4/7/11….where to?

Bloomberg Top Stories:

*ECB Raises Benchmark Interest Rate to 1.25% From 1%!!! – despite Trichet hello Bernanke???

*Euro Weakens Before ECB Rate Increase; Portugal Banks Rise, Swaps Decline

*Portugal Set to Start Talks on $107 Billion Bailout as Spain Threat Eases

*Bond Curve Shows That Peripheral Nation Bailouts Stop at Portugal – thankfully!

*Trichet Reticence Ignored as Investors Forecast ECB to Keep Raising Rates

*Deutsche Bank Traders in U.S. Said to Depart Amid Deferred-Pay Shift – awwww!

*Secret Tips From a New York Lawyer Led to $32 Million Insider Trading Bust

*BOJ Offers $12 Billion of Earthquake Loans, Cuts Outlook for Japan Economy – L

*Paulson’s Largest Fund Said to Wipe Out 2011 Gain With 4.4% Loss in March – one trick pony?

*Buyers Accept Smaller Spread for Lower-Quality 30-Year Municipal Bonds

*Academics in Qaddafi-Financed Parade Beat Retreat After Accepting His Cash

*Government Shutdown Threatens 800,000 U.S. Workers as Obama Seeks Solution – hey GOP!

*Obama Says Boehner Meeting ‘Narrowed’ Differences Threatening U.S. Budget – teabaggers?

Yesterday’s volume of 885 million shares, following 830 million,  was again only achieved in the final five minutes as at that time it stood at 775 million…and that was with another huge 640 million shares delivered by Citi following a 408 million share day. This time however the range was not just 6 cents but 18 cents which is a lot on a $4.59 stock.  But think of those two days ex the 1:10 reverse split TBA as to when. That would be just 64 million and 41 million shares (if that, since it will then be a $45 stock! Citi had been treading water for the prior 12 sessions, and it is now back to the old trading range. Backing out Citi the last two days volume would have been just 535 million and 470 million respectively! Over the past 14 sessions total NYSE volume has now averaged just 873 million shares – 250 million BELOW average, with just TWO 1 billion share days – still 100 million below average. On Tuesday CNBC even discussed the lack of liquidity, but Schwab market strategist, Liz Ann Sonders said she wasn’t concerned…you will Liz if and when sellers emerge!  Still there were 536 new 52 week highs and just 36 new lows while advance/declines and breadth ran about 1.5x positive. The major indices were all positive – but barely…imperceptibly?

But get this: Volatility (VIX) dropped to 16.90 -.35! People there is a troubled world out there that doesn’t care spit about corporate earnings!

Overnight, equities are mixed and mostly little changed. GTSE and DZ -0.2%^; CAC 40 +0.2%; Nikkei +0.1%; Hang Seng flat; Korean Kospi -0.2%; Indian Sensex -0.1%. Futures are higher ahead of the open: DOW +25; SPX +2.90; NDQ +4.25. U.S. Bonds weaker with the 10 year -3/16  to 3.57%, and the long bond 4.62% -3/8 .

Gold is up $1.80 to $1460.30 after setting a new high of $1463.70 ysterday – Silver at a 31-year high!; Crude is $108.94 +.11 after setting a new rally high yesterday of $108.93. Dollar bouncing off yesterday’s low of 75.249 tied the 3/22 low –  now 75.65 +.12.

Bloomberg Quote of the Day: “I am not afraid of the pen, or the scaffold, or the sword. I will tell the truth wherever I please.” – Mother Jones – labor protagonist

TB says: “You don’t have to agree with me, but no that I am offering heartfelt views and it is up to you to decide whether you wish to accept them…the key is you!

TB’s Quote of the Day: “Gather ye rosebuds while ye may.” – Robert Herrick (poet)

…as a trader friend was fond of saying: “the market will continue to go up…until it doesn’t!” Corporate earnings alone are a miserable way to value equities…perhaps in isolation of a particular stock or sector but for the broad market which nets this out? How high will it go? Beats TB but while we are now at 3- year highs the gains are coming in a niggardly fashion. Like Rockefeller passing out his dimes to the poor…and no, TB didn’t see that! Worse of course is when the move is on miserably low volume indicative of an absence of sellers who are biding their time…but when it comes time to strike they will.

TB has to provide the usual caveat however that while he does not trust this market he is not sitting holding excess amounts of cash earning zip (although that might prove to be a good strategy but not a good one to bank on). Instead he continues to shun growth stocks in favor of solid dividend payers with a record of raising them and at least maintaining the payout ratio. He is however, no longer reinvesting those dividends in the underlying stocks but letting them build cash. IF you look at the returns on most stocks and compare the dividend yields over the past year being reinvested in the stock or in money market funds the returns are both nice and about equal! If they are equal why invest in the stock?

But common stocks are only a small part of the mix. The rest is in high yielding preferreds of QUALITY banks and utilities, mortgage REITS that invest solely in U.S. government guaranteed mortgages, and income producing ETF’s. Not getting rich, not beating the indices but growing nicely at about a 10% return and TB and his clients can sleep at night. Is it the right strategy? It is A strategy…you decide.

We are at D-Day…the day the GOP…or more accurately the teabaggers can shut the government down…period! This is NOT like the Gingrich shut down (which TB was opposed to and which caused significant pain to many private companies, but not those receiving social security benefits as it was timed to not occur on the 3rd of the month when the checks go out…they now go out on a staggered weekly basis however!), this is an “I can do this…I have a mandate to do this” action. I believe like the misguided Democrats of two years ago, both the GOP and teabaggers (whose popularity is dropping sharply), will in the same way pay for their error. If a shut down occurs, TB predicts that Obama wins reelection (heck, Lincoln did it against greater odds!), and the Dems regain control of the House…but not by a convincing margin…if so, will THEY learn from it?

Here is a link to a Robert Reich article on the 1995 shutdown. When he was with the Clinton administration I was not a fan of him, but I believe over the past several years he has shown that he is a great thinker. If you think the shutdown is a good idea, read it!

That should give you plenty to think about today as the government tempts fate.

. . .   –  –  –   . . .

Thank you to all who wrote yesterday. After hitting the send button TB had serious thoughts about ending the column, but thanks to those of you who wrote…more than on any prior missive…most supportive but two with extremely constructive comments which will be addressed today…most do not see him as a ‘flaming liberal’ and realize that while he is expressing his opinions he does not want YOU, the reader, to blindly heed them. Here are  few of the comments:

“I am more interested in your views and observations of the global investment landscape than I am in your political views. I need to sort through all the investable opportunities I can handle for my diverse group of clients but I try to keep politics out of the decision and sorting process.”

To TB it is impossible to separate the two IF you are talking about long run stock market…in fact financial market performance since it is only in the short run that they can deviate.

“It strikes me that the ‘cut costs only’ argument from the GOP is happening because the cost cuts are ones the wealthy won’t feel anyway.  Public schools, transportation, as well as ‘entitlements’ like food stamps (up to record levels, btw) mean nothing to the ‘rich.’  This article in HuffPo about transportation cuts in Cleveland hurts job prospects for this without access to a car struck me as showing who is (and isn’t) effected by cutting public transportation.  If one side focuses entirely on what they don’t want to pay, and demonize all government payments as socialist and for the lazy, how can there ever be a middle ground in the rhetoric.  I think the Vanity Fair peeve hits the nail on the head:  “The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs…The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.

Meanwhile, the consumer is unemployed, experiencing flat wages if they are employed, and about to get their head handed to them on just about every item they buy.  Virtually every consumer company out there is talking about raising prices.  Here is a brief list of ANNOUNCED prices increases (in itself a very unusual step for companies):  P&G (batteries, laundry detergent), Hershey, Starbucks, McDonalds, Nike, Hanes (underwear), Kimberly Clark (diapers/wipes/tissues).  Either the consumer gives, or if they are as fully tapped out as we think (and in fact only ably to have increased spending over the last year+ due to mortgage non-payment, which is a conversation for another day:  A significant percentage of the country just isn’t paying their mortgage.  That’s a huge cost savings, but temporarily….), or corporate profits, up till mow in the recession driven by cost cutting, will start to fade.”

No need to attempt to amplify that comment…it is on target with what TB is trying to say.

With regard to the comments of your account friend: actually, Bill, I do the same with your rants as I do with Rush Limbaugh when he starts bellowing about something. I turn him off, or hit the delete key in your case. Must be the isolation up there.

In TB’s defense Rush Limbaugh is an opportunist…a former liberal who turned far right for the money…that is a fact. TB believes in all that he says, rightly or wrongly. As for my rants they are a result of, as a good friend and former boss said, ‘wearing your heart on your sleeve.

“Who the hell knows what’s going to happen in 10 years?” said David M. Primo, a political science professor at the University of Rochester in New York who studies the federal budget.

When Democratic President Bill Clinton reached a budget deal with Republicans in 1997, official estimates forecast the cuts would take five years to balance the budget, only to produce a surplus by 1998 that grew to $236 billion in 2000.

Conversely, when Republican President George W. Bush proposed his first round of tax cuts in 2001, the Congressional Budget Office forecast a surplus of $3.2 trillion over the next decade. Bush ended up running deficits throughout his presidency and left office with a shortfall of $1.4 trillion.

Gee!  Now there’s a surprise!”

Guess someone got what TB was trying to say.

Will end with one from a long time friend who comments very sparingly on TB’s missives:

“Bill,

I know left wingers.  Left wingers are friends of mine.  You are no left winger.

(Although, you are a friend of mine.)”

Have a generous day!

TB

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1 Comment »

  1. LDH said

    TB , for goodness sake, keep writing this blog! readers will take what they wish out of it, i myself have found great links, reports, letters, market data, and insights from you. if i find political difference, that’s fine, too. i hear a job coach on the radio sign off weekly with the admonition that “we find comfort in discourse with those who agree with us and growth with those who don’t”. keep up the good work. LH

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