9/14/12…what is an American?

Bloomberg Quote of the Day: “Laziness is nothing more than the habit of resting before you get tired.” – Jules Renard…Renard the fox?

TB’s Comment of the Day:  After a failed QE1, then a failed QE2, legendary investor Jim Rogers isn’t sure why the Fed wants to announce a QE3 after the FOMC’s policy meeting today. “They’ll look like fools,” he exclaims. Add into the mix that Europe is also bent on initiating its own version of QE, the Western world has just guaranteed itself “unanimity towards mutual destruction,” Rogers says. “We’re all going to pay a horrible price for this in a year or two or three.” – saiz TB: Amen, Brother Jim!

Bloomberg Top Stories:

*Stocks Rise With Commodities, Futures on Fed Stimulus as Oil Passes $100–thanks Ben

*Bernanke Open-Ended Battle to Boost Job Market Eclipses Inflation Concerns

*Spain’s Dilemma Over Aid Conditions Takes Center Stage at Crisis Meeting

*Junk-Bond Bears Getting Squeezed as Bernanke Unleashes QE3 – stay tuned for results

*Rajoy’s Resolve to Resist Aid Tested by Spanish Bond Euphoria

*Emerging Stocks Surge Most in 11 Weeks as Fed Plan Spurs Global Confidence – ???

*Mursi Risks Rift With U.S. or Egypt’s Voters as Islamists Protest in Cairo

*Egypt’s Islamist Groups Seek to Eased U.S. Tensions After Embassy Violence

*U.S. Embassy Compound in Yemen Stormed as Anti-Islam Film Protests Spread

*Romney in Virginia Expands Criticism of Obama Handling of Mideast Turmoil


…it is YOU! All of you. You are not Republicans or Democrats or independents or non-voters…you are American’s first. Deal with it!  But deal with it as Americans and don’t be counter to our nations interests. That is what is wrong with this election campaign and why TB wrote so negatively on Romney yesterday. We had eight years of a president who shot from the hip (Bush 43) and Romney seems even worse at it. His comments against the Administration in a press conference Wednesday were incredible. Once again, even when faced with the facts not available to him when he blurted out his opinion (yes we have free speech but you expect someone running for high office to think about the repercussions – beyond getting elected).

We now know that the attack on our embassy was not driven by the film but fueled by it. It was an organized attack by Muslim extremists. As for the film, it was produced by a Coptic Christian from California, and even that group denounces what he did having no knowledge of it. He has used several aliases has a conviction record, rented the theater for the ‘premiere’ where only a handful attended…dubbed in lines that the actors did not say (one has asked that her name be removed from the film). Is this the free speech we are protecting? An irresponsible act that has now cost at least eight lives…and this man has no regrets! Yes, we are right to apologize for the film. How can a middle easterner have any understanding of free speech…especially zealots intent on destroying America.

Let’s not destroy it from within…enjoy your weekend! You too, Mr. Romney!


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

Stocks rose sharply on a bet by Bernanke to fix the economy by driving up stocks – so far at the expense of longer term bonds. Volume rose sharply to 4.45B shares from 3.6B shares widening the range since July 29th from a low of 1.81B (8/31) to 4.45B shares (9/13)!  NYSE stocks executed without the aid of the ETN market also rose to 802M shares, barely above 800M but highest since 8/2 – still well below the 12 month average (845M) vs a weak 664M. There have been just THREE 700M+ days since 8/3, yesterdays was the highest since 8/7. The high ytd was 8/1’s 1.03B shares! Since 6/29 just 8 sessions have surpassed 800M shares besting 8/7’s 728M shares. The average since 8/1’s 1.03B is just 612M. The average for 2012 is just 780M shares and since 6/29 just 676M shares – WEAK!!! 77 of the last 112 sessions have been less than 800M shares (69%!). 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 – 845M is the 12 month average and slipping! Since 11/1 there have been just 16, 1B share days…12 in 2012! Since 2/6 there have been 40 sessions less than 700M shares. 194 of the last 205 sessions have been less than the 12 mo ave (95%)!

Advance/Declines were strong and positive for a third day and have now been so just 9 times in 18 sessions: +3.7x +1.9x vs +2.1x vs -1.5x vs +2.1x on NYSE and +2.6x vs +1.5x vs +1.5x vs -1.4x vs +1.4x on Nasdaq. Breadth very strong on NY: +10.5x vs +1.6x vs +3.2x vs -2x vs +3.1x on NYSE and +3.2x vs +1.6x vs +1.4x vs -2.6x vs -1.1x on Nasdaq. New 52 week highs nearly doubled to 365 (a new cycle high), vs 365 while new lows fell to 31 vs 40 – <50 for six days. The ratio surged to +20x!. The S&P VIX fell sharply for a second sessions to 14.05 vs 15.80 -1.75 – a 11.1% plunge. The highest level was 8/2 (17.98 intraday high of 18.96!), while low was 13.45, the low for 2012.

Here are the results of last 5 sessions: Dow +1.6% vs +0.1% vs +0.5% vs -0.4% vs +0.1%; Dow Transports +0.5%? vs +0.8%! vs +0.7% vs +0.5% vs +0.6% vs +1.9%;Dow Utilities +1.6%??? vs -0.4% vs -0.3% vs -0.1% vs -0.1%; S&P 500 +1.6% vs +0.2% vs +0.3% vs -0.6% vs +0.4%; Nasdaq Composite +1.3% vs +0.3% vs flat vs -1.0% vs flat; Nasdaq 100 +1.4% vs +0.2% vs -0.1% vs -1.3% vs -0.2%; Russell 2000 +1.3% vs +0.4% vs +0.3% vs-0.3% vs +0.5%; NYSE Financials +2.1%!!! vs +0.6% vs +1% vs -0.7% vs +1.2% vs +2.5% (KBW Banks +2.8%!!! vs +0.7% vs +0.8% vs -0.8% vs +1.6% vs +2.9%; Nasdaq Banks +1.4% vs +0.4% vs +0.4% vs -0.6% vs +0.6% vs +1.6%). NYSE Financial Leaders: BAC +4.8% vs -0.7% vs +4.6% vs -2.5% vs +4.9%! vs +5%; GE +0.6%; C +4.2% vs -4.2%! Both WFC and USB hit new 12 month highs. The rest of the pack were up from 1.6% (UBS) to 3.7% (JPM).

Global stocks STRONG!!! Let the games begin! FTSE +1.6% vs +0.1% vs flat vs -0.3% vs flat; CAC 40 +2.1% vs -0.8%! vs +0.4% vs -0.4% vs -0.4%; DAX +1.4% vs -0.3% vs +0.6% vs +0.1% vs -0.1%;Nikkei +1.8% vs +0.4% vs +1.7% vs -0.7% vs flat; Hang Seng +2.9% vs -0.1% vs +1.1% vs +0.2% vs +0.1%; Korean KOSPI +2.9% vs flat vs +1.6% vs -0.2% vs -0.3%;Indian Sensex +2.5% vs +0.1% vs +0.8% vs +0.5% vs +0.1%. U.S. stock futures stronger but off highs…not as much as one might expect: DOW +49; SPX +6.20; NDQ +14. How will we close today?

Long U.S. treasury bonds bore the brunt of the Bernanke put: 10 yr 1.82% -7/8 – record low of 1.40%; 30 yr 3.04% -2 pts!!! Long TIP 0.46% -1-1/8. 0.28% is record low!The 5 yr TIP yields -1.65% vs -1.49%. 10 yr -.72%.Bills 0.07% 1 month; 0.09% 3 months; 0.12% 6 months. Reverse Repo 0..32% vs 0.29%. 3 mo. Libor 0.38%!!! and 6 mo. 0.67%! DROPPING!!! European problem sovereign 10 years, Germany-benchmark 1.67% +12; Italy 4.94% -5; Spain 5.59% -2; Greece 20.27% +6; Portugal 7.79% +3; Ireland 5.06% -4. What hath you wrought, Mr. Bernanke?

Gold had been up slightly then dropped after the FOMC statement the soared to $1775 –  highest since 2/29 when it plunged $101.70 in one day! This created a powerful ‘key reversal’ (higher high, lower low, high above prior session high) It closed $1772.10 +$38.40. It is now up $110 since 8/30!!! 7/12’s intraday low of $1547.60 was lowest since June 1. The hit now stands at ZERO since 2/28!!! 2/28’s $1792.70 the intraday high not seen since 11/16! The record high is $1923.70, a buying climax on 9/6/11. SUP at $1650, the 40 day, $1637, 50 day, both rising rapidly now. MAJOR SUP at $1654, the 200 day. 5/2’s o/n low of $1526.70 was lowest since 12/29! Currently $1771.50 -.60 after an o/n high of $1780.20. Crude closed slightly higher but after hitting $98.58 – highest since 8/23 and remains above the 200 day. It closed at $98.31 +$1.01, 14 days after an intraday high of $98.29 on a negative ‘key reversal’ killed the rally – now pennies above. 8/30’s close was $93.35, lowest since 8/16! SUP at the 40 day (93.78), and the 50 day (92.49), both rising sharply! SUP at the 200 day (96.62). Res at $100 – it briefly hit $100.43 o/n, highest since 5/4 before pulling back and is currently $99.42 +$1.11!

What kind of day was it (as Edward R. Murrow would say)? A very weird one, that did nothing ahead of the FOMC statement the soared $13,359, highest since 12/31/07 due to Mr. Bernanke’s bizarre thinking the he can fix things by driving stock prices to the moon, Alice…the moon! As the old saying goes, don’t fight the Fed, but be prepared to counter when complacency sets in…and with the embassy attacks and a presidential election two weeks away it might not all be a bed of roses…remember they have thorns!

But the rally was strange…all major indices up from 1.3% to 1.6% EXCEPT Dow Transports which rose just 0.5% – they have not been believers in this entire rally and are now up just 3.6% ytd followed only by Dow Utilities +2.3% while the Dow is up 10.8% and the S&P 500 +16.1%. The Nasdaq indices are up more than 20% but rate is slowing. Meanwhile the Russell 2000 is up 15.6% and rising. Bernanke’s move can only help it more along with emerging markets…is that a good thing? Will boosting stock prices improve psychology and translate to economic growth? TB says no and once we get back to reality after the election the focus will be on budget problems and sequestration! Sorry Ben but you don’t have TB’s support…as if you care! Oh, Romney said he definitely won’t reappoint you…another stupid outburst?

Financial stocks got the biggest boost…JPM even closed the gap from when the ‘London Whale’ scandal erupted…or more truthfully when Jamie Dimon owned up to it…sort of! It is now 30% for the 12 months; 27% ytd, but still off 8.4% from its 3/27 high. Over tha last five years the return with dividends reinvested is just 1.3% – 0.26% annualized! Also,  since 8/2, GS is up 45% while MS is up 37%…and since a 12 month low on 7/24, even UBS is up 32%! Mr. Bernanke: what led the last bull market? FINANCIAL STOCKS! What is leading now? The leader in the prior boom does not lead the next one…capiche?

Now what did he do for bonds yesterday? The long bond is now trading at 3.01%, the 10 year at 1.80%…won’t this raise mortgage rates? Well you see we plan to buy up mortgages until the economy improves? Come again? Sorry but TB is in Jeffrey Lacker’s lonely camp. You haven’t a clue. This from a good friend and student of bonds – paraphrased with non-italicized comments by TB:

With approximately $14 trillion worth of mortgage securities outstanding and the Fed now committed to buying $40 billion per month it would take 350 months or over 29 years to buy them all. The Fed’s balance sheet indicates they hold approximately $2.6 trillion of securities of which approximately $845 billion are mortgages (but none are private label). This represents an explosion since August 2007 when the Fed “only” owned approximately $800 billion in treasury securities (and no mortgages!).

What actually happens when the Fed makes these purchases? Are the holders / sellers likely to replace their sales? After all, these holdings represent an asset class that they value. Are the originators of mortgages likely to find new loan applicants who will qualify for the issuance of a new mortgage (yes, if they can then sell them to FNMA and FHLMC and retain the 0.5% service fee…wouldn’t you with sub 4% mortgages that you can turn over forever risk free and earn as much on 8 of them as holding one mortgage?)

I must say, I am confused. I, for one, do not see the linkage between the Fed’s purchases and the stimulative effects that the Fed is expecting / hoping to see. There is approximately $32 trillion in private debt that is currently a challenge to sustain; we are observing a retrenchment / deflation of this number. I do not get it. (BTW, there is approximately $14 trillion in public debt which, of course, is growing OUT OF CONTROL.)

TB fully concurs with his observations-you decide! Someone is dreadfully wrong. Who?

Is this the opposite of The Big Short???

Note that the impact of QE2 was virtually nil ves Qe1…is there any reason to believe that it will be ‘different this time?’ Mr. Bernanke, have you heard of the law of diminishing returns? What say you, Mr. Friedman?




  1. Yarnman said

    TB–Methinks Helicopter Ben and Wall Street cast their votes for Obama yesterday! We’ve had two strong 90-10 UP days lately! The freaks are covering their shorts, and I’m busy revising my stop/limit orders (a trick I learned from you–many thanks) every day, it seems. So, ride the train while it’s going, and don’t fear jumping off between stations.–Yarnman

    • traderbill said

      I was astounded when Ben announced it at J.H. conference…unheard of before an election and either a concern for a Romney win or the situation is worse than we see. Or both! Keep those stop limit orders going…only way to play this without shedding tears later. When? dunno, Yarnman…dunno!

RSS feed for comments on this post · TrackBack URI

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: