6/11/12…money doesn’t by happiness, but…

Bloomberg Quote of the Day: “No more things should be presumed to exist than are absolutely necessary.” – William Occam…sounds like he taught the quants and developers of modern portfolio theory?…omit the exogenous variables, they don’t count…except when they do! TB

 

From Keep Calm and Carry On: “It isn’t so much that hard times are coming; the change observed is mostly soft times going.” – Groucho Marx

 

“If you can keep your head when all about you are losing theirs, it’s just possible you haven’t grasped the situation.” – Jean Kerr

 

Bloomberg Top Stories:

*Italy Moves Into Debt-Crisis Crosshairs After Spain Bailout Rally Fizzles – one day later???

*Stocks Rise With Euro on Bank Aid Program; Sovereign Default Risk Declines – for now!

*Spain Bondholders Likely to Rank Behind Official loans After Bank Bailout – hmmm???

*Goldman Sachs Predicts 29% Commodity Index Gain Led by Energy, Base Metals – short???

*Wien Unbowed by $1 Trillion Equity Loss Joins Birinyi, Golub Seeing Rally? Oh, OPM!!!

*India Likely to Be First BRIC Country Cut Below Investment Grade, S&P Says – so what???

*Hottest New Product in Corporate America Supply Chain is Skilled Students – drilling down!

*Gorman to Blankfein Treated Like Junk before Moody’s Cuts – MS/GS trading at junk levels!

*AMR Sees Labor Contracts as Biggest Hurdle to Exiting Bankruptcy This Year

*Euro Bloc Faces Greek Election Giving First Test of Spanish Bank Firewall – good luck!

*Socialist Set to Be Largest Group in France’s Parliament, Exit Pools Show

 

The Dow opened down, traded below Thursday’s low by about 18 points then rallied to within 1 point of its high and closed there, in what was essentially a parallel session lacking conviction but driven by the Spanish bailout (sic). It was up 1.1% as were the other key indices (+0.8%-1.2%), but with volume at lowest level since March 12th! That has to tell you something?…at least if you think about these things: faux rally!

NYSE stock volume was just 3.3B shares vs 3.9B shares. June 1st’s 4.6B, highest since March 16 will probably not be seen for the rest of the summer. NYSE stocks executed without the aid of the ETN market (where the high freq geeks play) had volume of just 693M shares vs 855M well below the average since 3/1 of 824M shares. 24 of the last 45 sessions have been less than 800M shares!!! Since 2/29 there have now been just 11 ‘average’ days (mostly down!), including 3/16’s high for 2012 of 1.65B and just ten have been above 900M – 955M 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 SEVEN sessions less than 700M shares. 134 of the last 150 sessions have been less than the 12 month average! Advance/Declines were positive: +2.4x vs -1.2x vs  +7.1x vs +2.8x vs -1.4x vs -5.9x on NYSE and +2x vs -1.5x vs +4.7x vs +1.9x vs -1.1x vs -5.3x on Nasdaq. Breadth was stronger: +3x vs -1.4x vs +11.8x!!! vs +4x vs -1.9x vs -12.3x!!! on NYSE and +3.9x vs -2.9x vs +12.4x!!! vs +2.5x vs  +1.2s vs -23.9x!!! on Nasdaq. New 52 week highs howver dipped to 116 vs 127, 44 (high was 420 on 3/26), while new lows ROSE to 78 vs 58. The ratio remains positive again for only the fourth time this quarter at +1.5x vs +2x vs +2.5x vs -2x vs -8.7x!!! The S&P VIX, which closed on 6/6 below the 200 day moving average of 25.04 dipped again to 21.23 – .49 but only after rising to 23.10 intraday and  remains above the 40/50 day at 20! Crazy month of June…options expiry this Friday.

Here are the results of last 8 sessions: Dow +0.8% vs +0.4% vs +2.4% vs +0.2% vs -0.1% vs -2.2%! vs -0.2% vs -1.3%; Transports +1.1% vs -0.1% vs +3% vs +0.4% vs -1.3%!!! vs -3.2%!!! vs +0.9% vs-2.1%!; Dow Utilities +0.4% vs +0.7% vs +1.3% vs +0.4% vs +0.3% vs -0.8% vs +0.4% vs -0.8%; S&P 500 +0.8% vs flat vs +2.3% vs +0.6% vs flat vs -2.5%!!! vs -0.2% vs -1.4%; Nasdaq Composite +1% vs -0.5% vs +2.4% vs +0.7% vs +0.5% vs -2.8%!!! vs -0.4% vs -1.2%; Nasdaq 100 +0.9% vs -0.4% vs +2.4% vs +0.4% vs +0.8% vs -2.6% vs -0.5% vs -0.8%; Russell 2000 +1.2% vs -0.6% vs +2.6% vs +1.2%! vs flat vs -3.2%!!! vs -0.1% vs -2%!; NYSE Financials +0.5% vs flat vs +3% vs +1.5% vs -0.3% vs -3.1%!!! vs +0.6% vs -2.3%!!! (KBW Banks +1.7% vs +0.1% vs +3%! vs +1.5% vs -2.9% vs -4.9%!!! vs n/a vs -2.5%!!!; Nasdaq Banks +1.3% vs +0.3% vs +1.8% vs +0.3% vs -0.8% vs -3.8%!!! vs n/a vs -1.9%!!!); NYSE Financial Leaders: BAC +1.9% vs -2.9% vs +7.6%!!! vs +3% vs -2%! vs -4.5%!!!; C +3.2% vs -0.9% vs +5.3%! vs +3.7% vs -2.2% vs -4.2%. GE +1.1% vs +0.6%; JPM +2.7% vs -0.8% vs +3.4% vs +3.2% vs -2.9% vs -3.7%! Not leaders but…WFC +0.8% vs +0.7% vs +1.5% vs +1.5% vs -0.5% vs +1.1% vs -5.9%!!! USB +2% vs -0.4% vs +1.6% vs +1.4%.  

Global stocks rallying, except India due to downgrade?: FTSE -0.6% vs +1.6% vs +1.4% vs closed x 2; CAC 40 -0.7% vs +1.2% vs +2% vs +0.8% vs +0.8%; DAX -0.5% vs +1.5% vs +1.7% vs +0.7% vs -0.6%; Nikkei +2% vs -2.1% vs +1.2% vs +1.8% vs +1% vs -1.7%!; Hang Seng +2.4%! vs -0.9% vs +0.9% vs +1.4% vs +0.4% vs -2%!!!; Korean KOSPI +1.7% vs -0.7% vs +2.6% vs closed vs +1.1% vs -2.8%!!!; Indian Sensex -0.3% vs +0.4% vs +1.2% vs +2.7%!!! vs +0.2% vs +0.2%  U.S. stock futures higher but at low end of range: DOW +59; SPX +7; NDQ +13.50.

Bonds weaker again continuing Friday’s slide: 10 yr 1.657% -5/32 – record low 6/1 of 1.442%!; 30 yr 2.76% -3/8; Long TIP 0.54% -9/16. A new record low yield of 0.347% on 6/1. The 5 yr TIP yields -1.08%; 10 yr -0.53%. Bills 0.04% 1 month; 0.08% 3 months; 0.13%. Reverse Repo 0.27%. 3 mo. Libor 0.47%, and 0.74% – steady. European problem sovereign 10 years, Germany-benchmark: 1.34% +1 bp’s; Italy 5.87% +13!!!; Spain 6.32% +15!!!; Greece 27.32% -37?; Portugal 10.12% -42???; Ireland 6.98% -5.  

Gold is mired below $1600 which is critical support and resistance with further res at $1610-12, closing at $1591.40 +$3.40. Since breaking above on June 1, it HAD traded in a narrow range of $1610-1642. It closed above $1600 for just four straight sessions not seen since 5/9. The hit is $202 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 is $1612, the 40 day and $1621, the 50 day, then $1689, the 200 day – all falling. It is now $1595.90 +$4.50. 5/2’s o/n low of $1526.70 was lowest since 12/29! Crude remains weak, closing little changed for a second straight session at a weak $84.10 -.72, but only after trading down to $82!!! On 4/26 it closed at $104.55…that is a 20% drop! RES at $96.44, the 200 DAY, the 40 day (95.81), and the 50 day (97.24) – 40/50 dropping fast. 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 $84.68 +.58! No QE3, no oil rally!

Again, the data shows that with all indices up 0.8%-1.2% following Wednesday’s all up 2.4% made the rally questionable and smelled of domination by high freak traders. It was…nothing to support it. Friday’s rally may have taken the steam out of short covering for options expiry but expect volatility thru Wednesday. After Friday we can worry about quarterend and what the hedge funds do after T+3. Are we having fun yet?

Facebook, rallied from its second lowest close ($26.31 vs $25.87) to $27.10 but essentially ‘skidding’ above the lows. Meanwhile, Groupon (GRPN) who from the get-go misstated revenues is now in trouble over issuing coupons that expired before the holder could use them. Why would any sane person…institution?…invest in something like this?

Spain’s banks have been ‘propped up’ as opposed to bailed out. This means that the reforms required of Portugal and Ireland and Greece do not apply here…PIG vs PIGS.

But look at the cost: unemployment in Spain is in excess of 25% – for under 25 years of age, 50%! Meanwhile the ‘perps’ – wittingly or due to their bad judgment…continue with business as usual, but those bank stocks are barely higher this morning meaning it gained nothing. Not much gain for $125 billion…see, it doesn’t buy everything.

Trade at your own peril this week…and for the remainder of the month…then go away!

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

…it can and will continue to buy elections. You can thank the ‘strict constructionist’ Supreme Court led by Chief Justice Roberts for that in the partisan-charged Citizens United decision which said that corporations are people too…in campaigns. To those who said that was only fair since unions can vote, recall that unions have members (while corporations have boards and shareholders who are blind to what the CEO’s are doing).

A cartoon yesterday had a reporter asking Roberts if he is concerned about the people, to which Roberts replied “corporations are people”. The reporter pressed saying that polls show the people are dissatisfied with the decisions…Roberts says “but what about the corporations?” The reporter says they back you 100%. Roberts: “the people have spoken.”

As Sandra Day O’Connor quipped, “where in the Constitution does it say a corporation is a person?”

So if you hate unions don’t get overjoyed at the outcome of the Wisconsin recall…it may come back to bite you when it is them vs. the people. Too much is being made of this being a victory and proof that the unions were the recall. Here is TB’s take:

When the GOP-led legislature showed no compromise and the Dems walked out and hid, people started to question the fairness. The unions pushed this to advantage, but people began to sign petitions…as time went on their anger subsided as it always does until it became more apathy AFTER the votes for recall were in. Then the outside interest groups pumped money into ads outspending by 9:1 and the opposition was doomed.

See this as a precursor to the rest of the elections this year. Whichever side you are on (and as TB clearly stated he is not in favor of recalls over differences of policy, only over gross negligence…had the recall not occurred it would have built up and then legitimate change might have occurred), you lose when outside money…66% of funds collected for Walker…came from out of state most notably by the Koch brothers who would prefer NO government. This is not the will of the people but the will of big money.

It is bad enough that Wisconsin allows recall on policy matters but to then allow the challenged to spend unlimited funds in defense while only allowing the opposition $10,000 per individual…is sheer lunacy. A bad situation has been made worse. But this is now mitigated by the legislature recalls which have now given the Dems control of the senate. So the re-election is moot…the power Walker had is now gone and TB predicts he will now be a lame duck.

Let the games begin…you ain’t seen nothing yet! Jefferson knew how quickly a democracy can cease to exist…and we are on borrowed time. Money can’t buy happiness but it can buy the illusion of happiness for a few at the expense of the majority.

Without credit, would we have a middle class now? You decide.

Have a great week! At least it should prove exciting!

TB

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