4/9/12…recovery? What recovery?

This week’s economic calendar has an inflation focus with March Import & Export Prices (Wednesday), the March PPI (Thursday), and the March CPI (Friday). We will also get February Wholesale Trade (Tuesday), the March Treasury Budget (Wednesday), February International Trade (Thursday), and the preliminary April Consumer Sentiment (Friday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA Bloomberg Quote of the Day: “That’s the motivation of an artist – to seek attention of some kind.” – James Taylor, who has ‘seen fire and rain.’ Also, true for most of us, no? Bloomberg Top Stories: *JPMorgan’s Iksil Fuels Prop-Trading Debate as Voldemort Swaps Meet Volcker *S&P 500 Futures , Asian Stocks Drop as Yen Gains on U.S. Jobs; Oil Declines, Gold up! *Jobs Pose Challenge S&P 500 Has Overcome Nine Times During Rally…but 10? New Qtr? *Italy Vies With Spain for Investor Funding as ECB Boost Fades *AOL to Sell $1.1 Billion of Patents to Microsoft, Return Cash to Investors – desperation? *Worker Shortage Dogs Trail King Factory as Jobs Go Begging in S.D. –another goldrush! *American Universities Infected by Spies From Abroad as FBI Detects Danger – Iran??? *North Korea Preparing Nuclear Test After Rocket Launch – but they promised??? *Annan Initiative in Doubt as Syria Killings Flare Unabated Before Deadline – oh boy! *Iran Agrees to Restart Nuclear Talks With U.S., Allies This Week; Possible Compromise *UBS Faces Billionaire Olenicoff in Lawsuit Over Blame for His Tax Felony – go get ‘em! The following, except TB’s commentary is from Friday’s for those who didn’t see it. Friday’s Market Reaction to Employment Report: U.S .stock futures PLUNGED reversing a modest pre-release gain, Dow -130, S&P -13.20, NDQ -25.50 – oh boy, won’t Monday be fun! Bonds added to gains with 10’s at 2.07 +15/16, 30’s 3.23 +1-3/4 – still very weak! Dollar Index off modestly while the Pound is the big winner at $1.588 +.0059. Commodities markets closed…as will everything by the normal opening. Traders will be very nervous over the weekend and Europe will be closed for Easter Monday. Is this a great world or what? …or what! The ball is in our court! Caveat emptor! Thursday’s volume dropped to 3.3B shares from 3.8B shares on NYSE listed stocks ahead of the long weekend and payrolls. NYSE stocks executed on the Big Board slumped to 715M from 832M shares, lowest since March 20, and well below the falling 12 month average (975M), by about 250M shares. Since 2/29 there has only been just two ‘average’ days, including 3/16’s high for 2012, and the average has been just 817M shares – and falling! Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 97 of the last 106 sessions have been less than the 12 month average! Advance/Declines were negative for a second session: -1.4x vs -4x! vs -1.9x vs +3x vs +1.4x on NYSE and -1.1x vs -5x! vs -2.4x vs +2.4x vs -1.2x on Nasdaq. Breadth was mixed: -2x vs -6x! vs -2.7x vs +3.9x vs +2x on NYSE and -+1.2x vs -8x!!! vs -2.5x vs +2.2x vs +1.4x on Nasdaq. New 52 week highs about doubled to a weak 124 from 68, high was 420 on 3/26, while new lows slipped to 101 vs 126. The ratio turned positive again but by just 1.2x vs -1x. The S&P VIX rose slightly for a second day after being steady for five sessions – rare –rising 16.70 vs 16.44, while intraday on 3/16 it hit 17.27, highest since March 9! Also, 3/16’s intraday low of 13.66 was lowest since 6/20/07’s 12.75. Sidelines look good to TB for now. Here are the results of the last five sessions: Dow -0.1% vs -1%! vs -0.5% vs +0.4% vs -0.1%; Transports +0.2% vs -0.4% vs -0.2% vs +1.0% vs +0.6%t; Dow Utilities -0.5% vs flat vs flat vs +0.5% vs +0.4%; S&P 500 -0.1% vs -1%! vs -0.4% vs +0.8% vs +0.4%; Nasdaq Composite UP 0.4%? vs -1.5%!! vs -0.2% vs +0.9% vs -0.1%; Nasdaq 100 UP 0.6% (thank you AAPL!) vs -1.4%!! vs -0.1% vs +1.1% vs -0.3%; Russell 2000 DOWN 0.3% vs -1.7%!!! vs -0.7% vs +1.2% vs -0.2%; NYSE Financials -0.3% vs -1.6%!!! vs -1% vs +1% vs +0.3%. NYSE Financial Leaders: BAC +0.3% vs -3.1%!!! vs -2%! vs +1.2% vs +0.4% vs -2.3% vs +1% vs -3.3%!; GE -1.3%!vs -1.1%! vs -0.3% vs -0.3% vs +0.6% vs -0.3%; F -0.3% vs -1.1%! vs +0.2% vs +1.2%! vs +0.2% vs +1.5%. Citi -0.7% vs -3.7%! Since peaking at $38.40 on 3/19, it has fallen by 9.4% to $34.79!!! Hello? Global equity markets pretty which were closed for Good Friday, are closed again, only Korea open both days, India open again. Europe rebounded Thursday so change was revised: FTSE C vs +0.4% vs -1.1% vs -0.2% vs +0.2%; CAC40 C vs +0.2% vs -0.5% vs -1.2% vs -0.6% vs -0.3%; DAX C vs -0.1% vs -1.7%! vs -0.2% vs flat; Nikkei -0.81% o/n vs -0.5% vs -2.3%!!! vs -0.6% vs +0.3%; Hang Seng C vs -1% vs closed vs +1.3% vs -0.2% vs -0.3%; Korean KOSPI DOWN 1.6% vs flat vs +0.5% vs -1.5% vs +1% vs +0.8% vs flat; Indian Sensex -1.5% vs closed two days vs -0.6% vs +0.7% vs +0.4%. U.S. stocks futures trashed for a second o/n session, but treated as one: DOW -121; SPX -15.20; NDQ -28.25!!! Bonds adding to Friday’s 30-year 1 point gain after gapping up Thursday. 10’s closing in on 2% while 30‘s have a ways to go – 3.19% lowest since 3/12/12! 10 yr 2.03% +3/16. RECORD low 9/23 of 1.6855%; 30 yr 3.19 vs 3.36% +9/16; Long TIP 0.80% vs 0.92% +7/16. It was 0.57% at high. The 5 yr TIP yields MINUS 1.27% vs -1.23%; 10 yr -.21% vs -.11%. Bills 0.06% 1 month; 0.07% 3 months, 6 months 0.14%. Reverse Repo 0.31%, steadt . 3 mo. Libor 0.47%, and 0.73%; steady. Commodities markets were also closed Friday. On Thursday, Gold closed below $1700 for a 19th straight session, but gaining $16 making the hit $151 since 2/28, closing $1630.10 +$16.00. 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, but is still below major support!!! The record high is $1923.70, a buying climax on 9/6. Res is $1693, the 200 day and $1701, the 40 day, then $1709, the 50 day, starting to roll over. Major RES is $1632, the 1/13/12 low! IT is now $1642.90 +$12.80! Crude rose Thursday but on an ‘inside day’, closing at $103.31 +$1.84 but a two day loss of 0.70. The session low of $101.08 was worst since 2/16/12! It remains well below the range of $105-110 which had held since 2/21!!! RES still at the 50 day (103.85), the 40 day (105.25), and major support at $95.55, the 200 day, all still rising. Crude getting thrashed again overnight and now $101.74 -$1.57, $101.08, the April 4 low is minor support – $101.08! Iran and N. Korea not helping it. Thursday was a weak day on low volume with only the two Nasdaq indices appreciably higher but on ‘inside’ days thus failing to recover Wednesday’s big losses, while the big guys were slightly weaker…Dow Utilities the big loser -0.5%? The rise in the Nasdaq 100 was by about 1.5:1 and half of the gain was due to Apple. Look at how AAPL has traded lately (in index points): +8 vs -4.3 vs +9.1 vs +5.6 vs -8.9 (Qtr end) vs -6.6 vs +2.5 – day it hit record high ($621.45, replaced yesterday with $634.66! NYSE Financials gained nearly 19% in Q1 but are much weaker with BofA off 4.7% in the last two sessions and Citi, which had fallen off the most actives, back in the fray, back among most actives and now down 9% since the March 16 high. Is this good for stocks? Due to the poor idea of releasing data on a day the market is closed…except bonds which were briefly open with the long bond rallying over a point, while the Dow Futures tumbled more than 100 points in the overnight market and are off 120 this morning, today should be a definite ‘E’ ticket ride! (Newbies…that is the best one stemming from the original Disneyland ticket pricing!) Don’t jump into a snake pit and ruin your entire quarter and possibly year-to-date! …or …you decide. Not only did the Supreme Court make its worst ruling ever in Citizens United, which has usurped the right to facts from the American people and candidates for office, but the JOBS Act (a total misnomer), which the GOP created, was signed into law on Friday by Obama. No bill ever does what its name implies, but this bill is worse, as James Kwak, of The Baseline Scenario wrote today: From the Times article on President Obama’s signing of the JOBS Act (emphasis added): While soliciting investment funds online has triggered fears of fraudulent schemes, the law’s backers said the greater availability of information through social media sites like Facebook would allow would-be investors to conduct their own background checks, making it difficult for such schemes to succeed (his emphasis). “While it seems reasonable to worry about these issues, there is just so much more information these days,” said Timothy Rowe, the chief executive of the Cambridge Innovation Center, which provides office space for start-up firms next to the campus of the Massachusetts Institute of Technology. TB heard Rowe on PBS in a debate and this is a sham. Not only will it allow social networks to promulgate financial ‘information’ (disinformation?), but it also allows analysts at financial firms to interact with the bankers on IPO’s! This is a travesty, especially when the SEC shirked its responsibility under Cox, while the regulators heeded Alan Greenspan and did nothing to protect investors. We have now completely destroyed what was billed as the fairest financial markets in the world, and replaced it with a grand casino. Worse, we already know from the dotcom bust, exactly will happen. Home prices improving? Guess again…and 1MM foreclosures have been added to list. The percentage home sales prices rose in February – not factoring in distressed sales. When distressed sales were included in the mix, prices actually dropped 0.8 percent from the month prior[1]. Year-over-year, prices fell two percent, which is the “smallest annual decline in 18 months” according to Capital Economics (CE). CE also noted that this trend indicates a usual pattern “following steep adjustments” and forecast that the “sheer extent of undervaluation in the housing market should eventually lead to a period of stronger growth.” – http://www.dsnews.com/articles/home-prices-rising-this-year-when-excluding-distressed-sales-2012-04-04 You probably aren’t aware, as TB wasn’t until recently that bank sales are not reported in home sales prices. Thus housing is not recovering anywhere near what the data shows. Also, with the new year comes a whole new wave of foreclosures…when will it end? . . . – – – . . . (SOS) . . . – – – . . . (SOS) . . . – – – . . . (SOS) . . . – – – . . . (SOS) …Thursday was the beginning of a new series on how some corporations, mostly financials have become ‘capitalist pigs.’ While Friday exposed healthcare lies promulgated by the GOP. They are doing their best to destroy what Alan Greenspan calls ‘free market capitalism’ all in the name of enriching the insiders even at the expense of shareholders. This is especially, but not always, true in companies where the CEO has the added ‘responsibility’ of being board chairman, which TB and others have repeatedly said is a direct conflict of interest! This is claimed to be done to hold down expenses but in reality it allows the CEO to set the board’s agenda, name directors who are often other CEO’s, and therefore set his own compensation. How many of you have worked for companies that paid a salary and bonus even for salesmen? Remember when you had a fantastic year but the company had a bad one and the check was handed to you with…we’ll catch you next time. Of course, that happened and Goldman Sachs and some other financial firms and they are having a mass exodus of some very senior people. This is especially true when the stock, like Goldman’s and Citi’s is flailing. Loyalty among thieves?…or just “it’s all about me, baby.” Last week, TB discussed the CEO’s of Best Buy and Ford (both of which have a separate chairman and CEO). A paradox on the surface but both show ‘contempt for shareholder.’ AKA: business as usual. In the case of Ford’s Alan Mulally, TB wrote a letter questioning his 11% pay raise when shareholder value has declined 20%…of course that is up 10% from the 2011 decline, but isn’t that supposed to be part of the equation for next years bonus consideration? Nevertheless, the stock is down 75% from its 2007 Ford replied with a boilerplate answer which TB printed on Thursday about what a good job he did…blah, blah, blah. Again, no fault with Mulally but shouldn’t shareholders come first?…or does he really need that $29 million, which is way more than Chrysler’s CEO does and who is the hardest working of the big three. You decide. Then there is Best Buy’s CEO, Brian Dunn, who, despite lowered estimates, missed again ($2.6 BILLION loss – that’s six straight quarters, folks! He then had the audacity to say he “feels good about the future of the company” and “there is absolutely nobody who is better suited for this job.” Chutzpah. In 2009 and 2010 he received awards as Best Retail Executive of the Year. He earned $5.03 million in 2011 – $1.06M salary, no bonus, 3.2M shares in stock options That $1.03M is up from $746,300 in 2007 – a 42% gain despite the stock declining in value the entire time! He WAS also a director of Dick’s Sporting Goods until 2009, where his total compensation $58,250 cash, plus stock and options, is $209,618, a company with a mirror trajectory….what did they know? Over the past year, Best Buy (BBY) is off 22% (29% since July 7th and 19% since Dec. 12th , and off 58% from the 4/7/06 high! – it is trading at levels not seen since April 2003!, yet still pays a dividend of 2.8% and has a five year growth rate of dividends of 11.5%. Its p/e is 6x and the p/e to growth rate (PEG) is just 1 times…not overvalued but not particularly promising either. A pity if you rode it all those years…still wouldn’t buy a big-box retailer! They are laying off 400 staffers at headquarters alone…did not disclose total, but did say they will close 50 stores and open 100 smaller ones, and are committing $800,000 to retraining employees. A Bloomberg article on March 30 says they may close as many as 200 and S&P has placed them on Creditwatch for a possible rating cut to JUNK. (It pains TB to write this as it is based in Minnesota, with a substantial number of its 180,000 employees located here.) True, part of it is circumstance but if they had paid attention to demographics they would not now be making decisions that should have been mad five years ago! Lastly, they have altered their fiscal year to end the nearest Saturday to January instead of the end of January, and recast prior results. This was done ‘to better align them with the industry.’ Whenever TB sees this, it raises a big red flag, not necessarily bad but… Remember when Goldman became a bank and moved their fiscal yearend from January to December to comply with banking regulations? They buried huge losses in the lost month. TB has written the company and will report back with their reply. (Note: TB wrote this on Friday afternoon. Sunday’s Minneapolis Star-Tribune had an article on Best Buy stating that even the founder, who supported Dunn for three years, is running out of patience.) TB has already run out of patience with over-paid CEO’s. Have a great week…and next week is another four-day’er! TB

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