From Keep Calm and Carry On: “This crash is not going to have much effect on business.” – Arthur Reynolds, Chairman of Continental Illinois, October 29, 1929.

Bloomberg Quote of the Day: “I was so naïve as a kid I used to sneak out behind the barn and do nothing.” – Johnny Carson

Bloomberg Top Stories:

*Trading Surges Boosted Whale’s Position Before Month-End JPMorgan Audits

*Yields Rise in Germany After Credit Outlook Cut; U.S. Futures, Euro Drop

*Spain Moves Toward Bailout as Rajoy Rescues Indebted Regions – oh boy…

*Hollande’s French Transaction Tax Drives Investors’ Quest to Find Loophole

*China Ousting U.S. in Canada Oil Market With $15 Billion Nexen Bid – perhaps THEY will build a pipeline-  all the way to China? Put thousands to work!

*Lockheed Martin Boost Forecast as Second-Quarter Earnings Beat Estimates – what about next year after the ‘fiscal cliff’?

*Europe Stymies Private Equity as corporate LBOs Stall without Bank Loans- !!!

*Britain Deploys Extra 1,200 Soldiers to Police Olympics After G4S Failure- shameful!

It was an ugly day BUT devoid of investor participation! Huh? Yes, volume fell back to  3.65B vs 3.8B shares. The range since 7/29’s QE surge of 4.56B (above average) now stands at just 2.06B-3.93B shares range – mostly high-freq trades.  NYSE stocks executed without the aid of the ETN market However TOTALLY IMPLODED to 743M finally topping 1B for the first time since June 29th (quarterend) in yet another high freak controlled selloff! Blame it on Spain? Earnings? But why the lack of retail participation? Only once in 15 sessions has volume passed 800M shares. The average for 2012 is 811M shares and since 7/2 just 707M shares, levels not seen since week ended 12/30/11! 48 of the last 76 sessions have been less than 800M shares. Since 2/29 there have been just 16 ‘average’ days (mostly down!), including 3/16’s high for 2012 of 1.65B (4.85B including ETNs) and just 15 have been above 900M – 936M is 12 month average. Since 11/1 there have been just 15, 1B share days…11 in 2012! Since 2/6 there have been 15 sessions less than 700M shares. 160 of the last 180 sessions have been less than the 12 mo ave (89%)!

Advance/Declines were very negative. Here are last five: -3.2x vs -2x vs +1.1x vs +1.6x vs +2.1x on NYSE and -3.9x! vs -2.8x vs -1.3x vs +1.5x vs +1.2x on Nasdaq. Breadth was similar: -2x vs -3.2x vs +1.1x vs +1.4x vs +2.3x on NYSE and -4.3x! vs -3.3x vs +1.5x vs +2.4x vs +1.3x on Nasdaq. New 52 week highs fell again to 134 vs 190 (7/3’s 504 is the high), while new lows more than doubled to 213 vs 99! The ratio is MINUS 1.6x!!! vs +1.9x vs +4.3x vs +3.6x vs +2.9x vs +3.6x vs +6x vs +1.3x vs +2.3x vs +3.8x vs +5x vs +5.7x vs +14x vs +20x. The S&P VIX rose by a huge 14.4% to to18.62 +2.35. On Thursday it closed at 15.45, lowest since 3/26 – the low for this year! Oh, oh!

Here are the results of last 5 sessions, all indices except Utilities down: Dow -0.8% vs -0.9% vs -0.3% vs +0.8% vs +0.6%; Transports -1.2% vs -2.2%!!! vs +0.9%! vs +0.6% vs -0.7%;Dow Utilities -0.7% vs +0.3% vs +0.1% vs +0.4% vs +0.2%; S&P 500 -0.9% vs -1% vs +0.3% vs +0.7% vs +0.7%; Nasdaq Composite -1.2% vs -1.4% vs +0.8% vs +1.1%! vs +0.5%; Nasdaq 100 -1.1% vs -1.3% vs +1.1% vs +1.3%! vs +0.6%; Russell 2000 -1.6%! vs -1.3% vs -0.4% vs +0.7% vs +0.4% vs -0.5%; NYSE Financials -1.3% vs -1.8%!!! vs -0.3% vs -0.4% vs +0.7% (KBW Banks -0.9% vs -1.9%! vs -0.5% vs -0.7% vs +1.1%; Nasdaq Banks -1.3%! vs -1.2%! va -1.1%! vs -0.5% vs +1% vs -0.6%). NYSE Financial Leaders: BAC UP 0.3%? vs -2.6%! vs -3.6%!!! vs -4.9%!!! vs +0.9%; GE +1.1%! vs +0.3%. Not leaders, but… JPM +1.4% vs -1.6% vs -1.4%! vs -0.1% vs -0.3% vs -2.7%; C -2.3%!! vs -1.9%! vs -1% vs +2.1% vs +0.6%. WFC -1.1% vs -1% vs +0.6% vs -0.5% vs +0.3%; USB -0.6% vs -0.6% vs +1%!!! vs +1.6% vs +0.5%; MS -1.1% vs -3.2% vs -5.3%! GS -1.1% vs – 0.7% and -4.7% for the week. Note that BofA rallied on technicals so it didn’t broach $7…possibly lifting JPM also?

Global stocks lower, except Korea and India, after getting SLAMMED on Monday: FTSE -0.1% vs -2%! vs -0.7% vs +0.3% vs +0.1%; CAC 40 -0.1% vs -2.2%! vs -1.1%! vs +0.6% vs +0.6%; DAX -0.2% vs -2%! vs -0.6% vs +0.9% vs +0.2%;Nikkei -0.2% vs -1.9% vs -1.4%! vs +0.8% vs -0.3%; Hang Seng -0.8% vs -3%!!! vs +0.4% vs +1.7% vs -1.1%; Korean KOSPI UP 0.3% vs -1.8%! vs flat vs +1.6% vs -1.5%!;Indian Sensex UP 0.2% vs -1.6% vs -0.7% vs +0.6% vs +0.5% vs flat. U.S. stock futures weaker and near lows: DOW -23; SPX -3.60; NDQ -5.750.

Bonds quiet after setting new record lows on 10’s and 5’s (0.55%): 10 yr 1.44% -1/8 – new record low of 1.41%; 30 yr 2.51% -3/8. Long TIP 0.30% -3/16. 0.29% also a record low!The 5 yr TIP yields -1.20%; 10 yr -0.69%.Bills 0.05% 1 month; 0.10%!!! 3 months; 0.14% 6 months. Reverse Repo 0.21%. 3 mo. Libor 0.45%, and 0.73% – trying to go lower! European problem sovereign 10 years, Germany-benchmark: 1.24% +7 bp’s; Italy 6.45% +16; Spain 7.48% +9; Greece 26.97% +50!!!; Portugal 10.51% +6;Ireland 6.01% +2.

Gold closed lower with $1600 out of reach for a 12th day, closing 1577.40 -$5.40. 7/12’s intraday low of $1547.60 is lowest since June 1. The hit is $187 since 2/28! 2/28’s $1792.70 intraday high not seen since 11/16! The record high is $1923.70, a buying climax on 9/6. Res is $1592, the 40 day and $1588, crossed and not moving, then $1663, the 200 day. 5/2’s o/n low of $1526.70 was lowest since 12/29! Overnight it is $1574.60 -$3.40. Crude plunged 3.6%, losing ground wiping out the gains from four weird up days and closing at highest since 5/22 ($92.94). The intraday low on 6/28 of $77.28 was lowest since 10/5/11. SUP at the 40 day (84.88), and the 50 day (86.33), RES at the 200 day (96.39), 40/50 still falling sharply. First RES is again $89.17, the 11/1/11 low, res at $92.52-54, the lows of 12/16-12/17, a prior double bottom. It is now $87.95 -.19.

A bad day in which stocks fell off a cliff…a fiscal one?…from right out of the chute. The Dow striking the session lows (-138, -1.9%!), 20 minutes after the open…like falling down a mineshaft. Dow Transports closed off 1.2% after being off 2.5%). Both Nasdaq indices were off more than 1% but for a second straight session the Russell 2000 small cap was worst at off 1.6%, -2.9% in last two sessions. All three gapped down on the open! Even Utilities were down, -0.7%. It was a very ugly day and while total NYSE volume was at the high end of the recent weeks, after just one 1B share day, stocks traded without the aid of the ETN market fell back to a WEAK 743M shares showing retail has no interest in playing in this game! While all indices recovered about half of their losses, the two Nasdaq indices failed to close the gap created at the open, but managed to get back above the 40/50 day which probably caused the bounce. The NDQ 100 had 7:1 declining with Apple barely positive after reports that sales would lag until they came out with the next model iPhone! This is no game for amateurs!

What we have here is the summer doldrums and worries about Europe, the elections and the Fiscal Cliff. An amazing selloff for the summer doldrums…yesterday it looked like it might recover and at least had a ‘dead cat bounce’ but today not so much…let’s see.

. . .  – – –  . . . (SOS!)  . . .   – – –  . . .  (SOS!) . . .   – – –  . . .  (SOS!) . . .   – – –  . . .  (SOS!)  Note exclamation points added to the SOS’s! It’s ramping up!

…a couple more interesting stories:

According to yesterday’s Huffington Post, the super-rich (don’t worry if you are reading this you aren’t one of them!), have $32 trillion in offshore tax-sheltered accounts. http://www.huffingtonpost.com/2012/07/22/super-rich-offshore-havens_n_1692608.html?ncid=wsc-huffpost-cards-image That could keep the IRS busy for decades, right? No wonder their effective tax rate is less than 10% and yet they are not willing to pay any more taxes…how much is enough? Even as their ‘beloved’ country is hitting the skids. Have they no recollection of what happens when greed reaches that magnitude? Remember that a lot of that was amassed without EVER paying taxes on it. Can something be legal yet morally wrong? You bet. Perhaps Mitt will explain the difference being a good Mormon (not a criticism of the church, just a statement as he says he is one).

Speaking of our wonderful, beloved IRS, an artist, Robert Rauschenberg, died leaving one of his pieces which included an actual stuffed bald eagle. In a crackdown where the IRS is now valuing Black Market items at street value, they placed a value of $29 million on it and are demanding it from the estate. Ah, just sell it, you say. Can’t, because it is an endangered species. What do they want them to do since it was created before it was one? Throw it in the trash? Ah, donate it to a museum! Sorry, because the value would still be zero…unless the IRS is willing to accept the value it has assigned to it – which it isn’t!

Perhaps they should destroy it but too late as the owner is already deceased. A quandary.

It now goes to the Tax Court to decide. If they side with the taxpayer as any rational person would, it will be zero and that is what the IRS will collect. Follow closely! This is the most absurd thing TB has seen the IRS do. But there are more…see U.S v Darusmont for TB’s family’s claim to fame. In short, Congress can pass a law after you do something and still create a tax liability. Ex post facto does not apply to the government.

Shouldn’t they be tracking down that $32 trillion instead? Wait…those people can afford the best lawyers!

Have an exciting day?

TB

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