8/23/12…anatomy of earmarks

Bloomberg Top Stories:

*Jobless Claims in U.S. Unexpectedly Rise for Second Week to One-Month High – this is measurement week for August payrolls…so it has a lot more impact. TB

*Greek Crisis Evasion Comes to the Fore as Merkel Hosts Hollande in Berlin – it is always at the fore and austerity is killing them…like Spain and Portugal. TB

*U.S. Stock-Index Futures Decline as Investors Weigh Outlook for Stimulus

*Money Funds Score Victory as Schapiro Abandons Quest to Regulate Industry – that is one sad commentary…Wall Street wins again! …and again! TB

*Bullard Says FOMC’s Minutes Are ‘Stale,’ Economy of U.S. is Stronger Now – even with QE3 there is going to be little bang for the buck so ignore the hype! TB

*Global Corn Output Forecast is Cut to 838 Million Tons by IGC Amid Drought – Dec Corn contract has gone from $500 in June to $82, +65% but there is no inflation, Ben?

*Ethanol to Stay in Gasoline Even if Obama Ends Requirement – MONEY TALKS!!!

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

*Welfare Clients Denied Voter-Registration Aid Spark Challenges Across U.S.

…today is the last time TB is going to harp on this election and the condition of the government in the U.S. There has been a total absence of response to what TB feels is the most important issue facing us…more significant than the deficit and national debt is how we decide to get out of it. That is, provided we can get the two parties to even hold an intelligent conversation.

Lessig’s book has an important section on earmarks and TB did not realize just how insidious they are nor how they have been the factor that has caused the number of lobbyists in the Capitol to surge exponentially.

As stated earlier there is little corruption in D.C. If so, it is only by the stupidest of them and most are not stupid. It isn’t even a quid pro quo. It is an extension of the gift society we live in.

Imagine that you are on a fundraising committee for a charity and you start calling your wealthy friends…how about buying a table for $10,000? Sure, they say. So far so good. Then comes a phone call to you, next month, next year, whenever. No mention of them buying that table but they are now asking you to contribute to their charity. Do you ignore them? Do you buy one $1,000 ticket? If so, that is the last time you will get money from them for anything.

That is the simple case. Now imagine you are a newly-elected Congressman who needs to raise $5,000 a day to finance your next campaign. All of them hate this hanging over their head. Here are a couple of ways.

A bill comes before the House to build roads. You add an earmark to help hospitals in your district (hmmm didn’t Ryan who hates earmarks do that?). No one asked you to, or perhaps they did, but then when you need money for your coffers you give them a call. You tell them you hope they will support your reelection so you can continue working for the community…no mention of the earmark…no need to. Bingo! The cash rolls in.

Ah but the lobbyists. They have substituted hard work and research, albeit biased, with fundraising. Did you know that they can give $15,000 to a candidates campaign…NOT directly to the candidate. So if 10 of them throw a ‘fundraiser’ for a congressman they can put forth $150,000. The lobbyists involved don’t even need to have a reason to support her…defense lobbyists might do this for healthcare…but then the healthcare lobbyists would do the same for the defense lobbyists. Do you see how insidious this is? Just like the SuperPac’s there is no accountability, no transparency…get the picture?

This is the world we live in and it stinks to hell. You need to read the book and see the quotes from former congressmen of both parties on just how bad this is. It more than stinks…it is destroying our country and both parties have allowed this to happen and will continue to. Remember in the first part of this when TB said that Obama threatened to veto the first budget that had over 9,000 earmarks in it? He was told by his own party that if he did so he would never get another bill passed.

So if you believe that either one of the presidential contenders or their VP’s are going to fix Washington, you are one big dreamer and setting yourself up for disappointment.

Here is a link to Simon Johnson and James Kwak’s site. Today there are two stories. The first is on Facebook and how it drives how we think (TB found out the other day that less than 10% of voters use it or tweet, yet it is shaping all of our thinking!). The second is on Romney’s fiscal policy and how Paul Ryan will push it to the extreme right.


You don’t have to agree, but an informed electorate is crucial to America’s survival. That isn’t TB speaking that is Thomas Jefferson!

Have a great day!


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

Stocks were off for a second day – except for the two Nasdaq indices bolstered by Apple while the S&P 500 broke even only because of it! Volume was slightly lower at 3.05B shares vs 3.25B vs 2.76B vs  2.91B vs  3.1B vs 2.6B vs 2.9B vs 2.48B vs 2.78B vs 3.07B vs 3.21B vs 3.64B. That describes the entire rally! The range since 7/29’s QE surge of 4.56B (above average) remains 2.06B-4.28B shares with just 2 days above 4B! NYSE stocks executed without the aid of the ETN market also dipped to 601M vs 641M vs 551M vs 564M vs 596M vs 498M vs 567M vs 484M vs 566M vs 576M vs 637M vs 728M vs 647M vs 754M vs 826M vs 1.03B! Since 6/29 just 7 sessions have surpassed 800M shares. The average since 8/1’s 1.03B is just 623M, and the highest since 7/29 was 754M shares. There is STILL NO retail! The average for 2012 is just 795M shares and since 6/29 just 701M shares, levels not seen since week ended 12/30/11! 64 of the last 98 sessions have been less than 800M shares (65%!). 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 – 873M is the 12 month average and dropping! Since 11/1 there have been just 16, 1B share days…12 in 2012! Since 2/6 there have now been 28 sessions less than 700M shares. 179 of the last 190 sessions have been less than the 12 mo ave (94%)!

Advance/Declines were negative for a third session at -1.5x vs -1.3x vs -1.3x vs +1.6x vs +2.6x on NYSE and -1.7x vs -1.3x vs -1.4x vs +1.9x vs +2.3x on Nasdaq. Breadth was similar: -1.1x vs -1.1x vs -1.1x vs +1.6x vs +3.2x on NYSE and -1.2x vs -1.2x vs -1.6x vs +1.1x vs +2.2x on Nasdaq. New 52 week highs fell by nearly 2/3 to 104 vs 284 (7/3’s 504 is the high), while new lows rose to 57 vs 32 vs 43. The ratio reversed to +1.8x vs +8.9x vs 5.5x – all three wereodown! The S&P VIX rose again to 15.11 +.09 three days after posting a 13.45, the low for 2012. It’s getting even dicier!

Here are the results of last 5 sessions: Dow -0.2% vs -0.5% vs flat vs +0.2% vs +0.7%; Transports -0.5%! vs +0.1% vs -0.1% vs +0.5% vs +0.5%;Dow Utilities -0.2% vs -0.6% vs flat vs -0.2% vs -0.3%; S&P 500 flat vs -0.4% vs flat vs +0.2% vs +0.7%; Nasdaq Composite UP 0.2%-0.3% vs flat vs +0.5% vs +1%; Nasdaq 100 UP 0.4% vs -0.4% vs +0.1% vs +0.4% vs +1.2%; Russell 2000 -0.3%! vs -0.1% vs +0.4% vs +0.8% vs +1.1%; NYSE Financials -0.1% vs +0.3% vs flat vs +0.5% vs +0.9% (KBW Banks -0.2% vs +0.2% vs +0.3% vs +0.6% vs +0.5%; Nasdaq Banks -0.4% vs -0.1% vs +0.1% vs +0.7% vs +0.5%). NYSE Financial Leaders: BAC +0.4% vs +2.3% vs +1.9% vs +0.9% vs +0.8%. Not leaders, but… C -0.8% vs +3.2% vs +3.3% vs +0.7% vs +0.3%; JPM -0.6% vs +2.7% vs +0.4% vs -0.3% vs +0.1%; WFC -0.6% vs +0.9% vs +0.1% vs -0.3% vs +0.5%; USB -0.6% vs -0.6% vs +0.4% vs -0.3% vs +0.1%; GS -0.4% vs flat vs +2% vs +0.1% vs +0.3%; MS -0.2% vs +0.4% vs +1.6% vs flat for two days; UBS UP 2.9% vs +2.7% vs -1.4% vs +1.5% vs +1.6% vs -0.3%. UBS is in a world of its own.

European stocks mixed, Asia higher: FTSE +0.2% vs -1.2% vs +0.3% vs -0.4% vs +0.1%; CAC 40 -0.5% vs -1% vs +0.5% vs -0.3% vs flat; DAX -0.4% vs -1% vs +0.4% vs flat vs +0.3%;Nikkei +0.5% vs -0.3% vs -0.2% vs +0.1% vs +0.8%; Hang Seng +1.2% vs -1.1% vs flat vs -0.1% vs +0.8%; Korean KOSPI +0.4% vs -0.4% vs -0.2% vs flat vs -0.6%;Indian Sensex flat vs -0.2% vs +1.1% vs +0.2% vs +0.2%. U.S. stock futures slightly weaker for a third session: DOW -9; SPX -1.60; NDQ -2.25.

Bonds slightly weaker after yesterday’s BIG rally: 10 yr 1.70% -1/32 – record low of 1.40%; 30 yr 2.81% -3/16. Long TIP 0.51% -1/8. 0.28% is record low!The 5 yr TIP yields -1.23% vs -1.14% weakness resuming! 10 yr -0.59 vs -0.50%!Bills 0.10% 1 month; 0.10% 3 months; 0.13% 6 months. Reverse Repo 0.20%! 3 mo. Libor 0.43%, and 6 mo. 0.71% – both trading below 0.45% and 0.73%. European problem sovereign 10 years, Germany-benchmark 1.41% -5; Italy 5.66% +3; Spain 6.36% +14!; Greece 23.01% –2???; Portugal 8.98% +6; Ireland 5.81% -1.

Gold holding above $1600, and looks like it could really break out today! It closed at 1640.50 -$2.40, but with an intraday high of $1658.20! 7/12’s intraday low of $1547.60 was lowest since June 1. The hit is $132 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 at $1605, the 50 day AND $1604, the 40 day. RES at $1659, the 200 day. 5/2’s o/n low of $1526.70 was lowest since 12/29! Currently $1663.70 +$23.20!!! Crude closed at $97.26 +.58, on an inside day so Tuesday’s intraday high of $97.25 still stands. SUP at the 40 day (89.61), and the 50 day (88.01) – finally flattening! RES/SUP at the 200 day (96.74). Currently $97.77 +.51 – O/n high was $98.28, highest since 5/4/12 – first day of selloff!

You can do anything with low volume if you have access to information milliseconds ahead of the crowd and scads of money to throw at it, which is what they did. But you have to look inside the numbers: the Dow was down; Transports were the worst performer, -0.5%; S&P was flat and both Nasdaq indices were up, while the Russell resumed its weakness. On the surface this is confusing but the 2% gain in Apple to yet another record high –after oscillating quite a bit- explains it. Take AAPL out of the S&P and it too would have been down. Likewise the Nasdaq. The 100 had 45 up 54 down. It was up 11.22 points with APPL adding 10.40 of them! So call both Nasdaq’s flat and the Russell 2000 which had been cruising fell 0.3%.

Financials were weak, except for BofA which rose 0.4% to $8.22, relax that is just 9 cents! UBS was the only other one up at 2.9%…perhaps their Phil Gramm clout is key?

The VIX has now been up for three session after hitting a low for 2012 on Friday (meaning call buying vs puts and probably due to options expiry), closing at 15.11. Here is the answer to yesterday’s question of: if all indices were down, how come the number of new 52 week highs rose to 284 from 237?  It was due to the early morning rally on Tuesday as Apple surged to yet another record high. Yesterday however it was only Apple that was up big and the index suffered in the red all session. Even Apple traded choppy after setting that record high of $674.88, fell back to $648.11 then slowly climbed back on big volume to close at $668.87, also a record. No stock is an island and given the huge volume of 20.2M, 29M, and 21.9M shares it seems anyone who wanted it is all in. Given that this is a favorite stock of Jim Cramer who hyped it, but remember that even he always says when he makes a recommendation if the stock soars, wait! Is Apple that good…meaning staying power at these levels. Remember after peaking in April at $644 on the new IPad it fell back to $531 before resuming its climb. How far this time? Trendline says perhaps $582 and the rest of the market is weak so…you decide.

Commodities are soaring, grains due to the Midwest drought with Gold and Crude now chirping in. Gold has been holding well above the critical $1600 and after touching the 200 day moving average yesterday surged through it overnight and is now $1663 +$25! The rally in Crude hasn’t been so glorious but it has been trading at the 200 day for two days and broke well above it overnight to $98.29, highest since May 4, the second day of a huge selloff. One can make a lot of arguments for both to continue to rally…or not!

Stock futures are weak (slightly) for a third straight session.



  1. Yarnman said

    TB–Let me say that I read you every day, and always check in even when you’re traveling to see whether you had time to write a bon mot or two. You strike me as a cautious person with integrity, and your clients should be pleased that they have your counsel. It may be my imagination, but it seems that as you have moved eastward for good family reasons, you have become more objective in your thinking, objectivity that is often lacking on both coasts. I am a New Englander, and all of my close friends seem to be Democrats so, because our political observations agree with each other, we have pleasant dinner parties, but we all feel that we have little impact on our legislators. My 40-something son said before Obama was elected that he dispaired for our country. (The context was whether big banks should “mark to market.”) His remark startled me, frankly, because I hadn’t realized to what extent the 2008 crash was affecting his colleagues (mostly lawyers). There is a sick feeling among too many of our “best and brightest” about the Congressional impasse, and the influence of money in our national goverment. Plutocracy is dangerous in a democracy. The “system” is intellectually corrupt, even though it may operate within the law. So, please keep writing, tell us what you’re reading, or listening to. We need your voice, and we value your thoughts.–Yarnman

    • traderbill said

      Thank you, Yarnman. I am discouraged, not that I feel like the allnight DJ but because of the apathy of the American people. They have been lulled into either believing our leaders (sic) or simply not caring. 80% of the vote is split between the two parties – about equally. But this does not tell the entire story because as Lessig writes, it was Johnson’s strong stand on civil rights that caused the Blue Dogs to remain Dems but vote GOP.

      Then when Reagan was elected it was the Christian right that swung over and they began their crusade against Roe v Wade and abortion. The last big swing was the Tea Party which is out of control of the GOP leadership and they know they need their support. Thus the party is no longer the one we grew up with …Eisenhower (who was a Dem prior to running for the presidency), even Bush Sr. But that has all ended and it is now a matter of holding all factions together and appealing to the Koch’s as well as Wall Street…again, Lessig says that it is easier to get funds from someone with an extreme position, reducing government size and scope, or taxes…imagine thinking 13% is adequate and 19% (rate top 1% pay) is too high?

      I had planned to get off it but thanks to you and four readers who get TB as email I am going to continue but not every day. Today will be back on thanks to a blog by Simon Johnson! I do not seek praise or even assent but honest dialogue that broadens all of our knowledge. Without it we resort to listening to only those who support our beliefs…MSNBC, FOX, etc.

      Thanks for sharing your background…perhaps we can make a difference!

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