4/20/12…truth in corporate and political governance

Bloomberg Quote of the Day: “The saddest thing I can imagine is to get used to luxury.” – Charlie Chaplin – think about it, how exciting is it to get something new when you do it every day of your life…his was a sad story due to his being defamed by Joe  McCarthy in his pursuit of communists…along with hundreds of others who refused to condemn their neighbors. TB


Which leads to ‘Smile’ composed by Charlie Chaplin, words by John Turner and Geoffrey Parsons, theme from the 1934 film ‘Modern Times’ and then Chaplin’s theme song.

Smile though your heart is aching
Smile, even though it’s breaking
When there are clouds, in the sky, you’ll get by
If you smile, through your fear and sorrow
Smile, and there’ll be tomorrow
You’ll see the sun come shining through
If you’ll….


Light up your face with gladness
Hide every trace of sadness
Although a tear, may be ever so near,
That’s the time, you must keep on trying
Smile, what’s the use of crying?
You’ll find that life is still worthwhile,


If you’ll just….
Light up your face with gladness
Hide every trace of sadness
Although a tear, may be ever so near,
That’s the time, you must keep on trying
Smile, what’s the use of crying?
You’ll find that life is still worthwhile,
If you’ll


What other song expresses a man’s life than this for Chaplin?  Brilliant comedian and actor, yet pursued by the U.S. government. He was accused of being a communist by the McCarthy committee, had has U.S. re-entry visa revoked under orders of J.Edgar Hoover, returned briefly in 1972 to accept an Honorary Award from the Motion Picture Academy. Thankfully, events like this can never happen again…or can they? Yes, they can!

How could the GOP not denounce Representative Allen West for declaring that more than 75 Democratic members of the House of Representatives were communists. Scarely a denial from GOP leaders. Throw the bum out! TB


Bloomberg Top Stories:


As TB foresaw, Dow 13k, would be hard to defend. As of last nights close, once again RESISTANCE lies above the close and the psychological 13k: 13009, the 50 day m/a and 13039, the 40 day. On an options expiry day, expect the worse but be happy it we close higher that the 12964 of last night. It was a DOWN day students, so what did volume do? It climbed! $.12B shares traded yesterday and while only about average of late, it broke the boring six day string of about 3.4B shares that has persisted since a week ago Tuesdday’s 4.66B on that big downdraft…with nothing to show for it! Also, NYSE stocks executed on the Big Board which also had been trapped for five sessions rose to 822M, highest since April 10’s 972M share day – that big downer. We are now 150M below the falling 12 month average (969M)! 8 of the last 10 sessions have been less than 800M shares! Since 2/29 there have now been just THREE ‘average’ days, including 3/16’s high for 2012, and the average has fallen to 803M shares. 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. 104 of the last 115 sessions have been less than the 12 month average! Advance/Declines were negative for a second session:-1.4x vs  -2.1x vs +3.4x vs +1.3x vs +-3.3x on NYSE and -1.7x vs -2.3x vs +3.2x vs +1.1x vs -3.5x on Nasdaq. Breadth was similar: -2x vs -2.4x vs +7.3x! vs +1.2x vs -6.4x! on NYSE and -1.6x vs -2.3x vs +5x! vs -1.4x vs -6.4x on Nasdaq. New 52 week highs however ROSE to 147 vs 114 (high was 420 on 3/26), while new lows were steady at 104 vs 107. Ratio is about 1.5x positive again vs  1:1 vs +3.5x vs 1:1 vs  -2.9x vs +3x vs 1:1 vs -3x!!! vs -2x. The S&P VIX barely yet again, due to today’s options expiry to 18.36 -.28, and since this was a down day indicates positions are squared ahead of expiration. Take a break today!

Here are the results of the last five sessions: Dow -0.5% vs -0.6% vs +1.5% vs +0.6% vs -1.1%; Transports -1.4%!v s -0.1% vs +1.4% vs +0.9% vs -1%; Dow Utilities -0.3% vs -0.2% vs +0.6% vs +0.6% vs -0.3%; S&P 500 -0.6% vs -0.4% vs +1.6% vs -0.1% vs -1.3% vs +1.4%; Nasdaq Composite -0.8% vs -0.3% +1.8% vs -0.8% vs -1.5%%; Nasdaq 100 -1.1%!!! vs -0.3% vs +2% vs -1.1% vs -1.5%; Russell 2000 -0.6% vs -0.9%! vs +1.6% vs +0.2% vs -1.5%; NYSE Financials -0.4% vs -0.8%! vs +1.6% vs +0.6% vs +1.9% vs +1.6%. NYSE Financial Leaders: BAC -1.7% vs flat vs +1.5% vs +1.3% vs -5.3%!!! vs +3.4% vs +3.8% vs -4.4%!!! vs -3.3%!!, GE -3.6%! Citi, while not a  leader  was off 0.7% vs flat vs +3.2% vs +1.8% vs -3.5% and since peaking at $38.40 on 3/19, it is now off 9%!!! Beware of financials!

Global equities generally higher:  FTSE +0.2% vs -0.4% vs -0.4% vs +0.8% vs +0.3%; CAC40 +0.3% vs -0.7% vs -1.6% vs +1.4% vs +0.6%; DAX +0.8% vs -0.1% vs -0.9% vs +1.2% vs +0.3%; Nikkei DOWN 0.3% vs -0.8% vs +2.1%! vs -0.1% vs -1.7%!; Hang Seng +0.1% vs +1% vs +1.1% vs -0.2% vs -0.4%; Korean KOSPI DOWN 1.3% vs -0.2% vs +1% vs -0.4% vs -0.8%; Indian Sensex  DOWN 0.7% vs+0.6% vs +0.2% vs +1.2% vs+0.3% vs -1.4% vs +0.8%. U.S. stock futures higher but well off highs…ignore until after expiry! DOW +52 a; SPX +4.70; NDQ +8.50. Bonds continuing to rally…hmmm TIPS starting to lag!?! 10’s still thru 2% but 30’s still well above 3%.10 yr 1.95% +1/4, RECORD low 9/23 of 1.6855%; 30 yr 3.10% +1/2; Long TIP 0.72% -1/16. It was 0.57% at high. The 5 yr TIP yields MINUS 1.28%; 10 yr -.30%. Bills 0.04% 1 month; 0.07%; 3 months; 0.12% 6 mos.. Reverse Repo 0.17% vs 0.23%! 3 mo. Libor 0.47%, and 0.73%; steady. European problem sovereign 10 years, Germany is benchmark: 1.71% +2 bp’s; Italy 5.63% +4; Spain 5.90% +4;  Greece 20.66% +18; Portugal 11.32% -29; Ireland 6.63% +5.

Gold closed below $1700 for a 27th straight session, +$2, making the hit $151 since 2/28, closing $1641.40 +$1.80. 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, which remains below major support!!! The record high is $1923.70, a buying climax on 9/6. Res is $1682, the 40 day and $1693, the 50 day, then $1699, the 200 day. It is now $1644.90 +$3.50. Crude was little changed but weak, closing at $102.27 -.40. Tuesday’s low of $100.68 was worst since 2/15/12! It remains below the range of $105-110 which held from to 3/28!!! RES still at the 50 day (104.67), the 40 day (105.38), and major support at $95.96, the 200 day, all but 40 day still rising. Little changed o/n, now $102.85 +.58. $101.08, the April 4 low is still minor support – Last 4/10’s low $100.68!!! – lowest since 2/15/12!.

Now we have proof that that second trip above Dow 13k was position adjusting augmented by high frequency traders with little retail activity. Wednesday’s minor winners MCD and CAT lost 15 index points and 14 respecitively. That caused the Dow to drop to the lowest level since March 27th. It closed 12964 with a range of 13080-12896! The Nasdaq 100 was the worst performing index ,except Transports (-1.4%), closing off 1.1% thanks to APPL losing 17, QCOM 7 and GOOG 2. Only EBAY, +5 and

GILD +4, were meaningfully up. Apple closed -20 to $587.44, just above its 40 day m/a (584) with support at the 50 day (567), which is also the 1st Fibonacci retracement from the one year low to the high. From the 2008 low that number is 514!!! MAJOR SUPPORT.

Today could be quite interesting but just watch and where possible raise those trailing stops. This could be the start of a major selloff…we are almost to May, which any astute market observer knows is the time to take a long vacation!

BUT…you decide!

. . .   – – –  . . .  (SOS)   . . .   – – –  . . .  (SOS)   . . .   – – –  . . .  (SOS)   . . .   – – –  . . .  (SOS)

…After discussing the wrongdoing at Best Buy, TB has a few more to add.

This morning, Reuters reported that a Goldman Sachs employee in the San Francisco office is under investigation for insider trading…was it…HIM?…or…HER?

Yesterday, it was Chesapeake Energy (CHK), a big natural gas producer. Like Best Buy, it’s co-founder is in the spotlight, only this time not playing second fiddle to the CEO. Oh, and he is also what TB loathes: Chairman AND CEO!  CHK was a stock that TB owned choosing it over Devon Energy (DVN) in a natural gas play, when it was last cheap but before it plunged recently. The primary reasons were a lower price and higher dividend…that was the wrong move however but TB bailed long before.

Over the past 12 months CHK is off 43% vs 25% as natural gas prices sunk (stunk?) despite crude soaring to $110…showing what fools we are and how speculation drives oil prices. Of course, Europeans don’t have the luxury of vast natural gas fields as we do, so switching doesn’t make sense for them, but why haven’t U.S. power companies converted their turbines? Dunno.

Both stocks peaked on 7/2/08 – just as crude was about to top (7/14/08 at $141.89). Devon bottomed out with the rest of the market on 3/9/09 while Chesapeake hit low on 12/5/08 and skidded thru early 2009. Here is relative performance raw and annualized:

2008 high to 4/19/11               Low to 4/19/11             Change from 2008 high

DVN    $127.43 -42.5% (-13.6%)    $38.55 -75.3% (-19.7%)          -30.7% (-9.3%)

CHK          $74  -72.7% (–29%)            $9.84 -66.8% (-16.4%)           -69.2%  (26.8%)

(includes reinvested dividends in both cases you would have been better off not to)

OK, now back to CHK’s problems. It was a darling of Jim Cramer back in 2008…then when it dropped he asked the CEO to come on the show to explain. He did. Shockingly, he said that he was so enthralled with the prospects that he bought more of the stock – on margin, but when it dropped, he was sold out on failure to maintain margin! In October 2008, it was announced that he had been forced to sell 33.5 MILLION shares on a margin call (for perspective, if he still had that position he would own more shares than the SEVEN largest shareholders today – Deutsche, Calamos, Invesco, JPMorgan, Norges Bank, Geode Capital, and BlackRock!

That did it for TB with Chesapeake! It is wonderful for a CEO to invest in his own company…it is WRONG to do it on margin! To TB, like Countrywide’s Angelo  Mozillo he should have been prosecuted as his actions exacerbated losses to other shareholders! Forbes labeled him ‘a risk junkie.!

Fast forward to yesterday when the story broke that firms controlled by McClendon were in debt to P.E. Group for up to $1.4 BILLION! According to Fuel Fix, an industry rag, the shareholders are protected as they have a first lien on the property BUT McClendon used his 2.5% stake in every well as collateral for the loans! TB was unaware of that arrangement. Takeaway: some people never learn…and a gambler is always a gambler!

As for the shareholders, they should have switched to Devon years ago.

The era of the omnipotent CEO may be coming to a close with Citi finally capitulating to shareholders over Vikram Pandit’s compensation. Will JPM’s Jamie Dimon do the same? His $27 million award was equal to 67 of his investment bankers! …and God knows they are well compensated!

Speaking of ‘diamonds,’ WSJ notes that Bob Diamond, CEO of Barclay’s made a half-hearted gesture over his $4.33 million pound equivalent bonus. He and his CFO have agreed to forego ½ of their payouts until the company delivers a return in excess of the cost of capital! Good luck, Bob…you still got too much, right, shareholders?

Now back to our wonderful politicians and wannabe’s. If you aren’t already you should be factchecking the off the wall comments of Mr. Romney and the GOP. His audacious claims that 92% of the layoffs since Obama took office were women, his continual blaming of Obama on the budget deficits are falling on deaf ears…except for the party faithful which is shrinking except the extreme right.

Don’t take this as an endorsement of Obama but a call for telling the truth to the voters – they can stand the truth! In fact, according to polls in every category Obama not only beats Romney but by double digit numbers, even though his margin shows about 52% to 44%. This will be considered when people enter the polling booths come November.

It is bad enough that the U.S. Supreme Court, in possibly its most misguided decision ever, became the enabler of SuperPacs which spread nothing but negative ads and disinformation. But for a candidate to outright misrepresent the truth is an abomination.

TB can hardly wait for the debates because that kind of misrepresentation of fact will crucify anyone who continues to fabricate lies. Can’t he find enough that Obama has done wrong to criticize him on? TB could…and so could you…unless you listen to the pundits…seek truth…it’s OUR country and there are presently no saviors.

Vote for whomever you choose but not as a partisan…but as an American who, unlike so many in business, who care not about the future of their companies, shareholders, and America, but their personal wealth.

No country with a large wealth gap has survived. The number of unemployed is not due to laziness, it is due to a continual shrinking of the labor force due to a lack of jobs and a lack of skills. Cutting the budget and throwing the burden on the already cash-strapped states and local governments will merely speed us on our way to…a change?

Have a wonderful weekend! (TB would say ‘marvelous’ but that sounds too much like Romney’s assessment of the Ryan Plan…or ‘marveloose’ as Jao Joabim pronounces it in the only version of ‘S’Marvelous’ that TB has ever heard – he can also sing ‘Besame Mucho’ without it being funny.!)



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