…Gip ’em and how using mark-to-myself

From Keep Calm and Carry On: “We will never return to the old boom and bust.” – Gordon Brown, Budget Statement, 2007 – he was right…we won’t return to a BOOM!

 

“One of the very difficult parts of the decision I made on the financial crisis was to use hard-working people’s money to help prevent there to be a crisis” – George W. Busyh, 2009 – prevent? We were already deep in crisis…and if he had succeeded in privatizing social security we would be in full depression right now…don’t you just love IRA’s? Egads!

 

Bloomberg Quote of the Day: “You cannot be mad at somebody who makes you laugh – It’s as simple as that.” – Jay Leno – really, Jay? What about politicians???

 

This week’s economic calendar is fairly light and largely devoid of really important indicators (giving us a break after this week’s deluge). The highlight of the week will be the May ISM Non-Manufacturing Survey (Tuesday). We will also get April Factory Orders (Monday), revisions to Q1 Productivity & Costs (Wednesday), April Consumer Credit (Thursday), the April International Trade deficit and April Wholesale Trade (Friday). In addition, the Federal Reserve will release its Beige Book (Wednesday) in preparation of the June 19th – 20th FOMC meeting. Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA

 

Bloomberg Top Stories:

 

*Germany Says Spain Can Seek Financial Aid as Rajoy Urges a ‘Banking Union’ – oh boy!

*Growth Slowdown Seen for Third Year With U.S. Avoiding Recession – want to bet on that?

*Treasury Bears Capitulating as Lowest Yields Seen Lasting Through Election

*JPMorgan’s So-Called hedge Proving Awkward for Fed Knowing Meaning of Word (perhaps Dimon thinks a hedge is something you put around you to hide everything from view? TB)

*Spanish Unemployment Rate Stays Above 24% as Tourism Boom Fades

*Banks Crimp Loss Leading Company loans as Capital Rules Bite – bite??? Or do they….

 

After a minor down day Thursday, the market absolutely tanked. We have now wiped out the entire gain for 2012. Payrolls were one factor but TB  believes not the real cause since there were problems with college grads entering the workforce but revisions were also bad. Romney making more of it than it was but notice not a peep out of him on those gas prices he blamed Obama for…they’re commodities Mitt and you of all people know that means speculative trading…the same that happened to Bush when it hit the record high! Get real and try to stop playing politics…you are looking very bad right now. Oh, and what is your plan???. Of course, Facebook is still a problem as is the revelation that JPM used different prices for their positions and customers…guess whose was higher?set yet another record for the worst-handled IPO in history with a new low close of $27.72 – $1.82 (-27.1% since pricing) and off 37% from the opening day high! Since peaking on 5/1 at the highest level since the crash, 13338.66, the Dow has been DOWN for 17 of the past 22 sessions, and the loss is now 9.2% below that days close! The Dow is now DOWN 0.8% ytd and 8.2% from the 3/30/12 close! Dow Utilities remain the only index up qtd, but even they lost 0.8% Friday and are now up just 1.2%! As for Financials, so far this quarter they are off 14.9%! Don’t you wish you sold in May?…early May or April?

 

NYSE stock volume was HUGE at 4.6B, highest since March 12 and…what does that mean boys and girls: BIG VOLUME ON A HUGE DOWN DAY!!!! Contrast to last Friday’s 2.74B, the low for 2012. NYSE shares executed on the Big Board slipped from Thursday’s  big 1.33B shared day to a solid 1B shares…the rest of the week had averaged less than 800M. A week ago Friday’s 594M was the low for 2012. 22 of the last 40 sessions have been less than 800M shares!!! Since 2/29 there have now been just NINE ‘average’ days (mostly down!), including 3/16’s high for 2012 of 1.65B, but average has fallen to 816M and just ten have been above 900M – 960M is 12 month average. Since 11/1 there have been just eleven 1B share days…only seven in 2012! Since 2/6 there have been SIX sessions less than 700M shares. 129 of the last 145 sessions have been less than the 12 month average! Advance/Declines were nasty: -5.9x on NYSE and -5.3x on Nasdaq. Breadth was even worse: -12.3x!!! on NYSE and an unbelievable -23.9x on Nasdaq. New 52 week highs continued to drift down to 42, the low was 34 (high was 420 on 3/26), while new lows soared to a dangerous 341!!! The ratio is now -8.1x. The S&P VIX, took out the 200 day moving average ancd closed at the session high of 26.66 +2.60, highest since 12/14/11!   

 

Here are the results of last 3 sessions –ex Thursday when market was down slightly insignificantly…BUT it was quarter end… Dow -2.2%! vs -0.2% vs -1.3%; Transports -3.2%!!! vs +0.9% vs-2.1%!; Dow Utilities -0.8% vs +0.4% vs -0.8%; S&P 500 -2.5%!!! vs -0.2% vs -1.4%; Nasdaq Composite -2.8%!!! vs -0.4% vs -1.2%; Nasdaq 100 -2.6% vs -0.5% vs -0.8%; Russell 2000 -3.2%!!! vs -0.1% vs -2%!; NYSE Financials -3.1%!!! vs +0.6% vs -2.3%!!! (KBW Banks -4.9%!!! vs n/a vs -2.5%!!!; Nasdaq Banks -3.8%!!! vs n/a vs -1.9%!!!); NYSE Financial Leaders: BAC -4.5%!!! vs +2.1% vs -3.1% vs +4.1%; F -4.2% vs -1% vs -1.7% vs +2.3%; GE -2.9%; WFC +1.1% vs -5.9%!!!; JPM -3.7% vs +0.6% vs -2%!and Citi -4.2% vs +0.2% vs -3.8%!!!.  

 

European stocks mixed, London closed, Asia weak: FTSE closed CAC 40 +0.8%; DAX  -0.6%; Nikkei -1.7%!; Hang Seng -2%!!!; Korean KOSPI -2.8%!!!; Indian Sensex +0.2%  U.S. stock futures little changed after Friday’s bashing: DOW -5; SPX +1.80; NDQ +5.

  

Bonds off following another HUGE rally Friday with l0’s in a session where the 10 year hit a record low yield of 1.442%!!!: 10 yr 1.50% -1/2; 30 yr 2.56% -15/16; Long TIP 0.37% -3/8. A new record low yield of 0.347% Friday. The 5 yr TIP yields MINUS 1.02%; 10 yr -0.60%. Bills 0.03% 1 month; 0.07% 3 months; 0.11% – plunging! Reverse Repo 0.28%. 3 mo. Libor 0.47%, and 0.74% – steady. European problem sovereign 10 years, Germany-benchmark: 1.22% +5bp’s; Italy 5.64% -20!!!; Spain 6.32% -14!; Greece 28.63%!!! -351!!; Portugal 11.35% -4; Ireland 7.11% +3.  
 
Gold rose big time and closed above $1600 for the firs time since 5/9, closing at $1622.10.70 +$57.90. The hit is now $171 since 2/28!. 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/Sup is $1618, the 40 day and $1627, the 50 day, then $1695, the 200 day – all slipping. CAUTION…it needs to hold $1600 again today and with a solid advance…don’t take positions here! It is now $1618.30 -$3.80. Last Wednesday’s o/n low of $1526.70 was lowest since 12/29! Crude was hammered, for a second day but worse, closing at  $83.23 -$3.30 for lowest close since 10/13/11!!! On 4/26 it closed at $104.55…that is a 20.4% drop! RES at $96.41, the 200 DAY, the 40 day (97.56), and the 50 day (98.98) – all falling sharply. First res $89.17, the 11/1/11 low, then $92.52-54, the lows of 12/16-12/17, a prior double bottom, MAJOR sup at $74.95, the 10/4/11 low!!! It is now $82.60 -.63. Look out below! Cheap gas for summer?

 

Think about how even Apple is hurting…due to hedge fund, not investor, selling to raise cash. After getting back up to the $560s, it  closed at $561 -$16.74…remember TB’s supports? $550, now $530, a double bottom from 5/17-18, then $500 and don’t think it will fall below $450….would be a buyer if it breaks $500 then bounces. On Friday it took 14 index points off the NDQ 100!

 

Then there is the SICK JPMorgan which plunged another 3.7% on Friday (or is its sick CEO Jamie Dimon?). Since gapping down on 5/11 it is off 21.6% and since the high on 3/27/12 it is off 31.3%!!! The latest being due to providing different market pricing for their proprietary positions and their clients…see below!

 

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

 

TB urges you to read Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das…who in laymen’s terms describe exactly what happened to cause the crash. This includes simplified explanations of MBS, CDS, derivatives and more. Read it and you will understand them: that they are heinous instruments of destruction.

 

Take the revelation that JPM was marking its positions to market at much higher prices than the clients. This has been done since before the crash with the idea of them getting margin calls and having to liquidate while the bank makes a profit. Isn’t that fraud?

 

This lack of transparency…as Paulson & Company fought with Goldman and others to get the prices raised on their CDS (short) positions even as the market was crashing. They lied while ripping off those who were long yet barely moving the pricing on shorts higher. In other words, you could have made the right bet yet suffered an erroneous (fraudulent?) margin call while the bank keep their positions from getting the margin calls…on the very same securities. Why hasn’t this been prosecuted? They had better do so soon or there will be no securities markets that a rational investor will play in.

 

TB had a great weekend and spent a lot of time talking to money managers and private investors who have lost confidence…even in the equity market. In the short run, Wall Street won…as did the politicians and lobbyists they plied (played?). But in the long run if we don’t clean up the markets and send people to jail we will be no better than the emerging markets…and you had better think what that means.

 

We have been blessed by the Euro crisis which has enabled us to sell our debt cheaply (even then though the Fed is buying half of the bonds sold beyond five years!). What will happen once the emperors clothes begin to vaporize??? You decide.

 

Have a great week!  

 

TB

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