6/12/12…more money ‘matters’

TB’s Quote of the Day: “The financial system has been transformed into a self-serving, grotesque casino that misallocates scarce savings, begs for and encourages speculative bubbles, refuses to restructure bad debt, and demands that the most reckless stewards of capital should be rewarded through bailouts that transfer bad debt from private balance sheets to the public balance sheet.” – John Hussman of Hussman Funds in shareholder letter…perhaps now someone will believe TB!


From Keep Calm and Carry On: “I believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson…ever hear a capitalist quote this one?


“Expenditures rise to meet income .” – C. Northcote Parkinson…his Second Law…or exceed them!!!

This week’s economic calendar has an emphasis on inflation and manufacturing activity. However, the highlight of the week will be May Retail Sales (Wednesday). We will also get May Import & Export Prices and the May Treasury Budget (Tuesday), the May PPI and April Business Inventories (Wednesday), the May CPI (Thursday), and the June Empire State Manufacturing Survey, May Industrial Production, and preliminary June Consumer Sentiment (Friday).

The following week’s economic calendar is fairly light with an emphasis on housing data. However, the highlight of the week will be the FOMC Meeting (Tuesday & Wednesday) which will conclude with the release of the member’s central tendency forecasts and Chairman Bernanke’s press conference. We will also get May Housing Starts (Tuesday), May Existing Home Sales, the June Philadelphia Fed Survey, and May Leading Indicators. Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA. (inadvertently left off Monday’s column. TB)

Bloomberg Top Stories:

*House of Dimon Tarnished by CEO Complacency Over Mounting CIO Trading Risk

*U.S. Futures Rise With Stocks on Stimulus Speculation; Spanish Bonds drop

*Top Traders Risk Expulsion From U.K. as Vis Limits Threaten Brain Drain

*Europe’s AAA Members at Risk as Leaders Still Muddling Through, Fitch Says

*Goldman Hires Schwartz Back to Run Asia After Work With Soros, Rajaratnam – here we go…

*Hong Kong Should Reconsider Currency Peg, Says Man Who Helped Introduce It

*Brazil Loses China Lifeline Amid Decade-Low Export Pace – Latin America growth at risk!

*Rising Junk Bond Yields Fail to Deter Investors Anticipating No Recession – it’s coming!

*Gulf Arab OPEC Members Said to Seek 500k Barrel Increase in Group Quote – hello???

*Oil Inventories Fall Most in Almost Five Months in Survey – hmmm?

*Gold’s Outlook Hinges on Emerging Markets Not inflation- over or underpriced?

*Portugal Dare Not Gloat as Spain Joins Regional Bailout Club – got that right!

*Romney ‘Sixth’ Son Oversees Fundraising Effort That Also Makes Him Money – rainmaker!    


The Dow opened up and hit the session high, up 99 points immediately then slowly declined for the remainder of the session to close off 143, a range of 252 points as once again high freak traders determined the fate. Do you really think Spain deserved that much of a rally? The bailout (sic) mechanism hasn’t even been ratified by EU members…or how the money will be used and what restrictions Spain (the EU is out of this one since it isn’t a bailout!) will place on the banks while the people are continuing to vent their anger at the government. Buy stocks? What fools we are!


NYSE stock volume barely budged from a weak 3.3B shares to 3.34B 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) also rose slightly to 740M vs 693M shares vs 855M on Thursday, well below the average since 3/1 of 824M shares. 25 of the last 46 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. 135 of the last 151 sessions have been less than the 12 month average! Advance/Declines were NEGATIVE…leaving in the one from June 1 for reference: -3.9x vs +2.4x vs -1.2x vs  +7.1x…vs -5.9x on NYSE and -3.4x vs +2x vs -1.5x vs +4.7x…vs -5.3x on Nasdaq. Breadth was even worse: -11.3x!!! vs +3x vs -1.4x vs +11.8x!!!…vs -12.3x!!! on NYSE and -6.5x vs +3.9x vs -2.9x vs +12.4x!!!…vs -23.9x!!! on Nasdaq. New 52 week highs however rose to 156 vs 116 But that was due to the opening surge so ignore it! (high was 420 on 3/26), while new lows also ROSE to 119 vs 78.. The ratio remains positive but likely not today for only the fifth time this quarter at +1.5x vs +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 rose after FIVE straight declines to 21.10 intraday Friday with a close of 23.56 +2.33 – am 11% gain in options expiry week? but only after rising to 23.10 intraday and is again well above the 40/50 day at 20! Crazy month of June…options expiry this Friday.


Here are the results of last 4 sessions leaves out some serious earlier declines: Dow -1.1% vs +0.8% vs +0.4% vs +2.4%; Transports -1.4% vs +1.1% vs -0.1% vs +3%; Dow Utilities -0.4% vs +0.4% vs +0.7% vs +1.3%; S&P 500 -1.3% vs +0.8% vs flat vs +2.3%; Nasdaq Composite -1.3% vs +1% vs -0.5% vs +2.4%; Nasdaq 100 -1.7%!!! vs +0.9% vs -0.4% vs +2.4%; Russell 2000 -2.4%!!! vs +1.2% vs -0.6% vs +2.6%; NYSE Financials -1.7% vs +0.5% vs flat vs +3% (KBW Banks -2.3% vs +1.7% vs +0.1% vs +3%; Nasdaq Banks -2.1% vs +1.3% vs +0.3% vs +1.8%); NYSE Financial Leaders: BAC -3.7%!!! vs +1.9% vs -2.9% vs +7.6%!!! vs +3% vs -2%! vs -4.5%!!!; C -4.7%!!! vs +3.2% vs -0.9% vs +5.3%! vs +3.7% vs -2.2% vs -4.2%. JPM -2.6% vs +2.7% vs -0.8% vs +3.4% vs +3.2% vs -2.9% vs -3.7%! Not leaders, but WFC -1.4% vs +0.8% vs +0.7% vs +1.5% vs +1.5% vs -0.5% vs +1.1% vs -5.9%!!! USB -0.8% vs +2% vs -0.4% vs +1.6% vs +1.4%.  


European stocks slightly higher, Asia weaker: FTSE +0.3% vs -0.6% vs +1.6% vs +1.4%; CAC 40 +0.4% vs -0.7% vs +1.2% vs +2%; DAX +0.4% vs -0.5% vs +1.5% vs +1.7%; Nikkei -1% vs +2% vs -2.1% vs +1.2%; Hang Seng -0.5% vs +2.4%! vs -0.9% vs +0.9%; Korean KOSPI -0.7% vs +1.7% vs -0.7% vs +2.6%; Indian Sensex UP 1.2% vs -0.3% vs +0.4% vs +1.2%. U.S. stock futures higher in mid-range: DOW +55; SPX +4; NDQ +9.25.


Bonds weaker after gaining back some of Friday’s slide yesterday: 10 yr 1.60% -5/32 – record low 6/1 of 1.442%!; 30 yr 2.73% -1/2; Long TIP 0.52% -9/16. A new record low yield of 0.347% on 6/1. The 5 yr TIP yields -1.11%; 10 yr -0.55%. Bills 0.04% 1 month; 0.09% 3 months; 0.14%. Reverse Repo 0.26%. 3 mo. Libor 0.47%, and 0.74% – steady. European problem sovereign 10 years, Germany-benchmark: 1.36% +6 bp’s; Italy 6.11% +10; Spain 6.60% +13!!!; Greece 27.92% +61!!!; Portugal 10.07% -4; Ireland 7.03% +3.  

Gold remains below $1600 which is critical support and resistance with further res at $1610-12, closing at $1596.80 +$5.40. 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 $197 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 $1611, the 40 day and $1620, the 50 day, then $1688, the 200 day – all falling. It is now $1589.20 -$7.60. 5/2’s o/n low of $1526.70 was lowest since 12/29! Crude plunged again and despite a drop in inventories remains weak, closing at a weak $82.70 -$2.40 with a session low of $81.11 – a new cycle low!!! On 4/26 it closed at $104.55…that is a 21.4% drop! RES at the 40 day (95.30), and the 200 day (96.43), then the 50 DAY (96.84), – all are now 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 $82.19 -.51! …and OPEC wants to raise quotas??? No QE3, no oil rally!


TB advised this was a faux rally and so they jammed it on the open so all indices hit their session highs. There were key reversals – not a good thing (higher high, lower low, and close below the prior day’s low on Dow, both Nasdaq indices, and Russell 2000, while the Dow barely had an ‘outside’ day (higher high, lower low). This is a very strong technical so watch closely…especially in an options expiry and this one a quadruple witching…could be painful.


Apple came into the game yesterday with a nice high $588.50 +$5. 18, ahead of Tim Cook’s presentation which was dominated by product marketing head Phil Schiller looking like a reincarnation of Steve Jobs or another sequel to ‘Men in Black.’ At the end of the day it was off $9.15…were both moves due to the market? It lost 7 NDQ 100 points followed by MSFT with 5.5…there were no gainers of even 0.1 points.


U.S. financials finally took a beating yesterday but then the only players are the flash traders who push them up, then back down at will…i.e. BAC -3.7% vs +1.9%! You don’t really believe this is true buyers and sellers do you? Well, do you? Sheesh!


Of course all was driven by the ‘relief rally’ (?) on the aid to Spain’s banks from a new agency to be ratified…or not…at the end of the week. Not to mention the big fat Greek vote this weekend on whether to abandon the Euro. You have to love this…IF they leave the Euro community, one Euro will now be one DRACHMA! The devaluation is expected to be about 50%…bet the electorate will love that…but then if you are debtor you will see your debt cut in half…some gotta win, some gotta lose…


Note the top headline today on Dimon…tomorrow he testifies before a congressional panel…if they are deferential to him as TB believes they will be, the fix is still in. God what fools we are!


How anyone has the audacity to say they understand this market is beyond comprehension…or at least TB’s feeble brain. But then it isn’t really a market…is it?…

no transparency ergo NO MARKET! Get real!


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


…should TB apologize for yesterday’s rant? Hell no! What is more it was his own independent thinking….but look what happened later in the day…reread the top quote today and think…this is a well-respected money manager who sees it the same way as TB.


Then on the NPR Nightly News came an interview with Michael Sandel who wrote ”What Money Can’t Buy” – to which the Koch brothers would add…isn’t worth having! That is now number one on TB’s must read list…and it should be on yours too!


It was not an exaggeration when TB said that ‘without debt there would be no middle class.’ We are living in an illusion of well-being by living on borrowed money – this condition began in the 1980’s with the big banks flooding us with unsolicited credit cards that carried high rates of interest except for those who didn’t need them and thus got them at zero…these people were called ‘freeloaders’ since the only thing the banks made off them were the transaction fees. Then came auto leases which at the end of the term left you with nothing and forced you to lease yet another car…ad infinitum.


The housing boom made us all feel wealthier (except those of us with nothing which the banks and Wall Street then conspired to make us feel wealthy by adding liar loans, no doc loans, and sub-sub prime loans which they dumped on unsuspecting investors thanks to the rating agencies…then blamed the borrowers for the collapse…except that if you aren’t granted a loan you can ask for as much as you want with no harm, no foul. The banks didn’t even care if you had one, two, three, or more homes that you planned to ‘flip’ for an obscene profit…until you couldn’t. The banks love to blame the Community Reinvestment Act for their problems…and admittedly it kick-started it, but when they found they could lay these off to unsuspecting fools they continued to do so with abandon. No, the banks were culpable…like Wells Fargo who never booked one sub prime mortgage yet was the biggest subprime lender offering 105% financing (80% first, 20% second, 5% unsecured) and did quite well at it by keeping the higher yielding second and unsecured portions knowing that they would be re-fied when the first reset came…worked like a charm until it didn’t! Funny, Wells then got stuck with the underwater portions and had to write them off…but that was still better than those who kept the mortgages on their books or those like Mother Merrill who knew the game was rigged but kept the AAA tranches when the spread was so narrow that no one else would buy them…but who cared? They were making so much on the underwritings…you know how that bet turned out!


We are a sick society…what can you say about a capitalist country that gave tax cuts to the wealthiest Americans, engaged in two wars without funding them, made a man with a questionable economic record the chairman of the Fed when he deplored regulation and spent 20 years trying to eliminate it while pontificating in terms no one could understand and thus was deemed to be brilliant?


Now those who perpetrated the fraud continue to do so on the backs of the middle-class (sic). Median income in Minnesota is $44k and declining…Wisconsin? $35k and also declining while despite this Gov. Walker has created fewer jobs than the other 49 states! Ah, ‘tis the municipal unions…save for police and fire who are good, right? Did Gov. Walker ever consider their wages and benefits? Disability retirements rather than paying them their salary and putting them in a desk job? There are a lot of retired police and fire who ‘were’ working construction jobs. No, his exclusion, like Schwarzenegger’s was purely political.


In the fable The Grasshopper and the Ants, Grassie had fun playing while laughing at the ants hard work…until winter came and he was freezing and the ants saved him (after all it is a fable)…but we, the grasshoppers AND ants never put anything away for winter…why should we…lever our homes since we were rich…Rich…RICH! Until…


That’s enough for today but hopefully you will see that things cannot be saved by lying suprpacs and a presidential hopeful who distorts facts in every speech while saying Obama has no plan…yet only says he has one without disclosing how HE is going to create jobs…the same miserable way he did in Massachusetts? This is not an endorsement of Obama…but anyone but Obama has to be the stupidest slogan ever and if we believe that the president is the root of all evil, then we will pay and pay dearly.


Oh, you did see where United Healthcare, the biggest health insurer and a few other big companies have said they will adopt many of the provisions of Obamacare regardless of the Supreme Court decision…including coverage of children to 26 years and paying for colonoscopies, mammograms and other proactive exams, but for preexisting conditions the individual mandate is a must. Once again you have been duped into believing it is all bad by a party that offered no alternative…except that this was originally their plan!

Don’t take TB’s word on these matters but stop listening to FOX NEWS and do your own homework…in case you haven’t noticed they have a very clear agenda.




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