5/6/11…too big to – – – – ?

U.S. Initial Jobless Claims rose by 43,600 last week to 474,000 vs. consensus 410,000!!! Also, the prior week was revised up 2,000 to 429,000. Meanwhile continuing claims rose by 74,000 to 3.73 million despite a drop of 42,900 in extended/emergency claims…a bad omen for THIS month’s Non-Farm Payrolls? DOL says it was due to NY holiday, Oregon program and auto shutdowns…your take?

U.S. Productivity Rose 1.6% in Q1 vs consensus +1.1%; Q4 was upward revised to 2.9% from 2.6%. Labor Costs +1%, Q4 revised to DOWN 1% from -0.6% - hmmm, do you think this boosts productivity and profits? You bet, but IS it sustainable? TB

Bloomberg Top Stories:

*Stocks, U.S. Futures Drop on Earning; Commodities Slide, Yen Strengthens

*GM First-Quarter Profit More Than Triples on Higher Sales in U.S., China

(you don’t think lower costs thanks to U.S. helped do you??? Sales = Revs)

*BOE Keeps Interest Rate at 0.5% on Signs Recovery is Fading – bad news TB

*Trichet Might Signal How Fast ECB Will Raise Rates After Holding at 1.25%

*Lloyds Sets Aside $5.3 Billion to Cover Loan-Insurance Claims; Shares Drop

*Barclays Surpasses UBS in Currency Survey; Deutsche Bank Retains Top Spot

*Macquarie Hires Cantor Fitzgerald’s Savio to Head U.S. Equities Business

*Silver Investors Dump Futures as Comex Boosts Speculator Trading Costs 84%

(Shades of 1980 and the Bass Brothers Demise…let’s do that for Crude too! TB)

*Oil May breach 30-Day Average, Drop to $98, Again Says

*Brazil Banks Beating Wall Street as ITAU Shows JPMorgan Who Rules Markets

*Colleges Learning Ayn Rand Can’t Be Shrugged as Donors Building Curriculum

*Qaddafi’s $33 Billion to Be Made Available to Libyan Rebels, Clinton Says

*Syrian Army Begin’s Darraa Withdrawal After ‘Restoring Calm,’ State TB Says

Wednsday’s volume of 1.1 billion shares (with rounding!) was the first  average volume day in 32 sessions – ok, readers, what is the bad new? IT WAS A DOWN DAY!!! following three straight do-nothing sessions. Worse Advance/Declines and Breadth ran more than negative 2x (except on Nasdaq where it was -1.6x), compare to the puny numbers of the prior three sessions. New 52 week highs plunged to 154 from 206 which id down from the 500-600 range we had been seeing while new lows rose to 94 from 70 from 43 Monday – remember it isn’t the number but the RATIO that is the precursor! Now look at the indices: Dow -0.7% after being flat for three days, Transports -1.6%!!!, S&P 500 -0.7%, Nasdaq Composite -0.5%, 100 -0.2%, while the Russell 2000 plunged another 1.3%…-3.8% in just three sessions and -4.2% from the 5/2 rally high!  

The Dollar is now oscillating around 73. Monday’s low of 72.83 was the  lowest since 7/29/08. The last close above 76 was on March 30th and it has been almost straight down since. Since April 14th the long bond had been in a range of 4.47% to 4.36% but continues to rally and is now 4.28%, while the 10 year note broke out of the range (3.41% to 3.29%), and is now 3.18%!!! For a secons straight session T-Bills out to 3 months are effectively at ZERO percent…hello, Congress this is a major problem in social security…you won’t address this fact though! Gold and Crude had ‘selling climaxes Monday then immediately tumbled and continue to do so. Gold hit a new all-time high of $1577.40 Monday and is now $1508.40 $6.90 AND traded to $1496.20 overnight! Crude is off $3.05 to $106.26 after also taking out the rally high with a $114.14 print Monday before plunging like Gold did. Moral: if you have to choose between Goldie’s forecast and Morgan Stanley’s, choose the former! They were recommending shorting commodities. Especially silver!

Global equity markets are weaker: FTSE -1.0%; CAC 40 -1.2%; DAX -0.6%; Nikkei closed for the week; Hang Seng -0.2%; Korean Kospi closed; Indian Sensex -1.4% – since 4/25 it is off 7.5%!!! U.S. Futures correctly focusing on jobs not productivity gains: Dow -56; SPX -8.10; NDQ -11.75

…fail? …succeed? Ever since the late Ronald Reagan unleashed ‘too big to fail’ on us against the advice of Treasury Secretary Don Regan, the big banks have had a license to steal at the expense of the American people and community banks. They could do no wrong and were accommodated by not only ridding them of the thorn of Glass-Steagall but totally removing the top five from ANY regulatory supervision. We paid for that mistake in spades. The second major error of his presidency was letting Arthur Laffer convince him that supply-side economics was the key to balancing the budget. How could anyone politically connected use the term ‘trickle down’ and get re-elected? This, and the timing suggests it is true, has led to what is now the biggest wealth gap of any industrialized nation in the world. Well done, Gipper…and especially you, Arthur, who still believes it works!

Then, despite the causing the biggest financial crisis in global history we bailed them out AND let the same managements (for the most part) continue to not only run the banks (and resume taking outlandish bonuses), but go back to business as usual at the expense of personal and small business loans, and what mortgage lending they are doing after stripping the origination and servicing fees are then sold to Fannie and Freddie as a liability to the U.S. taxpayers – their way of saying thanks, America!

Oh, but it gets better…not only did they nearly destroy the global economy, save and enrich themselves further with OUR money, but they lobbied heavily to prevent the regulatory changes necessary to prevent it from happening again by watering down Dodd-Frank to the consistency of weak tea. They did this by spending tens of millions on greedy lobbyists and all to eager to accept congressional cronies.

Furthermore, we already knew of the price-fixing, bribery of local public officials, misrepresentation of interest rate swap risk to the entities, costing them combined billions of dollars and some defaults.

Yet we hold out the head of one of the two worst offenders, Jamie Dimon, as a demigod, while there have been numerous convictions with JPMorgan, Citi, and the other big guys on fraud…all blamed on department heads and below. Doesn’t the CEO set the agenda and goals?

A story today, says that colleges are now being offered grants by wealthy industrialists with strings attached (they always have had some but these are outright demands. TB recalls one time back in the 80’s or early 90’s when a huge grant was offered to Yale on the condition that it make History of Western Civilizations a requirement…the donor credited his success (and TB does the same) to this two semester course. They turned it down…how could what has always been a requirement now be considered undue influence? TB found out when his son went to University of Oregon and satisfied the requirement with: History of Rock and Roll. This tells volumes about our educational system.

No but this situation is different. The donor, a former CEO, wanted them to teach Ayn Rand so students would learn what America is all about. TB suggests he pay attention to how it influenced Alan Greenspan and how that worked out…also that the reason it failed is that while we are always subject to greed taking over, the short-sighted nature of our economy now and the ridiculous risk/reward system makes it a joke. Go see the new movie on one of Ayn Rand’s books, “Atlas Shrugged” if you doubt this.

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

Last Friday, TB went to hear Fareed Zakaria speak on “The Future of the Middle East.” He was at his best. He, without sounding republican or democrat, conservative or liberal, spoke of how Saudi Arabia is the only arab country that was not established by the British and French. Even Jordan, which professes to have a long history.

One of his major points is that men are not the best leaders, women are. Call it testosterone or whatever, they are more stable and reasonable in their decision making when it comes to violence where as men are highly volatile. He then pointed to the fact that only 16% of U.S. elected officials are women, whereas in Europe it is 50% plus.

TB is inclined to agree, and it will shock readers that he is most impressed with Hillary Clinton (if only Bill would keep silent now), while the Palin’s, Bachmann’s, etc. are gaining visibility but may well open the way for women with foresight…hopefully.

He also pointed out that for every $1 spent on education, $4 is spent on medicare and social security. That is a major disaster yet the GOP wants to cut education and other things for the young who will be tomorrow’s leaders, the reason being that 18 year olds don’t vote while senior citizens do. Also, the Dems are afraid to say anything about social security for fear of losing votes. Listen to the teabaggers at recent rallies. Especially the ones 50-55 whose rights won’t be protected and may be out of jobs and it is doubtful they will ever find a good job again.

America, we are faced with a major crisis…and it is critical that we work together to solve it quickly and properly.

TB

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