12/20/12…John Boehner, dealmaker

“SINNERS REPENT! The end of the world is coming.” Placard carried by a man who like some today who believe the Mayan calendar is correct and it is the end of the world. For that man it was…he was crossing the street and because of his placard failed to see an approaching car. (From an old cartoon)…don’t be like him! TB

Bloomberg Top Stories:

*ICE to Buy NYSE for $8.2 Billion as Equity Trading Loses Volume to Futures – SELL!

*U.S. Economy Grows More-Than –Expected 3.1%; Jobless Claims Increase 17k!

*Gold Declines to Lowest Since August as U.S. GDP Data Damp Stimulus Bet

*Commodities Decline While S&P 500 Index Futures, Treasuries Little Changed

*BofA’s Moynihan Said to Block Proposal to Cut Payouts for Merrill Brokers

*Americans Prone to Hacking Don’t Know Chamber of Commerce Left Them Alone – !

*Oakland Pays $17 Million for NFL Raiders as City Can’t Afford Police Needs – SICK!

*Budget Talks Deteriorate Amid GOP Identity Shift on Tax Increases – see below!!!

*Putin Says Russia Not Wedded to Assad, Wants to End Syrian Civil Strife – LMAO!

*French Parliament Passes 2013 Hollande Measure for 75% Tax on Millionaires – well, there is one place wealthy Americans won’t move if taxes go up…think people!

*Clinton Pulled Into Benghazi Attack Debate After Keeping Low Profile – hmmm, no CEO was held accountable for the financial crisis…but the Secretary of State?    

*Connecticut Lawmakers Lost Nerve on Ban When Gun Lobby Mobilized – TY NRA!

IMPORTANT: Tomorrow is the last options expiry of 2012, Tuesday is last day for (T+3) settlement…which means hedge funds are in control for the remainder of the year since due to their leverage they have to close year on completed trades, not actual trades to avoid distorting balance sheets. Yesterday indicates that Tuesday’s rally was options expiration induced…trading can be dangerous for investors and other living things.

Yesterday’s NYSE volume fell back to 3.81B shares from 4.13B shares in a session that gave back about half of Tuesday’s gains. This contrasts to an average of the prior six sessions of about 3.3B shares. REAL trades on the floor also fell back to 751M shares from 820M, still low but only the 2nd 800M+ share day in 22 sessions during which average was just 691M shares! Advance/declines were neutral (?) while breadth was negative, offsetting the strong performance of Tuesday. Only the Dow was up, a mere 0.2% while the other indices were off from 0.3% to 0.7%n!)…thanks to the ‘mouthing off’ of House Speaker Boehner who may well regret his strong stand on incomes. Obama offered up $400k vs $250k on the marginal rate and Boehner countered with a useless $1MM…more in today’s commentary.

The S&P VIX reversed two days of declines rising to 17.36 +1.89!!! – an 11.5% gain and highest since 12/5, closing at the high and just below the 200 day m/a of 17.89 – vs 15.57 vs 16.34 vs 17.00 vs 16.56 vs 15.95. This is a warning shot! Positions are where traders want them to be ahead of Friday’s options expiration!

Bond market was slightly better after being thoroughly beaten up Tuesday and is up modestly overnight: 10 yr note 1.78% vs 1.80%, 30 yr 2.97% vs 2.98% – back from 3.00%! TIPS weak and languishing as traders manipulate that market so there will be big winners and bigger losers…worst sector! The 30 yr TIP yield is stable at 0.38% (closed 0.40% on Tuesday) vs 0.37% vs 0.30% vs 0.32% vs 0.29% vs 0.26% vs 0.23% vs 0.22% – the record low. Bills slightly higher again. The 1 month yields 0.02%.

Gold was off just $3 yesterday after losing $28 on Tuesday, closingat $1667.70 -$3.00 on an inside session following a low of $1662 – lowest since 8/31! It is way below the 40/50 day moving averages, but is up $2.80 overnight to $1670.50. Crude finally had a solid up move gaining $1.58 to close at $89.51, highest since 12/3 and broke out above the 40/50 day m/a’s. Overnight it is $90.14 +.16.

– – –  . . .  – – –

(This is not going to sit well with TB’s GOP friends…but it is time for truth, not politics…or else…TB)

…not! More like dealbreaker as today’s blurb will illustrate. Once again the GOP continues to shoot itself in the foot while lobbyist and NRA director, Grover Norquist continues to grin. To repeat: Norquist is an extremist right-wing ideologue who would sell out the entire country for his damned contract (with the devil!). But worse yet, read some of his inflammatory quotes on the National Rifle Association’s website:  NRA Norquist. Also look at how the NRA has morphed from a gun safety organization to a survivalist mentality and how they have distorted the Constitution: 2nd Amendment explained

There is no doubt  Speaker Boehner is juggling trying to work out a deal while not alienating the party’s big donors and Mr. Norquist’s minions in the House. But it is his tone that is way off base…every time he counters it is his ‘final’ offer and last night he said if Obama doesn’t accept HIS proposal we will go over the (illusory) fiscal cliff. Does that sound like a good negotiator? If he were playing poker he would be bluffing with a pair of deuces…and going ‘all in.’

So today, TB will show just how much Obama has given up and what Boehner is offering. No contest. First, recall that on January 1, no matter what the payroll tax is back and that is a big increase for ‘working’ Americans…not the wealthy with their income from capital gains (and dividends!). So TB went to the IRS website again. Remember, the Tax Code is supposed to be ‘progressive’ not ‘regressive’ as the GOP would like to see.

According to the IRS (per the Tax Foundation), the top 1% of incomes began at $344k (the new category of the top 0.10% instituted about 5 years ago, not available), top 5% starts at $154k (top 2% not shown but about $250k), top 10% 112k, then it falls to the top 25% at just $66k, and the top 50% (median) $32k. No wonder one if five or possibly four children live in poverty, yet Romney griped about the 47% who pay no taxes…and get benefits. How many of you could live on $32k a year without adjusting your lifestyle? Remember these are for TOTAL returns filed, not by size of family! Also, Mr. Romney those 47% pay other taxes to state and local governments and some federal taxes too.

Despite the regressive, since it wasn’t adjusted for inflation, Alternative Minimum Tax, 7,000 millionaires paid no taxes in 2009! Thanks to loopholes, generation skipping, etc.

Now consider Romney’s revised plan to cut rates across the board and limit deductions to $17k (wonder how much he would have given to charities under his own plan?). One half of those making between $150-500k would have forgone 25% of the tax ‘benefit, while 60-80% of those earning over $500k would lose one-third of the tax benefit.

Next let’s look at average deductions…important in the Boehner proposal….which sadly not enough detail is given on higher incomes. First, charitable deductions are limited to 50% of AGI which is how Romney’s effective tax rate was just 14%. For those earning $200-250k the average total deductions are $63,600, for those above $250k $130,400. this means that under Obama’s original proposal you would not be hit by the marginal rate until you made over $312k and would still be benefited by the lower Bush tax cut rates on all below that level so you might not be impacted until say $350k. Boehner on the other hand wants the line drawn at $1MM…meaning it would likely be $1.3MM in income before you would even be impacted by the higher rates!…and possibly $1.5MM before your effective tax rate is impacted! Going back to the first subject, the additional revenue raised would be totally insignificant as it would be close to 0.5% of the population that would be impacted…and a large number of these are Wall Street bankers and CEO’s of major corporations…this is who the GOP has chosen to protect at any cost.

Thus, Mr. Boehner has backed himself into a corner and while he is trying to cast blame on Obama, it will backfire…as all of their strategies of the last four years have! People are not stupid…but what amazes me is the GOP faithful w oar most likely in the top 25% ($66k and above). What is in it for them as they treat the wealthiest Americans as royalty? Beats TB. By the way all of the data came from the Tax Foundation…got a problem with that – with the exception of the estimated guesses by TB in the last paragraph. Let’s get on with this so the GOP can go back to loving Norquist and the NRA! Wake up, America…we are well on the way to oligarchy, not socialism!

Have a terrific day!

TB

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

Volume fell back from an above average 4.13B shares to 3.81B slightly above the 3.3B share average of the prior six sessions. NYSE shares executed without the aid of the ETN market also fell back to 751M shares from an above average 820M shares vs 702M vs 667M vs 654M vs 695M vs vs 693M vs 593M. There have been just 24 700M+ days since 8/3. Tuesday was the only 800M+ share day in the last 12 sessions! – average 691M shares! The average since 8/1’s 1.03B is just 681M. The average since 9/21 (12 mo high: 1.81B) is just 687M with just one 1B share day and just nine sessions above 800M shares! 134 of the last 179 sessions have been less than 800M shares (75%!). Since 2/29 there have been just 28 ‘average’ days (mostly down!), and just 22 have been above 900M – 757M is the 12 month ave and falling! Since 2/6 there have been 82 sessions less than 700M shares. 250 of the last 274 sessions have been less than the 12 mo ave (92%)! Since the crisis, this is the lowest average annual volume (range 588M-1.04B). Volume in the 90’s, during the boom: 315M shares. High freak trades replacing retail buyers.

Advance/Declines were FLAT??? 1:1 vs +2.8x vs +2x vs -1.1x vs -2.3x on NYSE and 1:1 vs +2.6x vs +2.2x vs -1.1x vs -1.7x on Nasdaq. Breadth was modestly negative: -1.7x vs +6.1x! vs +4.2x vs -1.1x vs -2.3x on the NYSE and -1.3x vs +3.3x vs +1.9x vs -1.1x vs -1.4x on Nasdaq. New 52 week highs held steady at 292 vs 292 vs 151 vs 95 vs 89 vs 209 (768 is cycle high, 28 low), as new lows remained at 53 vs 55 vs 74 vs 79 vs 84 vs 55. The ratio is: +5.5x vs +5.3x vs +2x vs +1.2x vs +1.1x. Recent high was +7x! The S&P VIX reversed two days of declines rising to 17.36 +1.89!!! – an 11.5% gain and highest since 12/5, closing at the high and just below the 200 day m/a of 17.89 – vs 15.57 vs 16.34 vs 17.00 vs 16.56 vs 15.95. This is a warning shot!

Here are the results of last 5 sessions: Dow +0.9% vs +0.8% vs -0.3% vs -06% vs flat; Dow Transports +1.6% vs +0.8% vs +0.1% vs +0.1% vs -0.3%;Dow Utilities +0.9% vs +1.4% vs -0.1% vs -0.4% vs -0.1%; S&P 500 +1.2% vs +1.2% vs -0.4% vs -0.6% vs flat; Nasdaq Composite +1.5% vs +1.3% vs -0.7% vs -0.7% vs -0.3%; Nasdaq 100 +1.5% vs +1.4% vs -1% vs -0.8% vs -0.3%; Russell 2000 +1.5% vs +1.4% vs -0.1% vs -0.6% vs -0.7%; NYSE Financials +1.4% vs +1.4% vs -0.1% vs -0.4% vs +0.4% (KBW Banks +1.9% vs +2.8% vs -0.3% vs -0.6% vs +0.4%; Nasdaq Banks +1.4% vs +1.7% vs -0.4% vs -0.6% vs -0.5%; NYSE Brokers +2.4%! vs +2% vs +0.1% vs +0.3% vs +0.4%.NYSE Financial Leaders: BAC +3.3% vs +4% vs +0.4% vs -0.7% vs +1%; C +0.8% bd +4.1%!!! GE -1.1% vs +1.4%. Does this make sense to you? Not to TB.

Global equities slightly better ex-India, and Japan which has been on a roll! FTSE +0.1% vs +0.5% vs +0.4% vs -0.5% vs -0.1%; CAC 40 +0.2% vs +0.4% vs flat vs -0.4% vs flat; DAX +0.1% vs +0.2% vs +0.4% vs flat vs +0.3%;Nikkei -1.2% vs +2.4%!!! vs +1% vs +0.9% vs -0.1%; Hang Seng +0.2% vs +0.6% vs -0.1% vs -0.4% vs +0.7%; Korean KOSPI +0.3% vs +0.5% vs +0.5% vs -0.6% vs -0.4%;Indian Sensex -0.1% vs +0.6% vs +0.6% vs -0.3% vs +0.5%. U.S. stock futures off slightly but mid-range on session: DOW -9; SPX -1.70; NDQ +.25.

U.S. treasury bonds were up slightly yesterday and are up slightly overnight following Tuesday’s rout: 10 yr 1.78% vs 1.80% – record low of 1.40%; 30 yr 2.97% vs 2.98% following 3.00%. Long TIP steady at 0.38% following 0.40% – 0.22% record low!The 5 yr TIP yields –1.49%; 10 yr -.76%.T-Bills: 0.02% 1 month;0.05% 3 months; 0.10% 6 months. Reverse Repo 0.26%. 3 mo. Libor 0.31%; 6 mo. 0.51%! European problem sovereign 10 years, Germany-bench: 1.42% -1; Japan 0.76% +1; Italy 4.39% -1; Spain 5.21% -2; Greece 11.34% -9 vs 11.74%!!! -77!!! vs 12.54% vs 12.73% vs 12.70% vs 12.64% vs 12.29% vs 12.88% vs 13.35% vs 13.92% vs 14.72% …on 9/20: 19.75%!!! An incredible move!!! Portugal 6.79% -1; Ireland 4.38% -2.

Gold was off just $3 yesterday after losing $28 on Tuesday, closingat $1667.70 -$3.00 on an inside session following a low of $1662 – lowest since 8/31! It is way below the 40/50 day moving averages, but is up $2.80 overnight to $1670.50. Crude finally had a solid up move gaining $1.58 to close at $89.51, highest since 12/3 and broke out above the 40/50 day m/a’s. Overnight it is $90.14 +.16.

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