4/24/13…they have so many ways to hurt your retirement (FINAL)

Bloomberg Top Stories:

*U.S. Durable Goods Drop the Most since August as Plane Demand Cools

*ECB Seen Likely to Cut Benchmark Interest Rate Next Week as Economy Slumps

*Copper Rebounds From Bear Market as Europe Stocks Gain; S&P 500 Fluctuates

*Apple’s $145 Billion in Cash Fails to Merit the Highest AAA Credit Rating

*Ford Posts Better-Than-Estimated Net as Fusion boosts Record No. America Sales

*Citigroup Says Debt Beats Peers in Advance of ‘Bail-In’ Rule – don’t believe it!

Just when you thought nothing new could happen to the stock market – one week following the Boston Marathon bombing, another terror emerged: a rumor, but not just that…rumor squared or rumor cubed??? Welcome to the age of tech and as the Monday Night Football team used to say ‘they have so many ways to get you.’

At 10:08am EDT, the S&P dove on a rumor that the White House had been attacked and Obama injured (what is interesting is that the market went DOWN on this when Wall Street is not a fan of the guy), when a hacker broke into the AP Twitter account and post it. The S&P plunged 15 points in two minutes and by 10:12am it was back to the same level…note all indices had peaked with nice gains about a half hour earlier (hmmm, since it was just a blip, could a high freak have been the culprit? Perhaps, SEC is investigating trades to find out…still think these guys provide real liquidity?…when we need it???). So, in four minutes it was all over and note the S&P closed up 16. Here are some others: Dow -144, closed +152; Composite -29, closed +36; NDQ 100 -28, closed +25. Talk about sick and sick people…thank God these morons don’t have access to bombs…or do they??? So this created the 7th volatile day in 8 sessions of insanity where valuation and fundamentals mean nothing…absolutely nothing. Wake up SEC and fix it…or forgot, you are already ‘fixed.’

So let’s see what else happened lately:

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 rose but to just 3.55B shares from a weak 2.97B vs 3.56B 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 rose slightly to a still weak 684M shares (with 37 million trading during the 4 minute ‘blip’) vs 620M shares vs 905M vs 798M vs 866M vs 723M vs 976M – the average last 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 – just THREE up, 11 down and on trades of less than that 68 were up and just 18 down…do you see why volume matters???

  1. new 52 week highs have ranged from 121-709, surged to 400 vs 237 vs 228 vs 106 vs 100 vs 155 vs 154. New lows were halved to 43 vs 96 vs 82 vs 159 vs 237 vs 120 vs 197.
  2. Advance/Declines were positive: +4x vs +1.4x vs +2.6x vs -1.2x vs -3.5x vs +4.4x vs -7.1x on NYSE and +3.4x vs +1.1x vs +2.2x vs -1.6x vs -4.2x vs +3.5x vs -8.1x on Nasdaq. Breadth was similar: +3.9x vs +1.6x vs +2.3x vs -1.3x vs -10.5x!!! vs +6.4x vs -7.2x vs -2.2x on NYSE and +3x vs +2.5x vs +2.3x vs -3x! vs -5.2x vs +6.2x vs -12.8x!!! vs -1.4x vs -1.2x on Nasdaq.
  3. The Dow rose 1.1% vs +0.1% for two days vs -0.6% vs -0.9% vs +1.1% vs -1.8%. Dow Transports +0.3%!!! vs +0.3% vs +1.5% vs -0.1% vs -1.5% vs +2.2% vs 3.8%!!! they never confirmed the rally!  Dow Utilities +0.4% vs 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 1.1% for a second day (APPL added 5 points of the 25 point gain with 5 others adding 1 point or more and 4:1 advancing) vs +1.4% vs -1.4% vs -1.8% vs +1.5% vs -2%. NYSE Financials rose 1.5% vs +0.3% vs +1.3% vs  -0.8% vs -1.8%! BofA only ‘most active’ financial +3%!!1 to close at $12.07 vs +0.5% to 11.72 vs +1.8% vs -2.2%.
  4. Volatility (S&P VIX) plunged 91 points to close at 13.48 -.91 and just 2 points above the low, with a high of 14.87 on the stock plunge and close is lowest since 4/12 – does this seem sensible…nearing time to put those limit/stop orders in again??? 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!!!

Global equities stronger, Europe for the 7th time in 12 sessions: UK +0.2% vs +1.2% vs +0.5% vs +0.3% vs +0.4% vs +0.7% vs -0.2% vs -1.1%!!!; France +0.7% vs +2.4%!!! vs +0.3% vs +0.9% vs +0.8% vs -1.6% vs flat vs -1%; Germany +0.5% vs +1.4% vs +0.7% vs -0.1% vs +0.4% vs -1.8% vs flat vs -1%!; Japan +2.3%!!! vs -0.3% vs +1.9%! vs +0.7% vs -1.2% vs +1.2% vs -0.4% vs -1.6%; Hang Seng +1.7%!!! vs -1.1%!!! vs +0.1% vs +2.3% vs -0.3% vs -0.5% vs -0.5% vs -1.4%; Korea +0.9% vs -0.4% vs +1%! vs +0.4% vs -1.2% vs +0.1% vs +0.1% vs -0.2% vs -1.3%; India closed vs +0.1% vs +0.8% vs closed vs +1.5% vs -0.1% vs +2.1%. U.S. stock futures higher at mid range in another narrow trading range: DOW +34; SPX +3.40; NDQ +7.25. Following Durable Goods, stocks falling after a positive opening: Dow -34; SPX flat; Nasdaq Composite -14; NDQ 100 -12

Bonds closed weaker but still at lower end of trading range of late and were trading little changed overnight but are rallying now following weak Durable Goods Orders: 10 yr Treasury 1.69% 1/8 (recent range now 2.06% to 1.68%), and the 30 yr’s 3.26% to 2.86%, 2.89% +5/16. The long TIP is now 0.45% +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 generally lower but gave up ground late yesterday: Germany 1.25% -1; UK 1.74% +1; France 1.70% -4, Italy 3.98% +5; Spain 4.28% +2; Portugal 5.68% +3; Greece 11.05% +1 vs 11.08 vs 11.22% (recent range 10.58%-12.57%!). Japan 0.58% +1.  

Gold had an inside day yesterday and didn’t approach Monday’s high of $1438.80 (highest since 4/12). Last Tuesday’s intraday low of $1321.50 – was lowest since Sept. ’10. It closed at $1408.80 -$12.40!The loss over the last week is now back to $80. A week ago Monday’s $149 loss to a 52 week low of $1361.10 was disastrous. Resistance remains way above at the 40 day/50 day: $1552-1564 – still dropping! Overnight it is $1427.00 +$18.20. Crude closed higher at $89.18 +.42, with an intraday high of $89.43, BUT  resistance still lies at the now converging 200 day ($91.67), 40 day ($92.41) and the 50 day ($93.02), all declining. The high of $97.80 on 4/1 was highest since 2/15! Overnight it is $89.88 +.70. 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 how disgusted TB is with the actions of the financial services industry, especially with their lobbying efforts which have successfully kept Congress from enacting any real reform. He is also disappointed in friends in the industry (who had no part in their shameful actions for the benefit of perhaps 5% of those involved, including one who lost even his severance when Lehman Brothers collapsed). Their comment has gone from the people were foolish to take out loans they could not afford (most of the foreclosure involved subprime loans with explosive resets – and many were forced upon minorities who could have qualified for conforming loans, while their was no due diligence on ‘liar loans’ and often the lenders ‘doctored’ the financials to make them look better as happened to a former colleague who protested to Citi and got it corrected…and she got the loan at the same rate). If I apply for a million dollar loan but don’t have the assets and it is rejected, no harm no foul, but if you, as the lender grant the loan knowing that the information is false and misleading, it is I who should be held responsible…along with the borrower!

Much of the focus to date has been on the mortgages which due to demand from Wall Street – and some cajoling for more loans with higher rates and thus less quality – who immediately packaged and sold the loans to unsuspecting investors thanks to the blessings of S&P and Moody’s who worked with the default models provided by Wall Street and allowed a loan to be put in a pool and if rejected could be put in one more time. Even a novice at sampling knows that the odds of this loan being kicked back three times are infinitesimal!

Despite Enron, which gave birth do Sarbanes-Oxley and which has never been applied to anyone since inception in 2002 – can you imagine that in 11 years not one CEO has been charged even in the biggest financial debacle in global history? Furthermore, while over 1,000 S&L executives went to jail, not one banker has…nor even been brought to trial. For an incredible story on this see:  Frontline, The Untouchables Prior to this the documentary Inside Job was the best resource on the crisis IMHO.

That story was back in January, but last night they addressed another problem created by corporate America and, once again, the financial services industry. Here is the link: Frontline: The Retirement Gamble

While not mentioned specifically, the issue arose during Reagan’s first term. A smart thanks to the efforts of tax consultant Ted Benna, while researching the IRS code found that an obscure rule made it possible to extend the newly formed IRA’s (1974) to 401(K)’s, While the 401(k) was intended to help all workers, it was the senior management that benefited the most (TB’s old company First Interstate Bancorp provided matching grants on sizable donations which prompted an old friend and Executive V.P. C. Paul Hulten to cry foul. He was overruled and once again the rich got richer). How nice that this dovetailed so well into supply-side economics…and you know where the trickle-down is, right? Hint: it’s on you!

This documentary is chock-full of experts (like John Bogle), and pseudo experts (like the heads of retirement at JPMorganChase and a woman from another firm. While those exposing the absurd fees (the average 401(k) holder will lose $155,000 over his/her lifetime to FEES…this is especially true with company controlled plans which generously reward the fund managers who in turn collect high fees from mutual funds etc in the plans. But the best part of the documentary is to see these highly compensated Wall Street execs, who are usually very smooth talkers, stumble on two questions:

*Don’t high fees paid to advisors reduce the return? (Fees paid out can run from 1-5% and that is a huge dent in your return…further more they don’t share in your losses. Based on size of your account you shouldn’t pay over 1% and if it is more than $1 million over 0.60% – 60 basis points…don’t forget if there are funds involved there are also hidden fees which can be huge (also use one, or more of the handy retirement calculators on line…many are referred to in the documentary).

*Since most Financial Advisors are under the control of their firm, wouldn’t it be better to have your investments with someone who acts as a fiduciary, placing the clients interests first? The appalling answer by the guy from JPM, “sometimes.”

You owe it to yourself and if you have children who are beginning college or entering the workforce, to watch this one hour presentation. Then, if you disagree, write TB and complain. But you decide, as TB often says, “it’s your money” – AND your retirement!!! Wait until you see how our bought-and-paid-for Congress handled the issue of regulation!

Have a great day!

TB

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