6/26/12…in the know

From Keep Calm and Carry On: “If all misfortunes were laid in one common heap whence everyone must take an equal portion, most people would be contented to take their own and depart.” – Socrates

“It is a common experience that a problem difficult at night is resolved in the morning after the committee of sleep has worked on it.” – John Steinbeck

Bloomberg Quote of the Day: “Lack of money is the root of all evil.” – George Bernard Shaw

Bloomberg Top Stories:

*Libor Guardians Said to Resist Change to Broken Benchmark Interest Rate – pullease!

*Spain’s Yields Rise With Italy’s After Debt Sales as U.S. Futures Advance

*Van Rompuy Proposals to Reshape Euro Area Garner Instant German Criticism

*King’s Vote for Easing Reflects Pessimism on Euro Crisis, Global Economy

*Home Prices in 20 U.S. Cities Declining at Slower Pace, Case-Schiller Shows

*Biggest U.S. Banks Shrinking Loan Portfolios as Region Lenders Fill Gap – hmmm!?!

*Congress Said to Discuss Delaying Automatic U.S. Spending Cuts Until  March – !!!

Volume dropped sharply from 4.85B shares to another weak 3.5B shares in a precipitous plunge at the open and never recovered. Contrast this to Friday’s choppy session where the bulk of the volume came in the final fifteen minutes and at the close. Friday took out June 1st’s 4.6B as highest since March 16th.. NYSE stocks executed without the aid of the ETN market also fell back to half of Friday’s 1.58B shares or 7.54B, also highest since 3/16’s 1.648B share day. 32 of the last 57 sessions have been less than 800M shares!!! Since 2/29 there have been just 14 ‘average’ days (mostly down!), including 3/16’s prior high for 2012 of 4.65B and just 12 have been above 900M – 946M is 12 month average. Since 11/1 there have been just 13, 1B share days…nine in 2012! Since 2/6 there have been SEVEN sessions less than 700M shares. 143 of the last 161 sessions have been less than the 12 month average!

Advance/Declines were negative again especially compared to Friday’s positives: -3.3x +2.2x vs -4.3x vs -1.1x vs +5.1x on NYSE and -2.9x vs +2.4x vs -3.8x vs -1.3x vs +3.2x on Nasdaq. Breadth was much worse: -8.6x!!! vs +2.2x vs -13.7x!!! vs +1.1x vs +5.2x on NYSE and -6.5x! vs +3x vs -5.7x vs +1.5x vs +5.7x on Nasdaq.. New 52 week highs declined to 111 vs 129 (high was 420 on 3/26), while new lows climbed to 179 vs 100. The ratio turned negative again at -1.6x vs  +1.3x vs +1.2x vs +4.5x vs +6.7x +2x vs +1.5x vs -1.4x vs -1.7x vs -1.6x! The S&P VIX surged by 12.5% to 20.35 +2.27 but remains below the 40/50/200 day although broaching 40/50 intraday after gapping up.

Here are the results of last 5 sessions: Dow -1.1% vs +0.5% vs -2%! vs -0.1% vs +0.8%; Transports -1.9% vs -0.8% vs -2% vs -0.4% vs +1.1%; Dow Utilities -0.4% vs +0.1% vs -1.2% vs -1.2% vs -0.2%; S&P 500 -1.6%! vs +0.7% vs -2.2%! vs -0.2% vs +1%; Nasdaq Composite -2% vs +1.2% vs -2.4% vs flat vs +1.2%; Nasdaq 100 -2% vs +1.2% vs -2.5% vs +0.1% vs +1.1%; Russell 2000 -1.7% vs +1.4% vs -2.4% vs -0.3% vs +1.8%; NYSE Financials -2.2% vs +1.1% vs -2.5% vs +0.4% vs +1.9% (KBW Banks -2.7% vs +1.4% vs -2.3% vs +0.3% vs +2%; Nasdaq Banks -2% vs +1.7% vs -1.9% vs +0.1% vs +1.5%); NYSE Financial Leaders: BAC -4%!!! vs +1.5% vs -3.6%! vs +0.1% vs +4.5%; GE -1.5%. Not leaders, but… JPM -1.9% vs +0.1% vs -2.3% vs +2.9% vs +2.2%; C -4.4%! vs +0.5% vs -3.6% vs +1% vs +3.5% vs -2.7% vs +1.4%; WFC -1.8% vs -0.5% vs -1.4% vs -0.5% vs +1.5%; USB -1.8% vs +1.6% vs -1.5% vs -0.1% vs +0.8%. NOTE BofA on Tuesday broke out of the range of $7.92 to $6.72 since 5/21, closing at $8.11, closed yesterday back at $7.82. New range: $8.22-$6.72…false breakout!

Global stocks mixed but with relatively minor changes: FTSE +0.2% vs -0.7% vs -0.8% vs -0.8% vs -0.3%; CAC 40 +0.1% vs -2% vs -0.5% vs +0.1%; DAX flat vs -1.8% vs -0.8% vs +0.3%; Nikkei -0.8% vs -0.7% va -0.3% vs +0.8% vs +1.1%; Hang Seng +0.5% vs -0.5% vs -1.4% vs -1.3% vs +0.5%; Korean KOSPI -0.4% vs -1.9% vs -2.2%!!! vs -0.8% vs +0.7%; Indian Sensex +0.1% vs -0.5% vs -0.4% vs +0.8% vs +0.2% vs .+0.9% vs -1.3%. U.S. stock futures up but giving up gains: DOW +24; SPX +2.20; NDQ +7.25.

Bonds are slightly weaker but at levels of Monday morning: 10 yr 1.62% -1/8 – record low 6/1 of 1.442%!; 30 yr 2.70% -7/16; Long TIP 0.50% -3/8. Record low yield of 0.347% on 6/1. The 5 yr TIP yields -1.01% still losing ground!; 10 yr -0.50%. Bills 0.04% 1 month; 0.08% 3 months; 0.15% 6 months. Reverse Repo 0.30%. 3 mo. Libor 0.46%, and 0.73% – steady. European problem sovereign 10 years, Germany-benchmark: 1.50% +4 bp’s; Italy 6.05% +7; Spain 6.64% +8; Greece 26.02% +23; Portugal 9.14% -3; Ireland 6.82% +1.  

Gold rallied sharply on stocks pain but never approached $1600 and resistance at $1608-17. It closed at $1588.40 +$21.50. Friday’s intraday low of  $1555.60 was lowest since June 8th! The hit is $201 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 $1600, the 40 day and $1610, the 50 day, then $1677, the 200 day. It is now $1583.20 -$5.20. 5/2’s o/n low of $1526.70 was lowest since 12/29! Crude closed slightly lower at $79.21 -.45. Friday’s low of $77.93 was lowest since 10/5/11. It has been below $85 since June 1!  RES at the 40 day (89.92), and the 50 day (92.65), then the 200 DAY (96.15), – 40/50 still plunging. 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 remains at $74.95, the 10/4/11 low!!! It is now $79.00 -.79.06 -.15.

Whereas Friday’s move was termed ‘inexplicable’ in this column, Yesterday’s was simply a plunge and struggle to regain the loss for the rest of the session which proved futile. To sum up: Friday’s rally regained only about one-third of Thursday’s losses. Thus it can be termed a dead cat bounce punctuated by yesterday’s declines of DOUBLE Friday’s gains or more! Today is the last day for T+3 settlement for hedge funds!

Who said stocks are boring?

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

…we have the right people running the country. They know the value of inside information…but what good it is if you don’t use it? Pesky things like the SEC get in the way of most investors…even hedge fund operators it now appears…but not Congress.

A Washington Post study of Congressional trades in the weeks and months leading up to the crisis showed that they are either brilliant traders (like Hillary Clinton’s cattle futures), or have knowledge others don’t. There is a pattern between conversations by ranking congressional officials and then-Treasury Secretary Henry Paulson. It seems on the days they talked on the phone…on other matters…he never discussed the crisis apparently…19 GOP’er’s and 15 Dems made substantial changes to their investment portfolios. These were not small trades mind you but in excess of $100,000 (note that the disclosure forms only ask for a range, such as $100,000-500,000). Here are some key trades:

*Then-House Minority Leader, Boehner was the Bush administrations point man on the stimulus package. On Jan. 23, 2008 he had breakfast with Paulson and the same day sold $50,000-100,000 from an aggressive mutual fund and moved to a defensive one. Boehner also made two ‘adjustments’ to his portfolio on Jan. 23, 2008…the day he Paulson and Pelosi met to strike a deal on the bailout. Then they met later and worked out a deal. After the trades were done because the markets were then closed!

*Sen. Ben Nelson (D- Neb) met with Paulson on Jan.10, 2007. The next day he sold $250,00-500,000 of Lehman  CD’s (?) and purchases a lesser amount of t-notes.

Interestingly, they usually contend that nothing pertaining to the crisis was discussed, and or they have a professional money manager.

IF they have one consider this…was it pure coincidence? Also, isn’t it worse if a member of Congress calls a major broker…you don’t think they would have a rookie managing their money do you? What would you do it a client in the know suddenly made a huge shift in their portfolio? On Wall Street information is power and thus how many other big accounts made the move?

Under congressionally-imposed ethics laws the treasury secretary would not have been able to make the same trades. Amazing how Congress always trumps us whether it is on retirements, health care, or their personal investments.

Lastly, one of the leaders of the charge on cleaning this us is Richard Painter, chief ethics lawyer for George W. Bush. Is there a message here?

Have a terrific day,

TB

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