5/24/12…let the games begin…and it won’t be pretty!

CORRECTION: Mea culpa…options expiry was LAST Friday! Coming back from vacation is hell! TB

 

From Keep Calm and Carry On: “If you’re in a bad situation, don’t worry it’ll change. If you are in a good situation, don’t worry it’ll change.” – John A Simone. Jr.

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” – Mark Twain – never doubt his wisdom or the propensity of grown men to be fools.

Bloomberg Quote of the Day: “I not only use all the brains that I have, but all that I can borrow.” –Woodrow Wilson – in the case of Facebook, you can borrow too many of them! TB

TB saiz: Take the sage advice of Groucho Marx and never join a club that would have you for a member. That goes for IPO’s  – even more so!

Bloomberg Top Stories:

*Stocks in Europe Rise as Commodities Advance Before U.S. Economic Reports- they never learn! Or perhaps it is what they are: traders not investors – ‘trading’ sardines? TB

*Deepening Euro Area Slump Foreshadowed in Output, Confidence Data – ah, the U.S.!

*European Leaders Clash on Joit Bond Sales as Hollande Challenges Merkel – egad!

*Facebook Falling to $22 by December Seen in Europe’s Structured Warrants

*Facebook IPO Debacle Triggers Legal Debate Over Selective Disclosure Rules – sick!

*Morgan Stanley’s Gorman (CEO) Said to Join Facebook Call on Price – he did it!

*Junk ETF Short-Sellng Surges as JPMorgan Best Spoil Swaps – more fallout, Dimon?

*S&P Finds Low Volatility, High Value Stocks are Winners – value vs. growth!

*Hewlett-Packard Rises as Job Cuts With Profit Buoy Turnaround Speculation – Hah!

*RIM’s Head of Global Sales Departs in Latest Shakeup for BlackBerry Maker

*Nasdaq OMX Puts at Two-year High Following Facebook IPO Mistakes – get it???

*JPMorgan Trading Loss Occurs a Bank Deposits DWARF Loans! It was OUR $$$!!

*Gold Boom Spreads Mercury Poison as 15 Million Exposed From Metal Refining!!!

*Iran Nuclear Taks Flounder in Bid to Forestall Threat of Military Strike

*Egyptians Wrestle With Presidential Choice as Vote Reaches Half-Way Mark

A string of downs, a solid ‘up’ day, and then a day The Dow was up and then it closed FLAT for two straight sessions. Still down, dirty and sloppy! Friday’s options expiry will be all there is to come in for tomorrow. Since peaking on 5/1 at the highest level since the crash, 13338.66, the Dow has been DOWN for 13 of the past 16 sessions, and the loss is still 5.4% from that days close. Furthermore, the 12 of the past 15 have resulted in LOWER LOWS. Yesterday, the Dow spent the entire session deep in the red, with the session high, just before the close just 5 points positive! At the low the Dow as up just 95 points from the yearend close, and just 94 points above the 200 day m/a…easily reached in just one session! The Dow is up just 2.3% ytd but still 5.4% below the 3/30/12 close!  Dow Utilities remain the only index up qtd, and just 1.4%! As for Financials, so far this quarter they are off 11.3% surpassed only by Telecom -17.4% and Semis -15.2%, and Oil Services -12%. Gold and Silver are now performing better at -10.6%! Ouch! Transports, +1.2%,  were the big winner yesterday, thanks to truckers and rails, and led by FedEx

NYSE stock volume was steady at 4.06B vs 4.08B shares. NYSE shares executed on the Big Board rose slightly to 863M vs 846M shares. 18 of the last 34 sessions have been less than 800M shares!!! Since 2/29 there have now been just SEVEN ‘average’ days (mostly down!), including 3/16’s high for 2012 of 1.65B, but average has fallen to 820M and just eight have been above 900M – 960M is 12 month average. Since 11/1 there have been just nine 1B share days…only five in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 125 of the last 139 sessions have been less than the 12 month average! Advance/Declines were slightly positive: +1.5x vs +1.1x vs +5.8x vs -3x vs -6.3x!!! vs -2.1 vs -1.8x vs -5.4x!!! vs -1.5x on NYSE and +1.2x vs -1.6x vs +3.4x vs -2.6x vs -4.2x!!! vs -2x vs -1.2x vs -3.1x vs -1.5x on Nasdaq. Breadth was similar: +1.8x vs -1.1x vs +3.8x vs -2.2x vs -7.5x!!! vs -2.5x vs -4x! vs -7x!!! vs -2.3x on NYSE and +1.4x vs -1.3x vs +5.5x vs -1.7x vs -7.9x!!! vs -2.6x vs -2.3x vs -2.9x vs -1.1x on Nasdaq. New 52 week highs were about unchanged at 43 vs 41 from an incredibly low 34 (high was 420 on 3/26), while new lows ROSE again to 272 vs 141! Ratio is now negative by -6.3x!!! The S&P VIX, off slightly to 22.33 vs 22.48.

Think about this: Apple once again a big winner +2.4% adding 7 points to the NDQ 100. In other words, without AAPL, it would have been DOWN…ditto the S&P 500!

Here are the results of last 9 sessions:  Dow -0.1% vs flat vs +1.1% vs -0.6% vs -1.2%! vs -0.3% vs -0.5% vs -1%! vs -0.3%; Transports +1.2% (best performer) vs +0.1% vs +2.9% (best performer) vs -1.3%!!! (worst performer!) vs -3.2%!!! vs -0.1% vs +0.1%  vs -0.8% vs +0.1x; Dow Utilities DOWN 0.6% (only loser) vs +0.5% vs +0.3% vs flat vs -0.7% vs -0.1% vs -0.5% vs -0.4% vs +0.1%; S&P 500 +0.2% vs +0.1% vs +1.6% vs -0.7% vs -1.5%!!! vs -0.7% vs -0.6% vs -1.1% vs -0.3%; Nasdaq Composite +0.4% vs -0.3% vs +2.5% vs -1.2% vs -2.1!% vs -0.7% vs -0.3% vs -1.1% vs flat; Nasdaq 100 +0.3% vs -0.2% vs +2.7% vs -1.2% vs -2.1%!!! vs -0.7% vs -0.4% vs -1% vs flat; Russell 2000 +0.7% vs -0.7%! vs +2.3% vs -0.9% vs -2.3%!!! vs -0.7% vs -0.2% vs -1.4%!!! vs -0.2%; NYSE Financials +0.1% vs +0.5% vs +1.4% vs -1.1% vs -2.2%!!! vs -0.9% vs -1.9% vs -1% (KBW Banks +0.8% vs +1.1% vs +0.6% vs -1.6% vs -1.7% vs -2.6%, Nasdaq Banks +0.5% vs -0.3% vs +0.8% vs -0.7% vs -1.2% vs -1.4%); NYSE Financial Leaders: BAC +2.7% vs +2.2% vs – 2.7% vs +0.6% vs -1.8%! vs -0.7% vs -2.7%! vs -2%!, C +2.6% vs +0.9% vs -1.5% vs -1.9%! vs -1.2% vs -4.1%! vs -4%!; GE FLAT vs +2.2% vs +0.3% vs +0.9% vs +0.3% vs -0.6% vs -1.1% (ranked by volume!). JPM not a leader but +0.5% +4.6% vs -2.9% vs -1.3% vs -4.3%!!! vs +1.3% vs -3.2% vs -9.3%. THESE are flash trades NOT real buyers!

European stocks now up 3 of last 4 sessions, Asia mixed: FTSE  +1.4% vs -1.9% vs +1.2% vs +0.6%; CAC 40 +1.1% vs -2.2%! vs +1.2% vs +0.8%; DAX +0.7% vs -1.8% vs +1% vs +1%; Nikkei +0.1% vs -2.2% vs +1.1% vs +0.3% vs -3%!!!; Hang Seng -0.6% vs -1.3% vs +0.6% vs -0.2% vs -1.3% vs -0.3% vs -3.2%!!!; Korean KOSPI +0.3% vs -0.9% vs +1.6% vs +0.9% vs -3.4%!!! vs +0.3% vs -3.1%!!!; Indian Sensex +1.7%!!! vs -0.5% vs -1% vs +0.2% vs +0.5% vs +0.3% vs -1.8%!. U.S. stock futures up slightly: DOW +37; SPX +5; NDQ +10.

Bonds are flat,  10’s and 30’s still well below 2% and 3% respectively: 10 yr 1.74% -1/64, RECORD low 9/23 of 1.6855%; 30 yr 2.82% -1/64; Long TIP 0.57% +1/16. New record low yield Monday of 0.535%. The 5 yr TIP yields MINUS 1.08%; 10 yr -0.45%. Bills 0.06% 1 month; 0.08% 3 months; 0.14% – steady. Reverse Repo 0.20% vs 0.24%! 3 mo. Libor 0.47%, and 0.74%; also steady. European problem sovereign 10 years, Germany-benchmark: 1.37% -2 bp’s; Italy 5.61% -3; Spain 6.14% -2; Greece 28.82%!!! +37!!!; Portugal 11.89% +7; Ireland 7.02% -11.

Gold and Crude suffered HUGE losses again. Gold closed at $1548.40 -28.20. The hit is now $243 since 2/28, a  loss of 13.7%! 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 $1630, the 40 day and $1636, the 50 day, then $1699, the 200 day – 40/50 are dropping rapidly. It is now $1567.00 +$18.66! Wednesday’s o/n low of $1526.70 was lowest since 12/29! Crude closed $89.90 -$1.76 with a low of $89.28, just 11 cents above the lowest on 11/1!!! On 4/26 it closed at $104.55…that is a 15% LOSS!!! RES at $96.39, the 200 DAY, the 40 day (100), the 50 day (101.31). First res $92.52-54, the lows of 12/16-12/17, a prior double bottom, MINOR sup at $89.17, the 11/1/11 low!!!. It is now $90.66 -.76.

Facebook (FB) rose just $1 to $32 (+3.1%), but remains off 15.8% from the price ‘fixing’ and 28.9% from the opening day high. This is a digrace but pales at the greed and stupidity of Morgan Stanley in trying to prove they were BSD’s (refer to The Bonfire of the Vanities). If you want to know how import FB was to them, the CHAIRMAN/CEO James Gorman, led the IPO team and came up with the pricing strategy the night before. First, take away HIS chairman title along with Dimon and every other greedy CEO. Second, what kind of genius prices it at the high because he didn’t want a ‘pop’ of more than 10%. Thus their (and rest of syndicate) profit of $176M looked great. Third, not only price it high but increase the offering by 25% taking the juice out of it. Fourth, both their and Goldman’s analyst lowered earnings estimate but only told key clients of the firm. Then there was the Nasdaq glitch (TB’s investment manager client told him that they had delays all day on the Schwab platform due to volume), which caused the IPO to open very late and left buyers not knowing if they were ‘filled’ and thus unable to sell as the price dove. This is unquestionably the worst IPO handling of all time…Bloomberg slug today calls it a ‘debacle’ – aka a fiasco! Worse, suits have now been filed against the underwriters, Morgan Stanley specifically, Facebook, Mark Zuckerberg, and the CFO. Let the games begin!

Look folks…TB’s advice is to stay sidelined here and perhaps install some trailing stops to avoid losses. After Friday we will be in the doldrums…and a week from Friday we get the payrolls numbers. Given the layoff announcements at General Mills and Medtronics, and the final tally at Hewlett-Packard of 27,000…do you think it is going to be a good number? That will set the stage for a long, depressing summer…but then, you decide!

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

TB just joined a group that is led by Pimco’s Paul Sculley, David Kotok, and others; the Global Interdependence Center. He is going to attend their 4th Annual Rocky Mountain Economic Summit at Jackson Hole on July 27th. No, this is not the Fed enclave which TB would love to attend but a group very concerned about the markets and Wall Street.

There is now a huge disconnect within the investment community. That is the buy side (professional money managers) and the sell side (Wall Street bankers). TB believes that nearly all of us on the buy side want better transparency in markets and are not blinded by greed. Most of us have 30, 40, 50 years experience and are highly disturbed at what has happened to a business we entered into, not to become rich, but to make a good living and to provide value to our clients.

TB has served on both sides as well as being head of investments for a bank. He spent six years on the ‘sell’ side doing institutional bond sales for Merrill Lynch and L.F. Rothschild, before giving up ‘the big bucks’ (he was never truly in that category) to return to what he felt was of more value, managing clients money. He has never regretted that decision, nor has he regretted striking out on his own to form his own firm.

TB’s disillusionment came in seeing MBA interns at Merrill in the early 1980’s who when asked, would say they had no intention of making this a career but getting rich in five years and then doing something else. In the 1970’s, this was more of a father/son business…most firms were partnerships and those that were publicly owned did not exhibit the greed and lack of restraint that is rampant today. That followed Ivan Boesky’s ‘greed is good’ speech, Michael Milken’s manipulated junk bond market that destroyed or weakened numerous companies, and exponential increases in CEO compensation as TB’s friend Graef Crystal has attested. Perhaps no one surpassed the greed and incompetence than Sandy Weill, who was the force behind the destruction of Glass-Steagall and with it any semblance of regulation. True, Glass-Steagall would not have prevented the crisis…it was overtaken by personal greed and short-term goals. Jamie Dimon, who spent most of his career at the side of Weill is the poster child for this. A smart if not brilliant man, he has sacrificed his morals, used taxpayer money to enrich himself, while shareholders of the most famous bank in America if not the world, have continued to suffer.

Unless and until we can cure this disease, we will face bigger and bigger financial disasters until even the Fed cannot help us…we may even be at that juncture right now.

Yet, our Congress is frozen by ideologues, many of whom are ‘on the take’ or at the very least immobilized by Wall Street lobbyists.

It is Reform Corporate (and Congressional) America – NOW!…that needs to be the number one item on our agenda, not balancing the budget which the GOP will never do.

There you have TB’s view…you decide whether he is right or wrong…

Until tomorrow…

TB

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