4/15/11…taxing!

Bloomberg Top Stories:

*BofA Posts First Profit in Three Quarters, Settles Faulty-Lending Disputes

*Greece Will Cut Spending, Sell Assets to Meet Debt Goal; Won’t Restructure

*Roubini Says Restructuring of Greek Government Just a Matter of Time

*China Economy Grows More-Than-Forecast 9.8% as Prices Surge Most Since ‘08

  (Hmmm inflation, creation of bad loans…that will do it every time! TB)

*Shocks Slow Global Growth Sustained by Labor Gains Converging With Profits

 (Labor gains or compensation gains for senior managements? TB)

*Gross Alone Beating S&P as Two Crashed in Decade Fail to Boost Bear Funds

*Bond Sales Rebound as Spreads Shrink to Lowest this Year – Caution! TB

*Quest for ‘Holy Grail’ of Super Corn Intensifies on Fertilizer Price Surge

*Tilera Startup to Challenge Intel With Chip Designed for Cloud Computing

*Losing 84 Cents on Dollar Reveals runaway Public Pension Boards in America

*Republicans Set to Pass Ryan Plan That Will Spur Next U.S. Budget Battle

*Senate Republicans Weigh U.S. Spending Cap Tied to Debt-Ceiling Increase

 (the mouse that thought it was a lion and roared accordingly…too bad they had to

 try doing it on ideology alone and not a doctrine of fairness…c’est la vie. TB  

Consumer Prices ROSE 0.5% in March in line with forecasts while the Core (ex food and energy) rose 0.1% vs consensus +0.2%. Food prices increased by the most since July 2008. Year-over-Year CORE CPI rose 1.2%…is that a threat for the Fed to consider??? Over the past three months Energy is up 42.5% annualized (Gasoline alone at a 71.2% annual rate!). THIS IS LARGELY SPECULATION and damaging to the broad economy, while food prices are up 7.5% annualized. Should make for an interesting FOMC!

Yesterday, the major stock indices were mixed and little changed for a second day with the Dow +0.1%; Transports +0.3%; S&P 500 flat, Nasdaq Comp -0.1% vs +0.6%; and the 100 -0.7% vs +O.8%, while the Russell 2000 +0.2%. NYSE Volume was 840 million shares, about 180 million below the LOW 12 month average of 1.12B shares, and like Wednesday itwas steady all session without the now customary surge in the final five minutes…nobody cares – still. This was the 19th straight below average session. Worse to find volume this low you have to go back to 1999 – source: Bloomberg news and finally people are beginning to agree with TB that a rally without volume is not a healthy thing!The Dow’s low pierced the 40/50 day moving averages before recovering due to the lack of follow thru. Not so for Goldman Sachs which closed on the 40/50 day yesterday and gapped down THRU the 200 day on the Levin Report and closed well below it – why not? An indictment could come for Blankfein and this will make it very dangerous for politicians to defend them despite their contributions. New 52 week highs ran just 102 vs 75 new lows. Advance/Declines were and breadth were slightly negative except on the AMEX but that’s a different story.about even as was Breadth on the NYSE while the Nasdaq and AMEX were about 2x positive! After three 200+ million share days Citi volume was back to 430 million shares. Nothing to see here.            

Overnight, global equities are weak for the second straight session (very much net down!) as they continue to grasp a reason to trade – one day up, the other down on the same old news: FTSE flat; CAC40 -0.5%; DAX -1.1%; Nikkei -0.7%; Hang Seng flat; Korean Kospi flat but net positive about 2%; Indian SENSEX -1.6% but also with a net gain of about 3%+. US Futures slightly weaker: DOW -4; SPX -0.20; NDQ -2.50 – going nowhere! Dollar still struggling and below 75, 74.81 +.08. Gold is $1476.30 +$3.90. Crude weaker but after a strong session yesterday $107.88 -.23. Bonds rallying following CPI. Next week’s FOMC meeting awaits. The 10 year note is 3.43% +17/32 and the long bond 4.50% +25/32 – about where they were prior to yesterday’s selloff.  

…a doubly taxing day today as it is not only the Federal tax filing deadline but the crosscurrents in the market are building, especially with the FOMC meeting next week. The hawk governors are itching to tighten despite signs of renewed global growth slowing. Could be a dangerous move and a contentious meeting.

Note that yesterday Google announced its earnings with a big fat miss on revenues. When asked on Bloomberg if it was a fluke, their analyst would only say: possibly…oops!

Can you believe Goldamn? First they settled for $550 million with the SEC and it now appears, thanks to the Levin Report we know why: the LIED in a prospectus saying their interests were ALIGNED with buyers of the CDO when in fact not only were they short it, they were short the entire issue! Blankfein also outright lied to Congress on this as Levin watched him – amused. He now says that he knew that it was a lie at the time, setting up a possible perjury charge for a man, not only a fellow lawyer but both were first in their class at Harvard Law a year or so apart…what a juxtaposition this was. The shark being attacked by the seal.  Meanwhile other civil cases are mounting against Goldamn and this gives them further credibility. On Wednesday, the stock closed between the 40/50 day moving average. After the report it gapped down thru the 200 day and closed nearly at the low…where it should be.

Then there was WaMu, the killer bank…they had a portfolio rife with fraudulent loans. This of course is contrary to what Ken Lewis of BofA said when questions were raised about that very point during the acquisition: our examiners looked at every loan in the portfolio and they are all good. Of course, anyone who has ever undergone a bank examination knows that this would take about six months…all they had time to do was randomly check them for documentation…and if it was forged how would they know. The only way to verify is to contact the individuals, etc. Ken Lewis deserved to lose his job over this but then he was drooling over the papers he needed to sign to own it.

JPMorgan is also mentioned and how Jamie Dimon continues to play ‘The Saint’ among sinners when there have been numerous charges and convictions of areas of the bank related to investments and especially municipal finance where they ripped off public entities…of course also at the expense of the citizenry.

UBS, Deutsche, it is a litany…yet no one…NO ONE has yet been prosecuted…when during the S&L scandal which was nothing compared to this in degree or forgery but more on undocumented loans, etc. Yet there were 1100 prosecutions of executives and 900 went to Club Fed…presumably many of the others settled for hefty fines.

The S&L’s were taught a lesson and had not had similar problems…of course Glass-Steagall was in effect then…since the Sandy Weill, Robert Rubin (appropriately their names are together here), Larry Summers, and Alan Greenspan push to eradicate it, this is what we got…thanks in part to an agreement not to regulate the top five banks. Sheer lunacy. Weill and Rubin should be in jail for their part, Summers was a sheep following his mentor, and Greenspan should be charged with gross dereliction of duty. But of course, that is a pipe dream.

Perhaps it is time for you to write your congressperson and demand that they be prosecuted? It is incredible that the Levin Report was so damning given the millions in campaign contributions and the powerful lobby that made Dodd-Frank a bad joke and the Volcker Rule the worst insult possible to a great man…a true leader!

Lastly, the SEC is considering an enforcement action against the two CEO’s of FNMA and FHlMC over failure to disclose subprime holdings. If proven, it would mean that the two men, Danial Mudd and Richard Syron failed to understand the risks they were taking. But wait…didn’t Robert Rubin himself, say he had no idea of the risks? Yet he was the driver to Citi to take on MORE risk…be like Goldamn. But what they did was by the safest (supposedly) tranches of CDO’s following the lead of the brokers themselves and buy what Moody’s and S&P said were Aaa/AAA securities with no possibility of loss. They were also following a mandate by BOTH parities and the Bush administration to enable more Americans to own homes! This could get interesting.

On the housing front, home prices fell in March in the San Francisco area as nearly half of all sales were foreclosures…add in short sales and what do you have left. If you are thinking about buying a home for investment think hard and long. There are going to be perhaps one million more foreclosures this year, due to loan resets, a flawed mortgage restructuring plan, and then watch as home equity loans which are now interest only are forced to convert to amortizing after ten years…that means fixing the rate. TB had a home equity with BofA who with three years left sent him a message warning him of this and said to call about a rate. Since he was paying 2.49% and the ten year treasury was around 4%, he enquired. The rate? 8% AND with amortizing principal it would have been a huge increase in monthly payments. After that they sent him two more notice, which of course were ignored…today the rate would still be 2.49% had he not payed it off. But think what a time bomb that is that will persist over the next five years or so, and with falling home prices you will have no choice but to accept the rate given by the current lender. Bastards! Thankfully, TB sold his home and is free of that albatross.

. . .  – – –  . . .   . . . – – –  . . . S O S   S O S

What about Obama’s speech last night? Biden fell asleep during it…’nuf said…but he could have at least amended his tax increase proposal to $1 million, or at least $500,000!

Don’t forget to file your taxes…or extension…then have a great weekend!

TB

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