10/27/11…’splaining the market

Bloomberq Quote of the Day: “Words ought to be a little wild for they are the assault of thoughts on the unthinking.” – John Maynard Keynes – talk about right up TB’s alley! Hear me FOX?

TB’s Quote of the Day: “We are the first nation in the history of the world to drive an automobile to the poorhouse.” – Will Rogers, a man TB truly admired.

Bloomberg Top Stories:

*Europe Boosts Rescue Fund to $1.4 Trillion; Banks Take 50% Greek Writedown – bigger bandaid
*Sarkozy Turns to Hu for China Aid as Europe Boosts Debt-Crisis Rescue Fund – is that WHO???
*Stocks, U.S. Futures Gain on European Crisis Deal; Treasuries, Bunds Drop – a big YAWN!!!
*Fed May Demand European Banks Give Daily Data on Liquid Assets, Collateral – a big OOPS!
*Fisher Says BOE’s Stimulus Justified as Economy May Already Be Shrinking – oh yeah!!!
*Fed Refuses to Share Internal View Traders See Underlying Significant Risk – the ‘R’ word again!
*Corzine Copying Goldman Sachs at MF Sends Stock Down 54% as Bet Backfires – yee haw!!!
*Rometty Knowing IBM One Mistake Away From Obsolescence Takes Charge – the next Kodak?
*Putin Pays Highest Yields in a Year After Absence – so much for Silvio’s bunga bunga girls!
*Procter & Gamble Reports Third-Quarter EPS $1.03, Meets Analyst Estimates – meets not beats!
*South Africa Budget Deficits Puts Risk above Brazil – what a fall from grace has Brazil had!
*Billionaire Sawiris Facing Death Threats Says Egypt Risks Becoming an Iran – Iyatollah this!
*Supercommittee Flirts With Failure on $1.2 Trillion U.S. Debt Cut Target – ideologues do this!
*Occupy Wall Street Clash With Police Illustrates Democrat’s Political Risk – and GOP’s
*Boehner Seeks $2 Billion for Ohio Fuel Plant After Attacking Solyndra Aid – you see the private sector does it best…just give them our money! Same old, same old! Jeez!

Volume rose to an above average 4.79B shares from 4.34B shares on a confused day where frequently the indices moved in opposite directions…at the end of the day – except the Nasdaq 100…what the…? The Russell 2000 and NYSE Financials led the way up but only recovered about half of Tuesday’s losses…think! NYSE stocks executed on the Big Board rose to 1.1B shares from 1B (TB reported 768M shares because Bloomberg hadn’t posted final volume…so ¼ of the trades were at the close – that is NOT retail buying!!!). Finally we had the first back-to-back 1B share days – barely – since 10/7 when there were 13 straight 1B+ share days, all but one above 1.1B. Advance/Declines were strong: +4.1:1 vs -5:1 vs +5:1 vs +6.5:1 vs +2:1 vs -2.6:1 vs +5:1 vs -4.5:1 vs +5:1 on NYSE and +2.7:1 vs -4:1 vs +5:1 vs +3.5:1 vs -1.1:1 vs -3.2:1 vs +2.3:1 vs -4.5:1 vs +3:1 on Nasdaq. Breadth was not as good: +3.7x vs -9x!!! vs +6.5x vs .+5x vs +2x vs -5x vs +13.5x!!! vs -7x vs +6x on NYSE and +1.5x vs -5x vs +1.5x vs +4x vs -1.1x vs -3.5x vs +5.3x vs -5.3x vs +3.2x on Nasdaq! New 52 week highs rose to 90 from 69, while new lows rose modestly to 54 from 43. The ratio is the fourth straight positive but slipped to +1.3x, only the seventh positive ratio in months, all in the last ten trading days. VIX decline sharply but closed above Monday’s 29.26 – the third lowest close since 8/3’s 23.74 when we were in full rally mode. It closed 29.86 -2.34 emphasizing importance of 30, major support/resistance.

Here are the results for the past four days. Dow +1.4% vs -1.7% vs +0.9% vs +2.3% +1.5%; Transports +0.3% vs -2.2% vs +1.8% vs +2.2% vs +1.6%; S&P 500 +1.1% vs -2% vs +1.3% vs +1.9% vs +0.5%; Nasdaq Composite +0.5% vs -2.3% vs +2.4% vs +1.5% vs +-0.2%; Nasdaq 100 DOWN 0.1% vs -2% vs +2.1% vs +1.3% vs -0.5%; Russell 2000 +1.9% vs -2.8% vs +3.3%!!! vs +2.3% vs +0.3%; NYSE Financials +1.6% vs -2.7%!!! vs +2.1% vs +2.3% vs +0.9%. NOTE none beat Tuesday’s losses and the worst were the Nasdaqs as has been the case for all four sessions! .

Global stock markets are super strong…relifef rally???: FTSE +2.5% vs +0.2% vs -0.2% vs +0.3% vs +1.1%; CAC 40 +4.8% vs +0.5% vs -0.7% vs -0.2% vs +1.5%; DAX +4.3% vs +0.4% vs +0.9% vs -0.1% vs +2.1%; Nikkei +2% vs -0.2% vs +1.9% vs flat vs -1% vs -1.6% vs +1.5% vs -0.9% vs +1%; Hang Seng +3.3% vs +0.5% vs +4.1%!!! vs +0.2% vs -1.8% vs -4.2% vs +2% vs -1.4% vs +2.3% vs +1.0% vs +2.4%; Korean KOSPI +1.5% vs +0.3% vs -0.5% vs +3.3%!!! vs +1.8% vs -2.7%!!!; Indian Sensex closed vs +0.4% vs +1.9%!!! vs +0.9% vs +0.9% vs -0.9% vs -1.6%; US futures also up – hip, hip, hooray!: DOW +212!!!; SPX +26; NDQ +48. WOW!!! Bonds nearly without bid on all that good news…which will be correct though?…that is the question: 10 yr now 2.29% -3/4, off a RECORD low 9/23 of 1.6855%; 30 yr 3.31% -1-11/16; Highest yields since 9/16 on long bond…8/24 on 10 yr! Long TIP weaker BUT to just 0.97% from 0.90%, -1-3/4. TB had been lulled into ignoring Libor as it was stuck at 0.25% for both 3 and 6 months. Yesterday, he observed however it is moving up: 0.43% 3mo. And 0.62% 6 mo. – available to only the BEST banks…otherwise an auction market. Bills steady at 0.1%.

Gold continued to rally yesterday for a fifth straight session, closing at $1723.50 +$23.10!!!, following 9/26’s low of $1534, lowest since 7/6!), first time above $1700 since 9/23, nearly eradicating the entire decline and is now $1723.50 flat overnight after falling to $1707 on the bailout news! 9/23’s low was nearly to the 200 day, $1556 (currently), now critical support. The record high is $1923.70, a buying climax on 9/6. Support is $1716, the 40 day: res is $1737, the 50 day….converging while 200 day continues to rise. Major support $1600! Crude was clobbered falling $2.97 to $90.20 but has recovered most of loss overnight and is now $92.79 +$2.59. Was Tuesday a peak? MAJOR resistance is $94.75, the 200 day…missed on Tuesday’s rally by 10 cents. Support is the convergence of the 40 and 50 day m/a’s at $85.62.

…don’t you get annoyed at those market analysts on CNBC (Cramer an analyst? A permabull0, who can always succinctly explain why the market did what it did…even when they haven’t a clue? Readers know TB doesn’t do that. Yesterday, however he said the rally wouldn’t hold, at first it did, then an hour later it failed, then tried to recover till after the midpoint in the session, then rallied on the German vote backing the rescue plan…which was a major surprise. So everyone was right at least once in the day…unless of course you were bullish on Nasdaq…see Nasdaq is the canary in the coal mine for corporate earnings as most are growth stocks. Volume was pretty steady during the session but despite all the volatility only resulted in 1.1B NYSE shares trading ON the big board. Note also that not one index made it back all the way to Tuesday’s levels…the Nasdaq 100 even declining 0.1% while the Composite only gained 0.5%.

So for all of you who say huh?, here is what one market analyst had to say, name withheld because TB doesn’t want said analyst mocked by others:

“Markets have bounced around all day with little conviction, still trading off various and sundry headlines out of Europe. The bottom line is that we know little more now than we did when the day started. The latest market mover was the 100th iteration of the rumor that China may be willing to invest in new debt from the European bail-out fund. The Dow shot up about 100 points while the treasury market is getting hammered.”

Diogenes…quick…bring your lamp…an honest man…but this one is a woman!!! Praise her, folks!
When you can’t say it any better just shut up and sit down!

. . . – – – . . .

The long-awaited Supercommittee held its first public hearings and what a joke that was. ‘Super’ is not only misused but even ‘committee’ is in doubt. What a bunch of clowns! THEN the Dems offered their plan, trebling the cuts the Supercommittee was mandated to make but with tax increases for the wealthiest. That is dead on arrival but it is possible that next year the Bush tax cuts COULD be allowed to expire…hence not raising taxes, right teabaggers? Wrong! If taxes are higher, even if it was supposed to be temporary…nine years is a big long for temporary while the wealth gap has widened, thus it is a tax increase. Nevermind that their idol, Reagan, cut taxes only in his first year as we were in recession caused by high inflation, raised taxes SEVEN times, with cumulative cuts of $275 billion and increases of $133 billion. Perhaps he is, like Keynes remembered only for PART of what he said? What say you, GOP?

Committee members had asked the CBO to provide information on the wealth gap. Here are results: the top 1% nearly doubled their share of after-tax household income from 1979-2007 and their income grew by 275%. The next 19% grew by 65% (that doesn’t keep pace with inflation, and the mid-60% by less than 40%. No wonder the ranks of those living below the poverty are swelling. 2007 is apparently the last available data year. Now imagine what those numbers will look like when you add in the years to 2010! But we have to cut spending…and not tax anyone more money says the hand-wringing tea party. So much so that they would drive us into recession, or worse, doing it, and all on the backs of those who have suffered most. Perhaps we need a Super-duper Committee?

TB has had an ongoing debate with a friend who thinks we have to take drastic action now…but at what cost? Does he seriously believe that making people worse off will cure the problem? No! It will make it worse. What we need is cooperation, not bickering, between the two parties on a common cause…to fix the problem…cut spending but do it sensibly and fairly.

Two days ago TB had lunch with a man who said ‘you have to have skin in the game, everyone must pay some tax, even those on food stamps…let them do without a pack of cigarettes.’ TB’s jaw dropped at that. THEN he said, ‘if there was no unemployment insurance we wouldn’t have unemployment,’ to which TB almost sprayed the table with his drink. Please reread those statements and think what he said because it is scary. It is much like Perry’s that if we did away with the minimum wage people would get jobs.

There is a real problem with unemployment insurance. It is that for most people if they take a job they get less take-home pay than when they weren’t working. Isn’t that basic economics? Exhaust your unemployment THEN get a job…only this time the recession was so sharp and swift that by that time even more were unemployed…then they extended unemployment benefits and a good thing too. TB believes most people do want jobs but have become discouraged. Thus the 16% unemployment rate when you include them and those who can only find part-time work.

TB has a solution of sorts: the states (since they pay it) should offer to pay the insurance to the company to hire an unemployed worker who is collecting, provided they pay him more than the amount of the insurance (so the companies don’t reap a windfall at the workers expense). Thoughts?

Back to the CBO study…why do you think 1979 was a good starting point? Because that was before Reagan and the shift to supply-side economics. It was also before the escalation in CEO salaries…usually not warranted for performance – most are incented on relative performance, not absolute. Thus CEO compensation rose from ten times the average worker to 500 or more times. What is worse is they don’t answer to the shareholders…nor does the board who the CEO picks, and worse often the CEO is also the Chairman of the Board…a direct conflict of interest to the mandate that the board be the stewards to the shareholders. When you add in interlocking boards the shareholders have no say and the CEO’s are in charge…good thinking! Lastly, the minimum income to qualify for the top 10% of all taxpayers has declined sharply on an inflation-adjusted basis since 1980. The CBO cites the eradication of labor unions, except in the public sector. See what happens when you trust management to take care of the workers interests? Longer hours, miscategorizing employees as managers to eliminate overtime then demanding longer working hours. This is the world we live in.

What is truly amazing though is if CEO’s and their top aides shared some of that wealth with employees…especially companies like Wal-Mart where their employees are their best customers, what a boost that could be to the economy. Alas, it ain’t gonna happen.

Have yourself a merry little day,

TB

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