4/17/13…signs of a sick society

From the Friars Club Encyclopedia of Jokes: “New Orleans is the only city in the world where you go in to buy a pair of stockings and they want to know your head size.” – Billy Holiday

Bloomberg Quote of the Day: “If you can’t annoy somebody, there is little point in writing.” – Kingsley Amis

Bloomberg Top Stories:

*Bank of America Earnings Miss Estimates on Mortgage Income; Shares Decline – duh!

*Stocks in Europe Decline With Copper as Krona, Yen Weaken; Gold Advances – a tad!

*Gold Wipes Out $560 Billion From Central Bank Reserves as Equities Rally- hello?

*European Car Sales Plunge Toward 20-Year Low as Demand in Germany Crumbles

*Central Bankers finding Stimulus Glitter in Explanations for Gold’s Slump

*Hog Glut Extending as U.S. Shipments Retreat Most in a Decade – China Flu

*Bomb Probe in Boston Turns to Publis as Homegrown Terror Prospect Arises

*Gun-Control Legislation Is Heading for Defeat as Senate Prepares to Vote – sad!

NOTE: I have never seen in my 40 years three consecutive days of trading in stocks, bonds, and commodities…a trifecta. The volatility in bonds normally doesn’t occur except over a minimum six month timeframe! This is a major warning!

How many times do you have to see this? But yesterday it was driven home in spades: you cannot beat the high frequency traders at their own game PERIOD!!! They take the market up, they take it down…often in the same day…and when you add in Friday’s options expiry and sharp swings in volatility, they are in heaven! Oh and don’t think Monday was the ‘head fake’ – it was yesterday which amounted to little more than a dead cat bounce! Got it? The fix is in and only a chump plays a game when he doesn’t know the rules.

A rally following two straight DOWN DAYS but the bounce was only about half the bounce off Tuesday and still below the mid point from Monday! Everything was UP, led by Dow Transports again which rose a nice 2.2% but followed a near 4% loss. Its partner in crime, the Russell 2000!!! – amazing how these two remain in sync and usually counter to the Dow…hello Dow Theorists – rose 1.8% but also following that near 4% decline! Total NYSE Volume dropped to 3.63B shares vs 4.64B vs 3.22B vs 3.38B vs 3.47B vs 3.23B…zzzzzz. A/D’s and Breadth were both positive, but again not enough to offset the prior day. The VIX which surged from 12.06 to 17.27 for a 43% gain Monday, closing at the high, declined 19% – again about half the surge – to 13.96. Forget Friday’s options expiry at your peril…sell in April and…

*Dow Transports +2.2% vs -3.8%!!! vs -0.3% vs -0.3% vs +1.8%. Russell 2000 +1.8% vs -3.8% vs -0.4% vs +0.1% vs +1.8%; Dow Utilities +1.2% vs -1.3% vs +0.2% vs +0.2% vs +0.8%. The S&P 500 ROSE 1.4% vs -2.3% vs +0.4% vs 1.2% vs +0.4%. Nasdaq Composite and 100 were both up by 1.5% vs -2.3% vs -0.2% vs +0.1% vs +1.8%. The Dow rose 1.1% vs -1.8% vs flat vs +0.4% vs +0.9%.

*NYSE Volume dropped sharply to 3.63B shares from 4.64B (bested only by the 4.93B 12-month high on the last options expiry on 3/15!) vs 3.22B vs 3.38B vs 3.46B vs 3.23B vs 2.82B vs 3.5B vs 3.32B vs 4.04B ( now 3rd highest). REAL Volume also declined to 723M shares vs 976M vs 700M vs 643M vs 688M vs 670M vs 583M vs 726M vs 647M vs 812M vs 639M vs 573M vs 876M (high since since 3/15) vs 596M shares vs 558M shares –the range since 2/11 is 558M to 1.825B on 3/15’s options expiry and a near 12 month high, second only to 12/21’s 1.88B shares. Note that 3/15’s (options expiry) was the only day since 2/28 to register over 1B shares! Ave vol. 12 mos. 735M, ytd 717M. There have been just 12 800+M shares in 2013 – almost exclusively on DOWN days!

  1. new 52 week highs which have ranged from 121-709, were steady at 155 vs 154 vs 285 vs 591 vs 505 vs 312 vs 269 vs 146 vs 143 vs 193 vs 417. New lows dropped back to 120 vs 197 vs 76 vs 41 vs 31 vs 52 vs 55 vs 96 vs 81 vs 114 vs 64. Note that with stocks near record highs it is very hard to get a new low!!!
  2. Advance/Declines were very positive vs extremely negative: +4.4x vs -7.1x vs -1.5x vs +1.6% vs +3.1x vs +1.4x vs +1.2x vs -1.1x vs +1.6% vs -3.7x on NYSE and +3.5x vs -8.1x vs -1.5x vs -1.1x vs +3.8% vs -1.2x vs +1.5x vs -1.5x vs +1.8x vs -3.3x on Nasdaq. Breadth was similar: +6.4x vs -7.2x vs -2.2x vs +1.7x vs +3.2x vs +1.9x vs +3.7x vs +1.0x vs +2.4x vs -5.7x!!! on NYSE and +6.2x vs -12.8x!!! vs -1.4x vs -1.2x vs +6.5x!!! vs +2.1x vs +2x vs -1.5x vs +2.1x vs -4.3x!!! on Nasdaq.
  3. The Dow was +1.1% vs -1.8% vs flat vs +0.4% vs +0.9%. Dow Transports were up 2.2% vs 3.8%!!! vs -0.3% vs -0.3% vs +1.8% vs -0.3% vs +0.9% vs +0.5% vs +0.9% vs -1.3% while Dow Utilities rose 1.2% vs -1.3% vs -0.2% vs +0.2% vs +0.8%.The two Nasdaq indices rose by 1.5% vs -2.3% vs -0.2% vs -+0.1%. The Russell 2000 rose 1.8% but vs -3.8%!!! vs -0.4%! vs +0.1% vs +1.8%. NYSE Financials rose by +1.8% vs -2.5% vs -0.5% vs +0.4% vs 1.6% vs +0.4% vs +0.7% vs -0.3% vs +1% vs -1.6%. All were up with Citi adding another 4% to its outlier +0.2%??? BofA again most active +2.8% vs-1.6% (to close at $12.38 vs $11.98) vs -0.8% to $12.17 vs -0.4% vs +0.6% vs +0.3% vs +2% vs  +0.3% vs +1.1% vs -2.8%. The range is $11.11, on 12/17 to $12.78 on 3/20.
  4. Lastly, volatility (S&P VIX), was the big story Monday, reversing five straight declines to 12.06 then surging to 17.28 +5.21 (high and close, +43.2%!). Yesterday it fell 19% to 13.96 vs 17.28 vs 12.84 vs 12.84 vs 13.19 vs 13.92 vs 13.89 vs 14.21 (high of 14.66 from a multi-year low!!!). The new range is 12.06-17.28, so it remains above the average 13.23, well below the 40/50 day (13.53/13.49) and the 200 day at 15.48…ytd the average has been 16.49 with a range of 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.49!!! This could be one very exciting options expiration!!!

European equity markets WEAK for 4th time in 7 sessions, Asia mixed: UK +0.7% vs -0.2% vs -1.1%!!! vs -0.4% vs +0.3%; France -1.6% vs flat vs -1%! vs -1.1%! vs +0.6%; Germany -1.8% vs flat vs -1%! vs -1.5%!!! vs +0.4%; Japan UP 1.2% vs -0.4% vs -1.6%! vs -0.5% vs +2%!!!; Hang Seng -0.5% vs -0.5% vs -1.4%! vs -0.1% vs +0.3%;  Korea +0.1% vs +0.1% vs -0.2% vs -1.3%!!! vs +0.7%; India -0.1% vs +2.1%!!! vs +0.6% vs -1.6% vs +0.7%. U.S. stock futures TANKING!!! DOW -103 vs +140; SPX -12.20 vs +14.70; NDQ -24.75 vs +26.50 (comparisons are to yesterday morning)

Bonds closed WEAK yesterday after two straight very weak sessions  but are back up o/n: 10 yr Treasury 1.70% +3/16 vs 1.72% -3/8 (recent range now 2.06% to 1.68%), and the 30 yr’s 3.26% to 2.86%, 2.89% +1/2 vs 2.91% -1 pt.  The long TIP also rallying – finally – after setting a new (record?) low of 0.36%, before backing off to 0.52%, closed 0.46% -1-5/16, now 0.45% +9/16 – UST trading like a third world nation!!! The high yield was 0.67%! Libor update: 0.240% 3 mos., 0.433%!!! 6 mos – falling again! Foreign bond yields all lover except Portugal: Germany 1.25% -3; UK 1.70% -2; France 1.80% -2, Italy 4.24% -6; Spain 4.65% -6; Portugal 6.01% +2; Greece 11.08% -3 vs 11.10% vs 11.05% vs 11.05% vs 11.06% vs 11.25% vs 11.43% vs 11.53% vs 11.94% vs 11.20% vs 11.94% vs 12.09% (recent range 10.58-12.57%!).  

Gold too had a ‘dead cat bounce’ (Paulson’s losses now estimated at $900 million!) following its worst decline since 1980 – coming of a record high then! The intraday low was $1321.50 – lowest since Sept. ‘10), before closing at $1387.40 +$26.30 That pales to the $205 loss the prior TWO sessions. Where is resistance? Dunno…a moving target. Look at the 40 day/50 day to see how disastrous this is: $1574-1591 and dropping! Overnight it is $1384.40 -$3.00! Crude was unchanged yesterday closing at $88.72 +.01, but not before putting in an intraday low of $86.20 – lowest since 12/6/12 –  resistance at the 40 day ($93.15) and the 50 day ($93.83)….but first the 200 day at $91.61!!! The high of $97.80 on 4/1 was highest since 2/15! day Overnight it is off again to $87.46 -$1.26. The range is now $86.06-$97.80 since Dec ‘12!!!!

Some random thoughts:

More signs of how bad we look to the rest of the world, but first, why pick on the bankers? Because as the Frontline’s, The Untouchables showed, no one cares about getting them. Instead, we blasted the homebuyers for being irresponsible, when the motto of Countrywide Financial was ‘fund it.’ That meant ‘if it breathes’ – fund it! Not only that but financials were doctored to make them acceptable…this of course implied ignoring credit scores. They also ‘steered’ minorities who would qualify for conforming loans into subprime. Why did they do these things? Commissions…and with the blessing of management! Note in Countrywide’s case, founder Angelo Mozillo was SELLING his shares while touting the stock…reminiscent of Ken Lay at Enron. But whereas Lay, Skilling, and other senior officers went to jail, Mozillo simply received a fine from the SEC that while big, was a pittance compared to his wealth and what he did to others!

Still, Jamie Dimon, the poster child for sound banking, and who admitted to a Senate panel that he erred (just as he was to do again last year with the London Whale!). But he is the outspoken leader of the financial lobby and tried to destroy Elizabeth Warren who has now come back to haunt him as a Senator and member of the Committee on Banking, Housing and Urban Affairs. If she can’t get the job done, nobody can. At the least it is going to be a huge uphill battle.

Don’t think that you are subsidizing the banks? Think again. All those mortgages being refied and underwritten are being sold to FNMA and FHLMC. Here’s an example: TB has refied twice in the past year…both loans were sold to FNMA after holding them less than two months. Why? Because the retain the servicing fee, 0.5%, and get rid of the liability. Do that seven times in a year and you earn as much on servicing as holding one of the mortgages. Do you hear anyone in Congress objecting? What happens when the Fed stops buying and rates rise? WE, the people, get screwed…royally…and we will still probably be stuck with another bank bailout unless Congress insists on more regulation. Highly doubtful.

Also, last night on PBS, a new documentary by Ken Burns on The Central Park Five was

aired. It is shocking and an unspeakable rush to judgment by the NYPD. Five young boys, all black, were browbeaten into confessing to the murder of a Central Park jogger in the 1980’s. This was a time of great racial unrest in NYC, and it got huge press. All gave confessions that not only had the facts wrong but the timeline was off…they couldn’t have done it as they were already picked up for something else. No matter.

Were these boys angels? No…they were typical inner city teens…particularly in NYC. Once again, Donald Trump rushed in and took out a full page ad…then when the real rapist/murderer was found…actually he was in prison and confessed since he knew one of the boys who was convicted. Eventually the sentence was vacated but New York’s finest in an internal investigation, exonerated the police officers who coerced the confessions in a total violation of their civil rights.

So after years in prison, they were released…no apology from the police or the prosecutor handling the case (now a wealthy lawyer who still stands by her original convictions), and they lost nearly a decade of their lives. To show how they turned out, all got GED’s in prison and some earned college degrees. Proof that juvenile delinquents don’t always turn out bad…even when treated as rapists in prison…the horror of which must have been unbearable…especially for naïve teens.

But the other sad point is the real rapist, raped and killed or beaten mercilessly, two more women….the one who died was pregnant, the other underwent years of rehab and surgeries. She went on to write a book on the crime…but had no recollection of the event, so had to trust what the police told her which was totally false. She only learned of this when the documentary was being filmed.

The commission investigating torture by the U.S. of alleged terrorists released a damning report yesterday. It shows that not only did we disregard the Geneva Convention which places our troops at more risk, we did in fact torture detainees including those who were simply in the wrong place at the wrong time. This blame extends to the top levels in the Bush administration and could result in international trials for war crimes…doubtful, but….either way their actions were shameful as shown in Zero Dark Thirty although the information did not in fact come from torture. The commission found zero instances where the torture produced any useful information. Nothing new on that…torture is cruel and inhumane and countless studies have shown people will say anything to get it to stop. Wouldn’t you? The useful way is to get to know them and establish trust so they slip.  Note too that they were critical of the Obama administration for continuing the secrecy. This despite promises to close Guantanamo Bay.

Lastly, it looks like the NRA is the winner as the gun control bill appears doomed. This despite the pleadings of the families of victims at Newtown. Well done you jackasses! Make them pay!

How about that? Disgusting actions by our government at all levels on banking regulation, criminal charges, torture, and gun control.

See why I am disgusted? Why aren’t you?

TB

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