6/15/12…what we don’t want

From Keep Calm and Carry On: “It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.” – Harry S. Truman

The only function of economic forecasting is to make astrology look respectable.- John Kenneth Galbraith

Bloomberg Quote of the Day: “We never know the worth of water till the well is dry.” – Thomas Fuller…or the value of freedom and democracy…ask the Greeks! TB

Next 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.

Bloomberg Top Stories:

*Stocks Rise With Commodities on Central Bank Stimulus Bets – operative word: bets

*Central Banks Warn Greek-Led Eu4ro Stress Threatens to Roil World Economy – duh!

*Draghi Fails to Find Clarity Communicating Shared Path Out of Euro Crisis –can you?

*EU Leaders to Press for Growth Measures as Draghin Sees No inflation Risk – none?

U.K. Export Slump Raises Recession Risk Risk as King Steps Up Response – response?

*Ex-Soros Advisor Fujimaki  Says Japan Likely to Default in Debt in Five Years – !!!

 *Irish Tell Spain to Imagine the Worst and Burn Bank Bondholders in Cleanup – irate?

Egypt’s Dissolution of Parliament Sparks Opposition Call for Protest Rally – messy?

*Obama Has Few Options to Contain Europe’s Decline as G-20 Talks Approach

California Budget Heads Toward Vote as Midnight Deadline Looms – dysfunctional!

Ah, it was a rally but given the trifecta of bad economic releases (CPI -0.3% BUT Core +0.2%…drop was oil prices; weekly jobless claims rose; Trade Deficit widened), any thinking person must ask: WHY??? Nokia announced 10k in job cuts…sure they are Finnish but HP is laying off 27k (this morning Moody’s cut them to junk). Meanawhile demonstrations in Greece ahead of the elections  while the Irish tell them to nail the bondholders! Ah, it is options expiry and the volatility has been…well…volatile since May 31st. Yesterday’s 10.7% decline is no exception:

Date Close/Range/ % Chg: 5/31 24.06/ 25.46-22.78/n/a; 6/1 26.66/26.71-24.94/+10.8%; 6/4 26.12/27.73-25.72/-3%; 6/5 24.68/25.90-24.50/-5.5%; 6/6 22.16/23.89-22.06/-10.2%; 6/7 22.48-20.74/-2%; 6/8 21.23/20.29/-2.3%; 6/11 23.56/23.56-19.87/+9.8%; 6/12 22.09/23.90-22.09/-6.2%; 6/13 24.27/24.93-22.66/+9.9%; 6/14 21.68/24.81-21.55/  -10.7% – that is four session with changes of 10% and a range of 39.6%??? Of course, the latter part, including the back-to-back 10% changes is explained by options expiry in a THIN market driven by high frequency trading…only!?! Watch out for today! Only the close matters!

For a FIFTH straight session NYSE stock volume was weak at 3.64B 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) rose to a still weak 779M vs 770M shares, FIVE straight <800M shares and well below the average since 3/1 of 818M shares. 28of the last 50 sessions have been less than 800M shares!!! Since 2/29 there have 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. 138 of the last 154 sessions have been less than the 12 month average! Advance/Declines reversed yet again – still seesawing: +2.4x vs -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 +2.3x vs -3.4x vs +2x vs -1.5x vs +4.7x on Nasdaq. Breadth was similar: +3.7x vs -2.2x vs +6x v -11.3x!!! vs +3x vs -1.4x vs +11.8x!!! on NYSE and +1.8x vs -2.4x vs +3.9x vs -6.5x vs +3.9x vs -2.9x vs +12.4x!!! on Nasdaq. New 52 week highs rose but with no significance to 107 vs 78 (high was 420 on 3/26), while new lows rose again to 150 vs 134.. The ratio remains NEGATIVE after just four straight positives at -1.4x vs -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 once again reversed to 21.68 -2.48 with an intraday high of 24.81 still above the 40/50 day at 20.70

Here are the results of last 5 sessions, not swings, following three straight rally days: Dow +1.2% vs -0.6% vs +1.3% vs -1.1% vs +0.8%; Transports +1% vs -0.6% vs +0.9% vs -1.4% vs +1.1% vs -0.1%; Dow Utilities +0.7% vs -0.1% vs +0.3% vs -0.4% vs +0.4%; S&P 500 +1.1% vs -0.7% vs +1.2% vs -1.3% vs +0.8%; Nasdaq Composite +0.6% vs -0.9% vs +1.2% vs -1.3% vs +1% vs -0.5% vs +2.4%; Nasdaq 100 +0.5% vs -0.7% vs +1.2% vs -1.7%!!! vs +0.9% vs -0.4% vs +2.4%; Russell 2000 +1.3%! vs -1.2%! vs +1.2% vs -2.4%!!! vs +1.2% vs -0.6% vs +2.6%; NYSE Financials +1.1% vs -0.5% vs +1.6% vs -1.7% vs +0.5% (KBW Banks +1.5% vs -0.2% vs +2% vs -2.3% vs +1.7%; Nasdaq Banks +1.4% vs -0.7% vs +1.6% vs -2.1% vs +1.3%); NYSE Financial Leaders: BAC +2.1% vs +0.1% vs +2.9% vs -3.7% vs +1.9% vs -2.9% vs +7.6%; JPM +1% vs +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 +0.9% vs -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 +1.4% vs +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 +1.5% vs -0.3% vs +1% vs -0.8% vs +2% vs -0.4% vs +1.6% vs +1.4%. NOTE BofA, despite the % change has been in a range of $7.92 to $6.72 since 5/21! Isn’t that special for a flash trader? You bet it is!

The only markets wackier than ours are the Europeans who act like every day is a crisis or a solution to it:

Global stocks rallying, except Japan and Korea: FTSE +0.4% vs -0.7% vs -0.1% vs +0.3% vs -0.6%; CAC 40 +1.6% vs -0.5% vs -0.2% vs +0.4% vs -0.7%; DAX +1.3% vs -0.7% vs -0.4% vs +0.4% vs -0.5%; Nikkei FLAT vs -0.2% vs +0.6% vs -1% vs +2%; Hang Seng +2.3%! vs -1.2% vs +0.8% vs -0.5% vs +2.4%; Korean KOSPI -0.7% vs +0.7% vs +0.3% vs -0.7% vs +1.7%; Indian Sensex +1.6% vs -1.2% vs +0.1% vs +1.2% vs -0.3%. U.S. stock futures again oscillating in a narrow range…what do you expect on options expiry? DOW +31; SPX +1.60; NDQ +5.75.

Bonds modestly rallying: 10 yr 1.59% +7/16 – record low 6/1 of 1.442%!; 30 yr 2.70% +7/8; Long TIP 0.49% +1-5/16. Record low yield of 0.347% on 6/1. The 5 yr TIP yields -1.14%; 10 yr -0.55%. Bills 0.05%!!! 1 month; 0.10% 3 months; 0.14%. Reverse Repo 0.31%! rising! 3 mo. Libor 0.47%, and 0.74% – steady. European problem sovereign 10 years, Germany-benchmark: 1.46% -3 bp’s; Italy 5.99% -11???; Spain 6.81% -4; Greece 26.03% -137???; Portugal 10.02% -13; Ireland 7.04% -8.  

Gold remais above $1600 and slightly above critical support at $1608-17, closing at $1619.60 +.20??? 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 $1686, the 200 day. It is now $1622.70 +$3.10. 5/2’s o/n low of $1526.70 was lowest since 12/29! Crude finally had a gain of more than $1 but still inconsequential. 6/12’s cycle low was $81.07! On 4/26 it closed at $104.55…that is a 21% drop! RES at the 40 day (93.81), and the 50 day (95.59), then the 200 DAY (96.39), – all stable again. 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 $84.03 +.12. No QE3, no oil rally!

Watch the markets today but remain sidelined at options expiry – especially given the volatility cited above means nobody knows who is long or short. All that matters is the close…if that as retail volume is barely visable.

We are in the summer doldrums and don’t you wish you had sold in May and gone on vacay? Egads!

. . .   – – –  . . .  (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)

…last Friday’s message was ‘what we want’ – sarcastically. Today’s is what we don’t want and more serious…frighteningly so.

We don’t want another four years of Obama because as Mitt says, ‘he has no plan…Mitt HAS a plan but won’t tell you because if he did you wouldn’t vote for him (his words, not TB’s!).

We don’t want gay marriage as that is a holy union between a man and a woman…never mind that church attendance is down and 50% of hetero marriages end in divorce…many multiple times…like the Donald’s. In Minnesota we have a gay marriage ban on the ballot that has no been opposed by Target and General Mills. Don’t we have enough to worry about…hey, weren’t jobs the number one issue…rather than spend our time on matters that are none of our business?

We don’t want a woman to have the right to choose…even in rape or incest instances. Rush Limbaugh calls a woman a ‘slut’ and ‘whore’ for testifying (she was asked to) before Congress on birth control access. Where was the outrage at this? Especially from those stalwart protectors of our Constitution. After the child is born she AND the child are on their own. In fact, we want to cut back on those food stamps and other safety nets which stopped us from going into a full-blown depression.

We don’t want higher taxes because that would violate a ‘pledge’ to Grover Norquist who answers to no one and is a damned fool…and thanks to that pledge a wealthy one. No sir…not even temporary cuts or loopholes…oh they say they will fix those IF you elect them but you know it will never happen.

We don’t want the financial sector to ever do to us what they just did but under the lead of Jamie Dimon…who has replaced Sandy Weill and who studied at his knee…we let him control the legislation while our Congress mildly chastises him for a loss, and can’t even tell the difference between proprietary trading and a hedge (hint: in a true hedge you cannot have a gain or loss that significantly differs from the basis!). No, we can’t even get him to admit to clawbacks against his bonuses which were directly attributable to the gains on those hedges! Damn, we are one stupid people! Right Jamie? Have a drink!

We want to destroy unions…municipal ones…but will that (while correcting the imbalances) destroy incomes as eliminating private sector labor unions did. Nice trade: your pension for a 401(k). Meanwhile…not coincidentally…CEO compensation soared and continues to feed on itself.

We want our kids and grandkids to live better than we do but we don’t want to see the budget balanced by reducing spending and appropriate tax increases. We can’t see that doing it all on one side…on the backs of those who have suffered most…will only drive us deeper into recession…which statistically speaking we are not in…but…

No what we don’t want is a continuation of the status quo but in so doing we insure that it will happen. We still engage in wars of which we have no reason to be involved in…by volunteer armies who are beginning to lose it. We don’t want to be what we are. So???

…by the day more and more are writing articles similar to TB’s and there is a growing sense of frustration…what say you? Are you in?…or out?

Have a great weekend,



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