11/15/12…give until it hurts

Bloomberg Top Stories:

*Euro Area Enters Recession for Second Time in Four Years as Crisis Worsens – !!!

*Treasuries Fall Before Talks on Fiscal Cliff; Oil Gains, Futures Fluctuate

*Yen Weakens to Six-Month Low on Stimulus Speculation as Europe Stocks Drop

*Wal-Mart Profit Forecast Trails Estimate as Third-Quarter Gains Slow – it’s the p/e!

*Target Third-Quarter Profit Rises as Store Sales Gain on Credit-Card Usage

*Deutsche Bank Sours on Bonds Losing Buyers as Pimco Sells – Oh, oh!

*Manufacturing in New York Contracts for Fourth Straight Month on Superstorm

*Gaza Militants Shower Rockets on Israel After Hamas Leader Is Assassinated

*Obama’s Defense of Susan Rice Brings Her Closer to Being Top U.S. Diplomat

*U.S. Postal Sevcice lost $15.9 Billion in Fiscal 2012, Vice Chairman Says – blame that

on Congress for making them FULLY fund pension NOW and refusing 5 days open!)

*Billionaire Carl Icahn to Give $200 Million to Mount Sinai Medical School (not if it was

a ‘for-profit! Much better spent than on a SuperPac don’t you think? TB)

*Farm Counties Topping Subsidy List Give Votes to Romney – Capische???

All stock indices were down from 1% (Dow Utilities) to 2.6% Dow Transports. It was an ugly day! Thus total NYSE volume rose to more than 4B shares – it had to be a down day! 4.1B vs 3.44B vs 2.92B vs 3.57B vs 3.76B vs 4.32B shares. Floor volume jumped to a well above average 829M shares from a weak 677M shares vs 292M shares (the new 12 month low)vs 740M vs 758M shares vs 874M, highest since 10/19! While advance/declines and breadth were solidly negative on Nasdaq they were disastrous on the NYSE: -8.8x!!! and -11.2x respectively!!! OUCH!!! Still bullish? Told you that rally on election eve was ridiculous!

Several stocks/funds fell by more than 10% including the Pimco Global Stock Plus (PGP), which fell by 11% to a level not seen since Oct. 2011! It invests in equity derivatives both U.S. and foreign and ‘actively managed’ low duration debt portfolios…apparently not active enough! It is a closed-end fund that until Dec. 2008 traded at a modest discount to the net asset value, but since has traded as high as an 88% premium – which is one stupid ‘investment’ – and plunged yesterday from about 55% to 38%!!! There are several Pimco funds trading this way, i.e. illogical! It has a 12.7% dividend yield now…but look what has happened to all those REITS, especially the mortgage variety and even name utilities! Stocks look bad, bonds look bad, commodities look bad…what’s a mother to do??? Cash is king! …at least for now!

Bond market traded WEAK despite the collapse in equities which should tell you something. It is off another 3/8 in the long end overnight: 10 yr note 1.61%, 30 year 2.74%.  3 mo. Libor steady at 0.31% while the 6 mo. dropped to 0.52%!!!

Gold closed slightly higher, $1730.10 +$5.30, while Crude was up almost $1. Gold is off nearly $12 overnight while Crude is trading slightly higher…at the pace of a wounded snail, $86.64. That is bad news for Crude which has done nothing for three days following a positive ‘key reversal’ (higher high lower low, close above prior day’s high), following an ‘inside day’ a day after a low of $84.05, lowest since 7/11. The recent selloff was triggered by a negative key reversal.

– – –  . . .  – – –

(Although petitions have been filed in 30 states (identical ones by the way, Texas Governor Rick Perry came out yesterday against the Secession petitions. TB)

…provided we can get those GOP congressmen who signed the oath with Grover Norquist against any new taxes, which includes restoring tax cuts or eliminating wasteful subsidies, we can make changes but you cannot expect the Dems to give in on huge cuts to their constituency without the GOP giving an inch. What part of compromise don’t they get?

A friend wrote, nicely, “We don’t build consensus by always attacking the other side.” He was referring to TB’s being so critical of the GOP. But would we be facing the fiscal cliff without the actions of the extremists in that party? They created a problem that could have been fixed by working together on tax increases (and especially loopholes like the above), along with spending cuts (yes there is waste in military spending!), but any talk of that was quashed in the primary debates when not one of the candidates raised their hand on being willing to increase taxes by $1 for a TEN dollar cut in spending. That folks, is what is called a non-starter and it only caused the Tea Party to dig in deeper.

Had the Dems given in, they would have lost their constituency, so in order to work both must give and that comes back to kicking Grover Norquist’s butt out the door! Who elected him? No one, yet he holds sway over the GOP and the country?

Most importantly, TB tries diligently to factcheck what he writes and when he is wrong, corrects it. Something both candidates for President failed to do, and the most egregious were the SuperPacs on both sides, but it was the volume of the GOP’s that made it the worst. This thanks to a partisan Supreme Court decision that gave them and worse, 501(c)(4)’s power to do just about anything they wanted. The only beneficiary was the networks and TB believes most rational people tuned them out as lies and distortions.

TB saw the Bloomberg story on abuse of 501(c)(3) non-profit status while writing yesterday’s column. The article primarily focuses on Imagine U.S. Polo Assn. which followed Ralph Lauren’s lead and is selling millions in apparel and underwear, yet not paying taxes. Furthermore, churches who have profitable operations (when I was at D&B, Standard Wire and Cable was a division of the Church of Religious Science), Major League Baseball is a non-profit. This is truly sick, yet good old boy Grover would oppose taxing them to the max.

Everyone familiar with the tax code knows that there is no rationale for ‘carried interest’ yet it allows hedge fund operators, private equity (such as Bain), to convert ordinary income to capital gains and be taxed at 15%.

But it is the other benefits the wealthy have…generation skipping, most of their income from capital gains (that is why Romney had a less than 15% effective tax rate – give to charity until you offset all ordinary income then pay the lower rate). Not singling him out, just because it is a good example and what he did any tax accountant, tax lawyer, or investment advisor would have been derelict in had he not done so with the blind trust.

No, this is not about Romney or even the Koch brothers, it is about much more. It is valuing ‘capital gains’ over hard work that produces wages which are then taxed as ordinary income.

George Steinbrenner along with at least two other billionaires beat the system. They did it by dying in that period where the estate tax was zero. Think of that lost revenue! Good job, GOP, A $5 million exemption takes care of virtually everyone while the balance, if an asset becomes the tax basis which is only paid when sold. TB has friends who rail about the estate tax saying they already paid those taxes…WRONG! They paid on the income that produced those assets…they took the depreciation on them…so, absolutely they should be taxed as they now are. End of story.

The argument is that it wouldn’t solve the debt crisis deceitful. No, it wouldn’t…but it would help and if we don’t get the fairness issue across, the entire country will pay for it in 4, 8, or 12 years when those who have been ripped off find a leader and peacefully take control. It will happen…it is just a matter of when!

Deductions should be capped for income, especially mortgage deduction, no limit on taxes paid, and some have proposed limiting charitable which TB believes would only hurt the charities. On charities, however, it is appalling the amount of your contribution that is paid to professional fundraisers…and annoying. So, if a paid solicitor collects (you should always ask if they are paid or a volunteer), that percentage, sometimes as much as 50% (!), that should not be tax deductible.

Also, as previously reported, the Franco Modigliani plan of a zero corporate tax rate should be employed which would help smaller corporations while shutting up the big ones who whine about the rate but pay nothing or less than 10% already. The offset? Tax dividends as ordinary income – the investor would benefit by taking away the argument that dividends are double-taxed from the CEO’s, reducing stock buybacks which are losers because they buy back more when the stock is high to offset options being exercised. Talk about whining from the GOP on that one. They, who used the argument that millions of Americans own stocks paying dividends is a sham. Only the wealthy hold those in TAXABLE accounts while the vast majority have them in IRA’s and 401(k)’s that will be taxed as ordinary income when withdrawn.

Two fixes to social security although the timing is bad: first, remove the restriction that Congress put on them to camoflauge the true cost of projects by forcing them to be paid at the treasury bill rate…the fund owns none, as Congress has already taken it, replacing it with IOU’s! Allow it to be invested in bonds of the U.S., foreign governments, and corporations. That would reduce the impact…Canada did it and along with other cuts and tax increases cleaned up their problem in THREE years (rates were higher then). Thankfully, Bush’s big idea of allowing people to invest their social security funds as they pleased didn’t fly…if so, we would be off even more now. The average person aged 55 has less than $32,000 in their IRA’s and 401(k)’s. Meanwhile it let the corporations off the hook…not to mention GM and United Airlines where we the people had to absorb the pension funds of their employees, while management reorganized and got rich.

Medicare? Get real…do all purchasing of prescription drugs as Medicaid does and cut the cost of prescriptions by 30% or more…stand up to the pharma lobby! As for those nice health insurers, if they want to participate they should be non-profits like they originally were so the incentive is to cut costs, not increase profits and bonuses. The GOP did a huge disservice saying leave it up to the states…why?…so you can move from one state to another and either be denied insurance by a company with the same name – for profit or not for profit, or forced to pay a much higher rate. This is what was wrong with they Ryan plan on healthcare. We live in a mobile society that should not be at the mercy of insurers. United Healthcare, now the largest, for instance has subsidiaries in every state, that feed into the parent. That is what is wrong! That would also stop them from denying payments hoping the patient will give up. Hospitals too should be non-profit. Those owned by the docs and corporations have higher expenses too…know of anyone who donated a wing on a for profit hospital?

Should care be rationed? YES! By only giving it where quality of life is increased AND life expectancy with it. Despite a DNR in TB’s mother’s file they tried to talk us into performing an operation…she was almost comatose, incoherent…it was heart surgery so very expensive. She died less than a week later and would have even with the surgery! Loved ones are the least qualified to make those decisions. Face it, we are all going to die. As for TB and his relatives and friends, once life no longer gives pleasure, forget it.

TB has given you some ideas or comments, send yours and he will publish them.

In case you didn’t see it, Bank of New York Mellon settled suit that their investment advisory failed to look after clients interests and do their due diligence on investing client funds with Madoff. The amount was $210 million. That is great news. Is it? It will be paid to those bringing the suits so the clients won’t be fully compensated after the lawyers take their cut. The really bad news is who will end up paying it? THE SHAREHOLDERS! For God’s sake when are we going to make the people at our banks accountable for something? …anything!!! No one has been tried in any bank, no individual has been fined – with the exception of Angelo Mozillo who was fined by the SEC! $40 million TB believes…a fraction of what he made by selling his own shares while touting them. Sick!

To those of you who think it is TB who is rough on the GOP, listen to Bobby Jindal:

“We’ve got to make sure that we are not the party of big business, big banks, big Wall Street bailouts, big corporate loopholes, big anything,” Jindal told POLITICO in a 45-minute telephone interview. “We cannot be, we must not be, the party that simply protects the rich so they get to keep their toys.”

He was just as blunt on how the GOP should speak to voters, criticizing his party for offending and speaking down to much of the electorate.

“It is no secret we had a number of Republicans damage our brand this year with offensive, bizarre comments — enough of that,” Jindal said. “It’s not going to be the last time anyone says something stupid within our party, but it can’t be tolerated within our party. We’ve also had enough of this dumbed-down conservatism. We need to stop being simplistic, we need to trust the intelligence of the American people and we need to stop insulting the intelligence of the voters.”

Read more at http://themoderatevoice.com/167956/quote-of-the-day-bobby-jindal-joins-ranks-of-gopers-edging-towards-more-moderate/#lQXXuQdHSMXbtP8L.99

But he defended two things their stand on gay marriage and abortion, saying they should stick with it but ‘tone it down.’ Tone it down? It is out of touch with America, isn’t it? No comment yet from Jindal on the secession drive. Paul Ryan is blaming the loss on ‘urban’ voters. Ahem, plus rural ones as that doesn’t explain those ‘must-have’ states.

Also, self-imposed GOP dictator, Grover Norquist said the Obama got elected because he called Romney a ‘poopy head.’ TB kids you not…that is what we are dealing with! Poopy head???

The Baseline Scenario just came out with this on the fiscal cliff and Grover Norquist:

Baseline/fiscal cliff  It lays out a kinder, gentler Boehner but can he win the right over?

Boys will be boys…so will a lot of middle-aged men!

Lastly, TB thought Obama handled himself well in the press conference, especially shutting up the reporter who yelled out a question when it was over – tactfully but firmly! TB just learned that starting with Reagan, who insisted all questions be provided in advance, that was followed to the letter by both Bushes, Clinton, and by Obama but not as strictly. The point is the question is meaningless…it is the follow-up they haven’t been able to prepare for! For Reagan that included those ones where he was walking away from the podium and then turned…as if spontaneously. Pretty interesting fact. Remember the Obama bashing that everything he said was from a teleprompter?

Hope you have a great day!

TB

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

Volume exploded to over 4 billion shares – of course! It was a DOWN day! All indices were down more than 1%. Dow Utilities, the only positive Tuesday (+0.4%), has been down 7 of the last 8 sessions, regardless of what the broad market does! NYSE volume 4.1B vs 3.44B shares vs 2.53B vs 3.57B vs 3.76B vs 4.32B. On 9/1 volume hit 4.56B shares, high of the year. NYSE stocks executed without the aid of the ETN market roared  to a strong 829M shares vs 677M shares vs 292M shares (12-month low!) vs 740M shares vs 758M vs 874M, highest since 10/19. There have been just 15 700M+ days since 8/3. The high ytd was 9/21’s 1.8B shares – due to a quadruple witching and an S&P rebalancing. Since 6/29 just 16 sessions have surpassed 800M shares, mostly down days. The average since 8/1’s 1.03B is just 674B. The average for 2012 is just 770M shares and since 6/29 just 697M shares– WEAK!!! 113 of the last 155 sessions have been less than 800M shares (73%!). Since 2/29 there have been just 25 ‘average’ days (mostly down!), including 9/21’s high for 2012 of 1.8B (5B including ETNs) and just 20 have been above 900M – 780M is the 12 month average. Since 11/1/11 there have been just 17, 1B share days…13 in 2012! Since 2/6 there have been 67 sessions less than 700M shares. 231 of the last 250 sessions have been less than the 12 mo ave (92%)!

Advance/Declines were negative for a FIFTH straight session: -8.8x!!! vs -1.1x vs -1.1x vs -1.1x vs -2.7x vs -4.3x!!! on NYSE and -3.9x! vs -2.1x! vs -1.2x vs 1:1 vs -2.8x vs -5.7x!!! on Nasdaq. Breadth was ugly on NYSE: NYSE: -11.2x!!! vs -2.4x vs -1.3x vs +1.1x vs -3.4x! vs -9.8x!!! on NYSE and -2.3x! vs -2.2x! vs -1.1x vs -1.1x vs -3.8x! vs -7.6x!!! on Nasdaq. New 52 week highs were cut again to a WEAK 47 vs 66 vs 116 vs 99 vs 115 vs 108 vs 216; (768 is cycle high), while new lows exploded to 394! Vs 286 vs 201 vs 244 vs 215 vs 196 vs 69 vs 97, do you see a trend? The ratio is negative for a sixth straight day: -8.4x!!! vs -4.3x vs -1.7x vs -2.5x vs -1.9x, recent high was +7x! The S&P VIX came out of its ennui rising 7.6% on a ‘key reversal’ to 17.92 vs 16.65 +1.27. The 12-month low was 13.32 on 8/17 while the 1012 high is 27.73 on June 4.

Here are the results of last 6 sessions: Dow -1.5%! vs -0.5% vs FLAT vs FLAT vs -0.9% vs -2.4%; Dow Transports  -2.6%!!! vs -0.1% vs +0.8% vs -0.7% vs -1% vs -1.9%;Dow Utilities -1% vs +0.4% vs -0.9% vs -0.7% vs -0.2% vs -2.2%; S&P 500 -1.4%! vs -0.4% vs FLAT vs +0.2% vs -1.2% vs -2.4%; Nasdaq Composite -1.3% vs -0.7% vs FLAT vs +0.3% vs -1.4% vs -2.5%; Nasdaq 100 -1.2% vs -0.8% vs FLAT vs +0.5% vs -1.5% vs -2.6%; Russell 2000 -2%! vs -0.6% vs -0.2% vs +0.2% vs -1.4% vs -2.6%; NYSE Financials -1.7%! vs -0.6% vs +0.2% vs +0.1% vs -0.9% vs -2.7% (KBW Banks -2.1%! vs -1.1% vs +0.2% vs +0.1% vs -0.6% vs -4.6%; Nasdaq Banks -1.6% vs -1.1% vs +0.2% vs +0.2% vs -1.1% vs -3.5%; NYSE Brokers -2.5%!!! vs -1.6%! vs +1.2%!?! vs -0.6% vs -0.9% vs -4.3%.NYSE Financial Leaders: BAC -3.5%! vs -0.6% vs -0.4% vs +0.4% vs +2.6%? vs -6.3%!!! vs +2% vs -1%, C -3.2%; GE -3.2%. Other key financials off 1.2-1.9% with MS -2.6%! BAC hit $8.95 and closed $8.99 breaking the $9-10 range! Last 8 day -8.7%!

Global equities weak, except Japan: FTSE -0.5% vs -0.5% vs -0.6% vs +0.3% vs -0.4%; CAC 40 -0.8% vs -0.3% vs -0.6% vs -0.2% vs -0.2%; DAX -1.1%! vs -0.3% vs -0.8% vs +0.3% vs -0.9%;Nikkei +1.9%! vs +0.1% vs +0.2% vs -0.9% vs -0.9% vs -1.5%!; Hang Seng -1.6%! vs +1.2%? vs -1.1%! vs +0.2% vs -0.9% vs -2.4%!!!; Korean KOSPI -1.2%! vs +0.2% vs -0.6% vs -0.2% vs -0.5% vs -1.2%!;Indian Sensex -0.8% vs closed vs -0.3% vs -0.1% vs -0.9% vs -0.3%. U.S. stock futures weak and slightly off lows: DOW -47; SPX -2.80; NDQ +0.50 back from -3. Strange session? Indecisive!

U.S. treasury bonds were volatile and couldn’t capitalize on the stock swoon. They are off modestly overnight: 10 yr 1.60% vs 1.59*% – record low of 1.40%; 30 yr 2.74% vs 2.73%. Long TIP 0.29% vs 0.28% – 0.25% is the record low!The 5 yr TIP yields -1.45% vs -1.46%; 10 yr -.83% vs 0.85%.T-Bills: 0.13% 1 month; 0.09% 3 months; 0.14% 6 months. Reverse Repo 0.30%. 3 mo. Libor 0.31%; 6 mo. 0.52%! On 9/18 they were 0.38% and 0.67% respectively. European problem sovereign 10 years, Germany-bench: 1.35% +1; Japan 0.73% -1; Italy 4.90% -4; Spain 5.88% -3; Greece 17.25% -2 …on 9/20: 19.75%!!!; Portugal 8.71% +13!; Ireland 4.59% -1.

Gold’s intraday high on Friday of $1739.40 was highest since 10/19. It closed yesterday at $1730.10 +$5.30. At the high it was near the 50 day moving average which was last visited on August 15th! It closed at $1796 on 10/4, highest since 2/29 and it has lost $66 since. 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. RES at $1742, the 40 day, $1744, the 40 day, CROSSED!MAJOR SUP at $1671, the 200 day. 5/2’s o/n low of $1526.70 was lowest since 12/29! Currently $1718.50 – $11.60! Crude closed higher at $86.32 +.94 not much change three days following a ‘key reversal’ (higher high, lower low, close above prior day’s high), the last time this happened it was a negative one which brought us all the way back down to an intraday low of $84.05, lowest since 7/11 and way below the 40/50/200 day where it has resided since 9/19! RES at the 40 day (89.04), 50 day (90.51), and the 200 day (94.47), all falling! Overnight it is $86.64 +.32. Minor support at $83.65, then $77.28, the 2012 low!!!

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