From the Friars Club Encyclopedia of Jokes: “Einstein explained his theory to me every day, and on my arrival, I was fully convinced he understood it.” – Chaim Weizmann, former President of Israel about a transatlantic crossing with Albert Einstein.
Bloomberg Quote of the Day: “Think wrongly, if you please, but in all cases think for yourself.” – Doris Lessing…TB couldn’t have phrased it better! THINK!!!
Bloomberg Top Stories:
*European Stocks Advance With S&P Index Futures; Government Bonds, Yen Gain
*Corzine Sued by MF Global Trustee for Triggering Eighth Largest Bankruptcy – where in the hell is the federal government??? This is sick! Oh, forgot he was a Senator!
*Goldman Sachs Cuts Outlook for Commodities as It Exits Wager on Lower Gold
*Europe’s Economy Gauge Shrinks for 15th Month as China Manufacturing Slows
*Paris Hit by Property Freeze as Hollande Taxes Detering Buyers
*Lockheed Beats Earnings Estimates While Cautioning on Forecast Amid Cuts
*U.S. House Prices Rose 7.1% in Year Through February Amid Tight Inventory –easing?
*Japanese Dividend Futures Diverge by Record From Nikkei 225 Rally
*Boston Bombing Suspect is Said to Tell Investigators Brothers Acted Alone
After six straight chaotic sessions which were up, up, down, up, down, down – finally a ‘semi-normal’ session that ended on a positive note, but the details did not impress. To wit: volume was WEAK, A/D’s and breadth were positive but so-so, but the VIX continued to slide.
NYSE Volume was a weak 2.97B shares – weakest in 11 sessions vs a 4B shares average last week – the two lowest, 3.63B and3.56B coming on the two ‘up’ sessions. REAL NYSE Volume was also a WEAK 620M shares following SIX 700M+ share days ranging from 975M last Monday (Worst selloff) to 743M Tuesday (rally) Monday 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.
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 +03% vs +1.5% vs -0.3% vs -1.5% vs +2.2% vs -3.8%!!! Russell 2000 +1.1% vs +1.2% vs -0.6% vs -2% vs +1.8% vs -3.8%!!!; Dow Utilities FLAT vs +1.4% vs +0.3% vs -0.6% vs +1.2% vs -1.3%! The S&P 500 rose 0.5% vs +0.9% vs -0.7% vs -1.4% vs +1.4% vs -2.3%.
*NYSE Volume plunged to a weak 2.97B shares vs 3.56B shares Friday on the 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 also plunged to 620M shares vs 905M 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!
- new 52 week highs have ranged from 121-709, were stable at 237 vs 228 vs 106 vs 100 vs 155 vs 154. New lows rose to 96 vs 82 vs 159 vs 237 vs 120 vs 197. See how much easier it is to get new lows after a nice drop?
- Advance/Declines were slightly positive BUT: +1.4x vs +2.6x vs -1.2x vs -3.5x vs +4.4x vs -7.1x on NYSE and +1.1x vs +2.2x vs -1.6x vs -4.2x vs +3.5x vs -8.1x on Nasdaq. Breadth was similar: +1.6x vs +2.3x vs -1.3x vs -10.5x!!! vs +6.4x vs -7.2x vs -2.2x on NYSE and +2.5x vs +2.3x vs -3x! vs -5.2x vs +6.2x vs -12.8x!!! vs -1.4x vs -1.2x on Nasdaq.
- The Dow was up just 0.1% for a 2nd day vs -0.6% vs -0.9% vs +1.1% vs -1.8%. Dow Transports +0.3% vs +1.5% vs -0.1% vs -1.5% vs +2.2% vs 3.8%!!! they never confirmed the rally! Dow Utilities FLAT vs +1.4%!!! vs +0.3% vs +1.2% vs -1.3%. Nasdaq Composite +0.9% vs +1.3% vs -1.2% vs -1.4% vs +1.5% vs -2.4% while the Nasdaq 100 rose +1.1% (MSFT and APPL combined for 14 points of the 30 point gain with 3:1 advancing) vs +1.4% vs -1.4% vs -1.8% vs +1.5% vs -2%. Dow 30 +0.1% vs +0.1% vs -0.6% vs -0.9% vs +1.1% vs -1.8%!!! NYSE Financials rose 0.3%% vs +1.3% vs -0.8% vs -1.8%! BofA only ‘most active’ financial +0.5% to 11.72 vs +1.8% vs -2.2%.
- Volatility (S&P VIX), seems settle down after those highs last week closing at 14.39 -.58 but it is the beginning of a new options month, right? The range last week was 12.06 (multi year low) to 18.20, but is now back below the 40/50 day (13.71/13.81) and the 200 day at 15.40…ytd the range is 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.43!!!
European equities stronger for the 6th time in 11 sessions, Asia weaker after two up days: UK +1.2% vs +0.5% vs +0.3% vs +0.4% vs +0.7% vs -0.2% vs -1.1%!!!; France +2.4%!!! vs +0.3% vs +0.9% vs +0.8% vs -1.6% vs flat vs -1%; Germany +1.4% vs +0.7% vs -0.1% vs +0.4% vs -1.8% vs flat vs -1%!; Japan -0.3% vs +1.9%! vs +0.7% vs -1.2% vs +1.2% vs -0.4% vs -1.6%; Hang Seng -1.1%!!! vs +0.1% vs +2.3% vs -0.3% vs -0.5% vs -0.5% vs -1.4%; Korea -0.4% vs +1%! vs +0.4% vs -1.2% vs +0.1% vs +0.1% vs -0.2% vs -1.3%; India +0.1% vs +0.8% vs closed vs +1.5% vs -0.1% vs +2.1%. U.S. stock futures higher near top of session range: DOW +54; SPX +4.30; NDQ +14.25.
Bonds won’t give up the ghost and are stronger overnight including TIPS: 10 yr Treasury 1.67% +3/16 (recent range now 2.06% to 1.68%), and the 30 yr’s 3.26% to 2.86%, 2.86% +1/2. The long TIP continues to recoup its losses and is now 0.44% +3/8 – after setting a new (record?) low of 0.36% on 4/5, before backing off to 0.52%! The recent high yield was 0.67% on 3/11! Libor update: 0.276% 3 mos., 0.431%!!! 6 mos. Foreign bond yields lower across the board: Germany 1.21% -2; UK 1.64% -1; France 1.70% -4, Italy 3.96% -9!!!; Spain 4.29% -19!!!; Portugal 5.67% -11; Greece 11.15% -8 vs 11.22% (recent range 10.58%-12.57%!). Japan 0.58% -2.
Gold rallied to $1438.80 (highest since 4/12) before closing ABOVE $1400 but remins in its worst decline since 1980 – also coming off a record high. Tuesday’s intraday low of $1321.50 – was lowest since Sept. ’10. It closed at $1421.20 +$25.60!!!The loss over the last week is now back to $68. Monday’s $149 loss to a 52 week low of $1361.10 was disastrous. Resistance remains way above at the 40 day/50 day: $1556-1569 – dropping! Overnight it is $1421.70 +.50 on a narrow insides session. Crude closed higher at $88.76 +.75, with an intraday high of $88.12, BUT resistance still lies at the now converging 200 day ($91.64) 40 day ($92.50) and the 50 day ($93.15). The high of $97.80 on 4/1 was highest since 2/15! Overnight it is $88.52 -.67. 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:
Readers know of my respect for Simon Johnson, former chief economist for the World Bank, and James Kwak, his law professor partner in The Baseline Scenario. They have done a great job exploding the myth of TBTF and have been outspoken critics of Congress’s regulatory efforts (sic).
They are capitalists but have a clear understanding of what capitalism really means and it is not what is practiced in the U.S. today! What we have is an oligarchy of major corporations (mainly financial) and the wealthiest individuals (many of whom made their money in financial services and enjoy incredible tax advantages).
With the average length of time of stock ownership declining from FIVE years in the 1970’s it has decreased – at an increasing rate – to just six months…one year for pension funds! For this reason one might think that shareholder activism is a bad thing, but what has happened is that the boards (stewards to the shareholders) have taken advantage of this situation and do as they please. When pressured they will put a shareholder initiative on the proxy but it is ‘advisory only’ most of the time and thus frequently ignored.
Furthermore, rather than act as stewards, the board acts as an extension of the CEO, granting him/her enormous powers, along with outrageous salaries and benefits – mostly in the form of stock options. Graef Crystal, a friend and former compensation analyst, has written extensively on these overpaid CEO’s whose only downside is to collect on their golden parachutes if and when they fail. Then along come their buddies and get them in at some other company. To fail is deemed experience…and one always learns from that don’t they? …or do they go right on making the same mistakes since there is no downside to their stupidity…or arrogance.
Kwak wrote of shareholder activism, which he teaches in his law classes, that conventional wisdom is that the board is better suited to making corporate decisions rather than the shareholders. That if a stock is trading at $20 and an offer is received at $30, the board may reject is as they know the ‘true value’ of their strategies. He dismisses this as do I. He writes:
But this myth will no doubt persist. Why? One reason is that, in academia (legal academia, at least), there is a market for entirely theoretical models that are devoid of any empirical support. More important, the myth of board insulation benefits corporations’ current directors and executives by freeing them to pursue their own interests.
Among the major supporters of board insulation are the U.S. Chamber of Commerce and the Business Roundtable. These organizations often hold themselves out as defenders of capitalism and free markets. But on this issue, it’s clear that they are not taking the side of corporations themselves or their shareholders. Instead, they are on the side of the select few who run those corporations. The ability of that privileged elite to mobilize corporate resources to protect themselves from their own shareholders is what ensures that the myth will persist.
How about that? Two bastions of conservatism and free market capitalism agree that management knows best. But do you believe them?
Today, Kwak wrote on a more pro-capitalist (not that his other view wasn’t, just that we have forgotten what capitalism is in this country), view that free markets should determine where capital should be deployed, or at least participate and take risk when governments deploy their (our) funds into speculative ventures. Here is a particularly galling case of government intervention and stupidity based on an article by Matt Bai:
…Curt Shilling’s gaming company, 38 Studios, (which) managed to secure a $75 million loan from the State of Rhode Island and then flame out into bankruptcy is a reasonably fun read. Bai’s main emphasis, which I don’t disagree with, is on Rhode Island’s Economic Development Corporation, which managed to invest all of its capital in a single company in a risky industry that, apparently, had failed to secure funding from any of the VC firms in the Boston area. Overall, this seems like another example of why government agencies shouldn’t be trying to act like lead investors.
This does not mean that they shouldn’t invest in things like energy and genetics but that the private sector must have ‘skin in the game’ when the amount required is incredibly high. Also, they should adhere to sound logic of diversification whereas Rhode Island bet all their money on one horse which came up lame.
So you see, private sector or public, there are no heroes…only opportunists and they are destroying us…in many cases by working together with the private sector supplying the funds necessary to get the incumbents re-elected – deserving or not. You decide!
Have a great day!