4/12/11…moving on

Bloomberg Top Stories:

*Stocks, Commodities Fall on Japan as Bonds Gain, Swiss Franc Strengthens

*Junk Bonds Poised for Record Year Led by Peripheral Companies – to heck with yields!

*JPMorgan, Bank of America Earnings May Show Weaker Revenue as Loans Stall!!!

*Japan Sees Greater Hit to Economy Than First Estimated on Nuclear Crisis – DUH!!!

*German Investor Confidence Drops More Than Estimated on ECB Rate, Portugal

*Alcoa Shares Drop After Aluminum Producer’s Quarterly Sales Miss Estimates!!!

*New York Fed Lures Wall Street Bidders on AIG’s Once-Toxi Mortgage Bonds

*Republicans, Democrats Reach Agreement on $38 Billion of U.S. Budget Cuts – very sad!

*Japan Raises Radiation Alert to Highest Level, Matching Chernobyl – when did they know???

*Bankers Get off Scot-Free in Industry Overhaul; Commentary by Matthew Lynn – Criminal!

*McDonald’s Franchise Owner Seeks Twice the Burger Chain’s Valuation in IPO – OMG!!!

Yesterday, the major stock indices were all down EXCEPT the Dow Industrials which were FLAT, BUT with 2:1 advancing…go figure! The loser this time was Dow Utilities which plunged 1.4% with all 15 members down! The S&P 500 and both Nasdaq indices wre off 0.5%, while the Russell 2000 small cap fell 0.8%. Like Friday advance/declines and breadth were negative by more than 2x!, but this time the AMEX could not fight the tape with a/d -3x and breadth -5x!!! Told you that was a fluke yesterday! As has been the case for more than two weeks, the 818M NYSE volume was again only achieved in the final five minutes as at that time it stood at 675 million (both nearly identical to Friday)…and marked the 16th straight below average session! Still, the pro’s say not to worry…fools! New 52 week highs however  slipped sharply to 183 while new lows inched up to 62. Citi volume fell back to 233M shares, the party is over and the reverse split approaches, accompanied by lower volume in both.

Overnight, global equities are much weaker: FTSE -0.8%; CAC40 -1.1%; DAX -1.0%; Nikkei -1.7%; Hang Seng -1.3%; Korean Kospi -1.6%; Indian SENSEX -1%! US Futures weak but not as much…wait till the earnings come in though: DOW -55; SPX -7; NDQ -10.50! Dollar below 75 again but still a tad better than Friday’s 74.838, lowest since 12/4/09, 74.97 -.09. Gold is $1462.70 -5.40  after setting a record high yesterday of $1478.00! (Gold stocks were crushed yesterday!) Crude too hit a cycle high of $113.46 yesterday then swooned to 108.68 before closing 109.92 and is now $109.50.

Bonds are stronger – finally, but not that much with the 10 year note at 3.54% +3/8 and the long bond 4.62% +9/16, still very weak. Will Pimco start buying again???


Bloomberg Quote of the Day: “The Right Honorable Gentleman is indebted to his memory for his jests and to his imagination for his facts.” – Richard Brinsley Sheridan

TB’s Song of the Day, ‘Moving On’ from Chicago, sung by Velma and Roxie:

While truckin’ down the road of life, although all hope seems gone,
I just move on.
When I can’t find a single star to hang my wish upon, I just move on,
I move on.
I run so fast, a shotgun blast can hurt me not one bit.
I’m on my toes cause heaven knows a moving target’s hard to hit.
So as we play in life’s ballet, we’re not the dying swans, we just move on,
we move on.
Just when it seems we’re out of dreams, and things have got us down.
We don’t despair, we don’t go there, we hang our bonnets out of town.
So there’s no doubt we’re well cut out to run life’s marathon, we just move on,
we just move on.
So fleet of foot, we can’t stay put, we just move on.
Yes, we move on!

…what is the point? Over the weekend, a ‘right’ friend sent a Dickie Morris piece (if you think by that TB doesn’t respect him you are correct), calling Boehner a sell-out for not shutting down the government and accepting those piddling cuts and said that he just handed Obama the presidency…the friend said he can’t stand the thought of four more years of Obama by the way. THEN, yesterday a ‘left’ friend sent TB Ed Koch’s commentary…which he started to read thinking it was another ‘please like me’ plea by one of the infamous Koch brothers…instead it was the former NYC mayor who sounded exactly like Morris, except he substituted Obama but with the same result!

Last night TB listened to O’Reilly, who had Brit Hume with him to stabilize him. O’Reilly said they should have shut it down as Hume moderated his comments and then he said that ‘every economist’ knows the only answer is to shrink the budget…forgetting of course there is an option of raising taxes on the wealthiest 1% – of course Hume said what do they want blood from them as have pay 40% of the tax burden…yes, Brit, true – and 80% of the wealth! Earlier Juan Williams had pointed this out. Then O’Reilly had a theory: see Soros and all others who want to improve social standards (rightly or wrongly) are doing it because they want to see the system collapse…wow! What a conspiracy theory! Hume had to reign him in on that one saying they wish to get their reforms in and then they will give in on the budget…whatever that meant. Then Hannity did his usual whining. On the left, Rachel Maddow, was not happy with Obama.

This is what has been accomplished: making everyone angry, accomplishing nothing, and behaving like children! You, folks, are not getting what you are paying for, but you are getting screwed! A Bloomberg article today talks about how the UK bankers are back to business as usual having accepted tons of freebies, and no one was found culpable. Same in the U.S. where Jamie Dimon got his $30 plus million bonus and unlike the S&L crisis where more than 100 execs went to jail or were fined severely, not one banker is in jail!

There is your segue to ‘moving on…and now a potpourri of things TB wants to say:

Alan Greenspan, not much of a knight, much less a Fed Chairman, was knighted (honorary since he is an American) on September 26th, 2002 by Queen Elizabeth for saving the world in the stock market crash and in the wake of 9/11…what a guy. Greemspan served an unprecedented five terms as Fed Chairman. He took office in 1987 and was almost immediately hit with the stock market crash when he calmed the markets saying the Fed would provide all necessary liquidity. Perhaps this was his downfall, or being a member of the Ayn Rand Society…how can the head of a regulatory body be opposed to regulation? Huh? But had he failed he might have learned from it, instead he believed he was a god. He then presided over three crises/bubbles, the first being the 1998 collapse of LTCM, where he got the credit and William McDonough did the work, while Congress in its infinite wisdom and proving it worth to Wall Street wanted to charge him with ‘entertaining’ since he sent out for lunches while they were saving it!

Greenspan had ‘appeared’ to be ready to tighten, but instead he was forced to ease sharply and never did a serious tightening after…ever…making him a major culprit in the crisis. But what TB is about to tell you, few know or have bothered to research.

In 1999, TB became curious about the level of margin borrowing due the explosion of day traders. What he saw shocked him. During the summer he went with the San Francisco Bond Club for a tour of the SF Fed. At lunch, Robert Parry, President addressed the club and in the Q and A, TB saw his grandest moment. What TB had unearthed was that in September 1998, Alan Greenspan had proposed making Nasdaq stocks eligible for margin borrowing. The Fed attempted this using five stocks, including Intel, Microsoft, etc. Then on January 1, 1999 he made ALL Nasdaq stocks ‘eligible’ for margin, since the trial with what were not typical stocks was a success. While major brokers refused to lend against the new ones, the ones serving the day traders did, since this was where they made their profit. So here is TB’s question:

“Mr. Parry, I understand Mr. Greenspan’s refusal to raise margin requirements since he doesn’t think it is fair (fairness is not part of the Fed’s mandate nor is ‘boosting’ the stock market as Mr. Bernanke is doing right now), but why did he make all Nasdaq listed stocks marginable – immediately after the IPO with no seasoning?”

You could have heard a pin drop and TB felt the icy stare of President Parry who said: “are you sure about that?” Now this was from a senior and voting Fed official!  TB tried making himself very small while all eyes were glued on him. All TB could say was “I’m pretty sure.” Then the attention drifted away and TB felt like a fool, wondering if he had dreamt it.

He hurried back to the office and went to the library pulling out Fed Journals and then he found it! Quickly he faxed it to Parry who sent back this response: “Oh that, yes.”

That was it…nothing more on an event that gave the market the final (as it turned out) push to a record high??? TB was and has remained disillusioned of the Fed since.

So the Greenspan Fed not only could not predict a bubble, it aided and abetted it! He then went on to deny a mortgage bubble and crisis and even ‘claimed’ he had no authority over mortgage companies and took no action…didn’t even sound the alarm!

Did he do anything though? Oh yes, he jumped on board with Robert Rubin and Larry Summers in attacking Brooksley Born when she wanted to regulate derivatives by making them trade on an exchange…had this one thing happened it would have either prevented the crisis or at least minimized it. He also favored elimination of Glass-Steagall and not regulating the top five banks and dealers! That is how JPMorgan, Citi, Goldamn, BofA, and Merrill were able to nearly destroy themselves…and would have if not being bailed out by the taxpayers and the Fed! Greenspan is guilty of gross dereliction of duty.

Well, that took so much space that TB is going to only offer one more rant: Congress. It took three years to censure Charlie Rangel on what was most certainly tax evasion – no criminal charges filed either. The House Ethics Committee has a score of members under investigation, sidelined by the budget debate (sic), including Maxine Waters who got money for her husband’s failing S&L (the only one to do so), without disclosing who he was! She should be in jail…instead they haven’t even held the hearings…and now we have GOP leadership. But then why does Congress want to air their laundry when both sides are culpable??? You are being ripped off…and name one Congressman who left there poorer…but you can name numerous ones who became millionaires or billionaires.

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

While you are calling TB a permabear, a friend sent a link that supports his case that we are still in a secular bear market. It is from Seeking Alpha and is a table showing the INFLATION ADJUSTED levels of the Dow from 1929-1949, S&P from 2000 to present and Nikkei from 1989 to present. mega bears chart.  Don’t read this on an empty stomach because it is exactly what has happened to incomes of those at the 10% level since 1981…only this table only took 11 years to show how your buying power has been eroded (S&P is off 31% in inflation adjusted terms). You have to take a look at this. If so, you will see that growth stocks are not providing returns and it is only income that has any value.

Have a terrific day!



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