3/14/12… Mr. Smith goes to Washington

Bloomberg Top Stories:


*Stocks Climb a Ssecond Day as Dollar Gains on U.S. Economy; Metals Decline – Gold -$35!

*Stress Tests Show How Fed Drove U.S. Banks to Bolster Their Balance Sheets

*China Said to Ease Lending Curbs for Biggest Banks to Aid Economic Growth – oops, slowing!

*Citigroup Vows to Try Again as Some Lenders Fall Short on Fed Stress Test

*JPMorgan Dividend Before Stress Tests Surprises Investors – others following…ex Citi!

*U.K. Joblessness Rises More Than forecast to Belie Recovery Signs

*Goldman Sachs Departing Employee Mounts Public Attack in NYT Opinion Piece – Gads!!!

*Thain Unlocks Shackles in CIT’s First Unsecured Bonds –  no thank to the Fed!

*VIX Hits Five-Year Low on Rally as Futures Gap Widens to Record – TB saw it first!  

*Italian Borrowing Costs Drop to Lowest Since October 2010 Auction

*Biggest 30 Year Rally in Muni’s Since October Jeopardized as Jobs Gain – hmmm

*Gap Targeting Broke Young Hipsters Seen as Flawed Plan for Revival – LMAO!!! 

Volume rose sharply to 4.35B shares vs 3.06B. The selloff began a week ago on a 4.16B share session. Finally the Dow not only broke out above 13k for the first time in EIGHT sessions! We took out Two weeks ago Wednesday’s high of 13,055.75, replacing it with a 13,177 close – just 3 points off the high! NYSE stocks executed on the Big Board rose but remain below the 1B mark at 907M shares vs 644M shares, lowest of 2012, still about 100M below average. Two week ago Wednesday’s was the highest of 2012, 1.11B shares. Since 11/1 there have been just seven 1B share days…only two in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 82 of the last 88 sessions have now been less than 1B! Advance/Declines were very positive: +4.2x vs -1.2x vs +2.3x vs +3.9x vs +3.7x vs -10.4x!!! on NYSE and +3x vs -1.3x vs +2.6x vs +2.6x vs +2.9x vs -4.6x! on Nasdaq. Breadth was very strong: +12.6x! vs -1.7x vs +1.8x vs +5.8x vs +4.7x vs -24x!!! on NYSE and +6.2x!! vs -1.6x vs +2.5x vs +2.7x vs +3.6x vs 6.5x!! on Nasdaq. New 52 week highs exploded to 386 vs 213, while new lows dipped to 28 vs 36. The ratio is now +14x vs +6x. The S&P VIX, after climbing to 20.87, highest since 2/10 while gapping up for two straight sessions fell for a FOURTH day and is now almost at a FIVE year low, since  7/16/07, closing at 14.80 -0.84. Don’t forget this is likely due to options expiry Friday! Extreme caution advised since we seem to think all of the world’s problems have been solved! Wrong!

Here are the results of the last six sessions: Dow +1.7% vs +0.3% vs +0.1% vs +0.6% vs +0.6% vs -1.6x; Transports +2.1% vs -0.3% vs +0.3% vs +1.4% vs +0.5% vs -1.5%; Dow Utilities +0.3% vs +1.1% vs +0.4% vs +0.2% vs -0.1% vs -0.4%; S&P 500 +1.8% vs flat vs +0.4% vs +1% vs s+0.7% vs -1.5%!!! Nasdaq Composite +1.9% vs -0.2% vs +0.6% vs +0.9% vs -1.4%; Nasdaq 100 +1.9% vs flat vs +0.4% vs +1.3X vs +0.7% vs -1%; Russell 2000 +2.1% vs -0.3% vs +1.3% vs +1.3x vs +1.1% vs -2.1%!!!; NYSE Financials +3.3%??? vs -0.3% vs +0.3% vs +1.4% vs +1.1% vs -2.8%!!! NYSE Financial Leaders: BAC +6.3%!!! vs -0.8% vs -0.1% vs +0.5% vs +4% vs -3.3% vs -2%; C +6.3%!!! vs +0.5% vs +0.6%; GE +2.4%.

Global equity markets generally stronger – except China: FTSE +0.4%+0.8% vs -0.1% vs -0.1% vs +1.3%; CAC40 +0.8% vs +1.1% vs -0.1% vs +0.1% vs +1.9%; DAX +1.3%! vs +1% vs +0.1% vs +0.2% vs +0.7%;  Nikkei +1.5%! vs +0.1% vs -0.4% vs +1.7% vs +2%; Hang Seng DOWN 0.2% vs +1% vs +0.2% vs +0.9% vs +1.3%; Korean KOSPI +1%! Vs +1.1%! vs -0.8% vs +0.9% vs +0.9%; Indian Sensex +0.6% vs +1.3% vs -0.4% vs +2.1% vs closed. U.S. stock futures slightly higher…tenuous? DOW +10 after being up 33 earlier; SPX +0.60; NDQ +2.25 – that’s it and high was just 2 points above this??? Bonds in the tank: 10’s and 30‘s well above 2% and 3% respectively: 10 yr 2.19% -5/8. RECORD low 9/23 of 1.6855%; 30 yr 3.33% -1-1/4; Long TIP 0.85% -15/16. 0.57% at high. The 5 yr TIP yields MINUS 1.36%; 10 yr -0.18%. Bills 0.07% 1 month; 0.08% 3 months, 6 months 0.15%. Reverse Repo 0.26%. 3 mo. Libor 0.47%, and 0.74%, stable.

Gold closed below $1700 for a second straight session but with a high of $1706.20, closely $1674.20 -$26.60!!!…$5 below the 200 day m/a.  A week ago Tuesday’s $1792.70 intraday high, not seen since 11/16! It had been above $1600 since Jan. 31, and is now $1646.40 -$47.80, taking out the 200 day m/a – like buttah!!! The record high is $1923.70, a buying climax on 9/6. Res is now $1681, the 200 day and $1701, the 50 day, then $1721, the 40 day, all rising! Major support is $1652, the 1/25/13 low! Crude also closed slightly higher at $106.72 +.38. It is now $106.77 +.43, with support at the 40 day (102.50), the 50 day (102.21), and major support at $94.95, the 200 day, all rising. Resistance remains at $110.

We had some fairly positive economic news but not enough to warrant a rally of that magnitude or more importantly a drop in the VIX to nearly a five year low! It’s as if we are now happy especially after reading the FOMC minutes…see they think they are stupid and going to keep rates low while the economy roars taking stock with it…get serious folks! This is incredibly overconfident!

What is most troubling to TB with a global financial crisis still out there is that the strongest sector was NYSE FINANCIALS!!! Up 3.3% and look BOTH BofA and Citi the volume leaders and both up 6.3%!!! Look at these headlines from this morning on Bloomberg:

7:39am EDT – Bank of America Leads Banks With Low Dividend, Buyback and Outlooks

And at the same time: Fed’s Test Hurdles Higher for BofA, Citi, JPMorgan, Wells Fargo

Sorry as an ex-banker and a believer that the only reason to buy a bank stock is for the dividend, this is clearly misguided.THEN 33 minutes after the close, this:

Bank of America Sinks 1.1% – huh? Oh yeah, options expiration Friday! Remember???

As for Citi get this that also came out half an hour after the close:

Citigroup, Sun Trust Banks Capital Plans Fail Fed Stress Tests AND

Citigroup to Submit Revised Capital Plan to Fed This Year

Not to worry though…these were all likely high frequency traders flexing their muscles. Sheesh!

FLASH! Ah, this morning TB found the reason for the banks rising: the Fed gave preliminary approval to JPM to raise its dividend 20%…not that that is a big deal and now the others, ex poor Citi are following suit. Beware though as the dividends remain a pittance and will!

The other big story was gold which plunged $26.60 to close at $1674.20 breaking below the 200 day m/a’s – it was already just below the 50 day and 40 day. Why? Dunno…

Here’s a  wrinkle for you: overnight stocks are not up that much…remember yesterday’s rally was on LIGHT NYSE volume…bulk of it was on ETN’s which means high frequency traders which you should discount heavily! You decide

. . .   – – –  . . .  (SOS)

…the number of movies in the slug now number four…kind of weak on this one, but apropos.

See, Mr. Smith is just like you and I. A nice guy who wants to go do some good for the country, you know, community service. He may have gotten there the old fashion way – with money, or been swept there by the fever of the Tea Party but unless he preached the gospel according to Grover Norquist and did as he was told, he is on the hot seat!  But TB digresses…

See the important thing here is he doesn’t know anyone that is feeling the pain anymore…he gets free dinners with lobbyists who just want to help with his workload. He is being told (now this is at the state government level with the epicenter right here in Minnesota but other states are seeing it too), that we can solve all of our problems by getting rid of the damned unions (wait, didn’t the Gipper already do that…oh, right, not municipal unions.

TB has been listening to testimony from union members that are saying they don’t like how their money is being spent. The current law says that you can pay just 85% if you don’t want them using it for political purpose. But Minnesota wants a law that says no one has to join the union or pay dues even though the union is representing them in collective bargaining. Think about this: there has been little bargaining power against management anyway, and this will make it worse.

Good news? Due to the mild weather which also produced energy savings in the north central and northeastern states, Lowe’s and Home Depot are doing incredible business. Combined they will add 15,000 seasonal jobs…oh boy…rally stocks…except these are part-time, minimum wage with NO benefits. That is not what we need…and is the spending just what would have been done in April anyway? You decide.

TB has a friend who says that a SuperPac study shows that the money isn’t being allocated in line with corporate interests but the CEO’s! Same must apply to regular PAC’s as the CEO pulls the strings there too. In other words, let’s keep wages down and MY tax rate low. The company? I’m only going to be here for three years or so, so let some other poor slob worry about it then. So if we cut the union power let’s at least ban SuperPacs who merely provide disinformation and serve no good purpose!

A study released last week by Pew (TB thinks), shows that savings for retirement are improving, BUT 43% in 2010 had saved less than $10k slightly better than 2009’s 39%. At the other end of the spectrum 27% vs 20% had saved $1,000 towards retirement. People want to save more but 16% are saving less citing: job losses, mortgage problems, and suspension of matching corporate 401(k) contributions. See…there is no need for a union…just ask management!

How have we…and especially our elected officials become so callous? Easy, they are afraid of not being re-elected…not being endorsed by groups tied to the wealthy and losing contributions from the wealthy. TB doesn’t think this is what the founding fathers envisioned…do you?

The January JOLTS number is out and guess what: the number of job openings to unemployed persons remains at 1:4! Compare and contrast to the 2000 recession when it hit just 2.9:1, and that was in a mild recession! Don’t even get TB started on pay or jobs with no benefits.

What we need is to take the food stamps away from those lazy people and their damned kids. Take away unemployment and they would all find a job tomorrow…uh huh…

This from Robert Reich yesterday: The Fed just reported that household wealth increased from October thru December…yay!!! That is the first gain in three quarters. But guess what? The entire gain came from stock prices rising! They even made up more than the loss due to housing.

Now look at this because either way, if you believe or don’t in the wealth gap this is one remarkable number: financial assets of U.S. households increased by $1.46 trillion in Q4 – that is a big number! Ah, but the wealthiest 10% took away $1.3 trillion of that sum and the top 1%, $554.8 billion. Hey, that doesn’t leave much for the rest…especially when 90% of the financial assets are held by the riches 10% of Americans and of that, 38% by the top 1%.

(One point Reich failed to make was one TB pointed out in January: that big Q4 rally that negated the third quarter plunge and brought the level back to the level of last May!!! Still, those holding stocks were better than the majority whose main asset (if they still have it), is their home.)

Lastly, some of you think I have been overly unfriendly towards Goldman Sachs. Read the Op Ed by a former Goldman insider in today’s NY Times…perhaps TB wasn’t tough enough on them?

Is this a great country or what?

Have a great day!




  1. ldh said

    TB, that survey was by EBRI, employee benefit research institute… ebri.org

    reading the “why I am leaving Goldman” is so anticlimactic. it’s as if he is the last guy to find out about the corrosive culture, even though it has been common knowledge for several years now.

    • traderbill said

      I felt the same but people get blinded by money…you and TB excepted…our taxes back us up on that!. Thanks for the source on the study too!

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