4/22/13…they have so many ways to get you…

From the Friars Club Encyclopedia of Jokes: “If I look confused it is because I’m Thinking.” – Samuel Goldwyn, and…

“If you make people think they’re thinking, they’ll love you. If you really make them think, they’ll hate you. – Don Marquis, and…

“What’s the difference between apathy and ignorance? I don’t know and I don’t care!”

This week’s economic calendar is fairly light. The highlight of the week will be the GDP – Q1 advance (Friday). We will get March Existing Home Sales (Monday), March New Home Sales and April Richmond Fed Manufacturing Index (Tuesday), March Durable Goods Order (Wednesday) and the April Consumer Sentiment Final (Friday). Courtesy of Economic Advisory Service

Bloomberg Top Stories:

*Stocks in Europe Rise as Italian Note Yields Drop; Yen Weakens, Gold Gains

*Dealers See No End to Fed QE in 2013 as Hatzius Forecasts 2016 Rate Rise

*Currency Trading Rebound Seen Buoying Banks Exploiting Diverging Economies

*Apollo-to-Goldman Embrace of Life Insurers Spurs State Regulator’s Concern

*Spring Swoon Sequel No reason for Economic Growth Scare in U.S. This Year – oh???

*Caterpillar Lowers Outlook as Profit Misses Estimates on Mining Slowdown – !!!

*Halliburton Reports First-Quarter Loss on Legal Costs From Gulf Oil Spill- aw Cheney

*Mullen Gets Goldman Betting on Housing After Subprime Big Short

*Japan Inc. Hesitates to Invest as Stock Market Rallies With Plummeting Yen – !!!

*Boston Hero Looked Guy With Bomb in Eye Before Awakening to Let FBI Know

*Boston Marathon Bombing Motive Sought for Brothers Who Differed in Style

*Chechen Conflict Spawned Terrorism as Islamic Separatists Embraced Jihad

*Older Tsarnaev Wanted to Stay in Russia Last Year Reading Koran, Aunt Says

 

FIVE straight sessions – up, down, up, down, down – as options expiry went by with a whimper…perhaps not surprising in light of the volatility all week which allowed all the players to square positions ahead of it. Only a fool would have been exposed on Friday! Best performer though was Dow Transports, up 1.5% while the Dow Industrials rose just 0.1%??? Next came Dow Utilities +1.4%!!! True the two Nasdaq indices , Russell 2000 and NYSE Financials all came in at +1.2%-1.4% but the S&P 500 was the weak sister gaining just 0.9%…telling us something? AAPL put in another new low of $385.10 and closed at $390.13. The loss from the 9/21/12 high of $705.07 is now 45% ($314!)/ It also impacted the Nasdaq 100 which gained 38.5 taking away 1.2 points but with 9 stocks adding over 1 index point and about 4:1 advancing. It was a horrible weak though with volume LOWER (note on an advance again!), at 3.5B shares, weak for an expiry, vs 3.9B vs 4.21B – both DOWN days. Tuesday’s now confirmed ‘dead cat bounce’ was on just 3.63B shares! Still think the bulls are on borrowed time…or has that time passed? Hmm.

Let’s look at the activity of the week:

NYSE Volume averaged 4.0B shares – the two lowest, 3.63B and3.56B coming on the two ‘up’ sessions. REAL NYSE Volume ranged from 743M on Tuesday’s advance to 975M Monday on that hellacious selloff…with Friday’s options expiry coming in at a solid but not great 914M shares. The average for the week was  859M shares vs the 12-month average of 735M shares. Almost the entire move was in the first two hours with 175m shares at the open and about 230M on the close…the rest was tepid as usual.

A/D’s and Breadth were both positive but paled in comparison to the declines. The VIX declined for only the second time in five sessions to 14.97 vs 17.56 (intraday high of 18.20! highest since 2/26) vs 16.51 (17.27). Incredible moves!!!

*Dow Transports +1.5% vs -0.3% vs -1.5% vs +2.2% vs -3.8%!!! Russell 2000 +1.2% vs -0.6% vs -2% vs +1.8% vs -3.8%!!!; Dow Utilities +1.4% vs +0.3% vs -0.6% vs +1.2% vs -1.3% – safest bet! The S&P 500 +0.9% vs -0.7% vs -1.4% vs +1.4% vs -2.3%. Nasdaq Composite +1.3% vs -1.2% vs -1.4% vs +1.5% vs -2.4% while the Nasdaq 100 rose 1.4% vs -1.4% vs -1.8% vs +1.5% vs -2%. Dow 30  +0.1%??? vs -0.6% vs -0.9% vs  +1.1% vs -1.8%!!! NYSE Financials rose 1.3% vs  -0.8% vs -1.8%!

*NYSE Volume slipped again to 3.56B share (but on expiry???) vs 3.9B vs 4.21B vs 3.63B vs 4.64B (bested only by the 4.93B 12-month high on the last options expiry on 3/15!). REAL Volume however ROSE to 905M shares vs 798M vs 866M vs 723M vs 976M – note that the weakest day was the ‘bounce’ and the average for the week was 859M vs the average of the past 12 months of just 735M 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! There have been just fourteen 800+M shares in 2013 – almost exclusively on DOWN days!

  1. new 52 week highs have ranged from 121-709, doubled to 228 from a weak 106 vs 100 vs 155 vs 154. New lows were halved to 82 vs 159 vs 237 vs 120 vs 197. It is, however, becoming easier to get new lows!!!…finally!!!
  2. Advance/Declines were positive BUT:+2.6x vs -1.2x vs -3.5x vs +4.4x vs -7.1x on NYSE and +2.2x vs -1.6x vs -4.2x vs +3.5x vs -8.1x on Nasdaq. Breadth was similar: +2.3x vs -1.3x vs -10.5x!!! vs +6.4x vs -7.2x vs -2.2x on NYSE and +2.3x vs -3x! vs -5.2x vs +6.2x vs -12.8x!!! vs -1.4x vs -1.2x on Nasdaq.
  3. The Dow was up just 0.1%??? vs -0.6% vs -0.9% vs +1.1% vs -1.8%. Dow Transports +1.5% vs -0.1% vs -1.5% vs +2.2% vs 3.8%!!! they never confirmed the rally!  Dow Utilities +1.4%!!! vs +0.3% vs +1.2% vs -1.3%…still best of the lot! The Nasdaq Composite +1.3% vs -1.2% vs -1.4% vs +1.5% vs -2.3%, and the NDQ 100 was +1.4% vs -1.4% vs –1.8% vs +1.5% vs -2%. The Russell 2000 rose 1.2% vs -0.6% vs -2%! vs +1.8% vs -3.8%!!! (Brokers +1.2% vs -1.4% vs -1.6%! KBW Banks +1.5% vs -0.9% vs -2%!, Nasdaq Banks +1.4% vs -0.3% vs -1.5%! BofA most active +1.8% vs -2.2% but still closing at just $11.65 from $11.44 lowest close since 3/5/13, with a low of $11.23. C -0.1% vs -1.4% vs -2%; WFC +1.2% vs -0.8% vs -1.3%; USB +0.7% vs -0.3% vs -1%; GS -0.6%! vs -1.4% vs -2.4%; MS +1.3% vs -5.4%!!! vs -1.7%; UBS +4.1%??? vs -2.6% vs -1%!
  4. Volatility (S&P VIX), continues to be…well…volatile…not surprising on an options expiry especially after such a violent week…almost beyond comprehension falling to 14.97 -2.59 with a range of 14.87 to 16.98 vs 17.56 for the highest close since 12/28, and a new intraday high of 18.20, vs 16.51 (high 18) vs 13.96 vs 17.28 (high and close). The range is 12.06 (multi year low) to 18.20, and is way above the 40/50 day (13.53/13.49) and the 200 day at 15.48…ytd, with a range of 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.45!!! Note it is back below the 200 day: 15.41 – watch closely!

European equities stronger for the 5th time in 10 sessions, Asia stronger for a second day: UK +0.5% vs +0.3% vs +0.4% vs +0.7% vs -0.2% vs -1.1%!!!; France +0.3% vs +0.9% vs +0.8% vs -1.6% vs flat vs -1%!; Germany +0.7% vs -0.1% vs +0.4% vs -1.8% vs flat vs -1%!; Japan +1.9%! vs +0.7% vs -1.2% vs +1.2% vs -0.4% vs -1.6%!; Hang Seng +0.1% vs +2.3% vs -0.3% vs -0.5% vs -0.5% vs -1.4%!; Korea +1%!!! vs +0.4% vs -1.2% vs +0.1% vs +0.1% vs -0.2% vs -1.3%!!!; India +0.8% vs closed vs +1.5% vs -0.1% vs +2.1%!!! vs +0.6% vs -1.6%. U.S. stock futures up slightly in a narrow trading range: DOW +40; SPX +13.64; NDQ +11.

Bonds closed WEAKER on Friday – EXCEPT the suffering TIPS which are also higher over night while the rest are about even: 10 yr Treasury 1.70% +1/16 (recent range now 2.06% to 1.68%), and the 30 yr’s 3.26% to 2.86%, 2.88% +1/16. The long TIP closed higher on Friday by 9/16 to 0.48% and is now 0.46% +9/16 weak – after setting a new (record?) low of 0.36% on 4/5, before backing off to 0.52%  – still out of sync! The high yield was 0.67%! Libor update: 0.275% 3 mos., 0.433%!!! 6 mos. Foreign bond yields all lower – except Greece and Japan: Germany 1.23% -2; UK 1.65% -1; France 1.74% -5, Italy 4.07% -14; Spain 4.51% -9; Portugal 5.79% -18; Greece 11.22% +10 vs 11.16% vs 11.18% vs 11.08% 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%!). Japan 0.60% +3.  

Gold rallied to $1426.70 before giving most of the gains back and closing only up slightly and below $1400 but took out that ‘double top’ at $1402 as its worst decline since 1980 – coming off a record high then – continues. Tuesday’s intraday low of $1321.50 – was lowest since Sept. ’10. It closed at $1395.60 +$3.10 The loss over the last week is now back to $94 while Monday’s $149 loss to a 52 week low of $1361.10 was the most disastrous. Where is resistance? Dunno…a moving target. Look at the 40 day/50 day to see how bad this is: $1560-1574! Overnight, however, it is $1426.90 +$31.30!!! with a session high of $1438.80 – high since 4/12. Crude closed higher at $88.01 +.28, with an intraday high of $88.79, BUT  resistance lies at the now converging 200 day ($91.63) 40 day ($92.69) and the 50 day ($93.29). The high of $97.80 on 4/1 was highest since 2/15! Overnight it is $88.71 +.70, with a session high of $89.13. Thursday’s session low of $85.61 obliterated Tuesday’s $86.20!. The range is now $85.61-$97.80 since June 29, 2012!!!!

 

Some random thoughts:

You might think that in this volatile market, an IPO wouldn’t fare well…you would be wrong, especially if Goldman Sachs, the Vampire Squid, is bringing it!

How would you like to invest in Sea World? Not TB! Ah, but Goldman Sachs took the entertainer public on Friday with an IPO (SEAS) priced at $27 ( 2.7 billion!). It immediately surged to $34.67 (+28.4%) before closing at $33.52 (still up 24%!). It now has a market cap of $3.1 Billion! Will this be just like the Blackstone and Fortress IPO’s? Possibly.

Speaking of Blackstone, it still holds 67.55% of the stock …should this company be valued at over $3 billion? Looks like an obvious short to me! Proceeds were used to pay Blackstone $47 million for terminating a 2009 advisory agreement. This on top of a $500 million dividend from the company and on top of a $110 million dividend in September 2011. TB found all this out (although it was readily available in the registration statement which said: “we are highly leveraged” with $1.8 billion in long-term debt!!!).

In just three years, Blackstone has more than doubled its initial investment and still holds controlling interest! Is this a great country or what? Hmmm, would Buffett buy it? Not on your life! Ah, but they have a kicker…a 3% dividend…isn’t that special? TB predicts it will go the way of Blackstone and Fortress when they graciously allowed investors to participate in their gains…sort of! (Thanks to Al Lewis, writing in The Wall Street Journal Sunday Edition…which TB strongly suggests you read.)

Once again, Goldamn shows how it is willing to prostitute itself at the expense if its clients (buyers) for its own gains and those of the sellers…can you blame them from wanting to be in bed with Blackstone?

Oh, and who runs Blackstone Group (not to be confused with BlackRock which is not a sleazy operation)? Stephen A. Schwartzman  – you may have heard he just gave $100 million of his own money to a Chinese University for scholarships while pledging to raise $200 million more! What a guy! Oh, and he also said a few years ago that if the ‘carried interest’ provision was eliminated it would destroy private equity…what a jerk!

To recap Blackstone Group LB went public on 6/22/07 at $31, opened at $37, hit a high of $37 before closing at $35.05! That was the only day you could have gotten out with a profit before it began a downward plunge to $3.55 on 2/27/09 (only last part due to the financial crisis as it was $15.34 on 10/3/08!!! It is currently $20.27

This followed the IPO of Fortress Investment Group (FIG) on 2/08/07 at $18.50 a share (and a secondary offering at $5 on 5/14/09). On the first day of trading it opened at $35!!!, surged to $37, before falling to $30.30 and closed at $31. It too plunged with just two minor bounces before the last time you could get out without a loss IF you were allotted shares of the IPO, on 8/10/07. (Note that it rallied fro $24.25 to $34.03 just preceding the BX IPO…anything suspicious in that? Round up the usual suspects whose names follow! It then fell to $0.77 on 12/26/08 in the crisis but was at $10 just before!!!

Since the secondary offering on 5/14/09 – after surging to $8.30 on 5/6/09, coincidentally (sic) just before the offering at $5 – it closed one day later at $4.25!!! and never got higher than $6.97 on 3/1/11 (it is now $6.03 after reaching a ‘lofty’ $6.57 on 4/11/13.

Who are the top holders of these sterling stocks? For FIG, they are Nomura (25.6%!!!), Wellington, Adam Levinson (who has a fund and is with Fortress), MS, CS, Citi, and GS. Of these the ones in bold were the original underwriters plus BofA, Lehman and ML! In the secondary, Citi, JPM (still owns 1.5%), ML, NOM, Can you spell underwater?

BX is currently 31.6% owned by: MS, FMR, Waddell & Reed, Credit Suisse, Citi, GS, and Deutsche Bank. Of these the ones in bold were the original underwriters plus LEH and ML! Can you spell underwater?  Question: is Goldamn trying to get in tight with Blackstone since the missed this IPO?

This speaks volumes about investment firms and confirms why the ‘carried interest’ trade must go along with better regulation by the SEC…or at least ‘some.’  Oh, and while it is clearly stated in the IPO, FIG and BX owners are part of limited partnerships, controlled by the management who is paid high fees for ‘managing’ (sic) the LP’s.

Again…is this a great country or what? Nothing is better than OPM (other people’s money) and that allows people like Schwartzman to make those nice gifts of scholarships.

 

Have a nice day and don’t take any wooden nickels…or stock tips! By the way, stocks are resuming their decline now that options expiry is behind us…for another month!

TB

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