4/11/11…instant insanity

This week’s economic calendar will pick of the pace of data releases with an emphasis on inflation. However, the highlight of the week will be March Retail Sales (Wednesday). We will also get February International Trade, March Import & Export Prices, and the March Treasury Budget (Tuesday), February Business Inventories (Wednesday), the March PPI (Thursday), the March CPI, the April Empire State Manufacturing Survey, March Industrial Production, and mid-April Consumer Sentiment (Friday). In addition to the economic data, the Federal Reserve will release its Beige Book for the upcoming April 26th – 27th FOMC Meeting (Wednesday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA.

Friday is the first options expiry of the new quarter, therefore not major, and is also TAX DAY!

Bloomberg Top Stories:

*U.S. Index Futures Gain Before Alcoa Earnings; Yen Strengthens, Oil Drops

(Bloomie is always trying to explain market action…but you know it is a wasted chore. TB)

*Schneider Electric Said to Be Considering Takeover of Tyco International

*IMF Lowers Growth Economic-Growth Forecasts for U.S., Japan, German Official Says !!!

*China Inflation ‘Somewhat Out of Control’ on Weak Currency, Soros Says

*Pimco Cuts Government-Linked Debt Holdings to Negative; Boosts Cash Assets

*Global Corporate Profits Rising to record Before Japan Quake Curbs Supply

*Cash-Loving Consumers Instigate Record $1 Trillion Cash Hoard – hmm. Consumption???

*Best Currency Forecasters Say Dollar Weakness to Persist as Fed Stimulation

*Canada’s Carney Raising Interest Rates is Just a Matter of Time

*Fed Director’s Bank Burned Twice on One Project as Laon to CEO’s Kin Sours! Pity!

*Insider Trading in China Thrives With Selectively Disclosed Economic Data

*Libya Rebels Spurn African Union Cease-Fire Unless Qaddafi Gives Up Power

*Obama to Confront Republicans Over Debt Cap in Next Challenge After Budget

On Friday, the major stock indices were all down from 0.3% (Dow 30) to 0.6%, except the Dow Transports -1.6%, and the Russell 2000 -1%, with advance/declines and breadth on the NYSE and Nasdaq negative by more than 2x!, while the AMEX played contrarian with a/d 1:1 and breadth 2x positive??? As has been the case for more than two weeks, the 816M NYSE volume was again only achieved in the final five minutes as at that time it stood at 680 million…the drop in volume from the prior two days is almost entirely explained by the drop in Citi volume! Let’s look at the volume of the past six days, with and ex-Citi:

Friday  Thursday Wednesday Tuesday Monday 12 mo Ave Ave since 3/21

816M   907M         885M          830M     770M       1127M            876M

396M 568M          640M          409M     297M         571M            406M

492M   339M         245M          421M     473M         554M            470M

Citi post 1:10 split volume:

49.2M  56.8M        64.0M         40.9M    29.7M        57.1M           40.6M

Overnight, global equities are weaker – sans the Korean Kospi (+0.6%) and U.S. Futures which are up (DOW +14; SPX +1.70; NDQ +6.25), in anticipation of Alcoa earnings…is this  a fool’s business or what? Buying or selling based on prior quarter earnings when we know the global economy is losing its hard-earned steam. China is suffering ‘runaway’? inflation by artificially pegging the Yuan to the sagging dollar.

FTSE just turned positive +0.1%; CAC40 -0.6%; DAX -0.3%; Nikkei -0.5%; Hang Seng -0.4%; Indian SENSEX -1%! Dollar a tad better after Friday’s 74.838, lowest since 12/4/09, 75.07 +.22. Gold is $1469 -5.10 but with an overnight record high of $1478.00! Crude too hit a cycle high of $113.46 o/n but since faded and is now $111.73 -1.09.

Bonds are slightly weaker with the 10 year note at 3.59% -3/32 and the long bond 4.66% -1/4, no doubt not helped by Pimco’s latest where they are now NET SHORT UST by 3%! Meanwhile cash and equivalents now stands at 31%, up from 23% last month, making it the largest component in their portfolio! The problem with following Pimco is that when they buy again…and they WILL buy again, the price will rise before you can get in!

…years…in fact decades ago there was a game called Instant Insanity. It was four cubes with four different colored sides. The object was to line them up so that all the colors showing (two sides were of course hidden) were the same. It was very difficult unless you were good at math where it could be graphed…same as with a Rubic’s cube.

That is what we have now in Congress, here are the sides: Dem left, Dem mod, Rep right, Rep mod, teabaggers, and Christian right. Try aligning those! It can’t be done and it couldn’t be at a worse time since rather than work for the people, all are posturing for their own constituency with the wild card being the teabaggers.

Make no mistake the problem began with the Dems last year when they failed to get agreement on a final budget by kicking the can down the road. But in fairness, they were against the GOP who was not going to give in before the elections…seeing this as a chance to seize power…meanwhile many of the members were in fear of their jobs, and as Florida’s Crist and Wisconsin’s Feingold showed, not wrongly. They weren’t conservative ENOUGH!

But now the GOP has mistaken their mandate, just as the Dems did, as the try to appease the teabagger wing (strong budget cuts), and the Christian right (Planned Parenthood although it does not and cannot by federal law – Hyde Amendment). We are fighting a battle over ideology and this thesis looking Path to Prosperity with seriously flawed data from the right wing Heritage Foundation which once again hails ‘trickle down’ as the solution saying everyone must share the burden without showing one place where the wealthy will lose a thing…no willingness to tax even hedge fund managers and private equity managers more than 15% on BILLIONS while main street loses, jobs, homes, availability of credit and self-esteem.

The insidious part is that we are to believe that Paul Ryan is a true believer, when he has a net worth of $2.4 million at least, and that the cuts, while painful ‘could’ or ‘may’ produce 2 million jobs, save $6 trillion from the deficit, and reduce unemployment to 2.8% (the Heritage Foundation has removed this from the website but it is in the 72 pager resolution). To put this in perspective, the last time we had this level of prosperity was when Eisenhower was President and we didn’t have a mobile economy. If you count in frictional unemployment it is unlikely that in the best of circumstances we could ever get below 6% and that of course assumes that wages will plunge making hiring U.S. workers more attractive than Asia. What does this say about what would happen to us…a consumer based economy that has been reliant on credit, not pay raises (except CEO’s) for three decades!

So what just happened: the GOP kicked the can down the road…where it will fester and the situation will worsen three months from now as we will be that much closer to the 2012 election cycle. Like the Dems, the GOP has entirely missed their mandate.

This is not to say that budget reform isn’t necessary…it must happen…but it must be discussed sensibly by responsible members of Congress (they are all responsible so far of being irresponsible), outside the view of the public and the debt ceiling MUST be detached from the budget process…it only increases the cost of debt…witness Pimco’s shorting U.S. treasury’s, and makes a mockery by authorizing debt then refusing to pay for it! Also, furloughed jobs eventually get their pay …and for doing no work. Not only that, but Congress would still have collected their pay…although there was a motion to not get paid during a shutdown.

TB is thoroughly disgusted with Congress and how it is controlled by those who contribute the most to it…as Charles Keating testified when asked if his millions of contributions got him any special favors: “I certainly hope so.”

Meanwhile, in Minnesota, where we have a budget deficit, the legislature is debating funding a new stadium for the Minnesota Vikings…of course the argument is that it boosts tourism…hello, they have TEN home games a year! How can anyone in their right mind be debating this issue when cuts have to be made??? It makes TB sick!

Also, the cost of a family of four attending a baseball game is now $172, which includes four tickets, parking for one car, two beers, two soft drinks, food, and a small souvenir. A family was shown going to a Twins game and when they came out they said how much they spent: $400! …ah but frittering away your money when you could see it better in the comfort of your own home? Priceless!

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

A week ago or so TB directed readers to a Joseph Stiglitz piece in Vanity Fair on the wealth gap and what it means to America. It turned out that that piece came from December 2009! He has written another piece in the May issue of VF that shows how the gap has widened since then. Here is the link: Stiglitz II

Sadly, it was the discussion of this piece and comments on the GOP budget proposal that cost TB a reader but as TB told him: this is not my opinion or philosophy, it is fact that the wealthiest 1% are stripping away (not necessarily intentionally), all the assets in this country.

Another friend/reader was critical of citing Stiglitz (as was another on Soros). This shows the problem when we shun someone with a different ideology, or in Stiglitz case that he did research for Chavez, with fact. TB loves fact, and it could come from his worst enemy if it calls his attention to an issue of importance. That is specifically what TB is urging his readers to do…stop believing everything you read…yes, even here, as readers have made corrections and TB has reported them –unlike Rush Limbaugh and others whose only goal is to incite the behavior they want. Do you want to be a puppet to TB or anyone else? Hopefully not.

Lastly, a long time friend was critical of TB citing Hitler’s rise to power by blaming the jews “who controlled banking and industry.” This gave them a ‘class’ to hate and played right into Hitler’s plan. Ignore whether or not they did…although the Rothschild’s were a major source of banking strength. The point was and is: it is far easier to accomplish your objective by uniting a people against a class than an individual. A class is faceless, it could be one of your neighbor’s. That is the power of hate. The lesson here is that he was able to do all of the atrocities because he extended that class to all jews, and almost destroyed them. That means that IF a new leader appears who can unite the true ‘silent majority’ of blacks, latinos, Asians, etc. in this country against the wealthy, it will not stop at the wealthiest 1% — 10%??? If so, we had all better be very afraid.

Have a great week!




  1. Andreas said


    as yor are a very close observer of volume: You might have not read Barry Ritzholz explanation yet. An interesting observation.


    • traderbill said

      I allude to that in today’s column by asking when boosting the stock market became a mandate of the Fed. I believe what he says is true (don’t fight the Fed), but this can only happen for so long.
      Today, Alcoa missed on revenues…further proof that rising commodities prices are on speculation not demand?…and warnings on JPM and BoA. As I have said p/e’s are not supposed to be based on prior quarter earnings but SUSTAINABLE earnings.
      Thanks for your comments!

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