8/6/12..cucharachas!

From Keep Calm and Carry On: “The safe way to double your money it to fold it over once and put it in your pocket.” – Frank Hubbard

TB’s Quote of the Day: ”It does no good to kill just one cockroach…you have to kill them all.” – Charles Bronson – Death Wish III 

This week’s economic calendar is fairly light and with an absence of any major market moving indicators. We will get June Consumer Credit (Tuesday), preliminary Q2 Productivity & Costs (Wednesday), June International Trade and June Wholesale Inventories (Thursday), and July Import & Export Prices and the July Treasury Budget (Friday). There are no data releases scheduled for Monday. Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA.

Bloomberg Top Stories:

*Knight Capital Ducks Insolvency as Investors Provide $300 Million in Cash

*Monti Warns of Euro Breakup as Disagreements Harden Over ECB Aid for Spain

*Bund Yields Drop as Euro Weakens; Stocks Advance With U.S. Index Futures ???

*Greece Agrees on Need to Boost Policy Efforts to Receive Aid, Troika Says

*Knight Investors Eye Prize in Market Making Business Aimed at Individuals

*Berkshire Cash Hoard Swells to $41 Billion as Buffett Cuts Consumer Stocks – a bear?

*Treasury Bears Submit to Bernanke as Bond Optimism Rise to Highest of ’12 – bullish?

*T. Rowe Price Sees Investor Food Fight as Newest Junk Bonds Soar

*Rogoff Sees World Wishing It Was America Year After S&P Downgrade of Debt –hello?

Finally a rally following four straight ‘down’ day following two straight ‘up’ days and everyone is ga-ga!! This will not stand to quote George H.W. Bush. Volume DROPPED to 3.75B vs  4.12B shares vs 4.34B! The range since 7/29’s QE surge of 4.56B (above average) remains 2.06B-4.28B shares. As always: note that the big days come when there is a reversal due to news but on a weak but better than expected payrolls number??? NYSE stocks executed without the aid of the ETN market were even worse falling back to 754M vs 826B vs 1.03M – if you can’t read short-covering there is no help for you as a trader! Just 7 of the last 24 sessions have surpassed 800M shares. The average for 2012 is just 812M shares and since 6/29 just 754M shares, levels not seen since week ended 12/30/11! 51 of the last 85 sessions have been less than 800M shares. Since 2/29 there have been just 19 ‘average’ days (mostly down!), including 3/16’s high for 2012 of 1.65B (4.85B including ETNs) and just 17 have been above 900M – 925M is the 12 month average. Since 11/1 there have been just 16, 1B share days…12 in 2012! Since 2/6 there have been 16 sessions less than 700M shares. 166 of the last 188 sessions have been less than the 12 mo ave (88%)!

Advance/Declines were positive following four straight negatives. Here are last six: +4.7x! vs -1.7x vs -1.7x vs -.4x vs -1.1x vs +5x! on NYSE and +3.4x! vs -1.4x vs -2.9x vs -1.4x vs -1.8x vs +3.3x on Nasdaq. Breadth was even stronger: +7.1x!!! vs -4x!! vs -2x vs -1.8x vs +1.1x vs +9x!!! on NYSE and +4.7x! vs -2x vs -2x vs -1.6x vs -2x vs +1.8x on Nasdaq. New 52 week highs more than doubled to 301 vs 141 (7/3’s 504 is the high), while new lows were more than halved to 77 vs 167 from a recent high of 229! The ratio turned positive again at +3.9x vs -1.2x! vs +2.1x vs +3x vs +3.7x +4x. This from the early rally highs of +14x and +20x. The S&P VIX plunged 11% to 15.64 -1.73 vs 17.57 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!  Now IF as the drop Thursday suggests, a huge number of calls were bought, more would be bought and the shorts would be forced to cover making the rally look stronger…kind of explains such a big move on such low volume, no?

Here are the results of last 6 sessions: Dow +1.7% vs -0.7% vs -0.3% vs -0.5% vs flat vs +1.5%; Transports +2.1% vs -0.1% vs -2%!!! vs -0.5% vs -0.3% vs +2.4%;Dow Utilities +1.1%??? vs -0.7%? vs -0.7%? vs -0.8% vs +0.4% vs +1%; S&P 500 +1.9% vs -0.7% vs -0.3% vs -0.4% vs -0.1% vs +1.9%; Nasdaq Composite +2% vs -0.4% vs -0.7% vs -0.2% vs -0.4% vs +2.2%!; Nasdaq 100 +1.9% vs -0.4% vs +0.3% vs flat vs -0.2% vs +2.4%!; Russell 2000 +2.6% vs -0.3%? vs -2%!!! vs -0.6% vs -0.6% vs +2.4%!; NYSE Financials +2.7%!!! vs -1.1%!!! vs -0.4% vs -0.6% vs -0.1% vs +2.4%! (KBW Banks +3.1%!!! vs -1.3%!!! vs -0.5% vs -0.4% vs -0.8%! vs +1.5%; Nasdaq Banks +2.8%!!! vs -0.5% vs -1.3%!!! vs -0.3% vs -0.7% vs +1.5%). NYSE Financial Leaders: BAC +3.5%!!! vs –0.6% vs -1.6% vs +0.8% vs -0.4% vs +2%!; C -2.2% vs -1.3% vs flat vs -0.6% vs +3.9%! Not leaders, but…JPM +2.6% vs -2.3% vs flat vs -0.4% vs -2%! vs +3%!!!; WFC +3%! ss -1.7% vs +0.2% vs -0.5% vs -0.5% vs +1.1%; USB +1.8% vs -1.3% vs -0.5% vs -0.7% vs -0.5% vs +1%; GS +3.2% vs -2.3% vs -0.8% vs flat vs -0.7% vs +3.7%!!!; MS +5.8%!!! vs -3.6%! vs -1.1% vs +1.1%! vs flat vs +3.8%; UBS +5%!! vs -2.2% vs -1% vs -4.2%! Meanwhile MGIC (MTG) which fell -64% Thursday after missing on earnings and breaching capital requirements, fell another 4.5% to $0.84 – this for a financial company? Hello, they are TOAST!!! As for Knight (KCG)  which fell -62.8% following a 32.8% decline on Wednesday rallied on a temporary infusion (?) 1.6% to a ‘lofty’ $4.05…get real and tell them goodbye! Buyers will emerge for their ‘aps’ but…

Global stocks up despite warnings of EU problems, but for the present all is well – huh? FTSE +0.3% vs +1.5% vs +1.1% vs -0.3% vs +0.6%; CAC 40 +0.75 vs +2.7% vs +0.9% vs flat vs +0.6%; DAX +0.7% vs +2.3% vs -0.1% vs +0.3% vs +0.9%;Nikkei +2% vs -1.1% vs +1.3%!!! vs -0.6% vs +0.7%; Hang Seng +1.7% vs -0.1% vs -0.7% vs +0.1% vs +1.1% vs +1.6%; Korean KOSPI +2% vs -1.1% vs -0.6% vs -0.1% vs +2.1%!!! vs +0.8%;Indian Sensex +1.3% vs -0.2% vs -0.2% vs +0.1% vs +0.5% vs +1.8%! U.S. stock futures up modestly and at session highs…do you trust this? DOW +20; SPX +3.50; NDQ +13.

Bonds were slammed on the faux stock rally but will rise again as bullish sentiment indicates, but are little changed o/n: 10 yr 1.56% +1/32 – record low of 1.40%; 30 yr 2.65% -1/16. Long TIP 0.34% -1/32. 0.28% is record low!The 5 yr TIP yields -1.25%!!!; 10 yr -0.68%!!!Bills 0.02% 1 month; 0.08% 3 months; 0.13% 6 months. Reverse Repo 0.31% vs 0.28%! 3 mo. Libor 0.44%!!!, and 6 mo. 0.72% – both have now broken below 0.45% and 0.73% where they have been embedded! European problem sovereign 10 years, Germany-benchmark 1.34% +5 bp’s; Italy 5.95% -6; Spain 6.68%! -9; Greece 24.41% -12!; Portugal 10.06% -51???; Ireland 5.85% +1. This is crazy!

Gold continues to pivot on $1600 closing above again at 1609.30 +$8.60 – an exact reversal of Thuursday That was the first time it has closed below $1600 since 7/25! 7/12’s intraday low of $1547.60 was lowest since June 1. The hit is $161 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/SUP at $1600, the 40 day and $1598, crossed and stable, then $1665, the 200 day. 5/2’s o/n low of $1526.70 was lowest since 12/29! Currently $1612.00 +$2.70. Crude had a HUGE rally +4.9%! closing at $91.40 +$4.27 – doubling the down move on Thursday? SUP at the 40 day (85.58), and the 50 day (85.82), both rising! RES at the 200 day (96.54). First SUP is again $89.17, the 11/1/11 low, RES $92.52-54, the lows of 12/16-12/17, a prior double bottom. It is now $91.08 -.32…can’t explain this thru fundamentals…no sir!

Breadth and Advance/Declines were very STRONG after FOUR straight weak sessions! This is only the second day of advances in six sessions…the last a faux rally from a week ago Friday…that was quickly overwhelmed. Lots of talk about nearing the 2008 highs for the S&P…but it isn’t even the same S&P which changes as stocks get in trouble or go out of favor. So who cares and is it something to be proud of when an index gets back to where it was four years ago? About as useful as the fourth quarter of last year was following a disastrous third quarter…or the second quarter of this year! Thankfully, investors only listen to CNBC and haven’t a clue about history! Egads!

Note that volume, both gross and especially executed on the NYSE plunged – not a sign of a rally – more a sign of SHORT COVERING. This is somewhat confirmed by the decline in the S&P VIX on THURSDAY – buying of call options to hedge shorts? Also, note that as in previous short-lived rallies all indices moved similarly which TB ascribes to high frequency trading not individual stock buyers…real ones!

Oh, and Knight (KCG) rallied on a one day infusion…call it what it was: short covering after the stock was off more than 90% the prior two sessions, capiche? Meanwhile, MGIC Mortgage (MGIC) continued to fall – it either has to find an angel or it is out of business. Think about that! Two financials within two days of one another? Boy isn’t technology great! Let’s turn everything over to the programmers and see what happens!

How many of you had even heard of MF-Global, Knight Capital, Bernie Madoff, Allen Standford and others before they blew up? Not many TB would suggest! Not many!

 

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

…there’s never just one cockroach…never! Sadly, our financial system, once the best in the world is now a disgrace…on all but those of us who have to invest in it (speculate is the more apt term. What is the problem here…more accurately ‘problems’.

What does it take to wake us up to the fact that our financial system has become a joke? A bad one…a ponzi scheme that the taxpayers keep afloat. When was the last time you heard a complaint about FNMA/FHLMC from a member of Congress – even from the GOP who loathed them but continued to take their money and tacitly back them!

We had Glass-Steagall which served us well for more than 70 years then thanks to the finagling by one Sanford Weill, who enriched himself while Chairman of Citigroup (don’t take TB’s word for it, take Graef Crystal, a former compensation analyst who billed him as the most overpaid CEO in America…and there is a lot of tough competition for that title!).

Then, thanks to direct phone calls to President Clinton, Treasury Secretary Rubin and Fed Chairman Greenspan, it was done…with the help of Sen. Phil Gramm who was rewarded by being made Chairman of UBS Americas…sweet!

But Sandy couldn’t even wait for the bill to be drafted…no sir, he began his stock swap for Transamerica even before it had become law…after all that was all he cared about: enriching himself, like Countrywide’s Angelo Mozillo…at least he got a hand slap!

TB believes that JPMorganChase is the most corrupt financial institution in the country. Yet its beloved Jamie Dimon continues to press for less regulation even in the wake of a $6 billion plus ‘gambling’ loss, and also to promote those who commit sins. This time however it was too big so CIO Ina Drew had to go…er…retire with $22 billion in compensation. She, however had the decency to return her last two years of compensation…something her irresponsible boss has refused to do, instead leaving it up to the Board, of which he is the only banker and Chairman. Board says do nothing! Dimon brought in a new risk officer…who lost his last job for allowing too much risk!

Every time we turn around our once-trusted banks continue to rip us off. Either thru illegal foreclosures, excessive fees, or now lending at the taxpayers expense. Just how many of those sub 4% mortgages do you think are going on the banks books? All of them…for 60 days – long enough to dump them on FNMA/FHLMC and still get paid ½% to service them. You do the math…they can make as much or more money from the same amount of capital with NO credit exposure…nope, that goes to you the taxpayer!

How about the Fed? Bernanke once thanked Milton Friedman and said they learned from their mistakes thanks to him…then they did the same thing all over again. The N.Y. Fed has become a joke, first with former Chairman Stephen Friedman who bought Goldman Sachs stock while still a director of G.S. Unlike Martha Stewart he didn’t go to jail or even get prosecuted, instead he had to give up the profits and resign! That’s it! Jamie Dimon sat on and still sits on the board of the NY Fed, even though his bank is being investigated. The new chairman of the NY Fed is an academic with no expertise in banking despite the by-laws calling for him to be.

Former Goldman co-chairman, Senator, and Governor Jon Corzine who decided to try his hand once again at investing…and as usual was a gun-slinger. TB didn’t even know that MF-Global was a primary dealer and when the went bust found out that the Fed no longer reviews the financials of primary dealers…the ones it entrusts with OUR money!

Then of course, Bernie Madoff, who escaped scrutiny for decades because he was a former president of NASD, and now we have ‘sir’ Allen Stanfrord, the Mormon Madoff, Peregrine and a dozen others not worthy of mention.

But it is also corporate America. Insurance companies…almost exclusively for profit that are fraudulently charging fees…when does it end…and where?

No, the world abounds with them and far too many in our own beloved U.S. of A. TB could write volumes about how the NRA has exceeded the wishes of its members, AARP enriched itself from its members – at the expense of our heirs, and Congress is rife with conflicts of interest that don’t even get attention (remember when Rep. Charles Rangel was censured by the House for things we would have been tried for tax evasion…then went on to be re-elected by an even bigger majority? At the time, Speaker Pelosi said that other cases were pending…like Rep. Maxine Waters (D) Los Angeles, who got her hubbie’s  S&L included in a Fed panel on bailouts without disclosing this and his was the only S&L to get bailout money…nothing since! This is two years after the investigation into Rangel began! Update: on June 12, it was announced that the investigation would resume…and four days ago that it would continue…conveniently nothing done until AFTER the election!

As for our presidential contenders, the word for them both is ‘gaffers’. This is the way they evade responsibility for their inaccurate statements and the media is only too willing to oblige by watching even closer and labeling everything a gaffe. This is sick! There is no way in this advanced information age for voters to make an objective decision – none!

Both take a shred of fact and then promulgate lies about it to confuse the voters. While Obama was crowing about the creation of 163,000 jobs, following just 67,000 in June when we need at least 250,000 a month to handle new entrants to the labor force, Romney was blasting him…because the unemployment rate rose to 8.3% from 8.25 and said his plan would create millions of jobs…despite evidence to the contrary by the Brookings Institute which he condemned but had lauded when they were critical of Obama’s! As for that 8.3% rate it was simply rounding: 8.225% vs 8.222% – talk about within the margin for error! They want you to trust them…not your lying ears and eyes!

TB is sick…sick of an ailing nation who continues to enrich the wealthiest…no not the 2% but the 0.01%! Like the Koch brothers who would destroy our entire infrastructure for their personal gain. How much is enough? Apparently not the $42 trillion that resides in offshore accounts! Honk if you think we are in trouble: HONK! HONK! HONK!

Hope you have a great week but do something…make your vote count, not as a republican or a democrat but as an American who loves her country. If only we paid enough attention to finding a solution as we have to the Olympics, we could do it!

TB

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