6/26..interest rates DO matter…and affect the housing market – DUH!!!

From The Friars Club Encyclopedia of Jokes: “My grandfather is a little forgetful, and he likes to give me advice. One day he took me aside and left me there.” – Ron Richards

Bloomberg Quote of the Day: “People may hear your words, but they feel your attitude.” – John C. Maxwell – and we wonder why we are misunderstood in emails!

Breaking News:

*U.S. Q1 GDP revised to 1.8% from 2.4% – no change was expected! Mortgage Apps and refi plunging as interest rates surge: 30 yr to 4.46% vs 3 mo. ave of just 3.86%!!!

Market Reaction: BOTH stocks and bonds up sharply…gold plunging to multi-year low!

 

Bloomberg Top Stories:

*Stocks Rise in Europe With Treasuries While Gold Drops; Bond Risk Declines – YAWN

*Currency Traders Trapped in Scandinavia Discover Krone(a) Isn’t an Easy Sell

*Swedish Krona Selloff Brings Relief to Sweden Exporters as Intervention No Option

*EU Finance Chiefs Resume Battle Over How to Impose Losses at Falling Banks

*Indian Rupee Plunges Past 60 to Record Low as Reserve Bank Sells Dollars – !

*Marc Rich, Fugitive Commodities Trader Parndoned by Clinton, Dies at 78 – awww

*Wal-Mart India CEO Jain Leaves Seven Months After CFO Was Suspended – oops!
*Gold’s Price Plunge Signals Fed Can’t Stoke Inflation – not with an ETF bubble!!!

*Congress Split Leaves Future of Landmark U.S. Voting Rights Law in Doubt

Finally an up day…of sorts. It took off like a rocked at the open then looked like a seismograph for the rest of the session – climbing erratically with a ‘double top’ on the Dow 45 minutes before the close then a final thrust to 14812 and a steady decline into the close at 14760 – pennies below the burst on the open. That tells us something…not that it was news but it was once again high frequency trading…good luck, boys and girls!

The best two performers were Dow Transports +1.9% and the battered NYSE Financials +1.8%, followed by Dow Utilities and the Russell 2000 +1.1%. Bringing up the rear were the two Nasdaq indices up 0.8% and 0.6% respectively. The latter, the Nasdaq 1000 rose 18 points but with just THREE gaining more than one index point: QCOM +2.8; INTC +1.4; and GILD +1.1 – first time in days…weeks?…that there has been a broad based rally…oh, and no member lost even 1 index point. Kind of looks like indexers buying, no? As for those big gains in Financials, they were limited to the BIG LOSERS of the past week: BAC +3%; C +3.4%; JPM +2.3%; GS +1.5%; MS +2.6%; UBS +2.3%. The one steady factor is and has been US Bank +1.3% which has had for down days – all slight – in the past seven sessions and over that period is up 2.7% closing at a new 52 week high yesterday. Contrast to the next best WFC +0.003%! then JPM -2%. The broker ‘banks’ (that’s what they are – broke’er) had big losses: GS -6%; MS -3.1%; UBS -4%!!! Told you financials were a bubble…but what about those BIG dividends…less than 1%?

Yesterday’s volume for NYSE listed stocks declined to a BELOW average 3.63B shares from 4.7B – on an ‘up’ session of course…they just don’t get it! Compare to the prior three days of 5B shares and for the prior four days, 4.64B shares  – all of it on BIG DOWN VOLUME!!! Floor traded volume averaged 1.35B shares – contrast to the 12-month average of 719M shares.

Bonds continued to be weak but TIPS managed to close a smidgeon higher but remain the weakest link. One positive: Mortgage REITS SURGED…finally…why not with those huge dividends and that massive selloff…time to buy???

All equity indices still have a huge negative month (off 3-5%)…have given up more than half their quarter to date returns and more than a third of year to date returns…with just three trading days left until Quarter end!!! Do you wish you had sold in May? Cash has been king…so far this month!

Here you go…:

* Dow 30 +0.7% vs -0.9% vs +0.3% vs -2.3% vs -1.4%; Dow Transports +1.9%!!! vs -2%!!! vs -0.5% vs -2.2%!!! vs -1.2% vs +1%; Russell 2000 +1.1%! vs -1.3%! vs +0.3% vs -2.6%!!! vs -1.4%! vs +1.2%!; Dow Utilities +1.1%! vs -0.2% vs +1.3%!!! vs -2%! vs -2.3%!!!; S&P 500 +1% vs -1.2% vs +0.3% vs -2.5%!!! vs -1.4%!; Nasdaq Composite +0.8% vs -1.1% vs -0.2% vs -2.3%!!! vs -1.1%! vs +0.9%; NDQ 100 +0.6% vs  -1% vs -0.4% vs -2.3% vs -1.2%! vs +0.8%.

*NYSE Volume fell sharply to a below average 3.63B shares from 4.7B vs  5.51B vs 4.84B vs 3.54B vs 3.1B vs 3.08B vs 2.91B (2nd lowest of 2013, 2.75B is the 2013 low). REAL NYSE Volume also declined but to a still above average 810M shares vs 968M vs 2.01B vs 1.07B vs 646M shares vs 679M (595M is lowest since 5/24). The 12-month average is still just 722M shares. The range since 2/11 is 558M to 2.01B eclipsing the 1.825B on 3/15’s options expiry. There have been just SIX 1B+ share sessions! There have now been 24 800M+ shares in 2013 – 8 up, 16 down, but on trades of less than that 82 have been up and 31 down…there have been 22 mixed sessions.

*New 52 week highs have ranged from 65-864. They rose to a weak 122 vs 76 vs 98 vs 65 vs 257 vs 345. New lows fell by two-thirds but to a still large 248 vs 715!!! vs 438 vs 550 vs 143 vs 104 vs 62!!!. Recent range was 49-715.

  1. Advance/Declines were solidly positive – finally, especially on NYSE!!!: +4x! vs -6.5x! vs 1:1 vs -17.5x!!! vs -5.6x! (recent range -17.5x to +4.4x) on NYSE and +2.5x! vs -3.3x!!! vs +1.5x vs -2.6x vs +2.3x vs +1.8x (recent -3.5x to +3x). Breadth was similar: +6.6x! vs -10x!!! vs -1.1x vs -18.6x!!! vs -11x!!! vs +3.8x!(recent -18.6x vs -11x!!! to +6.4x!!!) on NYSE and +2.6x vs -2.6x vs -1.1x vs -11x vs -2.2x vs +3.1x vs +2.6x vs -2.3x (recent -12.8x to +6.2x)  
  2. NYSE Financials rose by +1.8% vs -1.4% vs +0.1% vs -2.7% vs -1.6% vs 0.7%; Brokers +1.5% vs -1% vs +0.2% vs -1.9% vs -0.9% vs +1% vs +2%; KBW Banks +2.2%! vs -1.6%! vs +0.3% vs -1% vs -0.9%; Nasdaq Banks +1.7%! vs -0.4% vs +0.9%! vs -0.5% vs -0.8% vs +1%. BofA back to most active: +3%!!! vs -3.1%!!! vs -1.6% vs -2.3% vs -0.6%….closed up but BELOW $13 for a 4th day at $12.67 +.37. Last time below $13 was on 5/9 with a high of $13.83 on 5/30! It is now down 4.5% over the last five sessions….look at the others: JPM +2.3% vs -5.9%! vs -4%; C +3.4% vs -9.2%!!! vs -6.3!!!; USB +2.3% vs flat vs +0.6%!; WFC +1.2% vs -2.5% vs +0.7%:  GS +1.5% vs -7.1%!!! vs -6%!; MS +2.6% vs -2% vs -1%; UBS +2.3% vs -1.5% vs -6.4%! – not even a dead cat bounce!!! Banks in trouble EXCEPT UBS (I don’t own it!)   
  3. Volatility (S&P VIX) continued to yo-yo falling sharply to 18.47 -1.64 vs 20.11 6/25’s session high of 21.91 highest since 12/31/12!!! The range since 4/12 is 11.99 (multi year low) to 21.92, way the 40/50 day (14.84/14.82) and the 200 day (15.01)…ytd the range is 11.05 (3/14) to 21.92 (6/24) – 12 mo. ave 15.39!

 

Global equities sharply higher while Japan continues to tank!!! UK +1% vs +1.1% vs -1.3%; France +2%!!! vs +1.4% vs -1.9%; Germany +1.6% vs +1.6% vs -1.2%; Japan DOWN 1%!!! vs -0.7% vs -1.3%; Hang Seng +2.4%!!! vs +0.2% vs -2.2%!!!; Korea +0.2% vs -1% vs -1.3%; India DOWN 0.4% vs +0.5% vs -1.2%. U.S. stock indexes opening higher even with the sharp downward revision on GDP and weaker mortgage demand: DOW +123; SPX +14; NDQ +25!!!

Bonds were weaker again by ¾ on 10’s and 1 point on 30’s BUT the long TIP cane back closing about unchanged…note also mortgage-backed product rallied; overnight bonds are rallying WITH stocks…go figure!…since peaking on April 5th the long TIP has lost 39 points!!!! OR 27%!!! 10 yr Treasury 2.52% +3/4 (recent range 2.62% to 1.63%!!!), and the 30 yr range is 3.60%!!! to 2.82%, currently 3.56% +1 point. The long TIP is holding below 1.5%! Currently 1.34% +1-5/8 – still the weakest link since a new (record?) low of 0.36% on 4/5, 12 mo. ave 0.65%! Since the Bernanke announcement on May 7th the high yield has gone from 0.82% set on 5/22 to 1.53%! a 29 point loss!!! Libor update: 0.276% 3 mos., 0.422% 6 mos, still close to the Jan. 2010 record lows (0.382% on BOTH!!!). Foreign bond yields SHARPLY LOWEER across the board and very volatile: Germany 1.76% -5; UK 2.44% -9; France 2.37% -8, Italy 4.71% -14; Spain 4.85% -20!!!; Portugal 6.62% -15!!!; Greece 10.71% -45!!! vs 11.14% from 9.84% last Wednesday!!! Recent range: 8.04% to 12.57%.   

Gold closed slightly lower at $1275.10 -$2.00 with an incredibly low trading range of just $18.30, a day after a low of $1268.90 – lowest since June 30th, 2010!!! Support? Resistance? You pick ‘em!!! Look at the 40 day/50 day: $1391-1399…both plunging, and the 200 day – $1609!!! Hammered overnight and still falling, now $1238.40 -$36.70 with a session low of $1223.20 a multi-year low!!! Crude barely budged closing at $95.15 +.02 also with a ridiculously narrow trading range of $1.56~~~. The range this month is $91.26-$99.01 – highest since 9/17/12! It is now BETWEEN the 40/50 day m/a’s (95.19/94.28), while the 200 day ($92.29), remains CRITICAL support. Overnight it is $95.11 -.21 with a low of $94.27.  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:

Sorry this is so late…all I  can say is I believe we have hit the low prices on treasuries….yesterday during the session. A big indicator is mortgage related ETF’s and REITS rallied for the first time and offer incredible yields. Even though the losses have been double digit over the past year, the returns have been so high as to mitigate the loss.

For example, AGNC had a high of $36.77 on 9/17/12 and has declined, slowly at first, then accelerating since early May to $22.22 on 6/24. It is premature to call the sector cheap but don’t see much downside. Over the past year the total return is -29.9% and -17.7% with dividends reinvested…-15.1% if withdrawn. The dividend yield over the past 12 months has been 21.08% and despite lowering it from $1.40 to $1.05, the ‘indicated’ yield is still 18.45%! This loss was due in part to several secondary offerings and the absurd comments out of the Fed on ending the QE’s – at some point! Shame on you, Bernanke…you are hurting the markets.

Now consider that stocks AND bonds are rallying despite a downward revision from 2.4% to 1.8%!!! on the 1st Qtr GDP final – no change was expected! Meanwhile, mortgage applications slumped as the 30 year mortgage rate rose sharply to 4.46%!!! from 4.17% last month, and 3.90% as late as the week of May 24th! The average for the last 13 weeks is 3.86%! and a year ago the rate was 3.88%!!! That will squeeze many buyers out of the market and hurt sellers whose debt is on the cusp. Re-fi is DEAD! It fell 5.2% last week and 3.4% the prior week and is now off 26.2% JUST SINCE 13 weeks ago! Worse, it has fallen by 38.4% from a year ago…and you think the Fed is going to stop buying up mortgages…think again, Dorothy!

Nevertheless we live in an era where markets are driven by computer generated algorithms and we – you and I – are still driving the family sedan at the Indy 500! I don’t know of a single professional money manager who feels confident investing – THEIR money, not yours!!!

All the best,

TB

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