5/30/13…of the bankers, by the bankers, for the bankers

From the Friar’s Club Encyclopedia of Jokes: “You know what bugs me? People who smoke cigars in restaurants. That’s why I always carry a water pistol filled with gasoline.” – Paula Provenza

Bloomberg Quote of the Day: “Always remember that the future comes one day at a time.” – Dean Acheson

Bloomberg Top Stories:

*Economy in U.S. Grew at 2.4% Rate, Less Than First Estimated by Economist

*First-Time jobless Claims in U.S. Climb as Holiday Prevents Complete Count

*U.S. Stock-Index Futures Remain Higher After GDP, Jobless Claims Reports

*European Economic Confidence Climbs Amid Signs Record Recession is Easing – this was not…nor was this an economic recession…it was a FINANCIAL CRISIS – different!

*Blankfein Tops CEO Pay With $26 Million in Data Showing He’s OVERPAID!!!

*EMC Increases Share-Buyback Program by $5 Billion While Starting Dividend

*China Failure Stoking Growth With $1 Trillion Credit Seen as Warning to Li

*Facebook Posts Help Credit Bureaus Evaluate Users’ Financial Lives

*Assad Says Russian Missile Order Partly Filled While Analysts Are Skeptical

Another ‘gotcha’ day…back to back for bonds! Have the high freaks taken over the bond market too? …is mortgage hedging the problem?…or both? In 41 years I have never seen this kind of volatility in bonds…consider: On Tuesday, nearly a 1-1/2 point loss in the 10 year treasury, 2-3/4 on the 30 year, while the 30 year TIP lost nearly THREE points! Worse, all of these broke thru the prior support levels and that cannot be a good thing!

Yesterday, bonds rallied on equity weakness: 10’s 2.12% +7/16; 30’s 3.26% +1-1/16; 30 yr TIP 0.88% up just 3/8! Obviously no fear of inflation… Still it was clearly no more than a ‘dead cat bounce’ most likely due to short covering. No matter, even with a bond rally Utilities were slammed yet again falling 1.5% for worst performer!

Meanwhile, stocks declined a day after a rally that left Transports behind (flat). Dow Utilities lost another 1.4%!!! Since peaking on April 30th Utilities have now fallen 9.9%!!! They are now at the lowest level since March 1st! Anything that produces ‘income’ is poison: at least for now. Stocks? You call ‘em.

So let’s see what else happened:

* Dow 30 -0.7%, or 106 points from a loss of 181 at the session low, vs +0.7% vs +0.1% vs –0.1% vs –0.5%; Dow Transports -1.1%! vs flat vs -0.5% vs +0.2% vs -1.6%!!!; Russell 2000 -1%! vs +1.3% vs -0.1% vs +0.2% vs -1.7%!!!; Dow Utilities -1.5%!!! vs -1.4%!!! vs -1.1%!!! vs -0.6%! vs -1.6%!!!; S&P 500 -0.7% vs +0.6% vs -0.1% vs -0.3% vs -0.8%; Nasdaq Composite -0.6% vs  +0.9% vs flat vs -0.1% vs -1.1%!!!; NDQ 100 -0.6% vs +0.7% vs flat vs -0.3% vs -0.9%!!!.

*NYSE Volume rose slightly to an average 3.56B shares vs 3.43B vs 2.75B (2013 low) vs 3.27B vs 4.32B.  REAL NYSE Volume dipped slightly to 722M shares vs 734M vs 587M vs 683M vs 855M (highest since 4/30). Recent highs were 975M (selloff) to 887M (rally). The average last week was another weak 728M shares vs 726M vs 720M vs 687M vs 859M vs 689M!!! The 12-month average is just 722M 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 now been just 17 800M+ shares in 2013 – just 5 up, 12 down, but on trades of less than that 77 have been up and just 25 down…there have been 21 mixed sessions.

*new 52 week highs have ranged from 100-864. They plunged again yesterday to 175 vs 517 vs 138!!! vs 811 vs 763 vs 649 vs 811 vs 726. New lows more than doubled to 191!!! vs 79 vs 49 vs 63 vs 41 vs 31 vs 63 vs 67 (recent range 29-237).

  1. Advance/Declines were negative: -3.8x!!! vs +1.4x vs -1.2% vs -1.4x vs -3.5x! (recent range -7.1x to +4.4x) on NYSE and -2.3x vs +2.4x vs +1.1% vs +1.1x vs -2.9x! vs +1.2x vs -3.3x! (recent -3.5x to +3x). Breadth was similar: -1.7x vs +1.8x vs -1.5x vs -1.5x vs +1.6x vs -3.2x! (recent -10.5x to +6.4x!!!) on NYSE and -1.6x vs +2.5x vs +1.1x vs -1.1x vs +1.2x vs -3.3x! (recent -12.8x to +6.2x)  
  2. NYSE Financials fell 0.3%? vs +0.7% vs -0.3% vs -1% vs +1.2%. BofA surged 1.5%??? vs +0.8% vs flat vs -0.8% vs -1% to $13.54 +…20…13th day above $13 since 4/11/11 – all this month! No time to be superstitious.
  3. Volatility (S&P VIX) ROSE again to 14.83 +.35 (8th day above 13 since May 2).. It set a new recent high of 15.65 intraday – cheap time to buy puts is past. The range since 4/12 11.99 (multi year low) to 18.20, and it is back above the 40/50 day (13.37/13.61) with res at the 200 day (15.05)…ytd the range is 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.10!

European equities up slightly, Asia weak, led by Japan! UK +0.2% vs -1.6% vs +1.8% vs -0.5% vs -1.7%!; France +0.7% vs -1.3% vs +1.5%! vs +0.2% vs -2.4%!!!; Germany +0.5% vs -1.5%!!! vs +1.2% vs -0.5% vs -2.5%; Japan DOWN 5.2%!!! vs +0.1% vs +1.2% vs +0.9% vs -7.3%!!! vs +1.6%; Hang Seng -0.3% vs -1.6%!!! vs +1.1% vs -0.2% vs -2.5%!!!; Korea -0.1% vs +0.8% vs +0.3% vs +0.2% vs -1.2%!; India +0.3% vs -0.1% vs +0.7% vs +0.2% vs -1.9%!. U.S. stock futures little changed in a normal trading range: DOW +17; SPX +3.60; NDQ +3.25. Oops, stocks opened down slightly and are now slightly higher led by Transports??? Guess they didn’t see Nikkei?

Bonds are not a safe place to play for man or beast! They rallied yesterday in what can only be described as a dead cat bounce, well below the recent trading range which had been major (critical?) support…little change overnight: 10 yr Treasury 2.12% -1/16 (recent range now 2.17% to 1.63%!!!), and the 30 yr’s 3.33% to 2.82%!!!, now 3.26% +1/8. The long TIP is 0.88% +3/16 – still the weakest link since a new (record?) low of 0.36% on 4/5. It too hit a new high yield of 0.90% eclipsing the 0.82% set on 5/22! Libor update: 0.275% 3 mos., 0.416% 6 mos. Foreign bond yields lower, ex Greece and Portugal: Germany 1.51% -3; UK 1.95% -5; France 2.05% -1, Italy 4.12% -6; Spain 4.36% -4; Portugal 5.45% +2; Greece 8.80% +22 vs 8.54% vs 8.39% vs 8.63% vs 8.54% vs 7.98% vs 7.97% vs 7.94% vs 7.96% vs 8.47% it has now gone round trip (recent range now 7.94%-12.57%). Japan 0.89% -3.  

Gold closed modestly higher at $1391.80 +$11.90 on an ‘inside session’ following a negative key reversal following two straight ‘inside’ days which followed an ‘outside’ session that had an intraday high of $1413.10! No direction but at least it isn’t down! It has been down 10 of the last 13 sessions following 5/20’s intraday low of $1338, lowest since 4/18, at $1387.50 -$5.30. 5/10’s high of $1487.20 was highest since 4/12. 4/16’s intraday low of $1321.50 – was lowest since Sept. ’10. Resistance remains way above at the 40 day/50 day: $1448-1479 – falling rapidly now! Overnight it is $1407.00 +$15.20. Crude closed sharply lower at $93.13 -$1.88 with an intraday low of $92.83 below 40/50 day, just a day after a high of $95.92 – highest since 5/22??? Thursday’s intraday low of $92.21 was below the 200 day, a second test! The rally high was set 14 days at $97.17, nearing a 12 month high! It is again below Res at the 40 day ($93.28), 50 day ($93.64) and 200 day ($92.32). Overnight it is lower at $92.34 -.79. Worse, it had aa session low of $92.25 – both are now below the 200 day! 4/18’s low of $85.61 was lowest since 12/11! The range is $85.61-$97.80 since June 29, 2012!!!!

Some random thoughts:

Well, well, well, the banks had record earnings…but on what? Not on interest income! Three of the last four quarters have seen interest income down…despite record earnings?

This is not good as that is when banks start making bad bets…especially after their stock prices have risen so sharply. YTD NYSE Financials are up 14.2% which compares favorably to the Dow, +16.8% and the S&P +19.3%…all this on a ‘promise’ of higher dividends. Hello? How can you raise the dividend when the earnings are not based on declining, let alone non-sustainable interest income (hmmm…what about all those new mortgages and re-fi’s?…oops, forgot they sold them to FNMA/FHLMC – who in turn sold them to Bernanke – and retained the 0.5% servicing fee…wise but by no stretch sustainable.

Why is BofA so strong? Beats the hell out of me…of course when a 20 cent rise produces a 1.5% price gain…ah the wonders of a $13 stock….with a one cent (0.3%) dividend! But they promise they will raise it…like Citi (0.08%), JPMorgan has a 2.8% indicated dividend…still low but at least ‘acceptable’ unless they have another ‘whale’ in their future.

Speaking of JPMorgan, Jamie Dimon’s threat to stop playing with the kids if he wasn’t allowed to keep both the Chairman and CEO titles was pathetic…but it worked…or did it work because even with CalPERS and other pension funds, their holding weren’t enough to matter. Why? Blackrock is largest holder, 6.5%, then Vanguard, 4.7%, and these along with the other big ETF’s and mutual funds vote with management…or if they don’t like what they see, with their feet! So to hell with shareholder interests…moms and pops…they don’t matter. How else does one explain the conflict of interest of being Chairman and CEO…isn’t the board elected to be ‘stewards to the shareholders’? How old school, Trader Bill…get in touch with reality. How else can one get their cronies elected to the board by friendship, not financial acumen, and thus guarantee those hefty salaries and bonuses even as shareholders suffer? Hey, over the past 12 months, JPM is up 66%, 71% with those big dividends reinvested…and in spite of the whale fiasco up 26% ytd…oops, since peaking in May 2007, the return is 2.1% annualized….and that is the best of the banks! Too bad you weren’t in treasuries, right?

Meanwhile, the banks continue with their obsession of thwarting any and all regulation, thus guarantee yet another financial crisis in the not too distant future, while their lobby remains fully in control of OUR Congress…ain’t that a #@%&!

Have a great day!

TB

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