7/11/11…how did they do that?

TB’s Quote of the Day: “It feels like madness abounds in our state, like Wisconsin is 65,000 square miles surrounded by sanity.” – Mike McCabe, Executive Director, Wisonsin Democracy Campaign, a non-profit that advocates openness in government, on the wave of recalls and how the open primaries mean that Republicans can vote as Democrats and thus overpower the will of party voters …stay tuned.


This week’s economic calendar is heavy on inflation data. However, the highlight of the week will be June Retail Sales (Thursday) which will provide our first complete look at Q2 consumer spending. We will also get May International Trade (Tuesday), June Import Prices and the June Treasury Budget (Wednesday), the June PPI and May Business Inventories (Thursday), and the June CPI, the July Empire State Manufacturing Survey, June Industrial Production, and preliminary July Consumer Sentiment (Friday). In addition to the economic data, the Federal Reserve will release the minutes to the June 21st – 22nd FOMC Meeting, the highlights of which were already revealed at Bernanke’s post-meeting press conference. Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA


Bloomberg Top Stories:


*Italian Bonds, Euro Drop on Debt Crisis Concern; Stocks, U.S. Futures Fall

*Best Currency Forecasters Say Worst Is Over for Dollar After Index Falls

*Swaps Show Europe Crisis Bigger Threat than U.S. Jobless Rate

*Euro Chiefs Weigh Options for Greece as Spain, Italy Loom as Next Victims

*Vendors Led by Lockheed Face Losses as Obama Cuts $6 Billion in Contracts

*Porsche Ponders Supercar Exceeding $338,500 to Revive Flagging Slaes

*German Bond Yield Drops Below ECB Rate as Crisis Deepens

*Fed Data Cruncher Finds No New Normal Unemployment With Nationwide Figures

*Obama Said to Challenge Republicans for Details of Deficit-Reduction Plan

*Russian Cruise Ship Carrying More Than 200 Sank in Minutes in Volga River

*Panetta Says U.S. Will Act Alone to Stem Iran-Backed Attacks on Iraq Bases

*Madness Abounds as Wisconsin’s Walker Faces Season of Recall Electons



Volume slumped to 3.2B shares while Big Board volume dropped to 771 million shares, second lowest of the year to 5/27’s 693 million share day. This to TB implies ‘faux’ liquidity and should not be ignored. Volume crossed 600 million just 10 minutes prior to the close…but you would never have guessed that by the indices. Not only that but the VIX still rose sharply to 17.08 on the open then plunged as if there was no reason for the selloff and closed again at 15.95, same as Thursday (?), and up only slightly from Friday’s 15.87 (lowest since April 30th!). With options expiration this Friday we could get a wild ride.


The hot of late Dow Transports fell 1.2% for honors while the Dow and Nasdaq Composite each lost 0.5%, the S&P 500 0.7%, Nasdaq 100 0.3% and the Russell 2000 lost 0.7%. With the Dow plunging 1.5% shortly after the open this is a testament to the strength (?) and lunacy of the market given the disaster in payrolls. The two Nasdaq indices rose 1.4% and Russell 2000 +1.5%, while the S&P 500 rose +0.9%. Dow +0.7%, Transports +0.9%. Advance/Declines ran +3x on the NYSE and +3.3x on Nasdaq, while Breadth was +4.9:1 on NYSE and +4:1 on Nasdaq. Payrolls will pare back all gains and don’t forget options expiry next Friday.


Overnight global stocks have been blasted on European credit concerns (did you really think Greece was cured…or Ireland, Portugal…big talk today of Spain and Italy. Dow futures are -120, SPX -17.40; NDQ -39.50!!! Big declines. So we may have dodged a bullet on Friday to finish with an up week but we may well pay dearly for that misadventure this week ahead of options expiry on Friday. sdaq futures dropped 19 and the spot is now off 23. Gold is now $1553.50 +$11.90 while Crude is $94.67 -$1.53. Bonds rallying sharply with the 10 year +5/8 to 2.95%! The 30 year is also up 5/8 at 4.24% as we face a week of auctions (3,10,30 yr).


…that the stock market could ignore (except initially that is) the universally weak payrolls data including the revisions and even attempt to rally is not only a mystery but makes one wonder what drives the stock market these days. Not only are we not creating jobs we are slumping again. 16.2% of Americans are either out of work, discouraged or working part-time to try to make ends meet. Individuals are disgusted with stocks and the alternatives in bonds or cash as their cashflow declines. We have seen a serious deterioration in consumer confidence – particularly on ‘expectations’ six months out and that is the one that is supposed to drive the stock market. More examples of corporate malfeasance as an executive charged they committed tax and financial statement fraud avoiding $2 billion in U.S. taxes by falsely claiming the U.S. produced goods came from Switzerland which taxes at just 10%. This falls under Sarbanes-Oxley which has been largely unsuccessful in prosecuting these kinds of crimes but the whistleblower may have some real documentation. Free market capitalism at work, right?


Our government is dysfunctional thanks to the pounding and expletive calling elected officials who have now drumbeat their electorate into crazed fanatics so badly that if they compromise on even the debt ceiling they are worried about being run out of office. Nothing exemplifies this power more than House Speaker Boehner walking on talks with the President. Remember Boehner, like House Majority Leader Cantor was their during the Bush years which saw the debt ceiling increased eight times under GOP control…not to mention the tax cuts which did nothing for the economy except to lower the effective tax rate of the top 1% to 21%…thanks to Larry Kudlow’s pushing the 15% dividend tax exemption through on the basis that millions of Americans own stocks…they do, Larry IN IRA’s and 401k’s! These will be taxed as ordinary income when withdrawn. Another act of deceit which has weakened the economy except for the period of the housing boom which was even more faux than the stock market.


We are engaged in a monumental game of ‘chicken’ that is insane as the concept of buying things and then refusing to pay for them….out of principle?


Not one true student of economics believes you can significantly cut or balance the budget thru cuts alone and to let those who profited from the crisis continue to exploit us is unconscionable. Remember the top 1/10 of 1% starts at one billion of income! Yet facts are meaningless as we have diverted the anger of the middle class (sic) on the government rather than the perpetrators of the crisis.


This is not to say that something has to be done…or should have been done a decade ago but how do you cut the federal budget and increase jobs at the same time.


We now have the same number of jobs as in 2004…and you can’t hang all of that on Obama. Nor do the statistics on unemployment and the deficit tell the story as they were snapshots which ignore the momentum of job losses and crisis spending. Yet the GOP continues to use these as proof of Obama’s failure. True, he has handled a lot of things wrong but none of them would have changed the situation.


TB heard an extreme right commentator (Dan Patrick) not only call Obama a socialist but say that this is all part of his plan, equating him to Hitler. To the mindless souls who listen to this blather, is there any hope of success?


Don’t you wish the 2012 elections were over…either outcome would be preferential to the mess we are now engaged in.


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


TB listened to William Daley, Obama’s new improved Chief of Staff, Sunday as he tried to put a positive spin on the payrolls…he and the stock market pundits all trying to put a positive spin on Friday’s disastrous report. Who are they trying to fool?


Have a great week!




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