3/31/11…rags to riches

Bloomberg Top Stories:

*Bonds of Europe’s Most Indebted Nations Fall; Oil Gains, U.S. Futures Drop

*First-Time Jobless Claims in U.S. Declined by 6,000 Last Week to 388,000…big whoopee! TB

*Ireland Said to Weigh Allied-EBS Merger as Stress Tests Point to More Aid

*Gross Echoes Buffett Saying Treasuries Have ‘Little Value’ on Debt, Dollar

*European Stocks Retreat as Inflation Unexpectedly Accelerates – fastest in more than 2 yrs! TB

*Nations Face More Pain as Supply Flood Crashes Into Rate Rise…hello!!! TB

*Portugal Misses 2010 Deficit Target, Raising Chances of European Bailout

*Moody’s Signals Euro-Nation Downgrades Possible If Bailout Is Insufficient – way to go Moody’s!

*Cotton Acreage to Rise Less-Than-Forecast 15% on Record Prices – speculation!!! TB

*J&J Shareholders Missing Bull Market With Hip-Replacement Recalls Mounting

*Ford May Have Most to Gain in Obama Push for all-Green U.S. Vehicle Fleet

Yesterday’s 899 million shares marked the highest in seven sessions but was still 200 million below average (what happens when Citi’s, the most active stock, reverse split goes through reducing the volume bay about 300 million a day? Over the past seven days the average has been an unbelievably low 840 million shares! The Dow and ALL major indices rose modestly. Volatility (VIX), which had closed Monday at 19.44 just above the 40 day, gapped down on the open and closed at 17.71…too complacent?

Advance/Declines and Breadth ran positive 2-3:1 and there were 365 new 52 week highs and just 36 new lows.

Overnight, European equities declined on inflation fears, while Asia rallied modestly: Nikkei +0.5%, followed by the Hang Seng +0.3%. India’s Sensex +0.8%, and Korea’s KOSPI +0.7%  for a third straight session. Bonds are rallying again with long bond up nearly ½…up yesterday too DESPITE the equity rally!?! Gold is at $1437.00 +$12.10. Crude $106.47 +$2.20!!! Dollar finally slipping but still rotating around the 76 level. the Index at 76.30 +.13, Yen little changed at 82.83.

U.S. stocks  opened slighty positive but are now fading with Utilities (the big gainer yesterday), S&P 500, both Nasdaq Indices, and the Russell 2000 down slightly. Transports +6. Remember there will be quarterend rebalancing by mutual funds today!

TB’s Phrase of the Day: Noblesse Oblige – the moral obligation of those of high birth, powerful social position, etc., to act with honor, kindliness, generosity, etc.

TB’s Quote of the Day: “One reason—perhaps the chief—of the virility of the Roosevelts is [their] very democratic spirit. They have never felt that because they were born in a good position they could put their hands in their pockets and succeed. They have felt, rather, that being born in a good position, there is no excuse for them if they did not do their duty by the community.” – Franklin Delano Roosevelt and:

The Roosevelts on both the Republican and Democratic side of the family were raised in the tradition of noblesse oblige and FDR firmly believed in the concept of obligation to society. Eleanor Roosevelt explained her husband’s break with James Farley had less to do with politics than Farley’s fascination with the moneyed people he came to know and admire. “Jim and Betsy (Mrs. Farley) became more and more interested in social position while Franklin and I were concerned with social issues” (interview with Eleanor Roosevelt at Hyde Park, New York, Summer 1959).

…most of the mega rich today are not old money. Some earned it like Warren Buffett, Bill Gates, and although these aren’t men TB admires, Oracle’s Larry Ellison, and the Koch brothers. TB believes that this is a major part of the problem we face today. Old money trains (although it often falls on deaf ears) the young in social responsibility or at least one can hope they try. TB worked for an investment advisor that was bought by a Seattle family (actually two), who having made a fortune in the early 1900’s established trusts for the heirs. They required that the heirs serve the needs of the company and other businesses they branched into. Each year at the annual meeting of the company, the family collected…and still meets…in Seattle. On their eighteenth birthday the new heirs are sent a roundtrip ticket to attend the meeting. They are told that if they don’t attend they will not receive a ticket in the future, otherwise it is an all-expense paid event.

A former CEO told TB it is amazing to watch these kids as they shy away to the back, not knowing what is expected of them. Each year they become bolder and get more involved.

TB was incredibly impressed by this. In addition, family members are pressed into service for the family businesses when needed. Since the company has operations in many parts of the country and the family has spread out, they are useful assets and provide someone with a vested interest overseeing operations.

If this theme sounds familiar it is because it is the exact opposite of what the financial sector has become. Partnerships evolved into corporations ostensibly to raise more capital thus circumventing the older and retired senior partners by taking on more and as we have just seen, excessive risks for short term gain – for the individuals not the investors who then absorbed the losses while the risk-takers went on making even more money.

That folks is what is wrong with America today! Management controls the company AND the board – which is supposed to be the stewards for the shareholders. Frequently the CEO is also Chairman which is a direct conflict of interest in TB’s book. How can that possibly benefit shareholder interests? It cannot!

But the main point is that the wealthy…translation: super wealthy worth $1 billion or more – you thought being a millionaire was wealthy, more like upper middle class today…mostly came from the ranks of the lower and middle classes. For some, like the Koch’s, that means becoming horders, like a prisoner guarding his food from other inmates, and nothing is going to separate them from their money. Their idea of philanthropy is hiring lobbyists for their causes or creating sham foundations to promulgate their own wealth.

The only responsibility they know is to themselves…many don’t even show it to their families…Donald Trump seems a good example. Thus having no compassion for those less fortunate they mock them for their laziness and try to destroy the social safety net.

The GOP has seized upon this and that is their party which is amusing (as is the tea party) when you see delegates and supporters who are for the most part blue collar or white collar workers who are not at risk of having their taxes raised. Meanwhile it would appear that the Dems are wannabe’s as they take donations from them, which are provided as ‘insurance’ in case they are elected…why did Goldamn Sachs contribute $1 million to Obama’s campaign and become his number one contributor (they contributed less than half that amount to McCain…it’s called hedging your bets?). It was money well spent!

But as Capitalism: A Love Story, showed…by using an actual Citigroup equitey report from October 2005…it was written to point out FACT not to be judgmental of it. But the tone was that we no longer live in a democracy or democratic republic but a plutonomy– elected by the people but controlled by the few. This documentary (?) was produced by Michael Moore so TB googled: Citigroup Plutocracy. He found a link: scribed. But when he clicked on the site he couldn’t find it…then he saw this at the top of the page: “This content was removed at the request of Citigroup, Inc.” WTF??? Obviously they were threatened with a lawsuit, right? Not giving up, TB tried to go back to the google but accidentally forwarded and lo and behold he found it! Citigroup memo . The authors tell it like it is…with no emotion as one would expect of most people today…just matter of factly. They suggest that since goods that are purchased by the plutocracy have risen in price much faster than CPI (Giffen good in economic terms), and the way to benefit is to invest in companies that make or sell these products. Think Tiffany, Nieman Marcus, etc.

If that is the way you wish to live your life sobeit…but it almost humerous to think of adding a few thousand to your net worth while the super rich add hundreds of millions. The memo points correctly to the robber barons of the 1920’s and how that ended, and they say it will end when the people are no longer willing to take it…could be sooner than you think. Just as the Robber Barons and the French Nobility found out, when you ignore noblesse oblige you pay the consequences – eventually…it’s simple math.

Frequent readers know that TB has warned of just such a backlash and nobody has described it better than Paul B. Farrell…thankfully sent to TB by a friend/reader.


You decide…

Happy QE1!



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