3/2/12…hedge this!

Bloomberg Top Stories:

*Canadian GDP grew by 1.8% in Q4 as expected. Bank of Canada on hold.

*EU Leaders Declare Crisis Turning Point as Focus Starts Shifting to Growth! Ha! So they say!

*Stocks Decline With U.S. Index Futures as Spanish Bonds Drop; Euro Weakens – disagreeing?

*S&P 500 Volatility Flattening Fuels Risk of Complacency – you heard it first from TB!!!

*Life as LIBOR Traders Knew It Seen as Abusive by Collusion Investigators – TB is shocked!

*Greek Default Swaps Headed Back to ISDA Ruling Committee – don’t burn them yet!

*EIB Privileges in Greek Debt Plan Spur Complaints From Private Investors – you don’t say?

*Italian Deficit Narrows More Than Forecast on Spending Cuts, Tax – see, balance is the key!

*Treasuries Heading for 20 Year Bear Market, Aberdeen Asset Management Says – but stocks?

*Pimco’s Plan to Extend Bill Gross Brand to Active ETF Leaves Advisors Cold – right on!

*European Banks Miss Out on Best Bond Market Gains as Fear Trumps Greed – justifiable?

*Buffett’s Insurance Engine Set to Stall After 45 Years of Berkshire Growth – saw it coming!

*Housing in U.S. Lays Foundation for Recovery as Economy coaxes Buyers Back – Rich ones!

*BRIC Investors Losing as State Companies Forgo Earnings Amid Slower Growth

*California Attorney General Fights to Keep Madoff Suit Alive – as well he should!

*AT&T to Limit Connection Speed for Heavy Users on Unlimited wireless Plans – level not given

*Nokia Debt Rating Cut to Lowest Investment Grade by S&P, Outlook Negative – fall from grace!

*’Hiring Panic’ May Lift U.S. Job-Hunting Confidence Soon – operative word is ‘may’

*Syrian Army Takes Control of Homs District as Rebels Withdraw After Siege

*Iranians Vote in Parliamentary Elections as Foreign Sanctions Hit Economy  


Volume dropped by 50M shares to 3.9B shares from 4.2B shares, as once again the battle for Dow 13k resumed….but other than CNBC who cares? Since breaking out above 13k last Tuesday (13005 high), it has tested that level five times but for a second straight session closed below it, leaving just one close above. Wednesday’s high was the highest of the tests at 13055.75. NYSE stocks executed on the Big Board declined by 300M shares to 814M vs 1.11B shares, about 200M below average. Wednesday’s was the highest of 2012, eclipsing the 1.03B share session on 1/31 (the beginning of the current phase of the rally). Since 11/1 there have been just seven 1B share days…only two in 2012! 75 of the last 82 sessions have now been less than 1B! Advance/Declines were positive: +2x vs -2x vs +1.1x vs 1:1 vs +1.2x on NYSE and +1.3x vs -3x vs -1.1x vs -1.2x vs -1.2x on Nasdaq. Breadth was similar: +2.4x vs -2.7x vs +1.3x vs +1.3x vs +1.1x on NYSE and +1.9x vs -3.2x vs +1.7x vs +1.3x vs +1.4x on Nasdaq. New 52 week highs held at 268 from 260 while new lose slumped to 17 vs 32.The ratio rose to about 16x positive! The S&P VIX declined slightly to 17.26 -.89 – Bloomberg joining TB warning of too much complacency!  TB believes that is not the case but high frequency algorithms being in limbo.

Here are the results of the past five sessions: Dow +0.2% vs -0.4% vs +0.2% vs FLAT vs FLAT; Transports +1.1% vs -0.2% vs -0.1% vs +0.6% vs -0.4%; Dow Utilities +0.4% vs -0.2% vs +0.4% vs -0.1% vs +0.6%; S&P 500 +0.6% vs -0.5% vs +0.3% vs +0.1% vs +0.2%; Nasdaq Composite +0.7% vs -0.7% vs +0.7% vs +0.1% vs +0.2%; Nasdaq 100 +0.8% vs -0.4% vs +1% vs +0.1% vs +0.4%; Russell 2000 +0.5% vs -0.4% vs -0.4% vs FLAT vs -0.3%; NYSE Financials +1.2% vs -0.6% vs +0.4% vs +0.2% vs +0.1%. NYSE Leaders: BAC +1.9% vs -1.6% vs +1% vs +2% vs -1.8%; F +2.3% vs +1.1%; C +2.4% vs -0.4% vs +1.7%.


European equity markets mixed and little changed, Asia positive: FTSE -0.2% vs +0.7% vs flat vs -0.1% vs -1%; CAC40 +0.1% vs +0.9% vs +0.6% vs -0.2% vs -1.4%; DAX -0.1% vs +0.8% vs +0.5% vs -0.3% vs -1.5%; Nikkei +0.7% vs -0.2% vs flat vs +0.9% vs -0.1%; Hang Seng +0.8% vs -1.4% vs +0.5% vs +1.7% vs -0.9%; Korean KOSPI +0.2% vs closed vs +1.3% vs +0.6% vs -1.4%! vs +0.6%; Indian Sensex +0.3% vs -1% vs +0.1% vs +1.6% vs -2.7%. U.S. stock futures lower: DOW -17; SPX -3.30; NDQ -4.50. Bonds rallying – finally: 10’s and 30’s above 2% and 3% respectively: 10 yr 2.01%! +1/8. RECORD low 9/23 of 1.6855%; 30 yr 3.13% +3/8; Long TIP 0.76% +5/32; 0.57% at high. The 5 yr TIP yields MINUS 1.38%; 10 yr -0.257. Bills 0.06% 1 month; 0.07% 3 months, 6 months 0.12%. Reverse Repo 0.24%. 3 mo. Libor 0.48%, and 0.75%, stable.
Gold rallied from levels not seen since 1/25 closing at $1722.20 +$10.90, but low was 1695, set in o/n session. Tuesday’s $1792.70 intraday high, not seen since 11/16! It is still well above the 200 day ($1674), and has been above $1600 since Jan. 3. It is now $1712.70 -$9.50. The record high is $1923.70, a buying climax on 9/6. Sup is $1708, the 40 day, further support $1685, the 50 day m/a, both rising. Res is $1800, the 11/14 high! Crude rallied again, closing at $108.84 $1.77.   It is now $108.19 -.65, with support at the 40 day (101.44), the 50 day (100.97), and major support at $94.66, the 200 day, all rising. Resistance remains at $110.


…a survey of investors found that they were unimpressed with hedge fund performance, similarity between funds, and that they apparently found safety in the largest funds…rightly or wrongly. All wish to see more choices. Meanwhile as a top story reads, investors gave a cold shoulder to Bill Gross’ attempt to launch an ETF modeled after his successful Total Return Fund. Among the reasons was that the ETF could not use futures or options and thus would not mimic the performance of the fund – only its holdings. Those of you who have followed Gross know he doesn’t play games he can’t win…that he uses the media to transmit what he has already done thus exacerbating the moves as the wannabes follow suit. More importantly this stresses the strength and weakness of ETF’s: only invest in a fund that uses a reliable major index or sector; avoid short-sellers and especially ultra-short (or long) ETF’s; avoid commodities ETF’s and others that are billed as mimicking indices like the S&P 500 Volatility Index (VIX), and which can thus be gamed by traders. TB uses ETF’s and according to the survey the number of managers using them is growing rapidly, with good reasons. They have liquidity (sound ones by the biggest sponsors, Vanguard and iShares and a few others), provide diversification (but look how the underlying index is composed and watch correlation between different ETF’s (TB recalls Citi hyping ETF’s and their analysts recommended several – all of which contained CIti to one degree or another…that group was disbanded shortly after it began). Just don’t ignore ETF’s they are a cheap, can be traded during the day, and most importantly are tax efficient by ‘harvesting’ losses to offset gains which funds cannot do.


Once again the Dow struggled with 13k as volume plunged yet again and investors moved to the sidelines leaving the action controlled by the flash traders whose algorithms remain neutral. At some point…soon?…it will break out of its ennui and cause a big move in either direction. If you believe the market moves in the direction that causes the most pain, that move will be DOWN!

On the other hand if you are an optimist, write down all the reasons the market should be up.


About the moves: Apple is 10% of the Nasdaq 100 and has a 1 year return of 54.6%…this for a stock with a Beta of 1.06 – just about market neutral. It is in 10 broad and sector indices so consider how this stock alone altered performance last year. Remember that great first quarter, flat second quarter, miserable third quarter and fourth quarter that merely took us back to the Q1 levels! This is not to dissuade you from liking Apple but to see how it influences overall stock index prices. By the way, that one year return pales when you realize that had you bought it on November 30th you would be up 42.5%! Timing is everything (from 3/1 to 11/40 it was up just 9.4%…not bad but…). One other point, the stock hit $544 yesterday, a record high…how many shares can you afford…and if something goes wrong, goes wrong, goes wrong…


. . .   – – –  . . . note that the same old SOS applies…perhaps more so!

From the emails TB is getting, at long last people…thinking ones…are coming to the realization that the game is fixed. TB figured it out on his own but without the writings of Simon Johnson, James Kwan, and a few other wise men he would not have had the guts to continue with his thinking. To those of you who still believe it is all Obama’s fault, that some savior from the GOP will come to lead us out of the desert, think again…it isn’t going to happen…Wall Street and the wealthiest greedy Americans (think the Koch brothers), will not allow it. Meanwhile, people like Warren Buffett offer platitudes while also taking advantage of the system. Berkshire continues to fight paying taxes from 2002-2004 and 2005-2009 in two disputes with the IRS.


There is no doubt in TB’s mind that some strong leader will emerge and unite the vast majority of Americans after they finally tire of listening to the charlatan’s of both parties. Hopefully it will be someone of vision, not a despot who would destroy the strength of America, but we are now in a country that except to a minority doesn’t make some form of socialism unpalatable. How can we stand by and argue against safety nets, universal health care (which requires serious reform of the current system where doctors, hospitals, and insurers are aligned against the people), while a few prosper. Remember when even Romney said that 90-95% of families are struggling? Do you think that is get better as kids graduate from college to accept lower paying jobs and are faced with huge student loan debt, even as their parents wealth has been decimated by the financial sector’s greed. Occupy Wall Street was partially correct, but didn’t focus on reform, merely punishing them…and ignored the problem of the people they own who are our Congress.


On the lighter side, Rick Santorum claims that he suffered from criticism for his conservative views while at Penn State. But talks with his fraternity brothers showed him to be a bright student with a great personality and not particularly to the right…yes, he was conservative but conservative then is to the left of moderate today…after all, the GOP threw out that wing of the party years ago. They also provided a picture of him wearing a sweater, huge head of hair, a beard and smoking a pipe. In other words, an average Joe! There were no negative comments about him or his behavior by the way so the observations can be considered objective.


Hope you all have a great weekend,




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