4/4/11…three women

Bloomberg Top Stories:

*Commodities Climb to Two-Year High as Takeovers Buoy Stocks, U.S. Futures – a good thing?

*Euro Posts Best First Quarter on record as Germany Turns Trichet Into Hawk – c’est la vie!

*Wall Street Revenue From Trading Seen Falling a Fourth Consecutive Quarter – low volume!

*Commercial Paper Increases to Highest Since ’09 on Economy – what about high corp. cash???

*Lloyd Blanfein Reaps $19 Million as Cash Bonuses Return to Goldamn Sachs – it’s your money!

*Greek Default May Condemn Irish, Portuguese Debt to Same Fate – we don’t get it, do we?

*Blackstone Helps Fuel 84% Jump in Leveraged Loans on Floating Rate Demand – next crisis?

*Qaddafi Cease-Fire Proposal Rejected by Italy After Contact Through Greece

Friday’s volume slipped back to 902 million shares, below 1 billion for 8 of nine sessions. Over the past ten sessions volume has now averaged  just 886 million shares – 300 million BELOW average! No wonder trading revenues are declining! Of course that didn’t stop there being 650 new 52 week highs and just 41 new lows or advance/declines and breadth of nearly 3:1 on the NYSE – but only about 1.5:1 on the Nasdaq??? All the major indices were up about 0.5% except Dow Transports which surged 1.3%.

Volatility (VIX) gapped down and plunged to 16.42 (lowest since 2/18/11), before closing at a still low

17.40, – .34.

Overnight, global equities are rallying…modestly in Europe. HangSeng +1.5%, following a 1.2% gain., Nikkei +0.1% (TOPIX -0.3%); Korean Kospi -0.2%,  and the hot of late Indian SENSEX +1.5%. Futures are up ahead of the open: DOW +12; SPX +2.80; NDQ +8.75.

Gold is running again: $1437.30 +$8.30;  Crude is little changed at $106.01 – strong!

In case you didn’t see it on Friday, h ere are the Q1 and 12 month stats:

Dow +6.4%; +12.8%

Dow Transports +3.8%; +20.7% (but Nasdaq Transport -2%!)

Dow Utilities +2%; +7.8%

S&P 500 +5.4%; +12.5%

Nasdaq Composite +4.8%; +15.8%

Nasdaq 100 +5.5%; +19.4%

Russell 2000 (small cap) +7.6%; +23.3%

TLT (long bond ETF): -1.5%; +7.5%

LQD (Corporate ETF): +0.6%; +7.1%

HYG (junk bond ETF): +3.2%; +13.3%

MUB (national muni ETF):+0.9%;  -0.2%

PFF (preferred stock ETF): +3.4%;+10.1%

GLD (ETF): +0.8% ; +26.8%

OIH (Oil Services ETF): +17.2%; 33.8%

(All ETF’s assume dividend reinvestment in the ETF)

…in order of appearance: Brooksley Born, Sheila Bair, and Elizabeth Warren. All well educated, well-spoken, intelligent, and all crucified by the Wall Street driven GOP, and also some members of the Dems who have spent far too long drinking at the public trough. You are about to witness a brutal beating by Congress on Warren, condoned by Tiny Tim Geithner who never should have been allowed to leave the NY Fed and become Treasury Secretary, so entrenched and entranced was he with the powers that be in New York.

Brooksley Born is by far the most crucial and was treated the most hostilely by Robert Rubin, Alan Greenspan, and especially by the ‘affable’ Larry Summers. While head of the Chicago Futures Trading Commission (CFTC) she became alarmed with the growth of derivatives, most notably credit default swaps (CDS)and wanted them regulated, at first by the CFTC then she pleaded her case for regulation by any governmental agency. To say it fell on deaf ears would be a gross understatement since they listened and listened well blasting her with financial lobbyist supplied barbs, by all off the above officials and members of Congress who made her look like a blithering idiot…how dare you trifle with free market capitalism! Had she prevailed there would have been no financial crisis. Why? Because there would have been no incentive. By standardizing CDS and later Collateralized Derivatives Swaps (also CDS, it gets confusing), the incentive to churn them out would have been eliminated. How so? Because if you bought default protection and no longer felt the need to have it you could have merely sold the ‘option.’ There would have been plenty of speculators playing the spread (as the credit deteriorates the spread widens and when it improves it narrows, making trading them lucrative, but instead of piling up long and short positions and netting them out, they would have merely cancelled each other out.

Why was it that TB with very little derivatives experience and other bankers at a Euromoney Conference in London in February 2003 when they were still in their infancy, saw the flaw as did Born, yet the street didn’t? The answer is THEY DID! At a Bear Stearns session at the Conference, TB was dying to ask: ‘but what if the counterparty defaults?” He was beaten to the punch by a Danish banker to which the Bear trader paused, and then, as if a lightbulb went off, said: “you insure the counterparty!” To which the room of investment professionals burst into laughter and applause – all except the trader of course.

How can something so absurd on its face nearly destroy the global financial system? Consider Tulipmania…what could be more absurd than that yet at the peak one tulip bulb could by a ship and crew for a year!

Next came Sheila Bair, who also tried to warn of the banking crisis and still sees huge risk there. She too has been lambasted by Congress and the financial lobby.

How is it that within months after the collapse of hundreds of mortgage companies, hundreds of banks of all sizes, the very legislation that was to prevent it from happening again, has been contaminated to the point of near uselessness by the same powerful lobby and of course contributions to members of Congress as well as the President ($1 million from the largest contributor, Goldamn Sachs)? Never has a sector of the economy showed such resiliency, dare we say chutzpah? Meanwhile, treating the collapse almost as ‘one-time charges’ they are back prospering at the expense of the rest of the economy – save CEO’s of the biggest companies.

Lastly, we come to Elizabeth Warren, a respected Harvard law professor, who has been slandered, liabled, been ‘called names that ain’t in no bible’ as Paul Simon would say.

They are out to destroy her just as they did to Brooksley Born and they will succeed. Never underestimate the power of Wall Street. If you saw Inside Job, you saw how they got even with Elliott Spitzer – having him prosecuted under the Mann Act (which most people didn’t even know existed – transporting a prostitute across state lines). Not to condone what he did but that was a personal matter between he and his family, no public money was involved, but Wall Street had its say. Don’t mess with them!

. . .  – – –  . . .   . . .  – – –  . . . (again that is S.O.S.!!!)

Tomorrow, TB will discuss the budget cuts (sic) proposed by the GOP…all $33 billion of them which is about the same as a flea trying to attack an elephant (no pun intended). Here is a preview:

Remember Sen. Stevens (R) ‘bridge to nowhere?’ The cost of that project  was to be $223 billion to the federal government (meaning you), with another $185 million from Alaska, which Palin initially favored but reversed when the uproar began. Recall too that that wasn’t a bill, it was an ‘earmark’ on another bill! Perhaps you also recall that Stevens was asked to give it up to provide more funds for disaster relief in the wake of Katrina, he refused! Now back to the $223 billion…

We are being misled that not passing the budget or at least debt extension is no big deal. It is…it impacts the issuance and cost of U.S. Treasury debt. This is not the one day shut down in the original Contract with America…which the GOP cleverly dusted off then filled it with things they would like to see done away with as they were thorns in their side. There are very few proposed cuts that exceed the $223 billion as you will see tomorrow. You will also see that many of them are counterproductive and on their face absurd: cuts to the FBI, state and local law enforcement, the IRS (ah, fewer audits for the rich who are rarely audited anyway). Cuts to NOAA…didn’t we just have a tsunami that thanks to those buoys perhaps saved thousands of lives? Also, what about hurricanes?

So tune in tomorrow but in the meantime see this piece from Nobel laureate  Joseph Stiglitz which in a nutshell describes the coming revolution (most likely peaceful but earthshattering in its effect to the middle class as they will be lumped with the top 1%’ers.   Stiglitz-Vanity Fair

It is much later than we think as by the day more credible people are coming out warning of just what TB has said for more than two years. Wake up people!

Have a great day!

TB

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