply…you have only to look to the commodities market: cotton and grains spent most of the day down limit…a sign of the degree of speculation…and what about Gold that after climbing above $1400 on Monday has struggled to stay there. The only strong one is Crude which gapped up yesterday and traded to $96.39, a new rally high (sparking talk of ‘peak oil’ again)…but remember this is WTI which hit a record $16 discount to North Sea Brent last week!

One thing remarkable yesterday was the treasury market…it had a strong rally…unusual since last November since even on days that stocks have been down, it couldn’t muster a sustainable rally…watch and see. Bonds are starting the day about even but the 30 year bond and TIP are up 3/8 while futures show: DOW and NDA +5; SPX flat…not good.

…you can have all the money in the world and not be rich…yet that seems to be the goal of so many…Mubarak with his $70 billion (which the government is trying to claim back and should but can it win in a court of law?), the Saudi ruling family, Qaddafi, and all the other dictators (some elected in sham elections)…remember when a million was real money? Well, we have inflated our way past that…and despite the wealthiest showing incredible continuing gains in their own wealth, charitable giving is in the tank…this is not what Americans are about.

How come only a few like Buffet, Soros, Gates are the only true givers? Sorry to those of you who think the Napa Valley Wine Auction is charitable giving…it is getting a tax deduction so you can show off for your friends…how much money do you need? We have become a pathetic people with no moral compass…all roads lead to getting rich…our ‘best and brightest’ (whatever that means these days) choose careers on Wall Street over becoming engineers, scientists, or doctors…it’s all in the money.

When Michael Lewis wrote ‘Liars Poker’ he did it to show Wall Street for what it is…instead he was besieged by letters from college students at the top colleges asking how he did it! He is spending his time now between teaching and writing.

TB heard yesterday of a guy from his distant past that died of brain cancer at 60. He was an investment banker in his later years but when TB knew him he was a bond salesman, Gordon Murray. Gordon and another guy wrote a book exposing the myths of Wall Street which is available thru Amazon, “The Investment Answer.”

This reminds TB of another acquaintance, Ed ’Ned’ Gramlich, former U Mich Economics professor and Federal Reserve Governor who TB met at a conference in London where Gramlich was a keynote speaker. Shortly after, he contracted leukemia and failing to convince Greenspan of the dangers of subprime lending even as he was dying…that was his legacy. Very sad.

Contrast this with the Koch brothers who TB was criticized for naming yesterday for their support for far right causes…with the admonition of why not Soros for his support of moveon.org? The answer is that there is a huge difference between supporting a cause you believe in…Soros, who started life in Nazi Germany and then escaped communism by escaping to England as a youth in 1947 is merely supporting an organization he believes is doing is just (it doesn’t matter what you or I think), but he has no gain from it. The Koch brothers on the other hand create foundations to protect themselves…funding the tea party movement, and at least two other organizations…if you see ‘American’s for’ that is usually a tipoff that it is serving someone’s interest….like those emails that are full of half-truths…or less…the admonish you to: send this to every good American you know.

TB will not blast someone for their beliefs…no matter how far they are for his if they are sincere, or what they contribute to…unless it is just to enhance their own wealth…and these two curmudgeonly brothers who are among the wealthiest in the world…are a disgrace to America and what it stands for. The openly flaunt environmental and safety laws for their own good and were the driving force behind Governor Walker’s battle to stop collective bargaining.

In closing, it is a shame that people believe unions are inherently bad or that the majority of union workers are grossly overpaid…as much as TB abhors the multiple unions in every city, county and state in the country. But when Governor Walker specifically exempts police and fire – two groups that should never be allowed to strike, because they supported him…and yet they are the greatest inflator of wage costs in the private sector…remember that just as in private companies management is not part of the union…yet that is where the high salaries Walker objects to are at…what he is proposing will do nothing to stop those…and you can bet you will not see pay cuts for them. This is a gross sham and despite how you might feel about unions, we would not have the benefits we have today, retirements, health care, sick leave (by the way the U.S. is the worst of eight nations on paid maternity benefits).

So it is up to you…are you for fairness or do you side with the Koch brothers….isn’t it wonderful how money can get others to do your bidding? Ask Wall Street and its eager acolytes in Congress…pity us.

Have a great day!




  1. LDH said

    TB, I have my copy of “The Investment Answer”, and though there is no magic to it, it effectively summarizes the basic reasons of why you need advice independent of brokerages, and it provides a nutshell explanation of basic portfolio concepts, diversification, value vs. growth, power of compunded interest, et cetera. It is a quick read, an hour at most. I think it would have a great role for an independent RIA to hand to a new client, as it might answer the question “why should I have my money with you instead of my broker at X?” more effectively than giving an introductory spiel.

    • traderbill said

      Thank you for taking the time to write…I just ordered teh book. I have long been opposed to financial advisors working for a broker as it is impossible for them to be independent.

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