5/31/11…May is going away

This week’s holiday-shortened economic calendar is jammed packed with important indicators. The highlight of the week will be the May Employment Situation Report (Friday). We will also get the March Case-Shiller Home Price Index, the May Chicago Purchasing Managers Index, and May Consumer Confidence (Tuesday), the May ADP National Employment Report, the May ISM Manufacturing Survey, April Construction Spending, and May Vehicle Sales (Wednesday), revisions to Q1 Productivity & Costs and April Factory Orders (Thursday), and the May ISM Non-Manufacturing Survey (Friday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA

Bloomberg Top Stories:

*Stocks, U.S. Futures Rise on Optimism Over Greece; Euro Gains, Wheat Drops

*S&P 500 Cheapest Ever to Junk Bonds as Profits Jump While Equities Slump

*Euro-Asia Inflation Slowed in May, Easing Pressure on ECB to Raise Rates

*No-Bid Contracts for Fannie, Freddie Cost Taxpayers $400 Million in Fees

*EU Rules Out Greek Debt ‘Total Restructuring’; Plans Deal by End of June

*Bank of Ireland Imposes 90% Losses on Bondholders in Cash or Equity Deal!

*No Love Lost for U.S. Debt as Bond Dealers Share Fewer Treasuries With Fed

*Nokia Falls on Reduced Quarterly, Annual Outlooks for Devices and Handhelds

*BlackRock’s Fink More Bullish on U.S. Equities Than Bonds

*Palladium risin as BMW Becomes Catalyst for biggest Shortage in 32 Years

*Commodities End Longest Winning Run Since ’80 on Europe Debt, China Prices

*Manhattan Office Tower Build During Property Slump Gets Its Second Tenant

*Patek Philippe Poise to Unwind as Swiss Franc Breaks Out of Euro’s Orbit

*Yemen’s Capital Rocked by Explosions, gunfire as Tribal Truce Breaks Down

*Qaddafi Won’t Leave Libya, South African President Zuma Says After Visit

*Palin Shakes Up Republican Presidential Field While Keeping Mum on Plans

Friday’s volume was a typical pre-holiday 670 million shares in a meaningless, slightly up session, led by the Russell 2000 +0.7%. New highs rose to 211 from 178, while new lows which sagged to 46 from 137 (never short a thin market)! BofA, the new Citi, contributed 107M shares producing a hefty 2% gain (on an $11 stock though), but is still off 1.8% last ten sessions. Advance/Declines were +1.8x while Breadth was +3x, but volume makes that iffy. Here are the indices over the past six sessions: Dow +0.3% vs +0.1% vs +0.3% vs -0.2% vs -1.1% v -0.7%; Transports +0.1% vs +0.2% vs +0.9% vs -0.6% vs -1.6% vs -0.6%; S&P 500 +0.4% vs +0.4% vs +0.3% vs -0.1% vs -1.2% vs -0.8%; Nasdaq Comp +0.5% vs +0.8% vs +0.6% vs -0.5% vs -1.6% vs -0.7%; 100 +0.4% vs +0.7% vs +0.3% vs -0.6% vs -1.5% vs -0.8%; Russell 2000 +0.7% vs +1.2% vs +1.3% vs -0.5% vs -1.8% vs -0.7%.   

The Dollar broke below 75 Friday and Monday (in Europe) and was straddling both the 40/50 day m/a’s then broke down overnight and is now 74.63 -.28!!! Bonds are slightly weaker but trading is light: 30 yr 4.25% -1/8; 10 yr 3.09% -1/8. T-bills which traded at ZERO for ten straight sessions have settled in at 0.05%. Gold is now $1536.90 -.10. Support is $1462.50 hit a week ago Thursday, just below the 40 day m/a! Crude, which had been weak ever since setting that rally high of $114.14, on 5/2, is now $102.25 +$1.66 with par as major support.

Global equity markets rallying on optimism over Greece…and if you believe that… FTSE +0.9% vs +0.8% vs +0.4% vs -0.4% vs +0.6% vs -1.7%; CAC 40 +1.5% vs +1.1% vs FLAT vs -0.4% vs +0.4% vs -2%; DAX +2% vs +0.4% vs -0.4% vs-0.3% vs +0.9% vs -2%; Nikkei +2% vs -0.4% vs +1.5%!!! vs -0.6% vs +0.2% vs -1.5%; Hang Seng +2.2% vs +1% vs +0.7% vs +0.1% vs +0.1% vs -2.1%; Korean Kospi +2.4% vs +0.4% vs +2.8%!!! vs -1.3% vs +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 +1.5% vs +1.2% vs +1.1% vs -0.9% vs +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 surging ahead too: Dow +99; SPX +11.30; NDQ +22.25 – go figure?

…well here we are back from a three day weekend to challenge the old ‘sell in May and go away’ saw, on the very last day of that month. Yet we are having a monster rally in the overnight market with U.S. futures roaring…and on what? Allegedly because Greece will not have to be ‘totally restructured’ and not immediately. If you were in a Finance 101 class and analyzed their statement you would get a big fat ‘F’ for writing such an indefensible argument. But then logic is on leave.

Kudos to the Bank of Ireland, when after the newly elected government which won in the biggest rout in decades didn’t have the teeth to do anything despite having a clear mandate to scrap the guarantees on their bank debt. Most expected a restructuring but the Bank of Ireland took draconian measures wiping out 90% of the bondholders value and replacing it with equity or cash. Any bondholder with a brain (or access to credit default swaps), either sold or hedged their position.

Contrast this move to our government who continues to let the banks ruin us and our credit. A Bloomberg opinion story today said Obama should dump Elizabeth Warren as the fallout is going to hurt him politically. So what? The GOP with backing from the financial lobby has been all over her from the start ignoring her attempts to get their support. She, along with Brooksley Born have been chastised yet had Greenspan, Summers, Rubin, and others listened to her a decade ago we would either not be in the mess we are in or at least one not as severe. God we are fools…and so is Obama if he doesn’t fight her since, as TB says it he is safely in for a second term.

House Majority Leader Eric Cantor once again showed the lack of compassion the GOP is becoming known for when he said any emergency aid to the tornado struck states should be offset by spending cuts. This is tantamount to Sen. Stevens refusal to cut his ‘bridge to nowhere’ funding to help Katrina victims…yep, he too was GOP.

Sure TB is picking on the GOP…because they cannot see the damage they are inflicting on 90% of Americans at a time when you have to clearly define and agree on tax cuts and their implications for the economy.

IF the GOP is successful, along with the GOP controlled states budget cuts, it is a certainty that we will head back into recession…or worse. Where are the thinkers in that party? Are they so concerned with re-election that they would destroy what chance we have of getting well?

They scream for Medicare reform but not at the expense of allowing Medicare to negotiate and buy prescription drugs…or to change the fee structure that allows doctors to charge for every service. But at the same time they protect those 55 and older (or so they say because if they succeed in getting block grants they too will be hurt), they are imposing a tax of sorts on those 54 and younger.

They also conveniently forget that it was on THEIR watch that the deficit surged including $2 trillion gifted to the wealthiest Americans which they refuse to rescind. TB used to be a republican…he cannot be one today…

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

The weather is the key topic of interest and the Midwest is more aware of it than anywhere. But friends in San Francisco say they went thru May without a day above 70, including rain and snow.

Have a successful monthend!

TB

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