5/24/11…a loss of confidence?

Bloomberg Quote of the Day: “There are no such things as applied sciences, only applications of science.” – Louis Pasteur…is the app downloadable??? TB

Bloomberg Top Stories:

*Commodities Gain on Goldman Recommendation; Stocks, U.S. Futures Advance

(Wait…wasn’t Goldie saying short them? …and wasn’t $ weaker then??? TB)

*Goldman Finding Third Time in Russia a Charm as Blankfein Courts Kremlin

*Noyer Rules Out Greek Debt Restructuring, Says Austerity is Only Solution

(Not the only…they could and will throw out the government!!! Sheesh! TB)

*AIG Share Sale Aids Ohio Firefighters Burned by Stock Losses Before Rescue

*China Drives Porsche to Record as Cayenne Wait Means Carrera Instead

(the ultimate substitution effect, right? TB)

*Bernanke May Resist ‘Noah’s Ark’ Plan for Picking Systematically Risky Firms

*Billion-Dollar Bond Sales Jump Nine-Fold on Economic Growth

*Medicare Payment Cuts Lead Hospitals to Put-Off Buying Latest J&J Devices

*Priciest Homes in Greenwich Suffer Four-year Backlog on Wall Street Curbs

*Another Round of Storms May Sweep U.S. Plains After Deadly Tornado

*NATO Slams Tripoli With Heaviest Strikes Since Start of Bombing Campaign

*Taliban Strike Raises Concerns Over Safety of Pakistan’s Nuclear Weapons

Monday’s volume slumped to just 865 millon shares following Friday’s 1 billion share day, the first since May 6, and the downdraft continued unabated.BofA, the new Citi, was the leader with 128 million shares, plunging 1.4% following 0.9% declines for three straight sessions and is now off 4.3% in six sessions. Advance/Declines were brutal at -4x  Breadth was -9x on the NYSE and -5x on the Nasdaq! New 52 week highs slumped to 101 from 116 from 183 (contrast to those 400-500 days we had for weeks), while new lows surged to 140 from 82 besting the new highs for the second time in one week! Here are the indices over the past five sessions: Dow -1.1% v -0.7% vs +0.4% vs +0.7% vs -0.6%; Transports -1.6% vs -0.6% vs +1.1% vs +1.6% vs -0.2%; S&P 500 -1.2% vs -0.8% vs +0.2% vs +0.9% vs flat; Nasdaq Comp -1.6% vs -0.7% vs +0.3% +1.1% vs flat- 1.6%; 100 -1.5% vs -0.8% vs +0.3% vs +.1% vs +0.2%; Russell 2000 -1.8% vs -0.7% vs +0.2% vs +1.6% vs -0.3%.   

The Dollar held above 76 Monday after tracking sideways above 75 for  nine sessions but slipped overnight and is now 75.92 -.23. 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 after climbing to 4.33% is back to 4.28% overnight. Meanwhile, the 10 year note continues below the old range (3.41% to 3.29%), and after trading to 3.11% climbed back to 3.15%! T-bills which traded at ZERO for ten straight sessions effectively are 0.05%. Gold peaked with a record high on 5/2 then immediately tumbled then back below $1500 but then rallied back Friday and is now $1522.60 +$7.20. 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 a key reversal ten days ago (higher high, lower low, close below prior session low). After trading above par Thursday it was slammed to a 96 handle and is now climbing again with par as resistance, $99.66 +$1.96.

Global equity markets rallying but more like a dead cat bounce – if that: FTSE +0.6% vs -1.7%; CAC 40 +0.4% vs -2%; DAX +0.9% vs -2%; Nikkei +0.2% vs -1.5%; Hang Seng +0.1% vs -2.1%; Korean Kospi still really volatile +0.3% vs -2.6% vs +0.8% vs  -1.9% vs +1.6% vs -0.1% vs -0.8% vs -0.1% vs -2%!!!; Indian Sensex ditto +0.1% vs -1.8% vs +1% vs +0.3% vs -0.3% vs -1.1% vs -1% vs +1.1% vs -1.3%. U.S. Futures also in a DCB: Dow +43 vs -116; SPX +5.10 vs -11.10; NDQ +7.50 vs -21.75!!! – with Memorial Day weekend approaching it will be difficult to rally.

…the government is concerned about a lack of confidence in the stock market…that is not a story that is something that should have been obvious when we bailed out the top financial institutions along with GM and then passed on the auto suppliers and CIT Financial, the main source of funding for small business. Then, not only did they let them water down Dodd-Frank to a meaningless pile of jibberish, they reduced prosecutions (focusing instead on those dastardly inside traders who made a pittance compared to Wall Street) and not one person involved in a firm who created the mess has gone to jail. One ‘almost’ has to feel sorry for Angelo Mozillo for his fine…which was exceeded by his legal fees. What about the rest of them…who continue to do business as usual: bribing Congress, doing end-arounds on every attempt to rein them in, and like Goldman shorting their restricted stock holdings so their ‘skin in the game’ is the ultimate joke. The only ones with skin in the game are the shareholders…the REAL shareholders, not the hedge funds and other speculators who buy and sell on the latest news. We have created a new term for a buy and hold shareholder: SUCKER!!!

Decades ago, the SEC prevented interlocking boards…but look what we still have? They still allow one person to be chairman and CEO, a direct conflict since the chairman AND the board are the stewards for the shareholders.

Companies are run for short-term profits as that is what benefits the senior management NOT the shareholders, and this allows the type of deceit that has been rampant to exist and why Ayn Rand’s idea of free market capitalism is a total myth with Alan Greenspan and a few others being the few remaining true believers. Conceptually, it would not be in the interest of a company to do something illegal or detrimental to its long term existence…but when the rewards are for short-term performance that changes the picture…as has been proven and why allowing brokerages to go public was a very bad idea…we would not have had a crisis if they had continued as partnerships.

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

A friend and reader took exception to TB’s opposition to the Ryan plan which the public hates and which tried to ‘fool’ us into believing that the government would pay a fixed share of medicare when in fact it would decrease even as costs go up…thus leaving the states to hold the bag for Congress’ creation.

According to an article he sent by the CBO, the present value of costs of medicare, medicaid, and social security are 67 trillion, exceeding slightly total household net worth. Therefore, he suggests we have to go to the Ryan plan. To TB, this is the same as when we were told that oil would run out in 50 years…that was when TB was in the 5th grade – 56 years ago. Man’s strongest asset is his ability to adapt and when something is impossible and catastrophic it is in appearance only…problems can be solved…but not by panicking.

We have the largest corporations in America paying no taxes…and proud of it…we are subsidizing farming (think ethanol), oil companies, etc. We provided temporary tax cuts during a recession that the few beneficiaries made billions from and now the GOP insists they must be permanent. They also would like no estate tax when there is already a $5 million exemption. The GOP saw to it that the prescription plan for medicare expressly prohibited the government from buying the drugs directly…the biggest buyer in the world…thus letting the drug companies (who we are constantly seeing are nearly as corrupt as drug dealers), charge whatever they wish. We allowed hospitals and health insurers to go public…thus ending donations from the public for the former and huge premium increases for the latter to pay those enormous salaries and bonuses, often while cheating the insureds.

We need a sensible discussion not politically motivated rhetoric that will likely cost the GOP the 2012 election and rob the people of real choice in the election. Thoughts?

Have a wonderful day!

TB

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