11/1/11…it isn’t any better out there today

TB’s Song of the Day: “Turn out the lights, the party’s over, they say that all, good things must end.” –lyrics by Willie Nelson
Will Rogers Quotes (one of the smartest and best-loved men of all time):
“Ten men in our country could buy the whole world and ten million can’t buy enough to eat.”
“Be it pestilence, war, or famine, the rich get richer and poor get poorer. The poor even help arrange it.”
“This country has gotten where it is in spite of politics, not by the aid of it. That we have carried as much political bunk as we have and still survived shows we are a super nation.”
“And kid Congress and the Senate, don’t scold ’em. They are just children thats never grown up. They don’t like to be corrected in company. Don’t send messages to ’em, send candy.”
“This country has gotten where it is in spite of politics, not by the aid of it. That we have carried as much political bunk as we have and still survived shows we are a super nation.”
“There’s no trick to being a humorist when you have the whole government working for you.”
“This would be a great time in the world for some man to come along that knew something”. – how true and timely. Said while Hoover was president
“I am not a member of any organized party — I am a Democrat.”
‘I have no Politics. I am for the Party that is out of Power, no matter which one it is. But I will give you my word that, in case of my appointment, I will not be a Republican; I will do my best to pull with you, and not embarrass you. In fact, my views on European affairs are so in accord with you, Mr. President, that I might almost be suspected of being a Democrat.” Letter to President Harding offering to replace the current Ambassador to the Court of St. James.
“So when all the yielding and objections is over, the other Senator said, “I object to the remarks of a professional joker being put into the Congressional Record.” Taking a dig at me, see? They didn’t want any outside fellow contributing.”
“See they conducted experiments on convicts … I don’t know on what grounds they reason a man in jail is a bigger liar than one out of jail … The chances are telling the truth is what got him there …It would be a big aid to humanity, but it will never be, for already the politicians are up in arms against it … It would wreck the very foundation on which our political government is run … If you ever injected truth into politics you’d have no politics … Even the ministers are denouncing it now … Humanity is not yet ready for either real truth or real harmony.”
“The income tax has made more liars out of the American people than golf has.” This does NOT mean TB is in favor of a flat tax…that’s a flat-out no! Just reform what we have…if that is possible.
“When I die, my epitaph or whatever you call those signs on gravestones is going to read: “I joked about every prominent man of my time, but I never met a man I didn’t like.” I am so proud of that I can hardly wait to die so it can be carved. And when you come to my grave you will find me sitting there, proudly reading it.”
Note: TB only intended one quote but the man was a genius on politics and government!

Bloomberg Top Stories:

*Stocks, U.S. Futures Drop on Greek Vote Plan; Bunds Jump, Metals, Oil Fall
*MF Global Probe Said to Involve Hundreds of Millions of Dollars in Funds
*Corzine Key Man Bonds Default Before MF’s First Payment – last time it took 3 payments!
*Selling More Insurance on Shaky European Debt Raises Risk for U.S. Banks – at it again!
*Banks Seek to Trim Jobs as Europe’s Sovereign Debt Crisis Shrinks Revenue – uh huh!
*Australia Cuts Rates, China Manufacturing Slows as Europe Weighs Sale – double whammy!
*Stocks Beat Commodities, Bonds, Dollar With Biggest Monthly Gain Since ’09 – LAST month!
*Synthetic ETF Backers Pull Most Money in Two Years in Move to Real Assets – follow this!
*Beacon Power, Mini Solyndra, Files Bankruptcy With $39 Million DOE Loan
*Rising Misery Indexes Intensify Income-Inequality Effect – what damned wealth gap???
*Citigroup No. 1 Firm in Rating Financial Companies as Europe Roils Markets

Volume dipped slightly to 4.2B shares from 4.5B following that whopping 6.63B shares in Thursday’s mega-rally answering questions about the sustainability of this rally – it isn’t! A big down day following mixed day where the worst performer was NYSE Financials for a second session. The Dow, S&P 500, and NASDAQ Composite all plunged thru the 200 day m/a. Game, set, match! NYSE stocks executed on the Big Board rose to 1.14B shares from 1B shares. We have now had five 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 very negative: -4.5:1 vs +1.1:1 vs +6.9:1 vs +4.1:1 vs -5:1 vs +5:1 vs +6.5:1 on NYSE and -3.6:1 vs -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 even more negative: -15x!!! vs -1.2x vs +17.2x!!! vs +3.7x vs -9x!!! vs +6.5x vs +5x on NYSE and -7.5x! vs +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 again to 64 from 133 from 293, while new lows rose slightly to 42 from 38 from 34. The ratio is the seventh (and last?) straight positive but +1.5x vs +3x vs +9x, the tenth positive ratio in months, all in the last thirteen trading days – but this is no time to be superstitious! VIX screamed to 29.96 +5.43 – gapping up on the open and closing the gap down created on Thursday!

Here are the results for the past five days. Dow -2.3% vs +0.2% vs +2.9% vs +1.4% vs -1.7%; Transports -2.4% vs -03% vs +4.5% +0.3% vs -2.2%; S&P 500 -2.5% vs flat vs +3.4% vs +1.1% vs -2%; Nasdaq Composite -2.5% vs -0.1% vs +3.3% vs +0.5% vs -2.3%; Nasdaq 100 -1.9% vs +0.1% vs +2.8% vs -0.1% vs -2%; Russell 2000 -2.1% vs -0.6% vs +5.3%!!! vs +1.9% vs -2.8%; NYSE Financials -3.9% vs -0.6% vs +6.6%!!! vs +1.6% vs -2.7%!!!. The highlighted indices tell the story and why TB didn’t buy into the rally! Should be leaders, not laggards!

European stock markets are being slammed for a second day…Asia following suit! FTSE -3%!!! vs -1.3%! vs -0.3% vs +2.5%; CAC 40 -4.4%!!! vs -2.1%!! va -0.4% vs +4.8%; DAX -5.3% vs -1.8% vs flat vs +4.3%; Nikkei -1.7% vs -0.7% vs +1.4% vs +2%; Hang Seng -2.5% vs -1.8% vs +1.7% vs +3.3%; Korean KOSPI flat vs -1.1% vs +0.4% vs +1.5%; Indian Sensex -1.3% vs -0.6% vs +0.1% vs closed. You know it’s going to be a bad day when…US futures: DOW -194; SPX -29; NDQ -46!!! Bonds sharply higher for a second day – Monday’s rally was HUGE!!: 10 yr now 2.01% +7/8, RECORD low 9/23 of 1.6855%; 30 yr 3.02% +2-3/8; Long TIP below 1% 0.73% +3 point! A new record low yield!!! Libor steady at 0.43% 3mo, and 0.62% 6 mo.

Here’s the weird thing which attests to the speculative nature of gold. It fell $22 yesterday to $1725.20 and has taken out $1700 again overnight! Now $1694.10 -$31.00! 9/26’s low was $1534, lowest since 7/6, now critical support). The record high is $1923.70, a buying climax on 9/6. Resistance is again $1706, the 40 day, then $1729, the 50 day….converging while 200 day continues to rise. Major support $1600! Crude also off slightly Monday closing at $93.19 -.13, and is off again overnight to $90.72 -$2.47! Was last Tuesday a peak? Looks to be so! MAJOR resistance is $94.77, the 200 day…missed on last Tuesday’s rally by 10 cents. Support is the convergence of the 40 and 50 day m/a’s at $86.05-19.

…they have so many ways to get you. Barron’s on Friday had a big money manager survey and surprise, surprise, they were all bullish for the fourth quarter…heck it sold off before the end of the month just one day after loud applause. When will we ever learn. A default is a default is a default and 50 cents on the dollar is a default. Doubt TB? Ask the rating agencies! Why do you think we developed the Brady bonds in 1989? To wipe off the debts of the South American countries to Citi and Chase (not merged with JPM back then). A restructuring is just a default by a different, kinder and gentler name.
For God’s sake people just look at the headlines today…if that doesn’t make you pull in your bull horns nothing will. The Eurozone is a mess…our financial system is still at risk, yet we are doing nothing about it and nothing will likely be done until after the 2012 election unless we get another crisis first.
Remember the right opposed the financial bailout…let it all fall…they still say that about real estate…let it fall 30% more and clear the market…right into the hands of wealthy speculators at even more expense to those who have suffered the most…primarily through no fault of their own.
You don’t honestly believe they will back another bailout if needed do you? Then what will we have? A world without any financial system and that leads to trade wars and real wars.
Ah, TB isn’t going to let Jon Corzine off the hook. “Mr. All In!” Just like his former colleague, Bob Rubin he told MF Global that they needed to be more like Goldman…take more risk…and they did. Or how about the other ‘John?’ That would be the Merriwether of Long Term Capital Mismanagement which was the first, back in 1998, on essentially the same strategy: if a little is good, more is better…double down! Got a hunch? Bet a bunch! Prior to LTCM, the last brokerage to go down was E.F. Hutton. In 1980, they began a strategy of writing checks on uncollected funds, aka ‘kiting’ They got fined but then in 1985, memos were discovered that proved it was planned (TB was Chief Investment Officer at FNB Nevada in 1980 and raised questions about the profitiablity of the account…an analysis had never been done…he asked that they do it on a collected funds basis…found the same result! The bank had thought it was a profitable account yet we were losing thousands of dollars a year on it), and that was the end of ole E.F. Hutton, founded in 1904. They made money the old-fashioned way they kited it!
Of the three firms only LTCM wasn’t a publicly held company. Talk about the need to have skin in the game…the more incentive to take it and the less personal risk the more likely one will be inclined to do so. Of the top holders of MF Global, #7 is TIAA CREF – serving college teacher and the second largest fund, behind Cal STIRS/PERS. It owns 5.4%. Above that are other money managers and hedge funds. Vanguard is #9 at 4.5%, Franklin #10 at 4.5%. Some managers made HUGE increases in the third quarter…rots-a-ruck, so solly.
Yet we continue to coddle these companies…they overtraded. Worse, and this came as a surprise to TB as he is no longer heavily involved in the government securities market, they were a primary U.S. government securities dealer…la crème de la crème! Who was minding the store and just how much of this crapshoot was the fault of Mr. ‘Ex-Gov’ Corzine?
By the way a Bloomberg interview with William Cohan, author of “Money and Power: How Goldman Sachs Came to Rule the World” shows how he made similar big bad bets while at Goldman in 1994 and again in 1999. Here is the link: Cohan/MF Global interview
When is the government going to walk away from the power of the financial sector. When will they stop being able to deflect criticism or destroy anyone or anything that gets in their way. Look at the way they view OWS…they are making it anti-capitalist which for the most part it is not! It is anti-corporate crime…get it??? Why do you defend Wall Street? Are you blind?

. . . – – – . . .

Everyone is writing about the wealth gap…worst since the robber barons and greater in scale. Here is a link to a Robert Reich column in the S.F.Chronicle: Robert Reich/flat tax.

TB agrees with all points except a 70% tax on incomes above $5 million and eliminating capital gains…and as he points out that is on the AMOUNT above $5 million, not on all the income…which the GOP loves to misrepresent at every tax bracket. Any student of finance knows that the future value is reduced by the compounding rate (don’t forget about the future value being in dollars that are then reduced by inflation). So TB believes this would be highly negative for economic growth.

Enough for today, where is Will rogers when we really need his wit and wisdom?


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