10/9/12…some observations

Bloomberg Quotes of the Day: “No man can lose what he never had.” – Izaak Walton “Difficulty is the excuse history never accepts.” – Edward R. Murrow. This one was while TB was on the trip: “To be ignorant of ignorance is the malady of the ignorant.” -A. B. Alcott

This week’s economic calendar is relatively light with few major indicators. The highlight of the week will be the September PPI (Friday). We will also get August Wholesale Trade (Wednesday), August International Trade, September Import & Export Prices, and the September Treasury Budget (Thursday), and preliminary October Consumer Sentiment (Friday). There are no data releases scheduled for Monday or Tuesday. In addition to the economic data, the Federal Reserve will release its Beige Book in preparation for the October 23rd – 24th FOMC meeting (Wednesday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA

Bloomberg Top Stories:

*Stocks in U.S. Retreat Before Alcoa Earnings Report; Commodities Advance

*Merkel Urges Greece to Maintain austerity So Nation Can Stay in Euro Zone

*Downgrade of U.S. Seen as Upgrade as $4 Trillion Debt Dissolved Since 2006 (?) – i.e. total debt ‘relative’ to the size of the economy has shrunk. Total debt including federal and state has fallen to 3.29x GDP, lowest since 2006 from a peak of 3.59% four yers ago. Private sector borrowing is down by $4 trillion to $40.2 trillion. Keeps yields LOW!

*Euro Flight Costs Depositors as State Street, BNY Charge Interest in Krone!

*Financial Job Losses in Western Europe Surpass 30,000 as RBS-UBS Refresh

*Welder Wages Top Bank-Manager Pay as Caterpillar Searches for Skilled Workers     

TB is back from vacation and since the bond market is closed for Columbus Day (why aren’t the equity guys smart enough to come up with more days off?), thought a few observations and information collected and observed might be of interest.

We stayed in St. Louis, Memphis, Savannah, Charleston S.C., Asheville N.C. Berea, Ky., and of all places Peoria.

The difference from Minnesota was striking…lots of anti-abortion and anti-gay marriage billboards and people kept talking about the 47% who pay no taxes (at least Romney finally admitted that was totally incorrect). Still it was a great drive. We drove down with no signs of fall and then watched the colors change spectacularly all the way home.

As for the ‘debate’ Romney won hands down. He did it by sticking to his script but only looked good because Obama looked so unprepared. Both exaggerated ‘facts’ or told lies and that was embarrassing or should have been to listeners as we deserve more.

How bad was it? TB took a WSJ poll and graded it ‘B-‘ for Romney and ‘C-‘ for Obama. The consensus however was ‘A-‘ for Romney and ‘C’ for Obama…not surprising given the readership. Still, a good college debater could have destroyed Romney and his repeating the same statements over and over (there was a claim he had a crib sheet but that has been pretty much recognized as a handkerchief…either way it was boring and told us nothing.

Since the debate Romney has tried to seize the upper hand as polls show him not slightly but not statistically significantly in the lead. To TB his comments on foreign policy are downright scary and his accusations against Obama are shameful. The next debate will be on foreign policy…hope it is a better debate. Here is a link to factcheck.org’s impartial analysis of the statements in the debate…disgusting on both of their parts!

http://factcheck.org/2012/10/dubious-denver-debate-declarations/

A friend forwarded the next link to TB on Jack Welch. Neither of us can understand why the SEC hasn’t done something about his hiding the Joseph Jett problems by simply doing what he has done all along – manage earnings! Ahem, now he says that managing earnings is not in the best interests of the company or the shareholders – falls right in with TB’s comments on ‘free market capitalism.’ As long as the CEO can benefit himself the company, employees and shareholders fall back to a distant second place.

http://www.ritholtz.com/blog/2012/10/jack-welch-rejects-his-existence/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29

Just after this was sent to TB he saw Welch interviewed on Anderson Cooper and he sounded more like Donald Trump, claiming that the Administration had manipulated the employment date and he wouldn’t back off even when challenged by an economics reporter. (Diane Swonk, a respected economist had already stated that the drop in the unemployment rate was ‘statistically insignificant.’ That is because both the increase and decline were exaggerated by the rounding from three decimal places to just one!)

The fact is that it wasn’t a good report…only better in light of the recent weakness. We still need to create 200k jobs each and every month to make headway. That is not the administrations fault and Romney can do nothing more than Obama did. Also, the GOP House rejected sorely need infrastructure spending which will only cost us more in the long run. Good luck, America.

Also, if they were going to manipulate the numbers they would have to do more than just the headline numbers. Average duration of unemployment rose by about three weeks and there was a big jump in those working part-time for economic reasons. So what would have been achieved? You have to have a really conspiratorial mind to think like Welch.

Have a great week,

TB

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

Equity volume fell to 2.31B shares vs 3.2B on the partial holiday. On 9/1 it hit 4.56B shares, high of the year. NYSE stocks executed without the aid of the ETN market also plunged to 464M shares from the 607M – the lowest since 11/25/11! There have been just seven 700M+ days since 8/3. The high ytd was 9/21’s 1.8B shares – due to options expiry and an S&P rebalancing. Since 6/29 just 11 sessions have surpassed 800M shares. The average since 8/1’s 1.03B is just 654M. The average for 2012 is just 773M shares and since 6/29 just 691M shares – WEAK!!! 92 of the last 130 sessions have been less than 800M shares (69%!). Since 2/29 there have been just 22 ‘average’ days (mostly down!), including 9/21’s high for 2012 of 1.8B (5B including ETNs) and just 19 have been above 900M – 807M is the 12 month average and slipping! Since 11/1 there have been just 17, 1B share days…13 in 2012! Since 2/6 there have been 51 sessions less than 700M shares. 211 of the last 225 sessions have been less than the 12 mo ave (94%)!

Advance/Declines were negative: -1.5x vs +1.3x vs +2.7x vs 1:1 vs  +1.1x on NYSE and -1:8x vs -1.2x vs +2x vs -1.1x vs +1.1x on Nasdaq. Breadth was similar: -1.8x vs 1:1 vs +4.1x vs +1.2x vs -1.1x on NYSE and -2.3x vs -1.7x vs +1.8x vs +1.6x vs +1.9x on Nasdaq. New 52 week highs plummeted from 486 to 203 (768 is cycle high), while new lows rose to 63 vs 46. The ratio is just +3.2x. The S&P VIX rose and is above 15 again after falling to 13.67 intraday on 10/5.

Here are the results of last 5 sessions: Dow +0.1%vs -0.3%vs +0.4% vs +1.6%vs +0.1%; Dow Transports -1.1%! vs -1.5%!!! vs +0.3% vs +0.5% vs +0.8%;Dow Utilities -0.3% vs -0.6%vs -0.7% vs +1.6%vs -0.4%; S&P 500 -0.1% vs -0.3%vs +0.4% vs +1.6% vs +0.2%; Nasdaq Composite flat vs -0.2%vs +0.9% vs +1.3% vs +0.3%; Nasdaq 100 flat for a second day?vs +0.8% vs +1.4% vs +0.2%; Russell 2000 -0.2% vs -0.7%! vs +1% vs +1.3%vs +0.4%; NYSE Financials -0.6% vs -0.8%! vs +1% vs +2.1%!!! vs +0.6% vs +1% vs -0.7% vs +1.2% vs +2.5% (KBW Banks -0.5% vs +1.7%!!!vs +1.2% vs +2.8%!!! vs +0.7%; Nasdaq Banks +0.1% vs -1.1%!!!vs +1.2% vs +1.4% vs +0.4%). NYSE Financial Leaders: BAC -0.8% vs -2.6%!vs +1.5% vs +4.8% vs -0.7% vs +4.6% vs -2.5% vs +4.9%! vs +5%; GE +0.9%. C +1% vs +4.2% vs -4.2%! Broker dealers were the weakest again.

Global stocks mixed: FTSE -0.4%; CAC 40 +0.1%; DAX -0.3%;Nikkei -1.1%; Hang Seng +0.5%; Korean KOSPI-0.1%;Indian Sensex +0.5%. U.S. stock futures little changed: DOW -6; SPX -1; NDQ -9.50.

U.S. treasury bonds slightly (actually only slightly lower yields than on 9/20: 10 yr 1.71% +/4 – record low of 1.40%; 30 yr 2.94% +9/16. Long TIP 0.36%+11/16. 0.28% is record low!The 5 yr TIP yields -1.66%+1/32. 10 yr -.77%.Bills 0.10% 1 month; 0.10% 3 months; 0.14% 6 months. Reverse Repo 0.31%. 3 mo. Libor 0.35%!!!  6 mo. 0.62%. Both still falling! European problem sovereign 10 years, Germany-benchmark 1.49% +2; Italy 5.09% +3; Spain 5.78% -10; Greece 17.82% -7…on 9/20: 19.75%!!!; Portugal 8.13% +14; Ireland 4.78% +2.  

Gold continues to be volatile and closed at $1780.80 -$15.70.60. Friday’s high was $1798.10, highest since 2/29. 7/12’s intraday low of $1547.60 was lowest since June 1. The record high is $1923.70, a buying climax on 9/6/11. SUP at $1716, the 40 day, $1695, 50 day, both continuing to rise rapidly. MAJOR SUP at $1661, the 200 day. 5/2’s o/n low of $1526.70 was lowest since 12/29! Currently $1774.30 -$1.40. Crude continues to be weak and is not much off the $87.70 low of 10/3, lowest since 8/3! It has traded below the 40/50/200 day since 9/22! RES at the 50 day (93.66), the 40 day (94.30), and the 200 day (96.10)! Currently $90.37 +1.01 – still very weak – but why is gasoline so high???

A lot has happened in 2-1/2 weeks and the strength of stocks is hard to comprehend. Especially given the lowered earnings expectations. But the change of tone began with Bernanke’s 8/31 statement at Jackson Hole. TB believes it is being exaggerated. You decide.

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