5/16/11…follow the leader?

This week’s economic calendar has a focus on manufacturing activity with the May Empire State Manufacturing Survey (Monday), April Industrial Production (Tuesday), and the May Philadelphia Fed Survey (Thursday). We will also get some housing data with April Housing Starts (Tuesday) and April Existing Home Sales (Thursday). Finally, we will get April Leading Indicators (Thursday). The Federal Reserve will also release the FOMC Minutes (Wednesday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA

Bloomberg Quote of the Day: “There is no such thing as fun for the whole family.”- Jerry Seinfeld

Bloomberg Top Stories:

*NY Empire State Factory Index Falls to 11.9 from 21.7!!! Horrible news!

*Stocks, U.S. Futures Slip Before Greece Aid Talks; Swiss Franc Strengthens

*Greece to Plead for More Aid as Arrest of IMF’s Strauss-Kahn Clouds Talks

*Euro Crisis May Scuttle Eastern Europe Economy as Investors Bet on Region

*Bunds Lose to Treasuries as Merkel Pledges $200 Billion to Help Salvage EU

*Bank of Ireland Reading Sale of Last $1.8 Billion U.S. Real-Estate Loans

*Nasdaq Drops $11.3 Billion Bid For NYSE, Clearing Way for Deutsche Boerse  

*Earnings Estimates Fall Most Since 2009 in Europe as Bull Market Shows Age

*Speculators Make 15% Cut in Bets on Higher Commodities Prices Following Rout

*Gold Coins Show Bull Market Unbowed on Brisk Sales in Commodities Decline

*Citigroup Credit Default Swaps Show Debt Safer Than Goldman Sachs

*Cameron’s Austerity Squeezes Pound as Traders Turn Gilts Into Worldbeaters

*Sony Attack Shows Amazon’s Cloud Service Lures Hackers at Pennies an Hour

*IMF’s Strauss-Kahn Faces Arraignment in Manhattan on Attempted Rape Charge

*Louisiana Floodwaters Force Choices on Extended Farm Family; Threaten Ruin

*TEPCO Says Fuel in Tow Reactors May Have Melted at Fukushima Nuclear Plant

Friday’s volume was just 898 million shares and an ugly day it was. Citi had 43M, 430M pre-split shares trade and was off 2.1%, while BofA fell 2.2%. Goldamn continued its meltdown falling to the lowest level since 9/2/10. According to Barron’s Financials were off 1.7% last week, second only to Basic Materials -2.4% (Can that be a sign of economic strength?). Advance/Declines were -2x on the Big Board and -3x on Nasdaq. Breadth was -5x on NYSE and -6x on Nasdaq!!! Still incredibly there were 286 new 52 week highs –staying in the 250-300 range, not the old range of 500-600, while new lows slipped to 78 from 96. Compare the indices for last FOUR days: Dow -0.8% vs +0.5% vs -1% vs +0.6%, Transports -1.3% vs -0.1% v -1.3% vs +1.1%, S&P 500 -0.8% vs +0.5% vs -1.1% vs +0.8%, Nasdaq indices -1.2% vs +0.6% vs -0.9% vs +1% and 100 +0.6% vs -0.8% vs +0.9%, while the Russell 2000 was the big loser again -1.4% vs +0.8% vs -1.8% vs +1.6% vs 1.1% vs +0.5% vs -0.4% vs -1.3%…now down  2.9% last ten sessions and -4.1% from the rally high.   

The Dollar held above 75 for a fourth day and is now 75.63 -.08, on euro woes, not the least of which is the contender for IMF President an his rape charges. 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 is now back to 4.32….and this after the Empire State Survey plunge! 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%! For a nintth 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 below $1500 but then rallied again yesterday and is now $1495.90 +$2.30. 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 Wednesday (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. Overnight it is $98.68 -.97.

Global equity markets WEAK: FTSE -0.7% vs +0.6%% vs -1%; CAC 40 -1.2% vs +0.5% vs -1.2%; DAX -1% vs +0.1% vs -1.3%; Nikkei -0.9% vs +0.7% vs -1.5%; Hang Seng -1.4% vs +0.9% vs -0.9%; Korean Kospi -0.8% vs -0.1% vs -2%!!!; Indian Sensex -1% vs +1.1% vs -1.3%. U.S. Futures slightly weaker???: Dow -25; SPX -2.80; NDQ -2…you figure it out!

…after listening to the talk shows Sunday it doesn’t look like a Republican and hmmmm who could it be for the Democrats? Obama!!!

Why is it just when TB begins to think Gingrich makes sense he has to open his mouth and blow it…big time. Not only did he make comments with racist undertones…either that or the only analogies he has are of Africans or black Americans. Let’s see what other brilliant points he makes:

  1. Obama’s idea of success is the number of people on food stamps…one in six Americans is receiving them. Wait Newt…that sounds about right when you take the unemployment rate plus those who are working full time plus the discouraged workers you get 16%, where it has been for months…now if TB’s math is correct, one is six is about right. What do you propose, Newt? Cutting them off? Then take a look at the crime rate!
  2. He is opposed to raising taxes…including restoring them to the Clinton era level which as David Gregory says produced 4% GDP growth. That was then says Newt, the economy is no longer strong.
  3. The top 1% pay 40% of the taxes…the top 10% pay 90%…that is fair…let’s skip back to the top 5%…how much do they pay? How much of the wealth do they control? How many Americans are living below the poverty level? What happens if they lose hope of having a better life? The GOP had better start thinking hard about this!
  4. He is opposed to Obamacare, yet he was previously for it.
  5. When Clinton was president it was the GOP who controlled Congress that kept the budget down…TRUE…but then after he was forced to resign for his transgressions, it was the GOP that spent us into oblivion with the help of the minority Dems…come on Newt, truth!
  6. We need to stay the course in Afghanistan and rethink our alliance with Pakistan.
  7. Don’t think of his past moral life…that was because he was overworked trying to make America a better place, he is now a faithful husband and that is what we should think of him as.

Then on Face the Nation it was John Boehner’s turn.

  1. Everything is on the table on the budget except raising taxes – any taxes…ever!
  2. He believes the debt ceiling is very serious and a failure to pass it in time to prevent a default would be a grievous mistake. However, the treasury keeps finding more money and pushing back the deadline…John…can they do that forever? Aren’t the bonds to pay for the spending YOU and the GOP created in the first place? That includes $2 trillion in tax cuts for the wealthiest 1% of Americans.
  3. While the debt ceiling is important he will not allow it without a 1:1 cut in spending…right, John…and where will that money come from? You are not a leader…you are constantly explaining yourself and your values…
  4. There is nothing the government can do to create jobs…thank you for that John, that is sooooo encouraging…so why even try, and by the way let’s work to balance the budget so the wealthy can prosper more…perhaps even cut THEIR taxes again. Have you ever heard of the income gap, John? Have you heard of class warfare? The French Revolution? No…didn’t think so.
  5. The best was this…after spending billions in Afghanistan and Iraq, and thousands of soldiers lost, we cannot walk away, no, we must stay the course…if Boehner had been around then we might still be fighting Viet Nam using that sick logic. Throw good money after bad…more lives lost or ruined. Hope you listened to a real Secretary of Defense, Gates, last night, unlike the pompous, neocon, Rumsfield. He gets it!

On top of all this Mike Huckabee, the leader in the GOP race, withdrew…figure that one out…and all the candidates are rushing out to gain his supporters…including the foul-mouth Donald. The most-electable candidate, Mitt Romney however, is running from the universal healthcare plan he created in Massachusetts and is deemed a success. He says it is nothing like Obamacare, which is a big stretch, but he sees it as bad as the states should decide. Who? The Bankrupt States of America????

This brings us back to the stock market which had a horrible week and with the release of the Empire State survey will likely have another bad one. Meanwhile, specs are flocking OUT of commodities…what was with Goldamn anyway…panned them advocating shorts while Morgan Stanley touted them, then as soon as they are proven correct they say buy them, but the market wasn’t listening as they continued down.

By any measure stocks are NOT cheap…except to those who continue to tout them. Wrong you say? Not if earnings continue to grow at the same pace…but can that happen with high unemployment and a desire to cut spending while not inflicting any pain on the wealthy who have been the only beneficiaries over the past ten years? Not hardly!

TB is feeling very ill…

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

Hopefully people are beginning to get it…if not, just wait until the data keeps pouring in on the wealthiest 1% of Americans getting even more so while paying taxes that those in the top 10-15% would die for. What kind of people have we become? Would you like to stand in front of a soldier who died defending this country for us and tell him it served a good purpose? Meanwhile the wealth is concentrated on those who have taken…who have had a chance because of this great nation and they will be damned if they are going to give up one extra penny for it…let alone their lives. Ask not what your country can do for you…ask what it can do for ME!!!

Have a great week!

TB

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