5/17/12….what we have is…and Scotland from Glasgow to St. Andrews

Bloomberg Top Stories:

 

*European Stocks Drop With U.S. Futures on ECB Loans as Spanish Bonds Fall

*Index of Leading Economic Indicators Unexpectedly Declined Last Month

*Spanish Borrowing Costs Rise as Bond Yields Approach Greece Bailout Level

*Russia Capital Flight Quickens as Putin’s Opponents Occupy Moscow Squares –OWS???

*Mortgage RTates in U.S. Decline to Record Lows With 30-Year Loan at 3.79%!

*Goldman to Cash Out $1B of Facebook Holdings in Social Network IPO – bet against them?

*Dental Abuse of Kids Seen Driven by Private Equity Exploiting Health Fires – unnecessary and painful procedures made without parental consent – good for $, not for running a country! TB

 

The Dow had its FOURTH straight ‘lower low’ and while the declines have been minor the past two sessions, since peaking on 5/1 at the highest level since the crash, 13338.66, it has been DOWN for 10 of the past 11 sessions, the lone gain was 20 points, and the loss 5.1%! Furthermore, the 9 of the past 11 have resulted in LOWER LOWS.  after a failed attempt to rally that was little more than a dead cat bounce, closing at the exact same level as January 31, 2012…so much for that Q1 boost! We are now off 4.6% from the 3/30 close! Still like stocks? TB doesn’t! The other major indices are even less encouraging. As for Financials, so far this quarter they are off 10.2% surpassed only by Gold and Silver -18.9%, Telecom -17% and Semis -13.4%, and Oil Services -14.4%. Has the bear awakened? …after all, it IS May! All major indices were down with a rare tie at -0.7% for both Nasdaq indices AND the Russell 2000? Warning? Up to flash traders!

 

NYSE stock volume was 4.26B shares vs 4.08B – once again better volume on a DOWN session! NYSE shares executed on the Big Board were 872M shares vs 869 million shares. 17 of the last 29 sessions have been less than 800M shares!!! Since 2/29 there have now been just FIVE ‘average’ days, including 3/16’s high for 2012, but average has fallen to 810M and just six have been above 900M – 961M is 12 month average. Since 11/1 there have been just eight 1B share days…only four in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 122 of the last 134 sessions have been less than the 12 month average! Advance/Declines were negative for a FOURTH straight session: -2.1 vs -1.8x vs -5.4x!!! vs -1.5x on NYSE and -2x vs -1.2x vs -3.1x vs -1.5x on Nasdaq. Breadth was similar: -2.5x vs -4x! vs -7x!!! vs -2.3x on NYSE and -2.6x vs -2.3x vs -2.9x vs -1.1x on Nasdaq. New 52 week highs were unchanged at 81 (high was 420 on 3/26), while new lows surged yet again to 313 vs 284 – a VERY HIGH level! Ratio is now negative by 4x! vs 3.6x.  The S&P VIX, which gapped up on the open Monday, had an ‘outside day’ (higher high and lower low) on Tuesday, and a slight INSIDE day (so close though it was actually parallel), rising just 0.30 to 22.27. This is the highest it has been since 4/26 and has ranged from 15.75 (low on 4/26) to 22.70 (now a double top!). Once again, this is a clear warning that market is losing complacency…sell in May???

 

Here are the results:  Dow -0.3% vs -0.5% vs -1%! vs -0.3%; Transports -0.1% vs +0.1%  vs -0.8% vs +0.1x; Dow Utilities -0.1% vs -0.5% vs -0.4% vs +0.1%; S&P 500 -0.7% vs -0.6% vs -1.1% vs -0.3%; Nasdaq Composite -0.7% vs -0.3% vs -1.1% vs flat; Nasdaq 100 -0.7% vs -0.4% vs -1% vs flat; Russell 2000 -0.7% vs -0.2% vs -1.4%!!! vs -0.2%; NYSE Financials -0.9% vs -1.9% vs -1%, biggest loser again! (KBW Banks -2.6% vs -1.2%, Nasdaq -1.4% vs -0.7%); NYSE Financial Leaders: BAC -0.7% vs -2.7%! vs -2%!, JPM UP 1.3% vs -3.2% vs -9.3%; C -1.2% vs -4.1%! vs -4%!; GE -1.1% (ranked by volume!)

 

Global stocks WEAK, except Japan, are you starting to get it? There is a huge risk of a double dip here…markets have been in denial: FTSE  -1.3%! vs -0.9% vs +0.2% vs -2%!; CAC 40 -1%% vs +0.3% vs +0.8% vs -2.1%!; DAX -0.8% vs -0.8% vs +0.4% vs -2%!; Nikkei UP 0.9% vs -1.1%! vs -0.8% vs +0.2%; Hang Seng -0.3% vs -3.2%!!! vs +0.8% vs -1.2%; Korean KOSPI  +0.3% vs -3.1%!!! vs -0.8% vs -0.2%; Indian Sensex +0.3% vs -1.8%! vs +0.7% vs -0.5%.. U.S. stock futures opened weaker, now slightly higher : DOW +17, range 109 points; SPX +1.60, 14 points; NDQ +3, 25 points. Is this a great day for an IPO or what? …or what!!!

 

Bonds slightly better. TIPS are way overbought and will correct or at least underperform here! TB would ‘hedge’ – long the basis, short the TIP! But what does he know? Nothing, you know nothing, right Mr. Cramer? l10’s and now 30’s well below 2% and 3% respectively – first time since 1/18’s 2.96%! 10 yr 1.76% +3/64, RECORD low 9/23 of 1.6855%; 30 yr 2.89% +3/16; Long TIP 0.68% +1/32. It was 0.57% at high. The 5 yr TIP yields MINUS 1.17%; 10 yr -0.37%. Bills 0.07% 1 month; 0.09% 3 months; 0.14% 6 mos. – unchanged since 4/26! Reverse Repo 0.28%. 3 mo. Libor 0.47%, and 0.74%; also steady. European problem sovereign 10 years, Germany-benchmark: 1.42% -5 bp’s; Italy 5.88% +7; Spain 6.32% +8; Greece 27.38%!!! +14; Portugal 11.10% flat; Ireland 7.07% -2.
 
Another bad day for commodities! Since peaking on 8/1, the GS Commodities Index is off 2.2%. Gold continues to plunge and has been below $1600 since 5/9. It closed at $1536.60 -$20.50, making the hit $255 since 2/28, loss of 14.2%! 2/28’s $1792.70 intraday high was not seen since 11/16! The record high is $1923.70, a buying climax on 9/6. Res is $1641, the 40 day and $1648, the 50 day, then $1702, the 200 day – 40/50 are now dropping rapidly. It is now $1548.20 +$11.60. Yesterday’s o/n low of $1526.70 was lowest since 12/29! Crude closed $92.81 -$1.17 with a low of 93.02, lowest since 11/3!!! On 4/26 it closed at $104.55…that is an 11.2% LOSS!!! We took out 4/10’s low of $100.68, worst since 2/15/12 on May 4, a day crude fell by $4.55, or 4%! The range of $105-110 had held from 3/28!!! RES at $96.24 the 200 DAY!!!, the 40 day (102.27), the 50 day (103.11), and now $92.52-54, the lows of 12/16-12/17, a prior double bottom!!!. It is now $92.70 -.11. Yesterday’s o/n low was 91.81!!!, lowest since 11/3/11.

 

Stocks being trashed on Spain…especially Banco Santander. If you don’t know, thanks to the Spanish Central Bank’s tight regulations – like Canada’s. Santander was one of the best banks in the world…today, thanks to the capitulation to mediocrity of the central bank and risk-taking by management, it trades just above its 3/9/09 low (also the day our markets bottomed), yet they have NOT yet cut the dividend so consider where it will go when they do – they have no choice: indicted dividend yield is 20.4%!!! In April, these incompetents not only paid a dividend they RAISED it, nearly double!!! By the way do you know the symbol of the stock: STD – ‘nuf said!.Their Brazil bank (BSBR) was the largest non-U.S. IPO on 10/7/09. The ADS priced at $13.30 fell to $9.82 in May 2010, rallied to its record high of $15.66 on 11/4/10, then plunged to $6.73 on 11/25/11, back up to $11.30 in early March and closed last night at $7/96…Mr. Toad, what a wild ride!

 

Banking is NOT rocket science – understand this Mr. Dimon – and that means you are all using smoke and mirrors to fool us that you performance is stellar when it is all due to leverage…derivatives to spike the return on equity, while subjecting shareholders to great risk…while you make big bonuses and have your golden parachutes. Question: since the majority of the banks profits came from the problem division, clawbacks are not only for ‘consideration’ but should apply to ALL officers of the bank…including you, Mr. D.!

You still haven’t explained your concealing the American Century fiasco while you and the perp, J.E. Staley, reaped huge bonuses? ‘Splain it to me…please! Then recuse yourself from the board of the NY Fed…not that there is another NYC banker qualified to sit on the board…replace you with Vilnik? Pullease! Also, when is the SEC going to do its job and PROHIBIT one person serving as BOTH chairman and CEO, a clear conflict of interest as the board is supposed to be the steward for the shareholder – not the rubber stamp of its chairman! Do it! NOW!!! Oh and get this…according to a source at JPM reported by Bloomberg, the perp Bruno Iksil, aka “London Whale ” who manipulated the market and when that came out created the loss is STILL employed there! Why? To unwind his mistakes? Mr. D. please explain that too…if you can!

 

Best Buy’s (BBY) ‘pop’ on Monday following the announcement that CEO Brian Dunn’s affair was merely a violation of company policy and no company funds were used, and the founder and Chairman Richard Schulze had to step aside. Lastly

 

A CNET news story today also says the ‘the Geek Squad’ has a form with a box for you to write down your password…not stated, but they say it is your ‘desired’ password to ‘help them update your transactions.’ At least one customer has had his account compromised by this. Also, if asked to temporarily change your password so they can access it, they can then go in, if they want and permanently change your password. On top of this they charge outrageous prices for their service from computer novices. Heed.

 

Facebook IPO today?  Reiterating: current ownership: GS 10.4% of outstanding…think they will continue to hold? DST Clobal LTD 5.8%. T.Rowe Price 1%…have fun! Don’t forget the real owner, Mark Zuckerberg, 26.9% of outstanding…ta da! TB saiz: do NOT buy this stock…if you got it on the IPO sell it today on a large pop propped by hedge funds and flash traders…going down? TB hasn’t seen anything in his emails from Facebook for months…last night he got THREE saying friends, by name, had mentioned TB…is this an attempt at hype by Zuckerberg? Sure looks that way to TB. Caveat Emptor!

 

Here are some prominent IPO’s of the past five years…nothing can go wrong…go wrong…

 

Fortress Investment Group (FIG) 2/9/07, priced at $35, high on first day of trading, $37, close $31! Steadily fell to $0.77 on $12/26/08 (TB’s birthday!), high after that was $8.30 on 5/6/09, closed yesterday at $3.12!, that folks is a 91% loss! See, they thought that as a hedge and private equity manager, it would get a big share of profits..uh, no…because most were done outside the covered operations (like Bain, where they used OPM to buy up companies, then charged those companies for consulting services, etc. and reserved huge chunks of stock for themselves to be spun off…not just Bain but it is SOP for all private equity firms…it’s not about you making money, but them! Right, Mr. Romney?

 

Blackstone Group (BX), priced at $37 on 6/21/07…see they and another firm took FIG public and saw it was such a good deal they did the same! High that day was $38, close $35.06. Also plunged to $3.55 on 2/27/09. back up in a choppy manner to $19.49 on 4/21/11, then down and downer to a $12.22 close last night…OPM is so nice. By the way, CHAIRMAN AND CEO, Stephen Schwarzmen, testified before Congress that if they took away the carried interest for hedge fund operators (15% tax rate), the money would dry up…this is second only to Lloyd Blankfein being quoted as saying he is “doing God’s work.” Such hubris! Meanwhile a good fund and the first to go public more than 10 years ago and headed by Larry Fink, also chmn/CEO, a much smarter, less greedy guy, but well-paid nevertheless, has a total return of -5.2% for the past twelve months (compensation $21.9M). Schwarzman earned $5M last year, shareholders have lost 24.8% over last 12 months…pity him…

 

Linked In (LNKD), Priced at $83 on 5/18/11, high was $122.70 THAT DAY, close $94.25, then down to $60 on 6/20/11, back up to $115 on 7/28/11, back down to $56.45 on 11/28/11 and finally closed at $113.49 last night. Total return IF you were in IPO 36.85%, if you bought at the high -7.53%, if you bought at the record low, 78.14%, nice, right? Takeway…buy when everyone else has become a seller…but when is that???  

 

 Ok, enough negativity…look at Google (GOOG) a stock TB’s wife begged him to buy. Two smart guys but naïve in business of finance, Sergey Brin and Larry Page started this company and violated the ‘quiet period’ rules just before the IPO…they then brought in Eric Schmidt to run the company…fortunately for shareholders. The IPO was a bust and eventually went by ‘subscription’ through brokers like Schwab. After talk of $100 plus it came out on 8/20/04 at $85, peaked at $747.74 on 11/7/07, down to $247.30 on 11/21/08 and after rising to $629.51 on 1/4/10, oscillated in a 200 point range ($433-$670), closing last night at $624. 12 month return…18.6%. See, good things happen to those who wait and can resist hype!

 

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

 

…we flew from Dublin Airport to Glasgow and TB got some good information from the flight attendant. A guy who resembled Hugh Hefner was seated ahead of TB and the flight attendant’s jump seat was in the aisle one row forward. The guy, from Harrisburg asked her about the economy. TB became all ears. He had tried to prod others to talk about it but as Michael Lewis reported in Boomerang, the Irish are very friendly people, but they won’t talk about their problems, in fact, they cannot understand why Americans are so willing to do so. They even feel that the brief prosperity was not deserved, after all they have been a depressed economy for centuries…perhaps that explains it. But they are very angry with their government which was elected on a pledge to drop the guarantees of bank debt and is now incurring even more debt! Also at the Catholic Church over child abuse, abortion issues, birth control, and especially the Archbishop who had the audacity to say (when confronted with emails that showed he was aware of the violations yet did nothing), why single me out…other people knew and did nothing. So much for the adult in the room…could be a good candidate for office in the U.S. Congress, even President?

 

Ah, but not this flight attendant. She was around 30, married with a small child. Her husband has a good paying job and with her salary they bought a home for around 600k euros. It rose in value to over 1M. Clearly these people could afford the home…also her mother provided some money for both her and her sister to buy a home. She said she would now be lucky to get 300M for her home which means she is locked in for the duration of her 33 year mortgage! There was just a tinge of anger in her voice, otherwise she was very matter of fact but disillusioned. She cannot afford more children (GOP pay attention), and is worried about paying for her son’s college tuition. This drives home what TB has tried to: the vast majority of people did not buy homes to rip someone off, in fact they could afford them, but it was the liars, flippers, and the abetters, loan offers who altered financials that were the problem. How can we be so insensitive to others misery?

 

We drove around Glasgow, a tourist unfriendly city as in a half hour of driving and mapreading we couldn’t find the old town…except the university section which is pretty but we decided to get going…we drove up to Stirling Castle at the site where one of the great battles occurred. From there to the town of Callander, a small town in the Trossasachs (glens). We turned and crossed a bridge from the 1650’s with an inn and shop on the right which boasted more craft-brewed beers than anywhere else in Scotland. On the right was a neat little farmhouse, The Bridge Inn, operated by a woman in her 80’s. Both of her sons have left (fled?) the country for Australia and the U.S. The one who came here worked in Silicon Valley, cashed in on the boom and sold out before 2000, and is starting a small winery up in the Wine Country above Sacramento. What struck TB by this is that it is just like Ireland – smart, well-educated youth that can run circles around us, leaving their families to make a decent living. It began in Ireland with the potato famine and is best explained in a song, The Flight of the Earls  – originally Irish but applies here as well. She went out of her way to please us…and fatten us with a trad Scottish breakfast (as they did in Ireland which allowed us to eat just twice a day, even so TB gained six pounds).

 

The next day we drove through the Trossasachs, along the River Clyde and Loch Long, up to Oban which is a beautiful harbor on the Firth of Forth, then to Port William, then to Mallaig where we took a ferry (big ferry, just six cars as it is early in the season. Hint: this is a GREAT time to travel before the narrow roads are flooded with trailers!). We arrived at Ardvasar on the Isle of Skye and drove to Kyle where we stayed in a B&B on a five acre estate operated by a retired investment geek, like TB. His was an interesting story including becoming a missionary after tiring of the trade.

 

From there we drove over the passes and then down to Loch Ness where we saw the four locks at Port Augustus. Ness is the largest loch but we still didn’t see Nessie. On the way to Inverness we stopped at Urguart Castle…over a thousand years old but destroyed when the king needed a mobile force to defend against the Jacobins. The ruins have been partially restored and it is definitely a must-see! Then into Inverness for lunch at a tapas restaurant we had heard of…despite our arriving between meals but the owner, a Scot who lived for a few years in Barcelona fixed us paella anyway…a great lunch! Then on to the desolate…although we were told pretty when the vegetation blooms…hills to Balmoral Castle. We spent the night nearby in Braemar in a graystone B&B across from the home where Robert Louis Stevenson wrote Treasure Island. It was a very long day…but fruitful.

 

The next day we drove to Edinburgh, with an incredible stop at St. Andrews. Any time friends have visited there all you hear about is the golf course – seven actually, punctuated by the Old Course, the temple of golf. But the town is a beautiful university town with the remains of a beautiful cathedral and home to the University of St. Andrews where William and Kate met. At the clubhouse…not the old one which is men only and private…we had ‘scotch coffee’ as it was freezing and raining out. TB knowing of their affection for Arnold Palmer, and how many times his wife had asked for one but come up with nothing asked if they served the drink…of course, they did…always on the menu.

 

Then back across the Firth of Forth with view of the famous railroad bridge, once one of the engineering wonders of the world. We arrived in Edinburgh, another complex city and finally found our hotel for three nights, Jury’s Inn.

 

Tomorrow: Edinburgh and Leith

 

TB

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