9/30/11…three-bagged

Bloomberg Top Stories:

 

*Consumer Spending in the U.S. Slowed in August as Incomes Unexpectedly Dropped

*Stocks Decline, U.S. Futures Slide on Slowdown Concern; Gold, Dollar Rise

*Morgan Stanley Risk Hits Italian-Bank Level in Eyes of Credit-Swap Traders

*ECB Effort to Contain Crisis Is Complicated by Surprise Surge in Inflation

*Bernanke’s Fed Operation Twist Fails to Reduce Unemployment in Global Poll

*Europe Prepares Next Crisis Steps After Merkel Rescue-Fund Parliament Win

*Toyota-Honda Rebound Ignites Call of ‘What Recession?’ in U.S.Sales – what jobs?

*Credit Markets Head for Worst Quarter Since 2008 on Greek Default Concern

*Japanese Jump Brazilian Real Funds at Fastest Pace Since Earthquake

*Google Joins Apple Mobilizing Lobbyists to Push for Tax Holiday on Profits

*Al-Qaeda’s U.S.-Born Mastermind of Texas, Detroit Plots Is Killed in Yemen

*Obama Backed by 63% of Global Investors for Buffett Rule to Reduce Deficit

*Obama’s Standing With Global Investors Reverses from ¾ to 57% unfavorable

 

Volume rose slightly to 4.56B shares from 4.3B shares on a whipsaw session, way off 6.95B shares in last Thursday’s rout. For NYSE stocks while trades executed on the Big Board rose slightly to 1.2B from 1B shares – average for the week. Advance/Declines were positive but not that much for the size of the rally: +2.5:1 vs -5:1 vs +4.4:1 vs +2.7:1 on NYSE and +1.6:1 vs -5.2:1 vs +3:1 vs +1.9:1 on Nasdaq. Breadth was weak and MIXED!!!: +2.8x vs -28x!!! vs +3.1x vs +8x vs +2x vs -22x!!! vs -19x!!! on NYSE and MINUS 1.6x vs -13.4x!!! vs +3.8x vs +2.2x vs +5x vs -12x!!! vs -4x on Nasdaq! New 52 week highs were steady despite the rally at 17 vs 18, and remain weak while new lows surged yet again to 415 vs 259 vs 499!!! The high last Thursday was 1499!!! This level has only been seen a few times…think 1987 and 2008 – the ratio is now -2.5:1 but still negative so little value there. The VIX continued to fall and closed at 38.84 -2.24, but remains elevated. 48 was the selloff high, not seen since 5/21/10: 48.20!

 

Here are the returns for the day/month/quarter/ytd: Dow +1.3%/-4.0%/-110.2%/-3.7%; Transports +2.1%/-7%/-19.9%/-15%; S&P 500 +0.8%/-4.8%/-12.1%/-7.7%; Nasdaq Composite DOWN 0.4% vs/-3.8%/-10.6%/-6.5%; 100 DOWN 1.0%/-1.9%/-5.5%/-0.9%; Russell 2000 UP 1,7% BUT vs -4.2%/-8.8%/-19.9%/-15.4%; NYSE Financials +2.9%/-8.0%/-20%/-20.4% – note that BOTH Nasdaq indices had a down day and the NDQ 100 joined the others in negative territory for the ytd. Bad news.

 

Global stocks are in a funk but at least off the session lows that had Europe off 2%: FTSE -1.3% vs -0.7% vs -0.2% vs +3.1%!!! vs +0.8% vs -1.9% vs -4.5%; CAC 40 -1.8% vs -0.1% vs +0.1% vs +4.2%!!! vs +2.3% vs -2.7% vs -4.9%; DAX -2.5%!!! vs -0.4% vs +0.1% vs +4.1%!!! vs +2.9% vs -3.1% vs -4.3%; Nikkei flat vs +1% vs +0.1% vs +2.9% vs -2.2% vs closed vs -2.1%; Hang Seng -2.3% vs closed vs -0.7% vs +4.2%!!! vs -1.5% vs -1.4% vs -4.9%; Korean KOSPI flat vs +2.7%!!! vs -0.7% vs +5%!!! vs -2.6% vs -5.7%!!! vs -2.9%; Indian Sensex -1.5% vs +1.5% vs -0.5% vs +3% vs -0.7%-1.2% vs -4.1%. EUROPE RALLY NEGATED!!! The end of a horrible quarter. U.S. futures also in the tank: DOW -107; SPX -12; NDQ -19. Currently 10 yr 1.94% +1/2 after a RECORD low last Friday of 1.6855%; 30 yr back below 3% from a low of 2.748%, 2.98% +1-9/16!!! Long TIP below 1%: 0.98% +1-5/8.

 

Gold held above $1600 yesterday ($1617.30 -.80) following Monday’s low of $1534, lowest since 7/6!) and is up overnight, $1623.90 +6.60. Did we put in a bottom? Monday’s low was nearly to the 200 day, $1527.20. We negated the spike to $1923.70, a buying climax on 9/6. Crude was up yesterday to $82.14 +.93 after putting in a low of $77.11 Monday, lowest since the reversal from $75.71 on 8/9! It is now $81.52 -.62.

…Fidelity’s Peter Lynch used to talk about getting a ‘three-bagger stock’ where each 10% gain equaled one ‘bag.’ Even by this standard we have one and two bags on all indices for the quarter and a perfect ‘three-bagger’ in the wrong direction of negative returns for the month, quarter and nine months! ‘Sell in May and go away’ was never more appropriate. Speaking of which, we just got Consumer Spending which not only fell in August but for the first time in almost two years…can you spell ‘double-dip’?

Despite the Tea Party and the muzzled GOP saying taxes on the wealthiest should not be increased (remember TB does not favor it on ordinary income but for tax loopholes they and no one else enjoys, such as ‘carried interest’), a just completed global investor poll favors the ‘Buffett Rule’  shows that 63% support Obama’s proposed tax increase. Perhaps this is because being in the same industry they know hedge fund operators have been legally ripping off the government for years…and billions of dollars in lost revenues. Furthermore, their disapproval rating of him dropped from 73% to 57%.

What does this suggest? That the self-serving supply-siders who have succeeded in creating the largest wealth gap in U.S. history and risking unrest, are the vocal minority who respond only to the urge of greed, and then have the audacity to convince the very  people who have not found themselves enriched over the past three decades (except hedonistically thanks to the plastic in their pocket which they are now paying dearly for), to fight the ‘good’ fight for them, along with their highly paid lobbyists.

TB supports this poll because these are people who understand investments and global finance and know that the status quo is an affront to humanity and cannot be sustained. Like the Robber Barron’s of the early 1900’s, they realize that it is important…no imperative that the lower class feel they can move up to the middle class and that the middle class feel they can move up to the upper class. This is America. Instead, if you net out all of what we have that was purchased on credit…i.e. borrowing against future earnings, TB would argue that there IS no middle class left. Sadly, it is a broad middle class that differentiated the United States from other nations and why there is no better country in the world…not the U.K. and certainly not France or even Germany. It is also the keystone of sustaining a democracy which Thomas Jefferson recognized as ‘fleeting.’ Are we going to let our own greed and stupidity prove that after more than two centuries the “great experiment” is a failure…and by the very people who benefitted the most from it (not to be confused with prohibition which was termed the ‘noble experiment’ – it was an experiment but it wasn’t noble and created more crime and disrespect for law and order).

In closing, it is important that we not raise the tax rates on the wealthiest class but remove the loopholes and benefits bestowed by the two Bush tax cuts which we were tricked into believing would benefit all and were to be temporary, thus reversing them is NOT a tax increase. Look up the definition of temporary!

What is wrong is a country that has allowed at least five megabillionaires to die and their estates pay no taxes. George Steinbrenner being the most obvious case. He with the ‘small business’ New York Yankees and broadcasting among other ventures.

TB keeps hearing that an estate tax is wrong as taxes were already paid on it. We now have a $5 million exemption on federal estate taxes (also state inheritance taxes are a direct credit to federal ones). Using Steinbrenner for an example, depreciation and goodwill benefitted him taxwise and thus should be recaptured when the businesses are sold. To think otherwise is one strange (greedy?) way to look at things, right? You decide.

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

When will this quarter ever end? Today!!! Thankfully and we can now enjoy our weekend, until we come in Monday and see how our investments have suffered. This was a very bad quarter with few if any winners as once again correlation hit us…there were not good or safe hedges.

 

Have a wonderful, relaxing weekend…the rest can wait.

 

TB

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