7/12/13…Dimon’s aren’t forever

From The Friars Club Encyclopedia of Jokes: “Why do I need a gun license? It’s only for use around the house.” – Charles Addams

Bloomberg Quotes of the Day: “Endurance is nobler than strength, and patience than beauty.” – John Ruskin

Bloomberg Top Stories:

*JPMorgan 31% Increase in Second-Quarter Profit Beats Estimates on Trading – yep trading, mortgage production rev DOWN, 10% growth in desposits, int. earnings down!

*Summers Said to Indicate Interest in Succeeding Bernanke as Fed Chairman –  NO!!!

*European Stocks Gain on Stimulus as Lu Says Nation Can Cope with 6.5% Pace

*Losses Erased in S&P 500 as Bernanke Finishes Job That Began With Economy 

*Gold Traders Most Bullish in Five Weeks After Stimulus Stance – way oversold!

*Muslim Brotherhood Calls for New Protests After Egypt Targets Its Leaders

*Snowden Breaks Silence at Moscow Airport With Lawyers, Activists

*Ireland’s Lower House Passes Legislation Allowing Abortions for First Time – !!!

*Egypt Strife Reaches Gaza Hospitals as Lack of Fuel Threatens Care – egads!

What’s not to like about yesterday’s rally? Turns out: plenty! The rising tide lifted all boats and that is usually a good contra indicator. TB will go with that! First, let’s look at volume: an average 3.43B shares of NYSE listed stocks traded…however, real floor-traded shares barely rose to a slightly above average –of late-742M vs 671M shares. So? With the 12-month average at a weak 723M shares, the volume since 6/30 has averaged just 694M shares…ranging from 482M (low for 2013) to 906M – the only strong session! Volume counts! Why? Because the high freaks can do anything they want with an absence of real buyers which appear in the floor-traded shares. New 52 week highs rose slightly to 484 from 451 while new lows slumped to tie the low at 29 from 60, so far, so good. Advance/Declines and Breadth were strong…a positive as this is the first time we have seen this in the rally that began on June 25th. Lastly, the VIX closed at 14.01(lowest close since 5/24) with a range that included 13.57- indicating calls are starting to become expensive and thus confidence (sic) is returning. Is it? Time will tell…

All indices were up, led by the NDQ 100 +2%!!! BUT number two was Dow Utilities which rose 1.7%??? Why? Better earnings suggesting higher dividend payouts…well, it’s a possibility, but consider how bearish we were on the sector for the last quarter! The Dow had the lowest gain, 1.1%, while the S&P 500 rose by 1.4%. Dow Transports just 1.2% and the Russell 2000 just 1.3%…show me! Show me the money!!!

Our continued coverage of the choppy NDQ 100 which gained 59 points provides these index point movers: MSFT +7 vs +2.5; AAPL +5.3 vs +5.7 vs -1.1 vs -1.9; CELG +3.5; GOOG +3.2; INTC +3.1; AMZN/CMCSA +2.8; ORCL +2.6 vs -1.1. Only six stocks closed lower and none of them lost more than 0.1 index points! Very broad-based gains!

Here you go:

* Dow 30 +1.1% vs -0.1% vs +0.5% vs +0.6% vs +1.3%; Dow Transports +1.2% vs -0.7% vs +2.3%!!! vs +0.1% vs +1.5%; Russell 2000 +1.3% vs +0.2% vs +0.9% vs 0.4% vs +1.4%; Dow Utilities +1.7%!!! vs +0.4% vs +0.6% vs +1.3% vs -0.5%; S&P 500 +1.4% vs flat vs +0.7% vs +0.5% vs +1%; Nasdaq Composite +1.6% vs +0.5% vs +0.6% vs +0.2% vs +1%; NDQ 100 ++2%!!! vs +0.6% vs +0.6% vs +0.1% vs +0.7%.

*NYSE Volume rose to an average 3.43B shares vs 2.99B vs 3.14B vs 3.3B vs 2.63B vs 2.63B (1.96B is the lowest of 2013). REAL NYSE Volume also rose to an average 752M shares vs 671M vs 692M vs 905M vs 625M vs 482M – the 2013 low. The 12-month average is 723M shares! The average since 6/30 is just 694M shares ranging from 482M to 906M, 482M being the 2013 low! There have been just SEVEN 1B+ share sessions! There have been 27 800M+ shares in 2013: 10 up, 17 down, but on trades of less than that 87 have been up and 31 down…there have been 25 mixed sessions.

*New 52 week highs have ranged from 33-864. They rose slightly to 484 vs 451 vs 606 vs 669 vs 531 vs 165. New lows plunged to 29 (a new recent low!) vs 60 vs 70 vs 180 vs 64 vs 61 vs 33!

  1. Advance/Declines were very positive: 6.6x! vs +1.1x vs +2.8x vs +1.4x vs +1.3x (recent range -17.5x to +4.4x) on NYSE and +2.5x vs +1.4x vs +1.6x vs +1.3x vs +2.8x (recent -3.5x to +3x). Breadth was even stronger: +6.9x!!! vs -1.2x vs +3.4x! vs +1.7x vs +1.8x vs -1.6x (recent -18.6x!!! to +6.9x!!!) on NYSE and +4.8x!!! vs +1.3x vs +1.2x vs +2.4x vs +1.4x (recent -12.8x to +6.2x)  
  2. NYSE Financials rosee by 1.5% vs 0.4% vs +0.6% vs +1.3%! vs -0.3%; BUT Look: Brokers +1.9%!!!; KBW Banks -0.4%; Nasdaq Banks -0.8%. BofA was 2nd most active: +1.1% vs -1.2% vs +1.9% vs +1.7% vs +1.8%…$13.51 +.14.
  3. Volatility (S&P VIX) declined for a fifth straight day below 15 and the close of 14.01 -.20 is the lowest since May 24! 6/25’s session high of 21.91 was highest since 12/31/12!!! The range since 4/12 is 11.99 (multi year low) to 21.92, It is well below the 40/50 day (15.72/15.24) and the 200 day (15.06)!!!…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

European equities modestly better – Germany en fuego! Asia mixed, India hot!: UK +0.3% vs +0.6% vs -0.6% vs +0.8% vs +0.8%; France +0.2% vs +0.9% vs -0.7% vs +0.6% vs +1.7%!; Germany +0.9% vs +1.1%! vs -0.5% vs +0.9% vs +2.3%; Japan +0.2% vs +0.4% vs -0.4% vs +2.6%!!! vs -1.4% vs +2.1%; Hang Seng -0.8% vs +2.6% vs +1.1% vs +0.5% vs -1.3% vs +1.9%; Korea -0.4% vs +2.9%!!! vs -0.3% vs +0.7% vs -0.9%; India +1.4%!!! vs +2% vs -0.8% vs +0.6% vs +0.4% vs +1.2%. U.S. equity futures muted in yet another very narrow trading range: DOW +13; SPX +0.90; NDQ +4.

Bonds closed higher yesterday with 10’s to 30’s up ½ point but TIPS only slightly; overnight strong!!! 10 yr Treasury 2.54% +5/16 (recent range 2.74% to 1.63%!!!), and the 30 yr range of 2.82% to 3.71%, currently 3.60% +9/16. The long TIP is now 1.35% +11/16 – still the weakest link since the (record?) low of 0.36% on 4/5. Recent high 1.53%! Libor update: 0.268% 3 mos, 0.402%! 6 mos, still slipping and remains close to the Jan. 2010 record lows (0.245% and 0.382% respectively). Foreign bond yields lower, ex Italy and Portugal: Germany 1.57% -5!!!; UK 2.32% -6; France 2.18% -5, Italy 4.49% +2; Spain 4.78% -2; Portugal 7.05% +36!!!; Greece 10.33% -25!!! vs 10.69% vs 10.85% +28!!! vs 10.52% vs 10.54% +40!!! vs 10.85% -37!!! vs 11.22%. Recent range: 8.04% to 12.57%.  Japan 0.81% -1. Imagine being a Greek bond trader…or a trader who does Greek bonds!!!

Gold closed sharply higher yesterday closing at $1279.90 +$32.50!!! The sesson high however was $1297.20 not seen since 6/24!  – contrast to 6/27’s intraday low of $1179.40 – lowest since at least 2011 and now critical support. Major res is the 40 day/50 day: $1337/1360 – both declining rapidly, and way higher, the 200 day – $1582!!! Can’t help repeating: the combined bullion in the gold ETF’s was 2450 or so metric tons…it is now 1800 tons– a 25% decline…and when the ETF’s are being sold the metal has to be sold creating a maelstrom. Overnight it is $1271.10 -$8.80 – so far an ‘inside’ session. Crude closed weaker at $104.91 -$1.63 BUT with a new rally high of $107.45, highest since 3/1/12! –  it was almost an outside day! It remains well above the 40/50 day m/a’s (96.76/96.43), both climbing sharply now, while the 200 day ($92.60), is distant support. First support is $104.21-36 – the lows of the last three sessions! 4/18’s low of $85.61 was lowest since 12/11! It is up overnight at $105.81 +.90, near the session high.! The range is $85.61-$107.45 since March 1, 2012..


Some random thoughts:

…sorry about the bad pun that Ian Fleming would probably like!

A late Bloomberg story just came out saying that U.S. banks lost 78% of their securities gains in the bond sell-off that began in early May on Bernnake’s speech. Think about that and remember that in the investment portfolio – not trading – they do not have to mark to market!!! This illustrates how oversold treasuries are as this is the second worst selloff since 1994!!! These kinds of moves do not happen in the bond market and cannot be hedged against – impossible!!!

…and another. Rep. Jeb Hensarling (R-TX- did I have to add that???), has introduced a bill that would alter the entire mortgage market in the U.S.! He wants to faze out FNMA/FHLMC over the next five years and turn control over to the banks as the National Mortgage Market Utility – a voluntary securitization platform under the auspices of the Federal Housing Administration.

I cannot think of any stupider idea…and I am not a supporter of FNMA/FHLMC but the actions of the banks mean this would be a disaster for the consumer. Also, consider that the current conduit is bank originations, sold to FNMA/FHLMC (stripped of the servicing fee) and then to the Fed!!! Lest we forget, however, all the key Representatives (D) and Senators (R) as well have received huge support from these two august agencies. Call it dead on arrival…or else!

Well the parade of bank earnings is beginning with JPM beating estimates – on trading. The stock rallied initially in the overnight market until the details came out…it was all in trading and mortgage originations – while deposits grew by 10%, mortgage originations flattened out – and off 12% in Q2 (fallout from a possible end to the QE’s///where they going to sell ‘em???). Other traditional banking income was unimpressive, but they raised the dividend from 30 cents to 38 cents taking the indicated yield from 2.32% to 2.76%. What might they have done without that $4.4 billion loss YOU generated Jamie? YOU pushed risk and the Whale was eager to do just that! Now they have been told to control risk better and to make CEO salary and bonus more commensurate with risk. BIG YAWN!!! Oh, and Jamie warning of employee layoffs…get it? If not, pity!!!

Wells Fargo just out and also beat estimates by 20%!!! Unlike JPM their numbers impressed the street. Still their growth was due to: MORTGAGE ORIGINATIONS. Mortgage volume was up 3% in the quarter but DOWN 10% ytd! Wait, IF the QE’s are ending, where are they going to dump all that low-yielding paper? Living on borrowed time! That is all the big banks…little ones too?

As noted above, while NYSE Financials gained 1.5% yesterday, they were carried by Brokers +1.9% while KBW Banks declined by 04% and Nasdaq Banks by 0.6%. Will we see another Financial sector swoon? Note more regulatory talk and negative banking articles appearing and that will likely accelerate…as well as calls for tougher regulation which the industry an probably ‘buy off’ – why not? …they did it last time!

If we don’t wrest control back from the banks…and faux banks…this nation (and by extension the world economy) is in trouble. Not bad enough? Yesterday, Larry Summers indicated he might be interested in becoming the next Fed Chairman!!! no, No, and NO!

It is Yellen or we are in a heap of trouble! Women are key!!! Why didn’t we listen to Brooksley Born instead of allowing Rubin, Summers (there’s that name again), and Greenspan to trash her name when she wanted the CFTC to control derivatives trading? Simple…the banks didn’t want to lose their lucrative trades, without which they wouldn’t have been pressing lenders to create more subprime paper. That was the culprit. Remove the profit incentive and NO financial crisis…period.  Falsified financials? No way! Not if there is no way to dump them on unsuspecting ‘investors.’

Add to the list Brooksley Born and Sheila Bair…both brilliant and again, both beaten up by Jamie Dimon and the rest of the bankers. Who do YOU trust???

Have a fun and relaxing weekend! It’s beautiful again here on Lake Minnetonka!




  1. Yarnman said

    TB–I agree that Yellen is the one, but here’s a good poser for you: who’d you choose if you had only two choices that are Summers and Geithner? My guess is that Obama goes again with Tiny Tim, mainly because the confirmation process has already largely been done. –Yarnman

    • traderbill said

      Has to be Timmy…or someone else…a dark horse. Nobody can stand Summers and I suspect Obama is too after having to deal with him in first term.

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