5/12/11…something amiss?

Bloomberg Quote of the Day: “Never put off until tomorrow what you can do the day after tomorrow.” – Mark Twain. TB was thinking about procrastinating but will wait another day to see.

TB saiz: “Be kind to contrarians…give one a hug today.”

Bloomberg Top Stories:

*Stocks, Commodities Slump on Economic Growth Outlook; U.S. Futures Decline (how can this happen in ONE day? Why no concern before? Rhetorical. TB)

*Initial Unemployment Claims in U.S. Declined 44k Last Week to 434k

*China Orders Banks to Set Aside More Funds as Reserves to Cool Inflation

(too bad our Fed Chairman, Sir Alan didn’t have the wisdom to do same. TB)

*Rajaratnam Odds of Overturning Insider Conviction Slim, Ex-Prosecutor Says

*Portuguese Austerity Program May Lead to Greek-Like Recession – duh! TB

*Hedge Funds Exploit Australia REITs Buying Just Before U.S. Bust - ???

*Commodity Rally Reduces British Columbia’s Cost to Borrow. –What now? TB

*Coffee Inventory Gain Signalling 27% Slump to $2 a pound!!! –even this!

*Goldman Sachs Viewed Unfavorably by 54% in Poll showing No Damage to Firm???

*Property Buyers Expand Their View as Rebound Spreads From Denver to Dallas

(Oh? The decline in home values has been double the $8k tax credit, got it?)

*Desperate Americans Buy Kidneys From Peruvian Poor in Deadly Organ Trade

(This is SICK…no pun intended…will this happen here too…if you got the $?)

*Japan Suffering Setback at Fukushima No. 1 After Reactor’s Fuel Rods Exposed

*Flooding Prompts Louisiana, Mississippi Governors to Warn State Residents

*Worst Spain Quake Since ’54 Kills Eight on Day Before Nuclear-Safety Check

Wednesday’s volume was 976 million shares on a BIG DOWN DAY and were it not for the 1:10 reverse split for Citi it would have been an above average day…so it is worse than it appears. Cit’s total volume yesterday was 57 million shares (570 million old shares) so that would have added at least 200 million to the NYSE volume. Advance/Declines were -5x on the NYSE while Breadth was -8x!!! On the Nasdaq both were a negative 3+x. New 52 week highs dropped back to 228 from 495, for one day it was almost back the old range of 500-600, while new lows rose to 71 from 52. As for the indices, it was a shambles: Dow -1% vs +0.6%, Transports -1.3% vs +1.1%, S&P 500 -1.1% vs +0.8%, Nasdaq Composite -0.9% vs +1% and 100 -0.8% vs +0.9%, while the Russell 2000 was off 1.8% vs +1.6% vs 1.1% vs +0.5% vs -0.4% vs -1.3%…now down just 2.3% last eight sessions and -3.5% from the rally high – just when you thought it was safe…  

The Dollar burst above 75 again during (or causing) all the confusion to 75.42, taking out BOTH the 40 and 50 day moving averages and then to 75.645 overnight and is now 75.58 +.28! Could a move as small as this cause all the damage across markets yesterday? No sir! Monday’s low of 72.83 was the lowest since 7/29/08. The last close above 76 was on March 30th and it had been almost straight down since. Since April 14th the long bond had been in a range of 4.47% to 4.36% broke below it for a few sessions then back up to 4.35% and back to 4.30 on the stock selloff – that’s all? Meanwhile, the 10 year note continues below the old range (3.41% to 3.29%), and after trading up to 3.22% is now 3.18% again! For a seventh straight session T-Bills out to 3 months are effectively at ZERO percent. Gold peaked with a record high on 5/2 then immediately tumbled then back to the $1500+ level which held yesterday but it is now $1486.40 -$15.00. Support is $1462.50 hit last Thursday, just below the 40 day m/a! Crude, which has been weak ever since setting that rally high of $114.14, also on 5/2, had been up for three sessions after plunging to $94.63 on 5/6, just four days after the high! Then it rallied for two days before the key reversal yesterday (higher high, lower low, close below prior session low), just when it looked like it might get back to the 40/50 day (107/106 area), falling to $97.50, 8 cents above Monday’s low, and closing $98.21 -5.67. Overnight it is $96.38 -1.83 with a low of $95.25!

During the session when commodities (Wheat, Corn, Gold, Silver, Copper (which took out the 200 day moving average yesterday after toying with it for 5 straight sessions!). Bloomberg put out a release that some contracts had been stopped by the CBOE from trading, and at one point there were four top stories concerning the contracts. This is the second time we have seen this in less than two weeks and should be disturbing. Not only that the correlation between markets was scary while the bonds only benefitted slightly. Better think on this one!     Global equity markets tanking overnight: FTSE -%; CAC 40 -1.2%; DAX -1.3%; Nikkei -1.5%; Hang Seng -0.9%; Korean Kospi -2%!!!; Indian Sensex -1.3%. U.S. Futures following suit: Dow -55; SPX -6.40; NDQ -15.50!!!

…if you are a bull – be it stocks, Euros, commodities, you might be advised to rethink your position…perhaps on the U.S. economy too. First, we never got an explanation of the flash crash on May 6, 2010, which saw stocks like PG even, tumble by 50% before the exchanges cancelled trades and adjusted them. Worse, little has been done except for Sen. Schumer to propose a tax on flash trades…yeah, that’s the answer…course since it has three letters the GOP hates in it (t-a-x) it is DIW (dead in the water), and it wouldn’t solve anything except add money to the coffers of NYC.

TB pointed out last week that the prognostications of bulls are worthless treacle…they are always bullish, while the contrarian bears add value by making you think of what can go wrong – if you take the time to do that. Remember one is paid to be bullish, the other has capital at risk to back up his opinion. Why wouldn’t you consider someone’s opinion who has something to lose if he is wrong? Did you know that from 1998-2000 while virtually all money managers were long stock – in their client’s portfolios), many, if not most, were heavily in cash in their own portfolios? That is a fact and it should concern you that someone has enough conviction to miss a rally in his own account while going at flank speed with his client’s money (OPM).

Ah, the reason given yesterday was inflationary fears…hello? Then why did dollar rally? Also, CPI and today’s 0.8% in PPI are due to energy costs which in case you live in a vacuum are plummeting! TB has seen this before and it is precisely why the core is the number to look at: you cannot raise prices (at least fully) to offset energy costs, therefore it is self-correcting – even with the ‘peak oil’ advocates scaring people to death…which in turns cuts consumption even more and helps push those costs back down…never an intermediate buyer be.

Trying to get a reason TB tuned in the ‘laughable’ Larry Kudlow who was on a rant that the Rajaratnam trial may scare companies, afraid of wiretaps, to give out less information…since other conversations that were not criminal were also picked up in the course of the investigation. This is classic Kudlow…the markets are right and fair and government should just leave them alone…he makes TB ill!

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

The poll released this morning shows why TB will only refer to Goldie as ‘GOLDAMN SACHS’! 54% of global traders, investors and analysts have an unfavorable view of the firm…yet in what can only be described as a lack of moral compass…but 78% said the accusations will either have no effect on the firm OR harm its reputation without driving away customers. Flash back to E.F. Hutton, in early ‘80’s which was destroyed for just one thing: kiting, to improve its cash positions.

We are one sick nation…at least Wall Street is…and as Inside Job asked: why is no one in jail? Worse, why are they (Goldamn officers except top 8) not only making MORE money but using those restricted shares which were supposed to give them ‘skin in the game’ so they can buy PUT options or write covered calls against them. No word yet from Congress on this either. Also remember that Rajaratnam’s buddy Gupta – soon to be charged no doubt – was, until last year a director of Goldamn.

Now how about this story, Iowa Attorney General, Tom Miller, is investigating banks and their role in the foreclosure crisis. He is also making a run for governor. After being appointed to head the investigation…HE SENT LETTERS to banks and others involved asking for donations to his campaign! He says he knew these people so there was nothing wrong with doing this. Why is it that so many attorneys’ seem to skip the class on conflict of interest?

How much confidence do you have in the fairness of markets?

Hope you all have a great day!

TB

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