8/3/11…if not now, when?

Bloomberg Top Stories:


*Franc Plunges From Records as Swiss Central Bank Unexpectedly Lowers Rate

*U.S. Stock Futures Rebound, European Shares Pare Declines; Franc Weakens

*Pimco, BlackRock Say U.S. Economy Is Running at ‘Stall Speed,’ Fed May Act

*Birinyi Joins Biggs to Say Hold Onto Stocks After S&P 500 Erases 2011 Gain

*KKR Second-Quarter Profit Retreats 25% as Market Swings Hurt Buyout Fees

*Bank of America Said to Be Seeking Separate Home Mortgage Foreclosure Deal

*Downgrade Risk Is Discounted as Debt Deal Misses S&P 500 Goal

*Russian Billionaires Buy U.S. Estates as Overseas Wealth Flows to Mansions

*Debt Accord Means Lawmakers Must Debate Medicare, Taxes as Elections Loom

*U.S. Airlines Are Poised for $1.3 Billion Fare ‘Windfall’ in FAA Shutdown


Yesterday NYSE volume was a whopping 5.3B shares as money fled from stocks while Big Board volume rose to 1.25 billion highest since June 24th. The S&P VIX rose but still was only the third highest in the selloff. Still the close at 24.79 vs 23.66. The obvious signs of slower growth…or as some say the economy is at ‘stall speed’ should make even perma-bulls ask how long corporate profits can ignore reality. For financials this is already apparent.


The declines marked a sixth straight decline, led by Transports which fell 3.7% vs -1% vs -0.8% vs -2.6% vs -1.3%. The Dow was off 2.2% vs -0.1% vs -0.8% vs -1.6% vs -0.7% and is now up just 2.5% ytd. The S&P 500 fell 2.6% vs -0.4% vs -0.7% vs -2% vs -0.4% and is at NEGATIVE 0.3% ytd. The two Nasdaq indices fell 2.8% and 2.6% respectively vs -0.4% for two sessions after plunging 2.6%, while the Russell 2000 was the second worst loser at -3.3% vs -0.5% vs -0.3% vs -3% vs -0.8% vs -1.1%. New 52 week highs dropped sharply to 56 from 74, while new lows slid surged to an incredible 321 from 199!!! This is only the second time in months that the ratio has been negative and it has now been NEGATIVE for FIVE straight sessions! Advance/Declines were highly negative: NYSE: -3.6:1 vs +1.1:1 vs -2:1 vs -11:1 vs -1.9:1 vs -4:1, and -5:1 vs -1.2:1 vs -1.4:1 vs -6.5:1 vs -1.8:1 vs -3.3:1 on Nasdaq, while Breadth was attrocious: -17x!!! vs -1.6x vs -2.5x vs -17x!!! vs -1.4x vs -3.5x on NYSE and -20x!!! vs -2x vs -2x vs -11x!!! vs -1.1x vs -2.5x on Nasdaq.


Overnight global equities are tanking again: UK’s FTSE -1.2% vs -0.7% vs +1.4% vs -0.3% vs -0.5% vs +0.1%; French CAC 40 -0.3% vs -1.1% vs +0.5% vs -1% vs -1% vs -0.5%; German DAX -1% vs -1.3% vs +0.05% vs -1.2% vs -0.6% vs flat for two days; Nikkei -2.1% vs -1.2% vs +1.3% vs -1.5% vs -0.5% vs +0.5%%; Hang Seng -1.9% vs -1.1% vs +1% vs +0.1% vs -0.1% vs +1.3%; Korean Kospi -2.6%!!! vs -2.4%!!! vs +1.8% vs -0.9% vs +0.3% vs +0.9%; Indian SENSEX -0.9% vs -1.1% vs +0.6% vs -1.2% vs -0.5% vs -1.9%. U.S. Futures are modestly higher following Tuesday’s plunge: DOW +40; SPX +5.40; NDQ +8.25….almost exact opposite of yesterday! Gold is $1669.00 +$24.50 after hitting another record high of $1675.00 overnight, while Crude is $93.36 -.43 – and is below the 200 day for a third session, 95.000 which was major support. U.S. treasuries are little changed after two days of major rally with the 30 year at 3.90%!!! +1/8 and the 10 year 2.62% -1/16.


…think about that slug: if not now, when? TB is asked that by friends over his ‘emotional’ pleas on the debt ceiling talks. Yes, we have a problem, no we do not have a crisis…unless five or more years to fix a problem is a crisis in your book. Rather, to get attention a crisis was manufactured and instead of increasing focus on the deficit and how to fix it, both sides are now firmly dug in with an election year looming ahead. What is worse, the are totally ignoring the recent release of economic data showing a slowing in the economy…where the headline unemployment rate is 9.2% and the REAL rate is somewhere between 12-16% if you count discouraged and ‘marginally attached’ workers. Under what economic scenario does it make sense to CUT federal spending in this situation…but if now now…when?


George Will ranted about the failure of Keynesian economics Sunday on This Week. It made no sense. Keynes is the most maligned economist in history. First, he warned of the ‘liquidity trap’ which we are now in. In that scenario, fiscal policy doesn’t work…but what do you do? Stand idly by as the Fed did during the Depression…actually turning a recession into a depression? Second, his policy required building SURPLUSES in boom periods and then deficits in busts. It appears politicians never read this part. Larry Kudlow on the other hand was crying for more supply side economics…which has proved devisive and created the biggest wealth gap in this nations history…and what has that done?


Despite the debt ceiling battle, the Fed is meeting and may have to go to the THIRD round of quantitative easing…even as we prepare to cut spending??? Does the right hand know what the left is doing (no political implications in that).


TB wonders what these luminaries will say a year from now when the situation is much worse and despite cuts that might be made, revenues will decline…even with corporate earnings soaring but sheltered from taxes by being abroad and we are still subsidizing many companies foolishly.


The shutdown in Minnesota was enlightening as when a deal was finally cut…after losses of millions in revenues, the tea party was declared the winner…yet in two years we will face an even greater problem as they borrowed from the education and tobacco funds to do the job.


The FAA has furloughed 4,000 workers and the loss of revenues will exceed $1 billion…think about that in light of the ‘deal’ that was just struck. The FAA’s license expired and with it the ability to collect taxes so it is estimated that over $1 billion will not be collected. Why? Because of an argument over whether to close three airports. Oh but for you the consumer it gets even better…without missing a step, the airlines boosted fares so the amount you pay EXACTLY offsets the FAA tax…another transfer payment…or subsidy?


Both of the above examples show what happens when government is dysfunctional. Either way the public loses while some gloat in victory and Obama and Company caved with barely a whimper…until at the signing…big deal.


But the big question is what will be in the voters minds in November 2012 as they go to the voting booth? It won’t be a love of their representatives in D.C.


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


Enjoy your day!





  1. LDH said

    Hey, TB! these weak economic releases make me think turndown in topline revenue for companies relying on usa consumers. it should also mean reduced investment/expansion. would this not lead one to believe that the large cap multinationals would be increasing dividend payout as they are reluctant to reinvest? I feel that fixed income barely provide a real rate of return, and div. paying stocks provide cashflow, low beta in a volatile market, geographic diversity, and some upside potential. Do you agree? And if so, which ETF to go with? Thanks!

    • traderbill said

      see today’s commentary…on consumer demand. As for stocks, wouldn’t touch a growth stock here…look for income…yields of 5% or more and look at mortgage REITS and preferred stock ETF’s. Just my humble opinion.
      Thanks for commenting,

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