8/1/12…stimulate this!

From Keep Calm and Carry On: “Life is a shipwreck, but we must not forget to sing in the lifeboats .” – Votaire. At a concert  on Sunday, TB heard a song “My Sweetheart Went Down With the Ship” – written in 1913 about the Titanic…don’t recommend it!

Bloomberg Quote of the Day: “Jealousy is the tribute mediocrity pays to genius.” – Fulton J. Sheen

Bloomberg Top Stories:

*Monti Bids to Bridge North-South Divide on ECB Bond Buying to Ease Crisis

*U.S. Index Futures Rise Before Fed Decision as Spanish, Italian Bonds Gain

*All Markets Gaining for First Time in Two Years in Drought-to-Draghi Rally

*Societe Generale Second-Quarter Net Slides 42% on Russian, TCW Writedowns

*Draghi Reshapes ECB Crisis Fight as Trichet Dogma Gives Way to Pragmatism

*U.K. Manufacturing Slumps Most in Three Years on Weakening Orders

*Jain Cuts Deutsche Bank Compensation as Workers See Fewer Exits in Crisis

*UBS Facebook Loss Dwarfs Nasdaq Compensation Pool for Botched Stock Offer!!!

*India’s Worst Power Outage Highlights 60 Years of Missed Investment Goals

*Obama Leads Romney in Florida, Ohio, Pennsylvania Swing States, Poll Finds

Two straight ‘down’ days following two straight ‘up’ days and July went out with a whimper. Volume rose modestly to 3.78B shares vs 3.2B! The range since 7/29’s QE surge of 4.56B (above average) is 2.06B-4.28B shares. NYSE stocks executed without the aid of the ETN market also rose to 888M vs 659M – from the lowest level since 7/16 to nearly 900M shares AND on a down day! Just 5 of the last 21 sessions have surpassed 800M shares. The average for 2012 is just 811M shares and since 6/29 just 737M shares, levels not seen since week ended 12/30/11! 50 of the last 82 sessions have been less than 800M shares. Since 2/29 there have been just 18 ‘average’ days (mostly down!), including 3/16’s high for 2012 of 1.65B (4.85B including ETNs) and just 16 have been above 900M – 933M is 12 month average. Since 11/1 there have been just 15, 1B share days…11 in 2012! Since 2/6 there have now been 16 sessions less than 700M shares. 164 of the last 186 sessions have been less than the 12 mo ave (88%)!

Advance/Declines were negative for a second session. Here are last five: -1.4x vs -1.1x vs +5x! vs +2.7x vs +1.1x on NYSE and -1.4x vs -1.8x vs +3.3x vs +2.1x vs +1.4x on Nasdaq. Breadth was also negative: -1.8x vs +1.1x vs +9x!!! vs +2.9x vs -1.1x on NYSE and -1.6x vs -2x! vs +1.8x vs +2.9x vs +1.3x on Nasdaq. New 52 week highs fell again to 244 vs 267 (7/3’s 504 is the high), while new lows rose slightly to 84 vs 72 from a recent high of 229! The ratio is +3x vs +3.7x +4x vs +1.6x vs -1.2x. This from the early rally highs of +14x and +20x. The S&P VIX surged another 5% to 18.93 +0.90 – +13% in two days. 7/15’s 20.47 was highest since June 15th. A week earlier it closed at 15.45, lowest since 3/26 – the low for this year!

Here are the results of last 5 sessions: Dow -0.5% vs flat vs +1.5% vs +1.7% vs +0.5%; Transports -0.5% vs -0.3% vs +2.4% vs +1.5% vs -0.4%;Dow Utilities -0.8% vs +0.4%! vs +1%! vs +1.8%!!! vs -0.2%; S&P 500 -0.4% vs -0.1% vs +1.9% vs +1.7% vs flat; Nasdaq Composite -0.2% vs -0.4% vs +2.2%! vs +1.4% vs +1.7%; Nasdaq 100 FLAT vs -0.2% vs +2.4%! vs +1.4% vs -0.7%; Russell 2000 -0.6% vs -0.6% vs +2.4%! vs +1% vs +0.2%; NYSE Financials -0.6% vs -0.1% vs +2.4%! vs +2%! vs +0.4% (KBW Banks -0.4% vs -0.8%!+1.5% vs +1.7% vs +0.4% vs flat; Nasdaq Banks -0.3% vs -0.7% vs +1.5% vs +0.8% vs +0.3% vs -0.2%). NYSE Financial Leaders: BAC +0.8% vs -0.4% vs +2%! vs +1.4% vs .+0.4% vs -0.7% +0.3% vs -2.6%! vs -3.6%!!! vs -4.9%!!!; F +1.5% vs +1.1% vs -0.1% vs +0.5% vs -1%. Not leaders, but… JPM -0.4% vs -2%! vs +3%!!! vs +1.8% vs +1.3% vs +0.8% vs +1.4%; C flat vs -0.6% vs +3.9%! vs +1.9% vs +2.2% vs -0.4% vs -2.3%!!; WFC -0.5% vs -0.5% vs +1.1% vs +1.9% vs +1.4% vs -0.6% vs -1.1%; USB -0.7% vs -0.5% vs +1% vs +0.9% vs -0.5% vs +0.1% vs -0.6%; GS flat vs -0.7% vs +3.7%!!! vs +2.2%! vs +1.6% vs +1.4% vs -1.1%; MS +1.1%! vs flat vs +3.8% vs +0.3% vs +2.7% vs -0.2% vs -1.1% vs -3.2% vs -5.3%!; UBS DOWN 4.2%!

Global stocks mixed? FTSE +1.1% vs -0.3% vs +0.6% vs n/a vs +0.2%; CAC 40 +0.9% vs flat vs +0.6% vs n/a vs +0.7% vs -0.1%; DAX -0.1% vs +0.3% vs +0.9% vs n/a vs +0.5% vs -0.2%;Nikkei -0.6% vs +0.7% vs +0.8% vs n/a vs -1.4%!; Hang Seng +0.1% vs +1.1% vs +1.6% vs n/a vs -0.1%; Korean KOSPI -0.1% vs +2.1%!!! vs +0.8% vs n/a vs -1.4% vs +0.3%;Indian Sensex +0.1% vs +0.5% vs +1.8%! vs n/a vs -0.4% vs +0.2%. U.S. stock futures higher and at session highs: DOW +55; SPX +5.60; NDQ  +16.25.

Bonds closed VERY STRONG and are nearing the low yields again: 10 yr 1.48% -1/8 – record low of 1.40%; 30 yr 2.56% -5/16. Long TIP 0.30%. 0.28% is record low!The 5 yr TIP yields -1.27%!!!; 10 yr -0.72%!!!Bills 0.07% 1 month; 0.09% 3 months; 0.13% 6 months. Reverse Repo 0.26%. 3 mo. Libor 0.44%!!!, and 6 mo. 0.71% – both have now broken below 0.45% and 0.73% where they have been embedded! European problem sovereign 10 years, Germany-benchmark 1.34% +6 bp’s!; Italy 5.90% -14!!!; Spain 6.59% -8; Greece 24.61% +6; Portugal 10.73% -4; Ireland 5.79% -6!.

Gold still holding above $1600 but lost ground to the lowest level since breaking above $1600 following 13 days below, closing 1614.60 -$9.40 and more than wiping out the total $7.10 gain from the breakout. 7/12’s intraday low of $1547.60 was lowest since June 1. The hit is $154 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. SUP is $1601, the 40 day and $1597, crossed and stable, then $1666, the 200 day. 5/2’s o/n low of $1526.70 was lowest since 12/29! Currently $1617.50 +$2.90. Crude had the biggest move…down…in the last four sessions closing at $88.06 -.72. Since selling off on 7/23 the TOTAL change has been just $2.71! SUP at the 40 day (85.33), and the 50 day (85.86), RES at the 200 day (96.51), 40/50 converging. First RES is again $89.17, the 11/1/11 low, then $92.52-54, the lows of 12/16-12/17, a prior double bottom. It is now $88.40 +.34.

The rally is fast fading and becoming a memory of what might have been.

Breadth and Advance/Declines remain weak. The indices were all down except the Nasdaq 100 which was FLAT and for a second straight session saved by Apple which was the only real gainer again and this time added 13 points to the index following 9 on Monday, sans AAPL it would have been -0.5% – for a second straight session! Signs were that this was a totally high freak dominated session.

For the first time in the a couple of years (TB thinks), BofA was seriously displaced as the most active NYSE stock by SprintNextel (S) this time on a 3.3% loss vs a 4.6% gain but the stock trades in the low 4’s! Number two was Nokia of all things with an 11.1% gain! Nokia???

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

…this panel consisted of three economists, all of whom were senior analysts with Federal Reserve banks. William Stone is a former First V.P. of the Philly Fed and was thus the stand-in for the bank president.

Unfortunately there was little discussion of the recent Libor scandal involving the NY Fed or the problems of Jamie Dimon still being a sitting director of the NY Fed, former Chairman Stephen Friedman former Goldman Sachs chairman, who was still a director of some Goldman companies and bought GS stock while the board was debating making GS a bank and was later forced to resign…that’s it. Does that upset you, Martha?

Some time was spent on whether Fed policy should be eased but that would be difficult ahead of a presidential election given the Fed’s desire to stay above the fray. Still, if the situation deteriorates they would be forced to act, probably by buying more securities in ‘their’ portfolio…more accurately OUR portfolio. While U.S. treasury bonds have remained strong that is largely due to the situation in Europe. Furthermore, participation in auctions by foreign central banks has slumped to 26% with the Fed buying up the majority of bonds with maturities longer than five years.

There was nothing else new other than the graphs of ownership of U.S. treasuries.

At the break, TB spoke with William Stone, a very likable and capable man, about MF-Global and how TB hadn’t even realized they were a primary government securities dealer. Worse, after their demise the Fed stated that they no longer examined the books of primary dealers which is like a bank making a loan to a customer without doing even a basic credit check! That is what they got for it…another scandal! TB mentioned that when he worked for a primary dealer (Merrill) and later was at L.F.Rothschild during the period they had applied to be a primary, the oversight was very deep…into trading, financials etc. What a juxtaposition!

We talked about the NY Fed President Bill Dudley, who TB knew from when he was the bond economist for Goldman Sachs. He always seemed above the fray yet his integrity is now being called into question even more than Geithner’s was. TB hopes the rumors are false as he was a likeable down to earth guy…or does money talk?

While we were talking TB suggested that he has very little confidence in the Fed – a big red flag for a central bank! He then asked the moderator if he would be interested in putting up a question on the electronic question board about that. The question was: do you have confidence in the Federal Reserve: more, less, about the same as three years ago. Overwhelmingly, the answer was LESS confidence! No one had more! Scary!

So, as TB has found at most conferences the value is in meeting and conversing with the speakers. What you learn from a ‘canned’ speech is of little value, but you can learn volumes by talking one on one with the participants! Tomorrow will show the exception to the rule.

Tomorrow: U.S. Politics, Election Outlook

Have a productive day!

TB

 

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