11/28/12…Lucy leave that football alone!

TB’s Quote of the Day: “If the SEC’s strength is 50% budget then the other 50% is having the right person at the top. The Street is cannibalistic – its respect and fear comes if you’ve got a heavy hitter that knows this industry leading the agency. Otherwise, its business as usual.” – Anthony Sabino in Forbes…and we haven’t had one of those since William Donaldson before Glass-Stegall was repealed…pity. Instead we had Chris Cox and Mary Schapiro and now Elisse Walter. Trained by the street not experienced in it.

Bloomberg Top Stories:

*Fed Said to Consider Forcing Foreign Banks to Boost Capital of U.S. Units

*Gorman Enlists 30,000 Morgan Stanley Workers in Push to Avert Fiscal Cliff

*Stocks Decline With Metals on U.S. Fiscal Cliff Concern as Yen Strengthens

*Schaeuble Signals Greece Might Need More Help as Germany’s Bild Slams Deal- !!!

*Bean Says BOE Keeping Stimulus Option With Confidence Vulnerable

*ECB Sees Full Implementation of Bank Supervision Role by Beginning of 2014

*China Mafia-Style Hack Attack Drives California Firm to Brink of Collapse

*Egyptians Protesting Mursi Clash With Security Officials Firing Tear Gas

*Damascus Car Bomb Kills 20 in Twin Attacks on Suburb Mostly Loyal to Assad

*Warmest Year on Record for Lower 48 States as World Has Ninth-Hottest Year – !!!

Volume came back on the NYSE to 3.31B shares, but at a price…every index was down except Dow Utilities which rose a weak 0.1%. Meanwhile, REAL volume only rose to 68M shares from  633M shares – 6 straight sessions <800M shares! Advance/declines and breadth were negative on both the NYSE and Nasdaq. The VIX rose again to 15.92 vs 15.50 and is flashing a warning!

Bond market modestly higher: 10 yr note 1.61%, 30 yr 2.76%. 3 mo. Libor steady at 0.31%, 6 mo. 0.53%.

Gold and Crude were both off yesterday with Gold losing $7.20 and Crude 56 cents. Gold low was just below the 40 day moving average.

– – –  . . .  – – –

… listening to the GOP leadership, TB can’t help but think of Lucy pulling the football away at the last second so he lands on his keester. If this is the plan of the party, we are in for serious trouble as both sides have to be forthright and there is no way to cheat on the budget cuts…they will be cast into stone, especially with the GOP firmly in control of the House. Pardon TB for being so cynical but after the Obama/Boehner deal fell apart when his entire party went against the Speaker and left him out in the cold. True, there are several versions of this, some casting blame on Obama. You decide, but at the very least, Boehner was torpedoed by his own party.

Yesterday, TB said that the GOP is willing to raise revenues but wants to do it through limiting deductions in the Tax Code. This is a straw man….because those deductions – unspecified – will be fought by the powerful lobbies which Congress is bound to, and also, they could eliminate the mortgage deduction (true, a bad idea but if you cut it, that would reduce discretionary spending after we encouraged people to buy expensive homes…a bit late for that, Ollie.

The good news is the Republicans are finally backing away from Grover Norquist, but that won’t mean much if they try to trick the Democrats into major budget cuts and then fail to follow through on the revenue increases. Several writers are now commenting on this aspect of the deal and if they do it will be the moral equivalent of war.

We also should be…yet Congress never is…considering the impact on the states who are in no condition to absorb more expense…already they are drastically cutting spending and still cannot keep up with lost revenues. The Ryan plan did not disclose this except to talk about a voucher system which would limit increases in payments to the states and would even make them inadequate immediately with the budget cuts. Yet another flawed plan. They keep treating our problems as ‘micro’ when they are macro:

Cities < States < Federal Government < Global Economy

They are not independent but all depend on one another and we are hanging onto a thread provided by the Federal Reserve which is creating unintended consequences but it is all they can do.

Meanwhile we have slowly mounting municipal bankruptcies…neither the states or the federal government have this option and this is why a balanced budget amendment is a bad idea. But the worst part of these bankruptcies is they are having little or no impact on excessive pension benefits. There has been no reform yet there has to be.

TB would argue that there is not one public pension plan in the U.S. – federal, state, or local government – that is not severely underfunded. Let’s assume (a very big assumption) that a fund was fully, actuarially funded. That means that there is cash and investments available to meet all the benefit requirements…BUT…even if they were, they would not be….because ever since the 2000 stock market crash, they have only modestly lowered reinvestment assumptions for 8% to about 7% – that is not going to happen and each year, quarter, month, that becomes more of a liability. Even their bonds are not offering high enough yields yet are masked by the price appreciation which will fade rapidly if rates rise. This is an incredible mess, exacerbated by elected officials owing the employees…especially at the city/county level…good luck!

The appointments Obama makes for the next term are critical. We should be very disappointed at the replacement of Mary Schapiro with Elisse Walter, both having been thoroughly indoctrinated by Wall Street. We need someone independent enough to challenge them and knowledgeable enough to be successful as the three choices offered up by Simon Johnson would be. Someone not willing to just take on the easy cases but to go after top management, not just those in the middle as has been the case so far.

This extends to Attorney General Eric Holder, not for the things the GOP has accused him of, but his track record of prosecuting civilly and collecting ‘record’ fines – not difficult because we are dealing with record amounts of money! But nobody, least of all Holder seems to get past those stunning amounts. They don’t notice that they are concessions of less than the amount the banks made on those illicit transactions! Worse, who pays for it? Nor do they comment on the lack of criminal prosecutions of bankers.

TB firmly believes that the Benghazi hearings are merely a smokescreen to appease the bankers…if so, it is working.

Shareholders have seen the value of their investments plummet and then get hit with massive fines. In the third quarter of this year alone, BofA had total litigation expenses of $1.6 billion! Consider that the entire annual budget of the SEC is just $1.3 billion! These figures came from Forbes magazine! Morgan Stanley’s exposure to Spain is $1.7 billion or $400 million more than the SEC’s entire budget! JPMorganChase lost over $5 billion on a stupid bet in the first quarter and earned a record $5.7 billion in the third quarter. Citigroup missed by $8.5 billion in its valuation of the MSSB joint venture, and lastly Goldman Sachs spent $11 billion on employee compensation and benefits in the first three quarters of 2011. Question: how are you going to get Congress to increase the funding of the SEC by even $1 billion in this environment, especially when the banks own the GOP and much of the Democrats.

It’s enough to make you sick when a sector that comprises about 15% of our economy has the power to destroy the rest of it and is still showing no restraint. It will happen again.

Hope you have a good hump day,

TB

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

Volume was higher again at 3.31B shares vs 2.56B vs 1.45B vs 2.67B va 3.2B vs 3.36B! NYSE stocks executed without the aid of the ETN market rose to a still weak 689M shares vs 633M vs 329M vs 522M vs 645M vs 711M. The 949M of last Friday was highest since 10/19. There have been just 18 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 17 sessions have surpassed 800M shares, mostly down days. The average since 8/1’s 1.03B is just 679B. The average for 2012 is just 764M shares and since 6/29 just 692M shares– WEAK!!! 120 of the last 163 sessions have been less than 800M shares (73%!). Since 2/29 there have been just 26 ‘average’ days (mostly down!), including 9/21’s high for 2012 of 1.8B (5B including ETNs) and just 21 have been above 900M – 773M 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 72 sessions less than 700M shares. 236 of the last 258 sessions have been less than the 12 mo ave (91%)! This remains a manipulated market – going wherever the freaks want it to!

Advance/Declines were negative: -1.3x vs -1.3x vs +5x!!! vs +2.1x vs -1.3x on NYSE and -1.2x vs +1.2x vs +3.2x vs +1.8x vs -1.1x on Nasdaq. Breadth was similar: NYSE:-2.2x vs -1.5x vs +15.6x!!! vs +2.6x vs +1.2x on NYSE and -1.1x vs +1.8x vs +5.6x!!! vs +2.4x vs +1.2x on Nasdaq. New 52 week highs rose modestly: 170 vs 141 vs 159 vs 122 vs 124 vs 94 (768 is cycle high, 28 low), while new lows were steady at 48 vs  48 vs 43 vs 88 vs 106. The ratio remains positive: +3.5x vs +2.9x vs +3.7x vs +1.4x vs <1.1x. Recent high was +7x! The S&P VIX rose to 15.92 vs 15.50. 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 5 sessions: Dow -0.7% vs -0.3% vs +1.4% vs +0.4% vs -0.1%;  Dow Transports -0.2% vs +0.7% vs +1.1% vs +0.3% vs flat;Dow Utilities UP 0.1% vs +1.2%!!! vs -0.1% vs -0.4% vs -0.3%; S&P 500 -0.5% vs -0.2% vs +1.3% vs +0.2% vs +0.1%; Nasdaq Composite -0.3% vs +0.3% vs +1.4% vs +0.3% vs flat; Nasdaq 100 -0.4% vs +0.5% vs +1.5% vs +0.2% vs flat; Russell 2000 -0.2% vs +0.2% vs +1.1% vs +0.6% vs +0.1%; NYSE Financials -0.7% vs -0.5% vs +1.4% vs +0.2% vs +0.4% (KBW Banks -1.3%! vs -0.4% vs +1.6% vs -0.3% vs +0.7%; Nasdaq Banks -0.8% vs -0.1% vs +1.8% vs flat vs +0.4%; NYSE Brokers +0.1% vs +1% vs +1.6% vs +0.4% vs -0.5%.NYSE Financial Leaders: BAC -1.8% vs -0.7% vs +1.3% vs +1.5% vs +1.5%. No other leaders. BAC still in the $9-10 range, closing at $9.66, after hitting $8.95 lat week! No other leaders – again!

Global equities weaker, especially Asia: FTSE -0.3% vs +0.4% vs -0.7% vs +0.2% vs +0.7%; CAC 40 -0.3% vs +0.3% vs -0.9% vs +0.1% vs +0.4%; DAX -0.2% vs +0.6% vs -0.4% vs +0.1% vs +0.9%;Nikkei -1.2%! vs +0.4% vs +0.2% vs closed vs +1.6%!; Hang Seng -0.6% vs -0.1% vs -0.2% vs +0.8% vs +1%!; Korean KOSPI -0.8% vs +0.9% vs -0.2% vs +0.6% vs +0.8%;Indian Sensex closed vs +1.7% vs +0.2% vs -0.1% vs +0.3%. U.S. stock futures : DOW -19; SPX -3.20; NDQ -6.25.

U.S. treasury bonds rose on Tuesday and are up again overnight: 10 yr 1.61% +1/4- record low of 1.40%; 30 yr 2.76% +1/2. Long TIP 0.33% +13/16 – 0.25% is the record low!The 5 yr TIP yields –1.46%; 10 yr -.81% vs -.77%.T-Bills: 0.17% 1 month; 0.10% 3 months; 0.14% 6 months. Reverse Repo 0.25%. 3 mo. Libor 0.31%; 6 mo. 0.53%.  European problem sovereign 10 years, Germany-bench: 1.38% -6; Japan 0.71% -1; Italy 4.67% -5; Spain 5.41% -8; Greece 15.95%!!! +5…on 9/20: 19.75%; Portugal 7.49% -1;Ireland 4.67% -5.

Gold closed lower dipping below the 40 day intraday. It closed at $1744.80 -$7.20. Friday’s intraday high was $1755. On 10/4 it closed at $1796 highest since 2/29 and it has lost $41 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. MAJOR SUP/RES at $1743, the 50 day, and $1736, the 40 day.Further SUP at $1672, the 200 day. 5/2’s o/n low of $1526.70 was lowest since 12/29! It is now $1742.00 -$2.80.Crude also closed slightly lower at $87.18 -.56. RES again at the 40 day (88.01), then the 50 day (88.79), and the 200 day (93.95), all still falling! It is currently $86.70 -0.48.

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