12/5/11…the committee to save the world!

This week’s economic calendar is fairly light (especially in comparison to this week’s). The highlight of the week will be the November ISM Non-Manufacturing Survey (Monday). We will also get October Factory Orders (also on Monday), October Consumer Credit (Wednesday), Wholesale Trade (Thursday), and October International Trade and early December Consumer Sentiment (Friday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA (NOTE: if you need economic analysis for your business, he provides the best, most concise, data that I have found and while stating his opinion, gives you the opportunity to draw your own conclusions.TB)

 

TB’s Question of the Day: If Grover Norquist could extract ridiculous oaths from our members of Congress  who do NOT answer to him, and then bully, threaten and blackmail them into submission, why doesn’t he extract promises from them to cut their pay and benefits, and prohibit insider trading? TB

 

Bloomberg Top Stories:

 

*Merkel Heads to Paris as Euro Leaders Prepare for Summit to Halt Contagion- or not!

*Stocks Rise as Euro Rallies on Proposal to Reduce Italian Debt; Oil Gains

*Treasuries Welsom Bund Losses With U.S. Seeking $1Trillion for Deficit

*Monti’s Debut Austerity Package Risks Rousing Italian Wrath – as with Greek wrath!

*Bond Sales Top $1 Trillion as Europe Fails to Deter Disney – we’re going to Euroland!

*Italians Passing on Prosecco in Worst Christmas Since World War II – not even Prosecco???

*Wrath of Jobs over Android Awaits Validation in Apple-HTC Patent Decision

*Funds ‘Flatfooted’ as Iran Tension Drives Crude Past $100 – but pump prices are DOWN???

*Cocoa Slump Boost Outlook for Hershey Chocolate Profit – ah the cocoa bean again!

*Steinem’s Wall Street Occupied as Women Earn 81 Cents on Each Male Dollar!

*Putin’s Hold on Parliament Weakens Opposition Parties Advance

*Islamist Dominance in Egypt Election May Be Sealed in First-Phase Runoffs!

*Sarkozy Efforts to Align With Merkel on Euro Provoke French Germanophobia    


Volume rose modestly from a below average 3.82B shares to an average 4.1B shares TB doubts there was anyone outside the Obama administration that couldn’t see thru the numbers. After a failed attempt to rally, wioth the Dow up 80 points on the open, then struggling to +120, it came back down to earth closing off less than one point…a definite ‘E-ticket’ ride.  Meanwhile, NYSE stocks executed on the Big Board were were only modestly higher to 872M, from 855 – which was the lowest ‘full’ session since 11/15… day following a huge rally??? 14 of the last 16 sessions have been less than 1B! Don’t forget those stop losses for stocking stuffers! Advance/Declines were slightly positive:+1.4:1 vs -1.5:1 vs +30:1 on NYSE and +1.5:1 vs -1.6:1 vs +4.5:1 on Nasdaq. Breadth was mixed for a second straight session???: +1.6x vs +1.2x vs +30x on NYSE and MINUS 1.1x vs PLUS 1.3x vs +10x on Nasdaq. New 52 week highs rose to 172 from 156 while new lows declined to 62 from 83. The ratio remains about 2x positive. VIX rose minusculely,  closing 27.52 +.09, holding above the 26.46-27.01 gap up from 10/27 and 10/31. Third time below 30 in the past 17 sessions. Meanwhile the 12 mo. ave. lies at 23.50 – fear prevails!

Here are the results of the past three sessions: Dow FLAT vs -0.2% vs +4.2%!!!; Transports +0.8% vs -0.8% vs +4.8%; S&P 500 FLAT vs -0.2% vs +4.3%; Nasdaq Composite FLAT vs +0.2% vs +3.8%; Nasdaq 100 DOWN 0.3% vs +0.6% vs +3.8%; Russell 2000 UP 0.6% vs +0.9% vs +5.9%!!!; NYSE Financials +1.3%! vs  -0.9% vs +5.9%.  BAC +1.7% vs +7.3%!!!. That is an incredible discrepancy and shows of a lack of confidence in the markets.

Global markets strong, euphoric? FTSE +0.7% vs +1.5% vs +0.5% vs +2.9%; CAC 40 +1.4% vs +1.9% vs flat vs +3.5%;  DAX +0.8% vs +1.7% vs -0.5% vs +4.2%!; Nikkei +0.6% vs +0.5% vs +1.9% vs -0.5% vs +2.3% vs +1.6%; Hang Seng +0.7% vs +0.2% vs +5.6%!!! vs -1.5% vs +1.2% vs +2% vs -1.4% vs -2.1%!!!; Korean KOSPI  +0.4% vs flat vs +3.7% vs -0.5% vs +2.3% vs +2.2% vs -1% vs -2.4%!!!; Indian Sensex -0.3% vs +2.2% vs +2.2% vs +0.7% vs -1% vs +3%, up only six times in the last 18 sessions due to huge withdrawals from India funds: U.S. stock futures in never-never land: DOW +136; SPX +16; NDQ +28. Hold on…this is almost EXACTLY how much they were up Friday morning…and we ended up little changed and mixed! Bonds weaker again but yo-yoing with stocks for a SEVENTH straight session with 10’s and 30’s still well above 2% and 3% respectively. 10 yr 2.10% -5/8. RECORD low 9/23 of 1.6855%; 30 yr 3.10% -1-1/2; Long TIP 0.80% -1-15/16. .57% at high three weeks ago. The 5 yr TIP yields MINUS 0.94%! 10 yr 0.00%. Libor  0.53% 3 mo., and 0.75% 6 mo. – 3 mo. above 0.50% and six month now AT 0.75%…intervention has kept it steady for four straight sessions, but yearend approaches! Bills 0.01% from one month out to six months 0.04% – 3 mo -0.01%!!

Gold rallied nicely on Friday and is well above $1700. It closed at $1751.30 +$21.50 but is now $1737.70 -$13.60. Have you noticed that it is now correlated to stocks? Weird, huh? The record high is $1923.70, a buying climax on 9/6. SUP is again $1702/1720, the 40/50 day m/a’s. Res at $1800, the November highs. Crude rose Friday closing $100.96 +.76, and is now $101.83 +.87 $100 holding – so far! Support at the 200 day (95.974), still rising. Major support is the 40/50 day m/a at $94-91.31, also still moving up.

…that was the cover of Time magazine on Feb. 15th, 1999…coincidentally the day after Valentine’s Day…the annual lovefest. The committee included Alan Greenspan, Robert Rubin, and Larry Summers. Note that in little more than a year of that publication we were headed down and would not have come up had it not been for the creation of the most malicious loans in the history of mankind, that enriched a few (and the brave few who shorted them and had the timing right), the economy would never have gotten back to even normal.

Now we have a new ‘committee to save the world’ under the auspices of the world’s most powerful central banks (powerful here being almost an oxymoron…hmmm, moron…). But the stock market bought into it…just as they did in 1999, rallying of sorts…actually quite well. But the question is: are stocks of great value? Especially growth stocks? Where is the growth to come from? As in 1999, we had already had the growth.

Of course, the bulls will tell you that stocks are CHEAP! Cheep! Cheep! Like little birds taught only one phrase. But are they cheap? Are they cheap when correlations to other asset classes are unpredictable? On Friday morning stocks were up, bonds were up, and gold was up! This pattern has happened several times since the stock rally began in March 2009! Can you make a rational investment decision when this is occurring? Worse, when trading volume is average at best, and volatility, as measured by the swings is at record highs!

We are also told of the ‘equity premium’ to bonds which is laughable given that interest rates are so artificially low (until that it credit default swaps on YOUR sovereign debt go off the charts). Then what about that risk premium? Not to worry as the ‘committee’ will bring it back in line with just a few magical words.

Look at this performance, and have mercy on your poor investment manager…it’s a jungle out there:

Returns to 12/2/11:  5 days    QTD        YTD   12 months

Dow                               +7.0%   +10.1%  +3.8%    +5.6%

Transports                  +9.1%   +18.1%    -3.1%     -2.4%

S&P 500                      +7.4%   +10.0%    -1.1%    +1.6%

Nasdaq Comp            +7.6%     +8.8%    -1.0%    +1.4%

Nasdaq 100               +7.0%     +7.6%   +3.8%    +5.1%

Russell 2000           +10.3%   +14.1%     -6.1%     -2.8%

NYSE Financials        +6.1%     +6.5%   -18.1%  -15.7%

Note how ALL indices have tracked for last five days. Then note how the two best performers have been the two WORST long term performers. Would you have bet on any of these indices over the long time period? Have some sympathy for your portfolio manager who is undoubtedly doing his best in a most difficult time period. Also note that all CNBC talks about is the five day performance…is it sustainable? You decide!

Going back to the original Committee. Alan Greenspan may go down as the worst Federal Reserve Chairman of all time…or at least should…having presided over three…four?…market bubbles bursting, and never doing a thing except continue to provide excess liquidity as the grew because: free markets are the best decider of value. What’s a chairman to do? As for Robert Rubin, he not only destroyed the one document that served us well for more than half a century (Glass-Steagall), but went on to enrich himself thanks to Sandy Weill at Citigroup, then pleaded ignorance (however a whistleblowers document viewed last night on 60 Minutes informed him in a memo that 60% of the loans Citi originated did not comply with their lending standards!). As for Summers, he too concurred then for some inane reason was brought back by Obama as his chief economic advisor…and did nothing to help the economic recovery. What a trio!

”You can fool all of the time, and most of the people some of the time but you can’t fool ALL the people ALL the time”…or can you? Who uttered that famous quote? None other than Honest Abe! But it appears if you are Grover Norquist or Spencer Bachus (R-Alabama), you can do that.

Mr. Norquist has not compunctions about playing the devil and getting elected officials signing contracts with him that should be against the U.S. Constitution. But he doesn’t ask any concessions of them…why not have them sign an oath to cut their pay and benefits…after all with a 9% approval rating they should feel blessed to still have a job!  No, he doesn’t see the need for them to feel the people’s pain.

As for the esteamed (sic) Mr. Bachus, he who continues to trade his portfolio as he did when working his way through college, on Nov. 17th he announced that the House Financial Services Committee of which he is Chairman, would hold hearings the very next week on insider trading. The world is waiting Congressman…and waiting…nary a word from him or the committee.

. . .   – – –  . . .

TB finishe reading Inside Wall Street by Mike Mayo. This should be required reading for all bank officers…but management would prefer they not read it. It would also be wise for those buying bank stocks to read it, because management won’t.

Then on Friday, TB heard Bethany Mclean (The Smartest Guys in the Room), in a speech delivered at the Chautauqua Institution, (here is the link to the speech: Mclean). She too echoes the concerns of TB, and Mayo.

Finally, last night, 60 Minutes, interviewed two whistleblowers on the financial crisis. One, a senior vice president in charge of fraud at Countrywide (kind of an oxymoron too?), the other a senior VP with Citigroup. Neither has been contacted by the Justice Department. This further argues the case presented by TB, Mayo, AND Mclean. Doesn’t anybody get it?

No wonder Diogenes was frustrated…nobody would help him. How blind are the American people and how owned is our government that not one bank CEO has been prosecuted under Sarbanes-Oxley? …and how many small corporations have been damaged by its provisions on not being able to  have the same auditor and consulting firm?

TB says…throw them all out…until we get some people with the mindset Reform Corporate America…then we can fix ourselves…until then…pity.

Have a great week!

TB

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