3/12/13…dysfunctional R US

From the Friars Club Encyclopedia of Jokes: “Never go to a doctor whose office plants have died.” – Erma Bombeck

Bloomberg Quote of the Day: “Either you run the day or the day runs you.” – Jim Rohn

Bloomberg Top Stories:


*Banks Addiction to Leverage Said to Face Scrutiny at Basel Group Meetings – no!!!

*Yen Strengthens While Treasuries Halt Six-Day Drop as U.S. Stocks Retreat

*Building Booms in Boston as Younger Workers Say No to Life in the Suburbs

*Even Berlusconi Can’t Slow Bulls Boosting Forecasts for Euro – how sick is that???

*Truck Owners Buoyed as Freight Shipments Grow With U.S. Economy

*GM Common-Share Sales Raised $489.9 Million for U.S. Treasury Last Month – !!!

*Secret Sistine Chapel Vote to Start as Cardinals Seek Benedict’s Successor – and the scandals mount…this is the only group I know of that is more dysfunctional than us!

*Cordray Post at Protection Bureau at Stalemate as Sneators Won’t Negotiate – one of the few people in D.C. who knows what he is doing and the bank lobby is winning!


It is looking more and more like I was wrong in my prediction of a selloff or sharp correction by Friday…or soon…but the low volume, plunging VIX and overall global economic and financial problems say otherwise…especially when workers are not being rewarded for their effort…even so productivity gains are slipping.



The high on the Dow was a new record 14448 with a new high close of 14447.  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 SUNK to 2.98B shares vs 3.64B 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 managed to get even weaker, falling to just 599M shares (lowest since 2/11’s 497M!!!) vs 690M vs 708M 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 741M shares!!! Ave vol. 12 mos. 745M, ytd 71M. There have been just eight 800+M shares in 2013. THIS produced a Dow rally of 11.6% since the 12/28 low???…and FIVE consecutive record highs (ave 57 points, 341 total, closes 60 points since the series began 6 days with the gain just 2.4% higher). Also, since the last options expiry on 2/22 the Dow is up 3.2%, S&P +2.7%. This on a very thin-based rally which is unbelievably getting weaker! We could have a correction tomorrow or Wednesday…OR NOT! ALSO, the VIX which surged to 19.28 on 2/28 fell to an incredibly low 11.56 yesterday – an 8.2% decline with a low of 11.50 – lowest since 3/2/07 as the market raced to the record high! .

  1. new 52 week highs which had ranged from 121-680 (2/19), before falling to just 121, slipped to 560 vs 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 slightly positive and for the 10th straight session at +1.2x vs +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 +1.1x vs +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 less impressive at +1.6x vs +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 +2.1x vs +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 about 0.4%, with the NDQ 100 gaining just 8 points – five of them from Apple!  Only 58 advance with AMZN and AMGN each losing more than 1 point. The Russell 2000 small cap which had been the only impressive index was FLAT vs a 0.9% gain vs 0.5% vs +0.3% vs +1.2% vs +0.2% – that is up 3.6% in 8 sessions! Don’t look down!
  4. NYSE Financials rose 0.6% for a third 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 and gained 0.7% after losing 1.6% on Friday to close at $12.07, now at $12.15, coming back from $11.11, lowest since 12/17, and back well above the 40/50 day m/a’s from the lowest close this year – from $12.42 high on 2/13. Note: 11 cents is a 1% change!!!  Citi rose another 2% vs +3.7%. Hello??? GE -0.6%
  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 PLUNGED yesterday closing at 11.56 -1.03 or -8.2% with a low of 11.50, which has not occurred since 3/21/07 (11.21). Given all the world’s headlines and lack of income gains how can we be so complacent? Ah, in ’07 we were near the record high…you know…the one we just broke! For what reason???


Global equity markets are mixed for a second day: UK +0.1% vs +0.2% vs +0.7% vs +0.4% vs +0.4%; France +0.1% vs -0.3% vs +1.2% vs +0.6% vs +0.3%; Germany flat vs -0.2% vs +0.8% vs +0.3% vs +1.1%; Japan -0.3% vs +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 -0.9% vs FLAT vs +1.4%! vs flat vs +1% vs +0.1%; Kospi -0.5% vs -0.1% vs +0.1% vs -0.8% vs +0.2%; India -0.4% vs -0.2% vs +1.4% vs +0.8% vs +0.6%. U.S. stock futures little changed and in a very tight range: DOW -11; SPX -1.30; NDQ -5.75.


Bonds had another bad day with the 10 yr closing at 2.06% and the 30 yr at 3.26%, but are rallying overnight: 10 yr Treasury range of from 2.06% to 1.85% last 15 sessions, now 2.03% +3/16, and the 30 yr’s 3.26% to 3.05%, now 3.24% +3/8. The long Tip remains weak hitting 0.66% – a new high, now 0.64 +9/16!. Libor update: 0.241% 3 mos., 0.446% 6 mos, steady. Foreign bond yields lower, ex-Greece: Germany 1.48% -4; UK 1.96% -5; Italy 4.61% -2; Spain 4.71% -3; Portugal 5.83% -1; Greece 10.41% +3. Round and round she goes, where she stops?


Gold closed up slightly on a day where the entire range was just $8 – unheard of! It has been little changed for four 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 $1592.00 +$14.10! The total breakdown through the 40/50/200 day m/a’s, has major resistance $1636-1668, 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 dipped slightly yesterday, five days after setting another new low of $89.33, lowest since 12/26, and way below the 40 day ($94.69), AND $94.25, the 50 day. It closed at $91.95 +.39. Overnight it is very strong at $93.12 +$1.06.


Some random thoughts:


How can the stock market be at levesl not seen since the peak in 2007…AND volatility, as measured by the S&P VIX (ratio of puts to calls) plunging to 11.56 yesterday, -1.03 or 8.2%. Not coincidentally, that is the lowest level since 3/21/07 – on the road to those record highs. A financial crisis was brewing thanks to greed on everyone’s part and ‘innovation’ by Wall Street with the able assistance of the rating agencies.


Oh, wait…it wasn’t foreseeable…oh? Then how come real estate prices PEAKED in 2006??? Is there a parallel here? We have a dysfunctional government…as does the rest of the developed world, junk bond spreads are at record lows, emerging markets are the strongest area to invest, China and North Korea are problems…not to mention the entire Middle East which seems bent on fulfilling the predictions of the book of Revelations!


Go on, buy stocks…better yet, ‘borrow and buy’ as an old friend used to say…or another friend would quip, ‘got a hunch? Bet a bunch?’ Such are the times we live in…and pay the piper we will, only question is when. When I hear comments like ‘when the band is playing you have to get up and dance.’ No, Sandy, we don’t…we have to use our heads, unless that is beyond us.


It all reminds me of a joke about a farmer who had the best architect in his state design an outhouse for him. It was beautiful…all brick…he proudly showed it off to everyone who came by. But one day he noticed a terrible stink…so much so that he couldn’t bear to use it.


He called the architect and asked him to come out and look at it. When he arrived, he walked inside, around the outside, shook his head and said, “I don’t understand this, someone crapped in here!”


That could be the point we are now at…


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