7/11/12…the big loser

From Keep Calm and Carry On: “The art of living lies less in eliminating our troubles than in growing with them.” – Bernard Baruch  

Bloomberg Top Stories:

*Rajoy Raises Taxes to Clinch Aid as Anti-Austerity Protestors Roil Madrid

*U.S. Index Futures Advance Befoe Fed Report as Oil Leads Commodity Gains

*Dimon’s Risk Reputation at State as JPMorgan Briefs Analysts on Bad Trades

*Portugal Lurches Into Austerity Trap With Bailout Creditors – austerity trap!!!

*Canadian Banks Seen Superior by Regulator Surviving Global Economic Shocks

*Muddy Waters Stigma Means China Spends $1 Billion as Companies Exit U.S.

*Drought-Fueled Corn Rally Squeezing ADM Profit Prospects

*Geneva Bankers Use Arab Spring Uprising to Attract Clients in Middle East – Romney

*Obama Leads Romney in Quinnpiac Poll With 2-1 Backing From Single Women

*Cameron Retreat on Lords May Leave Rebellious U.K. Lawmakers Wanting More  

Yee haw! Volume rose from a near 12 month low in a down session where the only positive was Dow Utilities: 3.42M vs 2.78B shares –  NYSE stocks executed without the aid of the ETN market were less impressive at 728M vs 652M shares – highest since 6/29’s 4.56B – AND it was a solid down day after languishing in the red most of the session. This is the sixth straight session where volume was less than 800M shares with a high last week of just 736M shares day and the average is 627M shares, lowest since the week ended 12/30/11! 40 of the last 67 sessions have been less than 800M shares. Since 2/29 there have been just 15 ‘average’ days (mostly down!), including 3/16’s high for 2012 of 1.65B (4.85B including ETNs) and just 14 have been above 900M – 942M is 12 month average. Since 11/1 there have been just 14, 1B share days…ten in 2012! Since 2/6 there have been TWELVE sessions less than 700M shares. 152 of the last 171 sessions have been less than the 12 month average (89%)!

Advance/Declines were negative for a FOURTH day: -2z vs -1.2x vs -2.1x vs -1.3x vs +3.9x on NYSE and -2x vs -1.4x vs -2.5x vs -1.2x vs +2.7x on Nasdaq. Breadth was worse: -4.6x vs -2.2x vs -4.6x vs -2.7x vs +3.4x on NYSE and -3.7x vs -1.6x vs -3.9x vs -1.1x vs +3.4x on Nasdaq.. New 52 week highs rose to 327 vs 308 (7/3’s 504 is the high), while new lows rose to 85 vs 58. The ratio is +3.8x vs +5x vs +5.7x vs +14x vs +20x. The S&P VIX climbed again to 18.72 +.74…watch closely!

Here are the results of last 5 sessions: Dow -0.7% vs -0.3% vs -1% vs -0.4% vs +0.6%; Transports -1.3%! vs -0.3% vs -1% vs +0.2% vs +0.6%; Dow Utilities UP 0.2% vs -0.3% vs -0.4% vs -0.5% vs -0.3%; S&P 500 -0.8% vs -0.2% vs -0.9% vs -0.5% vs +0.6%; Nasdaq Composite -1% vs -0.2% vs -1.3% vs flat vs +0.8%; Nasdaq 100 -1% vs -0.1% vs -1.3% vs +0.1% vs +0.8%; Russell 2000 -1.2% vs -0.3% vs -1.3% vs -0.1% vs +1.3%; NYSE Financials -0.8% vs -0.3% vs -1% vs -1.4% vs +0.7% (KBW Banks -0.9% vs -0.5% vs -0.8% vs -1.5% vs +0.4%; Nasdaq Banks -0.4% vs -0.6% vs -0.5% vs -0.5% vs +0.7%). NYSE Financial Leaders: BAC -1.5% vs -1.3% vs -2.1% vs -3%! vs +0.1%; GE -2.3%. Not leaders, but… JPM +0.9% vs +0.2% vs -4.5%!!! vs -4.2%!!! vs -0.3%; C -0.9% vs -0.9% vs -1.8% vs -3%! vs +0.7%; WFC -0.9% vs +0.6% vs -0.2% vs -1% vs -0.2%; USB -0.4% vs flat vs -0.9% vs -0.9% vs +0.4%.

Global stocks mixed: FTSE -0.1% vs +0.8% vs -0.4% vs flat vs +0.6%; CAC 40 -0.3% vs +1% vs -0.2% vs -0.4% vs +0.2%; DAX +0.5% vs +1.2% vs flat vs -0.4% vs +0.8%; Nikkei -0.1% vs -0.4% vs -1.4% vs -0.7% vs -0.3%; Hang Seng +0.1% vs -0.2% vs -1.9% vs -0.1% vs +0.5%; Korean KOSPI -0.2% vs -0.4% vs -1.2% vs -0.9% vs +0.1%; Indian Sensex  -0.7% vs +1.3% vs -0.7% vs -0.1% vs +0.4%. U.S. stock futures rallying: DOW +50; SPX +5; NDQ +7…up, down, who cares…not enough real players!

Bonds stable for a fourth straight session: 10 yr 1.52% -1/8 – record low 6/1 of 1.442%!; 30 yr 2.62% -3/8. Long TIP 0.40% -7/16. Record low yield of 0.347% on 6/1. The 5 yr TIP yields -1.20%!; 10 yr -0.62%…both strong! Bills 0.06% 1 month; 0.09% 3 months; 0.14% 6 months. Reverse Repo 0.23% vs 0.24%! 3 mo. Libor 0.46%, and 0.73% – steady. European problem sovereign 10 years, Germany-benchmark: 1.31% -1 bp’s; Italy 5.84% -8; Spain 6.60% -14!; Greece 24.81% +6; Portugal 10.11% +13!; Ireland 5.96% -1.

Gold closed down and remain below $1600 for a third day and never touched it again: 1579.80 -$9.30 with an intraday low of $1547.60, lowest since 6/28. It has no traction. 6/22’s intraday low of $1555.60 was lowest since June 8th! The hit is $184 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 $1589, the 40 day and $1597, the 50 day, then $1666, the 200 day. 5/2’s o/n low of $1526.70 was lowest since 12/29! Overnight it is $1577.50 -$2.30. Crude declined more than offsetting Monday’s gain closing at $83.91 -$2.08 with a third straight lower high and lower low. The intraday low on 6/28 of $77.28 was lowest since 10/5/11.RES at the 40 day (85.75), the 50 day (88.64), then the 200 day (95.98)…40/50 still plunging! First REAL 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 $85.14 +$1.23.

Volume? You wanted volume…you got volume of sorts…but not retail participation and the action was all to the downside from the open and accelerated during the session. Rising volume on a down day is not a good thing. Also note that while all indices were down, except Utilities, the changes were not of the same magnitude as they had been in the prior two sessions…hmmm.

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

…we have a major banking scandal affecting hundreds of trillions of loan rates yet very few seem to get the significance. It is also viewed as a crime by one bank – Barclays – when others, including big banks in the U.S. will be dragged in, as they should be.

Most likely candidate here is JPMorganChase who is no stranger to controversy and misreporting. The Wall Street Journal ran an op-ed today on the clawbacks from ‘the whale’ and others involved, omitting asking why Jamie Dimon isn’t giving back at least some of his bonus which was predicated on the outsized earnings from that unit. Dimon’s defense is that his compensation is determined by the board of which HE is chairman!

Too Big To Fail must be killed before it destroys our financial system as many of today’s top bankers are only concerned with short-term profits to enhance their own compensation while taking outsized risks. It is no coincidence that both Barclay’s Diamond and JPM’s Dimon took risks that were not in accordance with prudent banking principles. Had they done so we would not be having this discussion.

We know that we have all been the losers of the rift inside the U.S. Congress. Whether it is on taxation or presidential appointments, stumbling blocks are being thrown up.

The GOP claims that fiscal policy (Keynes) does not work, yet what would have happened without the stimulus? While it didn’t turn things around it can take 4-5 years for an economic recovery to resume after a major financial crisis…and this one was truly global in nature. Meanwhile they espouse monetary policy and then declare war on the budget deficit…which they during the Bush years created and then it was exacerbated by the crisis…but the worst part is that for their own selfish political purposes they continue to blame Obama for creating them (as they did the price of oil until it dropped sharply).

Consider the following op-ed by Allan Meltzer a respected economist and highly regarded expert on the Federal Reserve and monetary policy:

By allowing its monetary policy to be influenced by elected politicians and market speculators, the Federal Reserve is putting its independence at risk. It is also neglecting basic economics, which was a great strength of its current chairman, Ben Bernanke.

Consider the response to last week’s employment report for June—a meager 80,000 net new jobs created, and an unemployment rate stuck at 8.2%. Day traders and speculators immediately clamored for additional monetary easing. Even the president of the Federal Reserve Bank of Chicago joined in.

To his credit, Mr. Bernanke did not immediately agree. But he failed utterly to state the obvious: The country’s sluggish growth and stubbornly high unemployment rate was not caused by, nor could it be cured by, monetary policy. Market interest rates on all maturities of government bonds are the lowest since the founding of the republic. Banks have $1.5 trillion in cash on their balance sheet in excess of their legally required reserves—far more than enough to meet any unsatisfied demand for loans that bankers regard as prudent.

Obama is not the answer but neither is Romney and if he is elected with a GOP controlled Congress, it appears that we will be back in recession, or worse, a year from now. This is what is caused by an inability to communicate, and compromise for the good of the country.

As for Obama’s recent call for a tax reduction for those earning less than $250,000 (which also includes their first $250,000), one has to wonder what he was thinking. Indeed, his own party is questioning it and just as they prepare to deal with letting the Bush tax cuts expire.

Who is the big loser? We, the American people…have they forgotten us?

All the best,

TB

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: