10/31/11…Obama is a socialist!

TB’s Quote of the Day: “As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth … to provide men with buying power. … Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. … The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.” –Marriner Eccles, Chairman of the Federal Reserve under FDR. 80% of the gains of the past three decades going to the top 2% is NOT a fair distribution. TB

This week’s economic calendar is quite full of potentially market-moving indicators. The highlight of the week will be the October Employment Situation Report (Friday). However, we will also get the October Chicago Purchasing Managers Index (Monday), September Construction Spending, the October ISM Manufacturing Survey, and October Motor Vehicle Sales (Tuesday), the ADP National Employment Report (Wednesday), preliminary Q3 Productivity & Costs, September Factory Orders, and the October ISM Non-Manufacturing Survey (Thursday).

In addition to the economic reports, the FOMC will have a 2-meeting on Tuesday and Wednesday. The policy statement on Wednesday will be released at 12:30 p.m. (Eastern) and Chairman Bernanke will hold a press conference beginning at 2:15 p.m. Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA.

Bloomberg Top Stories:

*MF Global Suspended by N.Y. Fed Pending Proof It can Act as Primary Dealer

*Bonds Drop in Italy, Stocks Slide on Europe Funding Concern; Yen Weakens

*Bonds Beating U.S. Stocks Over 30 Years for First Time Since 19th Century!!!

*Profits Top Estimates in U.S. for 11th Quarter in Biggest Rally Since 2000 – what the…???

*Draghi Takes ECB Helm in Battle Mode as Debtg Crisis Torments Policy Makers

*Yen Slides Most in Three Years After Japan Intervenes; Euro, Krone Weaken

*Groupon IPO Becomes a Must as Cash Burns With Investor Base at Limit – Avoid it!!! TB

*Junk Bonds Leading Corporate Debt to Best Month Since 2010 – thanks to stock rally!

*Iranian Police Seizing Dissidents Get Lots of Help From Western Companies

*Hedge Funds Raise Oil Bets on Collapse of WTI-Brent Spread – it was due to Libya! Yawn!

*U.S. Utilities Work to Restore Power as Snowstorm Cuts Supply to 3 Million

*Yemen International Airport Shut After Explosions at Nearby Air Force Base

*Huntsman Banks on Contrarian New Hampshire for Lagging Presidential Bid – go big John!
Volume slumped back to 4.5B shares from that whopping 6.63B shares in Thursday’s mega-rally raising questions (doesn’t it always these days?) on the sustainability of this rally on faux premisis and promises. A mixed day where the worst performers were NYSE Financials and the Russell 2000, the leaders on Thursday and again the two Nasdaq indices were dull and duller, both finishing in the red. NYSE stocks executed on the Big Board sliped to an average 1.0B shares from 1.43B shares (highest since 10/4). We have now had four straight 1B+ share days, not seen since 10/7 when there were 13 straight 1B+ share days, all but one above 1.1B. Advance/Declines were weak and MIXED: +1.1:1 vs +6.9:1 vs +4.1:1 vs -5:1 vs +5:1 vs +6.5:1 on NYSE and MINUS 1.3:1 vs +5.1:1 vs +2.7:1 vs -4:1 vs +5:1 vs +3.5:1 on Nasdaq. Breadth was also mixed with the indices changing places: -1.2x vs +17.2x!!! vs +3.7x vs -9x!!! vs +6.5x vs +5x on NYSE and +1.1x vs +6.8x! vs +1.5x vs -5x vs +1.5x vs +4x on Nasdaq! New 52 week highs were more than halved to 133 from 293, while new lows rose slightly to 38 from 34. The ratio is the sixth straight positive but +3x vs +9x, the ninth positive ratio in months, all in the last twelve trading days. VIX rose slightly to 25.53 +.07 – following the second lowest close since 8/3’s 23.74 when we were in full rally mode. This rally was faux and full of it and all on false premises!

Here are the results for the past four days. Dow  +0.2%? vs +2.9% vs +1.4% vs -1.7%; Transports -03% vs +4.5% +0.3% vs -2.2%; S&P 500 FLAT vs +3.4% vs +1.1% vs -2%; Nasdaq Composite -0.1% vs +3.3% vs +0.5% vs -2.3%; Nasdaq 100 +0.1% vs +2.8% vs -0.1% vs -2%; Russell 2000 -0.6% vs +5.3%!!! vs +1.9% vs -2.8%; NYSE Financials -0.6% vs +6.6%!!! vs +1.6% vs -2.7%!!!. Lots of misses and matches on earnings and few positive surprises. TB called Thursday’s rally massive short-covering and believes that is exactly what it was.

 

European stock markets are being slammed…Asia also weaker. FTSE -1.3%! vs -0.3% vs +2.5%; CAC 40 -2.1%!! va -0.4% vs +4.8%; DAX -1.8% vs flat vs +4.3%; Nikkei -0.7% vs +1.4% vs +2%; Hang Seng -1.8% vs +1.7% vs +3.3%; Korean KOSPI -1.1% vs +0.4% vs +1.5%; Indian Sensex -0.6% vs +0.1% vs closed; US futures also slammed: DOW -107; SPX -14; NDQ -22. Bonds sharply higher after Thursday’s debacle which took them to yields not seen since 9/2!: 10 yr now 2.23% +3/4, off a RECORD low 9/23 of 1.6855%; 30 yr 3.28% +1-15/16; Long TIP back below 1% 0.93% +2-1/16!!! Libor steady at 0.43% 3mo, and 0.62% 6 mo.  

Gold was essentially flat Friday ending seven straight up days, closing at $1747.20 -.50, 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 off overnight to $1722.80 -$24.50!  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 $1715, the 40 day: res is $1736, the 50 day….converging while 200 day continues to rise. Major support $1600! Crude also was off Friday closing at $93.32 -.64, and is off again overnight to $92.54 -.78. Was last 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 $85.65.

 

…that’s the word…and he has now wrested control from the do-nothing obstructionist Congress. Finally more like FDR than Herbert Hoover…funny though, Hoover has an institute named after him. TB still is baffled at why? What did the man do? He stood idly by while Prohibition became unpopular and threatened the country, then he stood idly by while the economy slumped into a major depression. No, here are TB’s two complaints about Obama:

  1. his choice of a group of tired, failed advisors while ignoring the one who could help, Paul Volcker
  2. his failure to use the bloody pulpit to condemn Congress for creating a crisis when there was none, and stonewalling fixing the economy while screaming the budget must be cut

 

Well, get this latest poll, he is at 46% approval and 46% disapproval, while the credibility of Congress has shrunk to just 9%! TB thinks that is a low. So, maybe he is now standing on his hind legs…that is not to say that TB approves of all he is doing…raising taxes on all making over $250,000 is a mistake economically, just close the loopholes and make sure they pay their fair share. But after all these months, look what the Supercommittee has done…zip…in fact that is exactly what the GOP wanted them to do…nothing…so the automatic cuts take. Remember the goal of the GOP is not to fix things but get rid of Obama at any cost to the economy and who cares which one of them does it…this anyone but Obama is not going to fly with intelligent voters who are sick of kids debating and spending the entire time making accusations, many, most(?),  spurious. As for Romney, it is OK to flip-flop on issues when you see you were wrong, but when they work out right, like healthcare, or when they are matters of principal such as abortion, that is an entirely different. As Paul Tsongas said of Clinton; he is pandering to the people, Yes, Paul!

 

Ever since the financial crisis which resulted in Dodd-Frank which is so watered down as to be meaningless and Wall Street intends to keep it that way. Back to the quote of the day from Marriner Eccles. As Fed Chairman (the Federal Reserve Building is named after him), he broke up the big banks by splitting off the investment banking side from the commercial as should be done again…the people should not be guaranteeing investments, let more speculative businesses to that. Glass-Steagal at a whopping 35 pages served this country well for years and it was only the meddling of the Congress with savings and loans, plus Reagan’s ‘too big to fail’ that put us where we are. The big banks whine that they can’t compete with the European banks without more freedom…freedom to what? Get bailed out? Hasn’t Jamie Dimon noticed that all the big banks are in trouble? You bet he has and he intends to profit from it…first for Jamie, then the shareholders.

 

OK, now let’s look at Obama. How dare he interfere with student loans. Really? Did you know that the combination of failed loans from the for-profit colleges and those from other instututions who can’t find jobs (sorry Herman, these people are not content to sit back and collect unemployment…they want work!), has enabled them to not negotiate payments…why should they when they can turn failed loans over to the government and collect 100 cents on the dollar?

No, the government should rethink the student loan program and how it is administered.

 

Health care? We are the only industrialized nation without national healthcare and while the one passed is a shambles, something has to be done. What is worse, we have the highest priced health care in the world. Everyone is for-profit these days…hospitals and health insurers.

 

Education? Our college graduates rank low in every area except self-esteem which is number one in the world…TB leaves it to you to assess the implications of that.

 

Infrastructure? Deteriorating rapidly and need huge upgrades…that will not come from budget cuts. Obama is chirping about increased fuel economy…we should be converting to natural gas. The much-touted Chevy Volt has a range of 35 miles on the battery…hello? That is a joke!

 

How dare he tell the banks to renegotiate loans! That is socialist…really? How about the big banks who made sovereign loans from WWII thru the 1980’s and constantly restructured them (in favor of the borrowers), because sovereign countries don’t default. So this is EXACTLY what Obama is asking. Because if you have someone upside down on their loan eventually they are going to stop paying, voluntarily or involuntarily. Don’t corporations do this all the time? Walk away from bad real estate investments? You bet they do…it was homeowners who didn’t but if it is good for the banks…and if it is good for corporations, who is to deny it to homeowners.

 

The banks of course have to be pushed into this. But isn’t it better to earn 4% on a loan that has a much better chance of paying off then 6% with a high probability of not paying off? So before you jump on Obama, think about this. Also, it comes at no cost to the government since the banks aren’t going to be paying taxes for years…if then!

 

We need more people like Marriner Eccles and Paul Volcker…people who see what is wrong and do something about it rather than the current wave of ideologues who have no idea what the ramifications of their actions are going to be yet profess to be leaders. TB thinks however the people are finally waking up. You don’t like Obama, fine…then replace him with someone who is going to fix things…of the GOP that is only John Huntsman. TB would also like to see Hillary Clinton (never thought TB would be saying this) instead of Obama…she loves a good fight and has proven she can lead as Secretary of State. Vice President? Hmmm… dump Joe Biden!

 

What is amazing about those who insist on slashing the budget is that they also believe in fighting wars and thus not cutting defense. They call themselves capitalists yet they have no concept of how to use capital. The ignore facts and say Keynesian economics does not and has never worked. Yet they offer no alternative other than cutting the budget will cause the private sector to create jobs. Do they have any concept of supply/demand? Apparently not, as the leader in the GOP race, Herman Cain, insists that his 9-9-9 plan will cut ‘hidden taxes and thus lower the cost of good sold. Poor Herman must never have taken Econ 100, nor did he see what happened in California under Prop. 13.

 

. . .   – – –  . . .

Wow! What a series…that is two straight Series losses for the Texas Rangers…hmmm, doesn’t Dubya own them?

 

Hope you had a great weekend, Happy Halloween…TB prefers El Dia de Los Muertos, arriva!!!

 

TB

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