6/14/12…capitalism and freedom

TB’s Quote of the Day: “…do not get the idea you’re anything special. Because you’re not…so think about this: even if you’re one in a million, on a planet of 6.8 billion that means there are nearly 7,000 people just like you. Imagine standing somewhere over there on Washington Street on Marathon Monday and watching sixty-eight hundred yous go running by. And consider for a moment the bigger picture: your planet, I’ll remind you, is not the center of its solar system, your solar system is not the center of its galaxy, your galaxy is not the center of the universe. In fact, astrophysicists assure us the universe has no center; therefore, you cannot be it. Neither can Donald Trump… which someone should tell him… although that hair is quite a phenomenon.” – teacher David McCullough, Jr. speaking at Wellesley High, Mass. Commencement ceremony. This is the best advice these pampered kids may ever get…although they don’t know it yet. TB

From Keep Calm and Carry On: “Today there are three kinds of people: the have’s, the hve-not’s, and the have-not-paid-for-what-they-have’s.” – Earl Wilson..is that not what the middle-class has become? TB

Credit is a system whereby a person who can not pay gets another person who can not pay to guarantee that he can pay.” – Charles Dickens…add to this list a bank. TB

Bloomberg Top Stories:

*U.S. May Consumer Prices fell by 0.3%, Core Prices ROSE by 0.2% – fuel costs!

*First-Time Jobless Claims in U.S. Unexpectedly Rose Last Week to 356k – not good!

*Current-Account deficit n U.S. Widens to the Highest level in Three Years – more bad!

*U.S. Stock Futures Fall After Initial Jobless, Consumer Price Data – duh!

*Merkel to Tell G-20 Germany Can’t Save Global Economy Alone

*Credit-Suisse Must Boos Capital to Insulate It From Euro Crisis, SNB Says

*Nokia to Cut 10,000 Jobs, Trims Outlook as Elop Struggles to Stanch Losses

*Early Death Assured in India Where 900 Million Fail to Eat Minimum Target

Despite rising at mid-session (albeit by just 25 points) the Dow then tanked closing -77 with a bounce from a 120 point loss and now 83 points below the close of 5/29…in other words we can’t shake that monkey from the 5/17 plunge and are still 600 points below the May 1 high when the selloff began. The Dow is now up just 2.28% ytd and now off 5.4% for the quarter…all the global indices are also down mostly in double digits.

For a FOURTH straight session NYSE stock volume was weak at 3.37B shares (range is 3.3B-3.38B shares). June 1st’s 4.6B was highest since March 16th .  NYSE stocks executed without the aid of the ETN market (where the high freq geeks play) dipped to 707M vs 724M shares, FOUR straight at <800M shares and well below the average since 3/1 of 818M shares. 27 of the last 49 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 – 950M 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. 137 of the last 153 sessions have been less than the 12 month average! Advance/Declines were negative again – seesawing: -2.1x vs +3.6x vs -3.9x vs +2.4x vs -1.2x vs  +7.1x on NYSE and -2.3x vs +2.3x vs -3.4x vs +2x vs -1.5x vs +4.7x on Nasdaq. Breadth was similar: -2.2x vs +6x v -11.3x!!! vs +3x vs -1.4x vs +11.8x!!! on NYSE and -2.4x vs +3.9x vs -6.5x vs +3.9x vs -2.9x vs +12.4x!!! on Nasdaq. New 52 week highs were steady at 78 vs 79 (high was 420 on 3/26), while new lows rose slightly to 134 vs 129.. The ratio remains NEGATIVE after just four straight positives at -1.7x vs -1.6x! vs +1.5x vs +1.5x vs +2x vs +2.5x vs -2x vs -8.7x!!! The S&P VIX also reversed more than cancelling Tuesday’s decline to 24.27 +2.18 with an intraday high of 24.93! well above the 40/50 day at 20!

Here are the results of last 6 sessions: Dow -0.6% vs +1.3% vs -1.1% vs +0.8% vs +0.4% vs +2.4%; Transports -0.6% vs +0.9% vs -1.4% vs +1.1% vs -0.1% vs +3%; Dow Utilities -0.1% vs +0.3% vs -0.4% vs +0.4% vs +0.7% vs +1.3%; S&P 500 -0.7% vs +1.2% vs -1.3% vs +0.8% vs flat vs +2.3%; Nasdaq Composite -0.9% vs +1.2% vs -1.3% vs +1% vs -0.5% vs +2.4%; Nasdaq 100 -0.7% vs +1.2% vs -1.7%!!! vs +0.9% vs -0.4% vs +2.4%; Russell 2000 -1.2%! vs +1.2% vs -2.4%!!! vs +1.2% vs -0.6% vs +2.6%; NYSE Financials -0.5% vs +1.6% vs -1.7% vs +0.5% vs flat vs +3% (KBW Banks -0.2% vs +2% vs -2.3% vs +1.7% vs +0.1% vs +3%; Nasdaq Banks -0.7% vs +1.6% vs -2.1% vs +1.3% vs +0.3% vs +1.8%); NYSE Financial Leaders: BAC +0.1% vs +2.9% vs -3.7%!!! vs +1.9% vs -2.9% vs +7.6%!!! vs +3% vs -2%! vs -4.5%!!!; JPM +1.6% vs +2.9% vs -2.6% vs +2.7% vs -0.8% vs +3.4% vs +3.2% vs -2.9% vs -3.7%!; C -0.2% vs +4.3% vs -4.7%!!! vs +3.2% vs -0.9% vs +5.3%! vs +3.7% vs -2.2% vs -4.2%. Not leaders, but…WFC +0.9% vs +1% vs -1.4% vs +0.8% vs +0.7% vs +1.5% vs +1.5% vs -0.5% vs +1.1% vs -5.9%!!! USB -0.3% vs +1% vs -0.8% vs +2% vs -0.4% vs +1.6% vs +1.4%. Dimon sold them a bill of goods helping JPM especially and the sector too.  

Global stocks weaker, except Korea: FTSE -0.7% vs -0.1% vs +0.3% vs -0.6% vs +1.6% vs +1.4%; CAC 40 -0.5% vs -0.2% vs +0.4% vs -0.7% vs +1.2% vs +2%; DAX -0.7% vs -0.4% vs +0.4% vs -0.5% vs +1.5% vs +1.7%; Nikkei -0.2% vs +0.6% vs -1% vs +2% vs -2.1% vs +1.2%; Hang Seng -1.2% vs +0.8% vs -0.5% vs +2.4%! vs -0.9% vs +0.9%; Korean KOSPI UP 0.7% vs +0.3% vs -0.7% vs +1.7% vs -0.7% vs +2.6%; Indian Sensex -1.2% vs +0.1% vs +1.2% vs -0.3% vs +0.4% vs +1.2%. U.S. stock futures oscillating in a narrow range: DOW +27; SPX +3; NDQ +5.50.

Bonds modestly weaker after rallying yesterday: 10 yr 1.61% -1/8 – record low 6/1 of 1.442%!; 30 yr 2.71% -1/16; Long TIP 0.51% -1/16. A new record low yield of 0.347% on 6/1. The 5 yr TIP yields -1.09%; 10 yr -0.53%. Bills 0.07% 1 month; 0.09% 3 months; 0.14%. Reverse Repo 0.30%! rising! 3 mo. Libor 0.47%, and 0.74% – steady. European problem sovereign 10 years, Germany-benchmark: 1.47% -1 bp; Italy 6.15% -4; Spain 6.85% +16; Greece 27.51% -30!; Portugal 10.15% -1; Ireland 7.13% -1.  

Gold closed above $1600 again and slightly above critical support and resistance at $1610-12, closing at $1619.40 +$5.60. Since breaking above on June 1, it HAD traded in a narrow range of $1610-1642 before breaking down again. The hit is $174 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 $1608, the 40 day and $1617, the 50 day, then $1689, the 200 day. It is now $1621.40 +$2.00. 5/2’s o/n low of $1526.70 was lowest since 12/29! Crude fell again while still little changed a day after putting in another cycle low of $81.07!, closing at a weak $82.62 +.70. On 4/26 it closed at $104.55…that is a 21% drop! RES at the 40 day (93.77), and the 50 day (95.56), then the 200 DAY (96.38), – all 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 $82.60 +.06. No QE3, no oil rally!

The high freak traders ARE the market…no other sane person (read investor) is playing! The summer doldrums have arrived and how the quarter ends is in question…most likely weaker as TB sees it. Especially after today’s numbers.

JPM rallied to$35.07 yesterday leaving a gap from 5/16/-17 at $35.10-46 when the stock plunged closing at $34.30 +.63 as Jamie dazzled them with bullshit! No other word for it and they bought it…as usual and expected. No culpability on his part…clawbacks will be required of the ‘guilty’ parties but not Mr. Jamie. No sir…why should it be his fault. As for the statement that deriviatives can cause problems a day prior to the disclosure, he says he had been assured the losses were not meaningful…therefore no violation of Sarbanes-Oxley. What’s a CEO to do? Question his subordinates? Despite TB taking the time to write to the committee, no one asked about the American Century settlement which cost shareholders $363 million on top of the $300 million they paid to get the accounts from them before fraudulently moving the accounts to JPM proprietary funds with lower returns less than a month after the deal was struck. Nor the fact the shareholders were not informed until AFTER the shareholders ratified the bonuses for both Dimon and the perp J.E. Staley who was promoted and granted an $11 million bonus! That only because American was successful in unsealing the records. Who are you going to believe? Dimon or your lying eyes? If this is the best banker in the U.S. (world?) we are in a huge mess!

TB repeats: without transparency and accountability there is no market…we just haven’t realized this yet as we listen to the sell-side analysts ply their trade…what fools we are!

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

(TB meant to mention yesterday the quote at the top today on not being special which coupled with the book mentioned and followed by Dimon’s testimony yesterday wherein he assumed no responsibility for the losses which only a fool (or senator) would believe, sparked the column. We do live in interesting times…sadly. TB)

…the damage that has been caused by that book by Milton Friedman and Anna Schwartz cannot be measured…nor can the impact of the Chicago school on thinking about corporations and capitalism. Add a Fed chairman (Greenspan), a follower of Ayn Rand who didn’t believe in regulation, the ‘owner’ of the biggest bank in the U.S. (Sandy Weill), a treasury secretary (Bob Rubin along with his assistant Larry Summers) and President Clinton who listened to both Weill and Rubin, the far right in the GOP led by Gramm and Grassley who loathed Glass-Steagall, escalating power of CEO’s and Wall Street over thirty years, and you have the recipe for what we have today: utter chaos.

In what other country could you have two opposite views on the crisis by the Tea Party (who blame it on government and irresponsible peons) and Occupy Wall Street (which has no common view but blames the financial sector)? Both are right and both are wrong.

We see documentaries like Inside Job, Too Big to Fail, and even Michael Moore’s Capitalism: A Love Story then go on our merry (?) way. What fools we are.

TB is not opposed to capitalism…but as Bonnie Blodgett wrote in Sunday’s Minneapolis Star Tribune that FDR knew the dangers of capitalism…yesterday’s quote from Thomas Jefferson showed his distrust of the banking system…that without tight regulation it becomes fascism…or communism (small c). Reagan saw regulation as thwarting growth. He was not an economic genius…had he been he would have seen through Laffer’s ‘supply side economics’ which has been used for the past thirty years to widen the wealth gap. But the right does not believe in the wealth gap and believes that saying there is one only serves to create class warfare. How can that be when it not only exists but is widening. So don’t blame Obama for creating the problem…it was the right that created it. TB is not a socialist, nor a capitalist but an American who does not like to see the decay, moral and otherwise that is occurring in this country.

Have we become a country where money buys elections…will they find a way to do it cheaper by simply buying votes from the poor for a loaf of bread? Illegal, but…

All TB asked of this election was two good candidates to choose from but the extremes in the GOP have prevented that. Yesterday, TB listened to a reporter who did a story on Mormonism. It was fair, balanced, honest, and actually very positive.

He was curious about one aspect though: blacks. He found a couple. The man had converted in 1973 when blacks were not allowed to hold office. His wife in 1978. Both strongly believe in the faith. But when asked if she would vote for Romney or vote for a black man she said she could not vote for Romney. Her reason was this: he stated that he had a plan but would not tell us because we wouldn’t vote for him. Hmmm…

So TB googled (and hopes you do too), ‘Romney won’t tell you’ and up popped numerous quotes going back to last March. Whereas Ron Paul specifically said which departments he would eliminate and Gov. Perry couldn’t recall which, Romney said flatly the he wouldn’t say. How can this be taken but to say that those departments are the ones that affect the most people…ergo the electorate?

But why do we let him get away with criticizing Obama for not having a plan but not being able to tell us how his plan is going to affect us? Isn’t that something he owes us?

Like it or not, Obama has done much of what he said he would do. Yet Romney has blamed him for the budget deficit (largely result of two ill-advised Bush tax cuts and two unfunded wars plus the bailout deal cut before he took office). He has blamed him for not creating jobs yet it is the state and local government layoffs…plus postal workers…that have kept the unemployment rate from dropping. Meanwhile he ignores criticism of his lack of job creation while governor of Massachusetts. Then there is the price of gasoline. He has steadfastly (until the price collapsed a little more than a month ago) blamed Obama and the failure to approve the Keystone pipeline (which would only dump more unneeded oil into the Roach Motel in Oklahoma where we don’t need it…in fact we have a glut in oil and refineries are not operating at capacity). Yet when the price declined beginning on May 3rd and fell from $105 to $81 he stopped that silly argument which ignored the spike from $50 to an all-time high of $147.27 on 7/11/08 under Bush. Neither man had control of those increases…furthermore the price of oil is not determined by supply or demand (although it is a contributing factor) but from speculation…the number one reason for the trebling while Bush was president. This from Romney who is said and claims to understand business and finance. He also claims to know how to run a government but that is by focusing on balancing the budget at all costs.

If you try to get your own house in order by cutting back on spending but you are heavily in debt you won’t make a dent in it without increasing revenue. Yet the GOP is opposed to increasing revenue although their ace in the hole is sequestration which will eliminate the Bush tax cuts but also restore the payroll tax so revenues will grow, debt will decline but productivity will not rise. It is a conundrum.

The House has passed a bill that would severely cut the funds for economic research and the census (last TB checked that was required by the Constitution). It passed on partisan lines. If the Senate passes it…hopefully not…the fix will be in to further conceal the effects of the wealth gap and those like the Koch brothers will have won the game.

Either the above makes sense to you or it doesn’t but you had better think long and hard about the coming election…think…for yourself…not parrot what TB or FOX News says.

It’s your country…value it.

Have a great day…and think for yourselves!



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