3/24/11…the message

Yesterday’s 878 million share day was the 4th lowest volume of the year. Feb.14’s 817 million was the lowest. While the Dow was up just 0.5%, it closed at 12,086, 5 points below the 40 day m/a. Either everyone is already positioned for quarterend or biding their time for T +3. Despite this we had a rally of sorts although Transports did not participate – on Tuesday they were the worst performer, thus not confirming the Dow’s advance. Advance/declines and Breadth were barely positive although breadth on the Nasdaq and AMEX was 2x positive. There were 172 new 52 week high and 64 new lows. Have you noticed that since the Fed’s strange announcement that the big banks could resume paying dividends, JPM, C, GS, WFC, and BAC have all declined…BofA is not only down but gapped down on the open yesterday, closing below the 200 day m/a, and Citi is almost there despite their flawed 1:10 reverse split strategy that fooled no one…perhaps investors are wiser than the Fed! An FT article states that the Fed REJECTED BofA’s dividend proposal…oops! Today, Wells Fargo removed BofA from their ‘Priority Stock List’ – see how it trades today!

Overnight equity markets are up: Europe 0.6%-1%; Hang Seng +0.4%; Korean Kospi +1.2%; Indian Sensex +0.8%. Japan the only loser: Nikkei -0.2%. U.S. Futures: DOW +50; SPX +6; NDQ +17. U.S. bonds slightly weaker. Gold $1441.50 +3.50, overnight high $1442.70 – near the 3/7 record high of $1445.70! Crude $106.53 +.78 and also near the 3/7 rally high of $106.95. Currencies little changed.

…being sent by the GOP governors is the wrong message. Furthermore, it has less to do with budget balancing than silencing opposition. If you oppose unions influencing elections thru lobbying efforts and campaign contributions than you must feel the same about corporations…to do otherwise is prejudicial. Yet big business, most notably the financial sector, has somehow found a way to be invisible…despite the biggest financial debacle of all time. Not only that they accomplished it within a year of the Lehman failure and are again paying outrageous compensation, and circumventing Dodd-Frank (interesting that the law bears the name of two Democrats…whatever happened to things like McCain-Feingold…heck, whatever happened to Feingold, an honest politician derailed by the teabaggers for not being a conservative, that is probably the last bipartisan major bill that has passed and it was on campaign reform. People this is not about parties it is about doing the right thing and they are doing it all wrong.

In the case of Gov. Walker of Wisconsin, at least, he said what he was going to do when elected. But it is the manner that he did it and the violation of open meeting laws that should appall us. Then the others followed with at least one hiding enormous powers to turn over aspects of government to the private sector…as did the WI bill that allows the governor to sell off utilities without bidding and without review. This should be ruled unconstitutional…but with the Supreme Court you never know.

The teabaggers elected the GOP to balance the budget and not raise taxes…despite the hypocritically low effective rates paid by those who funded them, like the Koch brothers.

How many of the teabaggers had to worry about their taxes being raised? From the looks of the ones TB has seen they are middle-America and most assuredly didn’t have to worry. We are in a world of class warfare as TB has warned ever since he saw the wealth gap continue to widen after the financial crisis…and it is still widening.

Remember that for the at least 90% of Americans their chief asset is their home. Take that away from them…or most of the equity in it and they have nothing…nothing…saved towards retirement. At the same time their 401(k)’s and IRA’s were minimized and many are being forced to draw them down even as the stock market recovered. Some with hefty penalties due to being below the minimum age for withdrawal. But for the wealthiest 2% of Americans homes are not their chief investment…it is mostly stocks, bonds, and other investments, that is how they continued to thrive. Still, they complain about their taxes despite low capital gains, generation-skipping and other dodges that their advisors have for them, so that their effective rate is below that of many Americans from the 5th to 10th percentile.

That is where the message comes in. By damning teachers, most of whom are trying to do a good job, have little means of advancement, they have lowered the esteem they are viewed as, and what kind of role model does this become. Do we think that by destroying the unions we will improve the quality of teachers and worse the number of young people who desire to do so? The answer is they, and we know who ‘they’ are, don’t care. That is not the issue. It is pure ideology. Instead, the more aware they are of Wall Street salaries, the best and brightest shun being engineers, scientists, doctors, and head for the streets of New York. Yippee!

What is interesting is that the GOP governors…and Gov. Brown in California is that they are exempting police and fire, and Brown’s case prison guards. It is these two areas that are the most out of control on salaries and benefits making their entire argument bogus. Perhaps it is that these groups vote conservative…we know they contribute big! But it is the benefits and retirements, especially police and fire chiefs who are EXEMPT. TB’s idea is that the state set the salaries for these classes and force them to adhere to them. This would have prevented the wage escalation that happened just as CEO’s when companies began to outbid and used compensation analysts who receive a percentage of the salary/benefits package…gee, is that why they now make several hundred times that of the average worker up from ten times in 1980? Hmmmm.

60 Minutes last week profiled a for profit school that pays teachers six figure salaries. They screen them to get the very best. Then they work them and to keep up with the pace required they are working 60-70 hour weeks. Many burn out and return to the public sector. It should be obvious what is happening. This is an other situation, like the Ivy League colleges which increase the likelihood of the elite staying there.

This is where the class warfare becomes mean-spirited. Americans, have always favored the underdog…because we WERE the underdog while under British control. We never looked down on the poor let alone the bottom 80% of our society, but now we try to destroy them, ignoring the consequence of what millions of poor teenagers in our biggest cities will see as their only way out: gangs and crime. Is this what we want? A world like in Blade Runner, with the wealthy living in huge buildings with heavy security and never venturing outside on the streets. TB doesn’t want to see it, and doesn’t want his kids or grandson to see it, but why don’t we see what is happening to America?

Think about it and you decide but we are running out of time.

Ah the big banks at it again. The Financial Services Authority (FSA) in London has subpoenaed employees of JPMorgan, Citi, Deutsche and other banks that comprise the eight that provide the rates that determine Libor, a rate that over $300 trillion of loans are priced off of. This came to light during the crisis when, despite throwing out the highest and lowest rate the averages were way lower than most banks were paying, IF they could borrow. The investigation involves price-fixing. Imagine collusion to fix rates artificially low which means that your loan fees are reduce, but which is more damaging to the competition that is not part of the eight bank ‘club.’ Heck, what did these banks care, their banks were funding them at very low rates and since they are users of funds provided by the downstream, smaller banks, they are only concerned with what they pay for funds, not what they can sell them for. This has serious ramifications on the relationship between the banks and the regulators. See Bloomberg story today, but most of what TB just said was HIS thinking, the article did not even discuss why they might do this! That is where the decade of banking experience comes in handy!

. . .  – – –  . . .   . . .  – – –  . . .

Yesterday was an eventful day for TB. About a week ago he decided he wanted to do something to give back and become involved in the new community so he went to a Rotary meeting right around the corner from the new digs. Met some interesting people there and heard an inspiring story from a woman track coach. Next week: join…if they’ll have ole TB. Then we found a dog that fit what we have been looking for and adopted it. Rather, she adopted us. We have a size restriction in the condo and she is just 3-1/2 months and 10 pounds and will grow to about 20. She looks like a miniature of our last wonderful dog, an Australian kelpy mix (cattle dog), and should be great company. She is a terrier mix: black w/tan and a small white star on her chest…a tat???

Have a terrific day!

TB

 

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