9/19/11…who produces jobs?

This week’s economic calendar is quite light with an emphasis on housing. The highlight of the week will be August Housing Starts (Tuesday). We will also get August Existing Home Sales (Wednesday) and August Leading Indicators (Thursday). The FOMC will have a 2-day meeting on Tuesday and Wednesday with the release of their policy statement on Wednesday afternoon. Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA.


Bloomberg Top Stories:


*Stocks, U.S. Futures Drop as Euro Falls on Greek Concern; Treasuries Rally

*Greece’s Eligibility for Next Aid Payment Under Scrutiny by EU, IMF Today!!!

*Tyco International Plans to Split Into Three Separately Traded Companies

(Again??? They did this in 2002 for a rally that lasted 3 days and have done zip!)

*Bonuses Are at Risk After UBS Investment Bank’s $2.3 Billion Trading Loss

*Europe Bank Bonds Show Dollar Doubts That Rally Can’t Deny

*AT&T is Said to Approach Rivals on Asset Sales to Rescue T-Mobile USA Deal L

*Bond Dealers Add $90 Billion of Treasuries in Fastes Expansion Since 2007

*Banks More Reluctant to Lend on Renewed Concern Greece is Close to Default!!!

*Bernanke Joins King Tolerating More Inflation as Economics Fail to Revive

*China Crash Victims Prove Obstacle for Sale of New Rail Bonds to Investors

*Obama to Propose $1.5 Trillion in Taxes Over Next Decade Targeting Wealthy

*Israel, U.S. Strive to Avoid Veto in Blocking Palastinians’ Statehood Bid

*States Prepare for Cuts as Supercommittee Targets $500 Billion in U.S. Aid

(Bait and switch…pass responsibility to states then refuse to help pay for it!)


Volume rose to 4.76B shares from 4B shares for NYSE stocks while trades executed on the Big Board shrunk to 964M shares ssrged to 1.8B shares, the highest since 8/11, and finally breaking the ennui that has existed for the past three weeks. Yes, it was an up day but all three metrics looked weak. Advance/Declines were only slightly positive: +1.1:1 vs +3.3:1 vs +3:1 vs +3.2:1 on NYSE and +1.1:1 vs +2:1 vs +3:1 vs +3.1:1 on Nasdaq. Breadth was weak and MIXED!: +1.1x vs +7.5x vs +5.4x vs +3.1x on NYSE and MINUS 1.2x vs +3.3x vs +5.5x vs +6x on Nasdaq. New 52 week highs climbed to a still weak  72 vs 52, while new lows were steady at 85 – maintaining the negative ratio which continues to haunt and cast aspersions on the ‘rally.’ The VIX fell to one points to 30.98, still elevated after taking out the 40 day 32.92, and at the low, 30.43, nearing the 50 day 30.16; and 200 day 20.96, all still climbing. 48 was the selloff high, not seen since 5/21/10: 48.20!


Look at the last week, for the month/quarter (in parenthesis): Dow (-0.9%/-7.3%!) +0.7% vs +1.7% vs +1.3% vs +0.4% vs +0.6%; Transports (-0.1%/-14%!!!) FLAT vs +1.4% vs +2% vs +3.4% vs -0.2%; S&P 500 (-0.2%/-7%!) +0.6% vs +1.7% vs +1.4% vs +0.9% vs +0.7%; Nasdaq Composite (+1.7%/-5.5%!) +0.6% vs +1.3% vs +1.6% vs +1.5% vs +1.1%; 100 (+2.9%/-0.8%) +0.9% vs +1.5% vs +1.5% vs +1.3% vs +1.3%; Russell 2000 (-1.7%!/-13.7%!!!) +0.1%!!! vs +1.3% vs +1.8% vs +1.8% vs +0.9%. For the month, only the two Nasdaq indices are positive but look at those quarter to date declines…makes for some ugly client meetings and low fees!!! NYSE Financials are off 4.63%/-16.8% respectively.


Global stocks are rallying are tanking (ex Japan) on Greece after four days of intoxication wore off…who were they kidding??? Greece is toast!: FTSE -2% vs +0.6% vs +1.9% vs +1.5% vs flat; CAC 40 -2.9% vs +0.6% vs +2.5% vs +2% vs +0.5%; DAX -3%!!! vs +1% vs +2.5% vs +1.1% vs +1%; Nikkei UP 2.3% vs+2.3% vs +1.8% vs -1.1% vs +1%; Hang Seng -2.8% vs +1.4% vs +0.7% vs -3.5% vs closed; Korean KOSPI -1% vs +3.7% vs +1.4% vs -3.5% vs closed; Indian Sensex -1.1% vs +0.3% vs +1% vs +1.5% vs -0.2%. U.S. futures are hitting the skids!: DOW -149; SPX -19.30; NDQ -33. As for bonds, rallying and 10 yr back below 2%: 1.97% +3/4; 30 yr 3.23% vs 3.35% +1-9/16!


Gold still not benefitting from the uncertainty – but what is certain to TB and anyone with a brain that a Greek default is nearing…and if it goes, they will look closely at Italy, along with the other sad sacks of Portugal, Ireland, and Spain. It is now $1821 +$6.30. It is dtill $102 off the record high of $1923.50 set on 9/6. Crude gave up its pursuit of $90, having traded in a narrow range for the last four sessions around the 40 day at $88.34 – all with lower highs and lower lows (bearish)and again a lower low.


…the public sector thru fiscal policy? Or monetary policy? The private sector thanks to free market capitalism which TB does not believe exists, nor does it produce jobs…at least domestically. Then what does?


Small business…but therein lies the rub. What is a small business? Is it the Koch brothers companies? Should each be treated separately?…or is it really a big private company with many tentacles? Is Cargill a small business. Let’s find out what the SBA says: it is 500 or fewer employees and less than $7 million in receipts…hmmm that could be just $14,000 per worker…ok, now we have that settled. Or do we? The GOP claims to support small business but has done NOTHING for them. Obama formed a commission and of all the possible people appointed Jeff Immelt of GE to head it! Talk about dead on arrival. Note also that it is not just small business that creates jobs but ONLY small business as big companies are NET losers of employees. That is fact!


More significantly, it is new enterprises that create jobs overwhelming all others. Here is where the economy comes in. Who in their right mind would start a business in an uncertain economy? Then there is the long-established fact that 4 out of 5 of these start ups will fail in the first five years – or less. The GOP blames it on Obamacare but that is only part of the problem. These people are at ground zero for the economy, not sitting in some Manhattan high rise, and they know people are hurting. Furthermore, they know that the GOP will not help their cause by slashing the budget. So they sit on their hands, while big corporations sit on their hoards of cash that earns zero interest, and is a huge drag on returns. Through cost-cutting, to the bone, they have been able to churn out higher profits and worker productivity but that has now peaked and earnings will cease to rise…in fact, in Q1, earnings slipped, and one study shows this has been a precursor to recessions.


To TB there is only one solution and it is still fourteen months away: throw them out, and Obama must agree to not seek a second term (and soon), allowing Hillary to run. Hillary? This from TB? Oh, now he really has gone ‘round the bend!  No, she has proven herself capable as Secretary of State in very trying times, she knows the ropes from when she was first lady, and she is a WOMAN! How many of you feel that the men have screwed it up so badly with their testosterone urges (can’t believe TB is saying that either), that this is the only solution…and it would open the door for more equality for women. Palin, God help us, set the course, but she was merely doing this in the tracks of Geraldine Ferraro who was treated horribly. But Palin as president? She who stepped down after one year as she didn’t want to be a lame duck governor??? …not to mention collecting $100k per speech! Then she helped fuel the tea party (with the Koch brothers money), who is left? Michele Bachmann who is destroying herself much as Palin did – with her own mouth. Why is it that people feel they have to scream to get their point across? Like Larry Kudlow and Jim Cramer do???


So, IMHO, Hillary is the only chance we have and she would bring over a lot of female swing voters.

That’s how TB sees it…how say you (to steal a phrase from O’Really (sic)? It is your choice.


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


Strange Sunday for the talk shows with Clinton, Bill that is, being on all three! He was up against Mitch McConnell, who as a member of the gang of six, professes to be a stabilizing force, and is on the supercommittee (another sic), calling for compromise but with NO tax increases…no subsidies taken away…and no logic! We are doomed.


There is not one recognized economist…save the supply-siders who never met a tax cut they didn’t like…and need…who doesn’t see balancing the budget as a three-pronged effort: tax increases (but where they do the least damage…$1 million an over to at least make hedge fund operators pay their fare share which is double 15% at least and the entire class only pays 23%…but please, not another AMT!!! Second, is cutting costs, and third, ECONOMIC growth, which does not appear likely.


The budget deficit is as high as it is because of:

  1. two rounds of tax cuts the benefitted the wealthy – number one cause which was amplified when the economy tanked reducing federal revenues even further
  2. Medicare Part D with way to pay for it…Dubya’s baby, and like Rosemary’s, scary
  3. the stimulus…and what would you have done? Let the banks fail? But not to reform them is a travesty and allow them to keep control – of the banks as well as the Congress


All of this is a direct result of GOP control of the Congress with the able aid of the Dem’s. Norman Orenstein, who TB mentioned on Friday, said the above, as has every thinking analyst, and predicted that the GOP will fail. He also said studies show that term limits don’t work as the cost of getting elected is so high that they do what the high bidders say. Also, there are two types of Congressmen: one just wants to make a big splash and get out so he can make more in the private sector, and be long gone when the results of his acts fail, and two, ones that want to be re-elected and have to raise money from the first day they take office. Term limits impair continuity, and encourage the first type of politician. He has no solutions to get out of this except major campaign reform.


One last point, the GOP insists on tax reform…it has failed every time it is attempted. Why? Because the army of tax preparers, tax lawyers, and tax accountants has so much to lose that they will buy the preservation of the status quo. That’s how TB says it…so don’t believe all those GOP promises.


Have a terrific week!




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