11/17/11…Charlie and Lucy

A special issue of Charles Schultz’ lovable Charlie Brown:

  1. Charlie prepares to kick football
  2. Lucy pulls it away at the last instant
  3. Charlie lands on his butt
  4. Lucy says try it again
  5. He protests saying she will pull it away again
  6. Lucy says “no, I promise I won’t”
  7. Charlies prepares to kick the ball
  8. Lucy pulls it away…laughing
  9. Charlie lands on his but
  10. Lucy says you are so dumb Charlie Brown


The above story is dedicated to those of you who still believe the U.S markets are fair and that ‘buy and hold’ is a valid strategy. The only real investors out there…besides Buffett of course…are the companies you own, squandering their billions on stock buybacks.


Bloomberg Top Stories:

**Legg Mason’s Bill Miller Will Exit Main Fund After It Falls Behind Peers (he had a 20+ year record of beating the S&P 500…now into oblivion. Note same happening to commodities traders)

*Housing Starts in U.S. Decline 0.3% to 628,000 Rate; Building Permits Gain

*Stocks in U.S. Retreat as European Debt Concerns Overshadow economic Data

*Merkel Rejects French Calls to Deply ECB as Crisis Backstop on Euro Debt – oh oh!

*Greek Government to Start Talks Tomorrow on Voluntary Debt Swap With Banks

*Canadian Consumers Adding to Record Debt Now May Pare Spending Later

*Salesforce Valuation 56 Times Higher Than S&P 500 Spurring Bears – see that???

*Occupy Wall Street Protestors Head to Stock Exchange as Police Stand Guard

*Solyndra loan Decisions Were Mine, Chu Will Tell Congressional Committee

*Republicans Considering Romney Can’t Reconcile Competence With Expediency

*Rear-View Camera Rule for U.S. Autos May Cost $18 million Per Life Saved – sheer stupidity!

Volume rose to an average 4B shares after four consecutive low volume days as we approach tomorrow’s options expiry. NYSE stocks executed on the Big Board rose modestly to 912M shares still below average but up from the dismal levels of the last three sub-800M share days – lowest since May 27th (692M on the day before the Memorial Day weekend, a modest up day)! TB took out his favorite saying yesterday from boredom but it still applies: UP, low volume, DOWN average or higher volume. Advance/Declines were solidly negative: -3.3:1 vs +1.8;1 vs  -3:1 vs +6:1 vs +2.3:1 vs -9:1!!! vs on NYSE and -1.3:1 vs +2.1:1 vs -3:1 v +3.6:1 vs +1.7:1 vs -6.9:1! on Nasdaq. Breadth was similar but weaker: -5.4x vs +1.8x vs -5.5x vs +12.8x! vs +2x vs -60x!!! on NYSE and -2.7x vs +2.5x vs -3.6x vs +6x vs +1.6x vs -18x!!!! on Nasdaq. New 52 week highs dropped 20% to 86 vs 107, while new lows were steady at 124. The ratio is becoming more and more negative. Will it change tomorrow after expiry? You decide. VIX ROSE SHARPLY to 33.51 +2.29. RES is 30 and still high lending credence to the ‘high frequency trading’ explanation.

Here are the results for the past six days,: Dow -1.6% vs +0.1% vs -0.6% vs +2.2% vs by 9:1 vs -3.2% by 30:0; Transports -2% vs +0.8% vs -0.7% vs +2.8% vs +1.3% vs -3.8% by 19:1; S&P 500 -1.6% vs +0.5% vs -1%! vs +2% vs +0.9% vs -3.7% by 499:1!!!; Nasdaq Composite -1.7% vs +1.1% vs -0.8% vs +2% vs +0.1% vs -3.9% by 7:3; Nasdaq 100 -1.7% vs +1.1% vs -0.6% vs +1.9% vs -0.1%vs -3.6% by 99:1; Russell 2000 -1.8% vs +1.4% vs -1.6%! vs +2.6% vs +0.9%+3.9:1 vs -4.8% by 4.7:1; NYSE Financials -1.8% vs +0.1% vs -1.8% vs +2% vs +0.4% 2.3:1 vs -5.6% by 63.5:1!!! BAC -3.8% vs +1.3% vs -2.6% vs +3% vs -2.1%; C -4.1% vs -1.3% vs -3.2% vs +2.4% vs -0.7%; MS -8%!!!

Global stock markets weak for a THIRD straight day, except Korea: FTSE -2%!!! vs -0.8% vs -1% vs -0.6% vs +1% vs +0.3% vs -1.6%; CAC 40 -1.5% vs flat vs -2% vs -1.3% vs +1.5% vs +0.9% vs -2.2%; DAX -1.4% vs -1.1% vs -1.9% vs -1.1% vs +2.1% vs +1.5% vs -2.3%; Nikkei +0.2% vs -0.9% vs -0.7% vs +1.1% vs +0.2% vs -2.9% vs +1.2% vs -1.3% vs -0.4% vs +1.9% vs closed vs -2.2%!!! vs -1.7%; Hang Seng -0.8% vs -2%! vs -0.8% vs +1.9% vs +0.9% vs -5.3%!!!; Korean KOSPI UP 1.1%! vs -1.6% vs -0.9% vs +2.1% vs +2.7% vs -4.9%!!! vs +0.2%; Indian Sensex down for a SIXTH session: -1.9%!!! vs -0.6% vs -1.4% vs  -0.4% vs 1% vs closed vs -1.2%. U.S. stock futures weak for a second day: DOW -33; SPX -5; NDQ -8. Bond market unable to take advantage?: 10 yr 2.00% +1/16. RECORD low 9/23 of 1.6855%; 30 yr 3.03% +3/32; Long TIP 0.83% vs .57% at high week ago Tuesday. The 5 yr TIP yields MINUS 0.87%! 10 yr +.03%. Libor  0.48% 3 mo., and 0.69% 6 mo., a very steady upward climb – bears watching! Bills 0.00% out to six months where it is just 0.04%! 

Gold trading down sharply overnight – wait, aren’t stocks weak again??? It closed at $1774.30 -$3.90, and is now $1741.60 -$32.70!!! The record high is $1923.70, a buying climax on 9/6. SUP is $1717, the 40 day. Crude traded to highest since 5/31 overnight, $103.37!, after closing at $102.59 +$3.22 and but is now $100.98 -$1.61. Is it copying the pattern in gold? Support at the 200 day (95.27) which had been resistance for the past two weeks and rising. Major support is the convergence of the 50 and 40 day m/a’s, just crossed at $88.64-89.02, and still moving up.

Groupon watch continues (GRPN) IPO Priced at @$20 11/3

Day1 $31.14-25.90 closed 26.11 +$6.11

Day2 $27.78-24.59 closed $25.97 -.14

Day3 $26.21-24.75 closed $24.90 -$1.07

Day4 $24.56-22.76 closed $24.02 -88 – gap down on open from $24.75-$24.56 – now res.!
Day5 $24.96-23.20 closed $24.41 +.39 – first up day and higher high, higher low!

Day6 $25.23-23.61 closed $24.25 -.16 – down again on an inside session

Day7 $24.16-23.40 closed $24.07 -.18 – lower high and lower low

Day8 $24.74-23.23 closed $24.07 unched – slight outside day (higher high, lower low)

Day9 $24.30-23.75 closed $24.03 – new low on an inside day…tell it goodbye!

…you know what TB is sick of hearing? Those self-righteous souls who have jobs saying “you have to have skin in the game.” As they see it if you don’t pay any income tax you don’t pay taxes. So if you have a home and pay property taxes, work but are at the poverty level and pay social security and medicare, pay sales taxes, have payments of up to 10% on your student loans to pay back that wonderful education you got, you don’t have skin in the game. You are a deadbeat!

One friend said with a straight-face (as TB’s jaw dropped): if they cut off unemployment insurance they would get jobs right away. WTF???

So let’s shift to some other people who don’t have skin in the game. Aside from TB’s usual rant about hedge fund operators and their ‘carried interest’ loophole which allows them to convert ordinary income to 15% capital gains (unlike deferred income which grows tax-free but when withdrawn is taxed at the normal rate). Who are these people?

The number one offender is corporate CEO’s. Worse the ones who are CHAIRMAN and CEO, which is an incredibly sick conflict of interest, especially since the board becomes their lackies rather than being the stewards to the shareholders as required by law. Where is the SEC on this? That’s another story but we know where they have their heads!

So for an example we will use the eight most overpaid CEO’s according to AdvisorOne magazine that TB referred to in his 11/7 diatribe:

Here are the CEO’s – all are also Chairman, Company, 12 mo. Earnings growth, compensation. TB has now added number of employees, employee costs for $5MM

8. Kevin Sharer, Amgen  -3%, $21M, 17,400. $283

7. William Weldon, Johnson & Johnson, -4%, $28M, 14,000, $357

6. Robert Stevens, Lockheed Martin, -7.2%, $12M, 126,000, $40

5. William Swanson, Raytheon, -10.1%, $18M, 72,000, $69

4. Miles White, Abbott Labs, -11.3%, $25M, 9,000, $555

3. Laurence Fink, BlackRock, -17.9%, $23M, 10,200, $490

2. Tom Ward, SandRidge Energy, -22.4%, $21M, 2200, $2,272!!!

1. John Chambers, Cisco, -31.4%, $18M, 71,820, $70

With the exception of SandRidge, it looks puny, and TB bets that that is exactly how the CEO’s see it. Cut my compensation by $5MM and it is nothing.

That is what happens with wealth. In 1987, Bank of America, sold its investment advisory, BAIMCO, to Monarch Insurance. The CEO, Tom Kelley, took $6MM (a large sum at that time, gave NONE of it to the employees…yet he had argued that he had to have ‘shadow stock’ in order to retain good people. TB joined the firm shortly after and felt that had he given just $10,000 to every employee they would have been thrilled. To him, that looked puny TB is sure so he did nothing and was despised for it. (As an aside BofA was on the ropes at the time and those who had invested in the supplemental retirement plan, which was invested in BofA stock got pennies on their investment. Many switched it to Monarch which was climbing. Two year later BofA had fully recovered while Monarch plunged, forming a perfect ‘X.’ They have so many ways to get you.). TB won’t even address what Jon Corzine did to his company!

Now let’s consider the problem most companies are having: retaining good employees. There is a donut hole: no problem with employees with less than five years, no problem with employees with more than ten years…but 5-10 they are losing their best to other companies. That is where the hiring is…from stealing other companies employees (much as those Black Friday sales merely steal buyers from competitors!). So why not reward them? That would mean higher pay for 10-20% of the employees. At SandRidge that could be as much as $10,000-20,000 while the CEO remains grossly overcompensated!

Worse, he screws up, or in this case continues to, gets kicked out with a golden parachute and some other dumb company hires him because surely he now knows what he did wrong! Wrong!

Meanwhile, employees are asked to bear a higher percentage of benefits costs, and their pay raises don’t keep pace with inflation. Nevermind the poor shareholders who see the value declining and since it is institutional ownership that controls the company, they vote WITH the board, then sell the stock if they are unhappy…poor long-term holder!

Now you know who really has no skin in the game…along with your Congressmen!

. . .   – – –  . . .

TB repeats his call for Reform Corporate America (RCA) with the goal to pressure companies to act responsibly and bring management’s actions and ‘bribery’ to the attention of the voters so they can throw out those who aided and abetted the deceit while enriching themselves at the public trough. That is your assignment Tea Party…not trying to balance the budget which will either fail or sink us into a deep recession or worse!

Early this morning, TB’s daughter went into labor and by tomorrow TB should have a second grandson!!!

Have a great day!



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