6/27/11…faux or real?

This week’s economic calendar is relatively light. The highlight of the week will be the June ISM Manufacturing Survey (Friday). We will also get May Personal Income (Monday), the April Case-Shiller Home Price Index and June Consumer Confidence (Tuesday), May Pending home Sales (Wednesday), the Chicago Purchasing Managers Index (Thursday), the final June Consumer Sentiment, May Construction Spending, and June Motor Vehicle Sales (Friday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA..

Bloomberg Top Stories:

*Consumer Spending Unexpectedly Stagnated in May as Prices Climbed – A big DUH!!!

*Greece’s Creditor Banks Move Toward Bailout of 70% of Debt, Sarkozy Says

*Fed Seen Buying #25 Billion a Month In Treasuries After QE2 Comes to End

*Euro Strength Sustained in Widest Libor Gap since 2009 as Greek Vote Looms

*Record Junk Outflows Trigger investment-Grade Divergence – spreads do matter! TB

*Euro Strength Sustained in Widest Libor Gap Since 2009 as Greek Vote Looms

*China Stocks Priced for Hard Landing Hint Second-Half Rally by Top Brokers

*Soros Says a Euro Exit Mechanism Is ‘Probably Inevitable’ Amid Debt Crisis

*Transitory Gloom Obscuring Deere Boom as U.S. Data Show Latent Resilience???

*Los Angeles Dodgers File for Bankruptcy Amid Fight for Control of MLB Team!!!

*Papandreau Faces Parliament on Second Austerity Call as EU Deadline Looms

*Obama Wants to Scrap $72 Billion Corporate Tax Break as Republicans Balk

Volume was a huge 4.49B shares with Big Board providing a whopping 1.74B shares Friday (highest since March 18th, and the bad news is it was a horrid day. It was an inside day from Thursday’s big whipsaw that took ithe Dow back below 12k and closed at 11,934, almost at Thursday’s low. Note major support is the 200 day at 11,777 – not very far! It was also the 7th down week in the last 8 with the prior week’s meager bounce to 12,004 being the only ‘good’ news.

On Friday, the Dow was off 1% Transports  -1.7% (tied with NDQ 100 for biggest loser); S&P 500 -1.2%, Nasdaq 100 -0.3%, while the Russell 2000 was the best performer at -0.3%. Advance/Declines were -1.9x on NYSE and -1.5x on AMEX! Breadth was even worse at -4.5:1 on the NYSE and -3:1 on Nasdaq!

BofA punged1.8% on 121 million shares and closed at $10.52 where it has been residing since June 7th!  That is more than 25% of total volume…thank you flash traders! Other leaders were Ford -1.7% and GE off 2.2%.

In commodities the disconnect between reality continues as the spread between the Gold ETF (GLD) and the gold miners ETF (GDX) is 8.2 standard deviations off the norm…believers in long tails think again as this has existed for more than a month! Also the spread between North Sea Brent and WTI continues off the charts.

Overnight, the Dollar held near major res at 76  (75.70) as the see-saw between the EU and Greece continues. U.S. Treasuries are little changed except the long bond which is off 7/16. Gold is $1499.00 -$1.90 while Crude continues to plunge and is now $90.24 -.92.

…the subject of course is liquidity and Friday was another example of what can only be dubbed ‘faux’ liquidity.The highly touted (by Wall Street and hedge funds) of improved liquidity through electronic trading platforms (ETN’s) is as faux as it gets but what the hey, they are using it to game the market and your wallet. You don’t stand a chance against the mob in this environment which explains why so many investors have headed for the sidelines or safety of bonds (safety??? With the liquidity issues there?)…ok, relative safety.

Friday is quarterend and it most certainly will be memorable if not pleasant. An ugly quarter, despite the blatherings of the bulls on how stocks have never been so cheap…value is relative, remember? It is what someone else will pay, not what you or TB think it is.

Oh but stocks must be a buy…look at money market and bond yields. Well, interestingly, Bloomberg reported last week that endowments have been sidling up to bonds lately…while others are shifting to high dividend stocks (some still see 3% for blue chip names as high dividend while TB does not…but the volatility is supposed to be less than those providing higher dividends…you make that call). This is the world we live in, one filled with uncertainty and little promise of improvement as far as the eye can see…that is the most dangerous statement one can make because it seems everyone says it we hit a brick wall as if we had blinders on…perhaps we do.

A Bloomberg story today talks about Deere showing underlying strength in the economy but the stock lagging…since June 1 it has traded below it’s 200 day moving average – levels not see since early December!

It seems to TB that the bulls are not paying attention to the weekly jobless claims (or monthly payrolls reports).

At the beginning of this quarter TB warned not to ruin your year on a rally…S&P 500 is now up just 0.8% ytd and off 4.3% for the quarter…get the picture. Meanwhile our dysfunctional Congress continues to squander any hope of a recovery…no matter how small…on their own parties presidential election hopes…to hell with the people’s business, right?

. . .  – – –  . . .   . . .  – – –  . . .   (again, that is SOS, folks!)

Back home in Minnesota and enjoyed a day on the lake yesterday…sprinkled with rain but all in all not bad. Trying to put things together after a week in Bakersfield caring for my 91 year old uncle who TB can happily say is coming back nicely. Thanks to all of you who sent your good wishes.

Have a great week!

TB

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