3/11/13…social safety nets

From the Friars Club Encyclopedia of Jokes: “A man who carries a cat by the tail learns something he can learn no other way.” – Mark Twain

TB’s Joke of the Day: Do you know the difference between a ‘general’ partner and a ‘limited’ partner? If not, you have never invested in a limited partnership because in one, the limited partner starts with the money and ends up with the experience while the general partner starts with the experience and ends up with the money.  

Bloomberg Quote of the Day: “Act as if what you do makes a difference. It does.” – William James

This week’s economic calendar is packed with important indicators. The highlight of the week will be February Retail Sales (Wednesday), February PPI (Thursday) and February CPI (Friday). We will also get February Treasury Budget (Tuesday), February Import & Export Prices, and January Business Inventories (Wednesday), Q4 Current Account (Thursday) and March Empire State Manufacturing, February Industrial Production, and March Consumer Sentiment Preliminary (Friday). Courtesy of Economic Advisory Service

Bloomberg Top Stories:

 

*Bernanke Saying We Never Have to Sell Drives Mystery Over Meaning of Exit – !!!

*European Stocks Retreat on Italy’s Debt Downgrade as Oil, Metals Decline

*BOE Inflation Threat Means Linkers Outpace Even Italian Debt

*John Paulson Is Said to Consider Puerto Rico as New Home With Lower Taxes – !!!

*Carney Legacy Revealed in Biggest Sentiment Reversal Since ’08 – Pound Declining

*German Yields Immune to Lure of Equities as AAA Supply Shows

*Oil Bets Fall to Two-Month Low as Prices Break Below $90 – tried to warn you!

*US Airways Chief Defies Buffett Adage Vowing American Atop Returns by 2016

*Americans Without Insurance Hit by Biggest Hospital Bills in Broken System –SICK!

*Karzai Accuses U.S. of Taliban Collusion as Bomb Attacks Mar Hagel Visit –collusion?

*Main Suspect in New Delhi Gang Rape of Student Found Hanged in Tihar Jail

*Harvard’s Search For E-Mail Leak in Cheating Scandal Raises Ire on Campus

*Malawi Arrests Former Government Officials for Coup Conspiracy       

  

I sincerely believe that those who are long now will regret it BEFORE Friday’s options expiration. Talking from position? Perhaps but when you have these kinds of moves in  a very thin marketOK, OK, the market rallied again…well sort of but the gains were modest as the Dow  eked out yet another new record high and high close…but  by just 35 points vs 38 vs 88 and 42 vs 56 points. Meanwhile volume has been little changed for the last five sessions while REAL trades on the NYSE barely passing 700M for the first time in four sessions? Expect a continuation today however on the employment situation.

 

The biggest gainers was the Russell 2000 +0.5% while the Dow and S&P had to settle for 0.2% gains, The two Nasdaq indices (plus NYSE Financials) were all +0.3% while the stellar Dow Transports fell for a second day -0.5% vs -0.4% after being the big winner at +1.5% vs +1%. Dow Utilities declined by 0.3% vs flat vs +0.5% vs +0.9%!

 

The high on the Dow was a new record 14354 with a new high close of 14329.  This is looking more like yet another year of ‘sell in May and go away’ – IF we make it that far…and if the extremists in the GOP have their way it will be even earlier!

 

Total NYSE total volume rose slightly to 3.64B shares vs 3.62B vs 3.67B vs 3.57B vs 3.38B vs 3.76B vs 3.53B vs 2/28’s 4.2B (highest of 2013 by about 400M shares). Real NYSE volume rose continue to be WEAK at 690M shares vs 708M shares vs 684M vs 683M vs 693M  – vs 2/28’s (monthend) 1.01B shares!!!(second only to 1/18’s 1.07B and third best to 12/21’s 12 mo. high of 1.88B shares). Note that 700M occurred just once last week while the average volume since 2/15 is a weak 751M shares!!! Ave vol. 12 mos. 745M, ytd 714M. There have been just eight 800+M shares in 2013. THIS produced a Dow rally of 11.2% since the 12/28 low???…and FOUR consecutive record highs (albeit small ones: since the series began 5 days ago the high is just 2.8% higher. Also, since the last options expiry on 2/22 the Dow is up 2.8%, S&P +2.4%. This on a very thin-based rally which could set up a correction as early as today but could be as late as Wednesday. ALSO, the VIX which surged to 19.28 on 2/28 fell to a very complacent 12.59 Friday.

  1. new highs which had ranged from 121-680 (2/19), before falling to just 121, seesawed again to 630 vs 447 vs 539 from a very high 709 vs 418 vs 274 vs 326 vs 268 vs 145 vs 273 vs 214. New lows barely budged to 26 vs 24 vs 64 vs 73 vs 98 vs 93 vs 59 vs 49 vs 74 vs 52. Puts are incredibly cheap if you want safety!
  2. Advance/Declines were positive for the 9th straight session at +2x vs +1.4% vs +1.3x vs +2.8x vs +1.3x vs +1.3x vs +1.1x vs +3.2x vs +2x on NYSE and +2.1x vs +1.6x vs +1.2x vs +2.4x vs +1.2x vs +1.3x vs -1.1x vs +2x vs +1.5x vs -4.4x on Nasdaq. Breadth was similar at +2x vs +1.8x vs +2.2x vs +4.1x vs +1.5x vs +1.2x vs -1.1x vs +6.2x +2.4x vs -9.7x on NYSE and +1.9x vs +1.9x vs +1.4x vs +3.4x vs +1.8x vs +1.7x vs -1.1x vs +4.4x vs +1.6x vs -4.5x on Nasdaq.
  3. The two Nasdaq indices rose by 0.4%. Apple was modestly higher. Last Monday it was the big loser dragging the 100 down by 8.5 points. The Russell 2000 small cap continued its climb with a 0.9% gain vs 0.5% vs +0.3% vs +1.2% vs +0.2% – that is up 3.6% in 7 sessions!…what gives???
  4. NYSE Financials rose 0.5% for a second day vs +0.3% vs +0.9% vs +0.5% vs +0.1% vs -0.2% vs +1.4% vs +0.6% vs -2.5%. BofA still most active BUT not only fell 1.6% but closed at %12.07 following that 2.9% to $12.26 (first time since 2/19), coming back from $11.11, lowest since 12/17, and back well above the 40/50 day m/a’s for the lowest close this year – from $12.42 high on 2/13. Note that due to the low price 11 cents is a 1% change!!!  MGIC fell by another 0.6% vs -12.3% vs +5.1% following +27.8% and +10.3%, still up 30% in five days!  Citi rose 3.7%???
  5. Lastly volatility (S&P VIX) which had back to back lows going back to 2006 – 12.13 then back to 18.99 (with an intraday high on 2/28 of 19.28, highest since 12/31 – highs on 12/30-31 were 22.72 and 22.19 respectively, highest since 6/15. It closed at 12.59 -.47 or -3.6% and well below the 40 day m/a (13.75). Far too complacent for the reality! Why? Because Friday is options expiration!

 

Global equity markets mixed on Italy news: UK +0.2% vs +0.7% vs +0.4% vs +0.4% vs +1.1%; France -0.3% vs +1.2% vs +0.6% vs +0.3% vs +1.6%; Germany -0.2% vs +0.8% vs +0.3% vs +1.1% vs +1.9%; Japan +0.5% vs +2.6%!!! vs +0.3% vs +2.1%!!! vs +0.3% vs +0.4% vs +0.4% vs +2.7%!!! vs -1.3% vs -2.3% vs +2.4%, Hang Seng FLAT vs +1.4%! vs flat vs +1% vs +0.1%; Kospi -0.1% vs +0.1% vs -0.8% vs +0.2% vs +0.2%; India -0.2% vs +1.4% vs +0.8% vs +0.6% vs +1.4%. U.S. stock futures little changed and trading in a very tight range: DOW +6; SPX -0.80; NDQ -3. – Caution!

 

Bonds continue weak with the 10 yr closing at 2.4% and unchanged overnight: 10 yr Treasury range of from 2.06% to 1.85% last 14 sessions, now 2.04% and the 30 yr’s 3.26% to 3.05%, now 3.24% +1/8. The long Tip also remains weak again at 0.64% vs 0.65% – a new high!. Libor update: 0.240% 3 mos., 0.447% 6 mos, steady. Foreign bond yields higher in Germany and U.K. for a second say,  problem countries mixed, now with problem credits weaker again: Germany 1.50% -3; UK 2.01% -6; Italy 4.64% +5; Spain 4.71% -3; Portugal 5.84% +3; Greece 10.45% +8 – how do you trade something like this? Better to buy lottery tickets!

 

Gold closed up slightly and has been little changed for three sessions, still near support with the loss from the 1/17 high of $1699.90 at $115! It closed at $1576.90 +$1.80, still down -$71 in 10 sessions but also above a week ago Thursday’s low of $1554.30 – not seen since May 2012! Overnight it is $1563.60 -$11.50! The total breakdown through the 40/50/200 day m/a’s, has major resistance $1638-1668, with first resistance at $1600, a double bottom from 8/14-15, also a psychological level. Last time it was below $1500 was Sept. 2011!!! Crude rose slightly again yesterday, four days after setting another new low of $89.33, lowest since 12/26, and way below the 40 day ($94.73), AND $94.25, the 50 day. It closed at $91.95 +.39. Overnight it is $91.69 -.26.

 

Some random thoughts:

 

What is it the Tea Party and their brethren in the GOP don’t get about running a democracy? You cannot create a wealth gap as more people sink below the poverty level and expect to win elections…especially when you make ridiculous assertions, mock science (Jeb Bush said that!), and cater to the whims of the lunatic fringe. They are ignoring the votes of minorities (majorities!) – not just latinos and blacks but Asians!!!, the gay vote, women, and the youth vote. No party can survive in this manner. As Keynes famously said, “when the facts change, I change my opinion, what do you do, sir?

 

The Tea Party continues to take us from crisis to crisis…from the debt ceiling (which despite GOP promises WILL occur again as the Speaker has no control over the fanatics), to the budget deficit…all the while proclaiming that the tax ‘increases’ (sic) agreed to over yearend are the last they will allow. Remember that the Koch Brothers, two of the richest men in the world fund this group. Isn’t that obvious as they continue to pamper the wealthy…to the point of not being able to find any deductions that can be cut…even the ‘carried interest provision?

 

Obama has overstated his case on the sequestration – yes, he too is using scare tactics because that is all that is available to him. He looks ridiculous though in cancelling White House tours…which should be a basic right of Americans. There is ‘hope’ for him though now that he is hosting lunches and dinners with the ‘loyal’ (sic) opposition.

 

You cannot run a country like a corporation – thankfully or the current wealth gap would be a pittance – when CEO’s earn 300, 400 times – or more – than the average worker! We are at a very dangerous crossroads in our nations history…one that Jefferson warned of – not to mention Eisenhower!

This from an informed reader of this blog who provides me with good, sound ideas:

“TB–Tom Edsall points out that you can solve Social Security so-called underfunding just by eliminating the cap for the FICA payroll deduction. “Currently, earned income in excess of $113,700 is entirely exempt from the 6.2 percent payroll tax that funds Social Security benefits (employers pay a matching 6.2 percent). 5.2 percent of working Americans make more than $113,700 a year. Simply by eliminating the payroll tax earnings cap — and thus ending this regressive exemption for the top 5.2 percent of earners — would, according to the Congressional Budget Office, solve the financial crisis facing the Social Security system.

The link to his NYT article is:

http://opinionator.blogs.nytimes.com/2013/03/06/the-war-on-entitlements/

The Social Security “entitlement” is an easy fix–one doesn’t have to jigger retirement ages, or even means-test retirement payments! I can’t understand why this “fix” is called a “tax increase” by the GOP, when it really is a “shared contribution” (employee and employer) to a retirement plan. Lots of small businessess, supposedly championed by the GOP, don’t have 401(k) plans for their employees, but willingly contribute their employer share every week to the social security program.”

That is Social Security…even more serious is Medicare which could be fixed…just shove the damned pharma lobby aside and refigure how doctors are paid. Raising the eligibility age will only increase the cost as more and more needed care is deferred!!!

Will close with this: on retirement security, the U.S. ranks 19th (just ahead of the U.K.), but behind Czech Republic, Slovenia and other countries. Leaders are Norway, Switzerland (see it can be done), Luxumburg, Finland, and Denmark. Think about it.

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