7/22/13…what do aluminum and oil have in common? A lot it turns out!

From The Friars Club Encyclopedia of Jokes: “LBJ always told the truth, except when his lips moved.” – Red Buttons

Bloomberg Quotes of the Day: “Science does not know its debt to imagination.” – Ralph Waldo Emerson…think of inventions from sci fi…Scientology…the list goes on…

The Bottom Line: Labor market trends are slowly improving, with the recent drop in jobless claims. Manufacturing activity expanded as indicated by the Empire State and Philadelphia Fed regional surveys. Industrial production and business inventories rose while housing starts and sentiment dropped. Retail sales rose, suggesting modest growth in consumption in Q2. Inflation remains subdued. Next week’s economic calendar is fairly light. We will get the June Existing Home Sales (Monday), July Richmond Fed Manufacturing Survey (Tuesday), June New Home Sales (Wednesday), June Durable Goods Orders (Thursday), and July Consumer Sentiment Final (Friday). Courtesy of Economic Advisory Service

Bloomberg Top Stories:

*UBS Approaches U.S. Settlement on Mortgage Securities as Profit Increases–aren’t you glad we bailed out the banks and brokers…so they could continue to enrich themselves?

*Wall Street Commodity-Trading Businesses in Jeopardy as Fed Reviews Rules – finally!

*Copper Leads Metals Higher on U.S. Economy Speculation as Stocks Fluctuate

*McDonald’s 2Q EPS $1.38, estimate $1.40 – hmmm let’s see how that plays out!

*Abe Election Win Sets Up Next Fight as Struggles Loom Over Growth Strategy

*Portugal 10-Year Yields Drop to Four-Week Low as Early Election Ruled Out

*Bull Market Through 2013 Confirmed by S&P 500 Rallies of Past 23 Years – uh huh, did anyone stop to think it might just be different this time…when was financial crisis?

*RBS is Sued by Fired Emerging-Markets Rates Head Lee Over Forfeited Bonus – awww

*China Move to Market-Set Lending Rates Puts Spotlight on Low Saver Returns

*Cohen the Cutthroat Trader Stares at Demise for Being Soft on Supervision – heh heh!

*Hezbollah’s Military Arm Branded a Terror Group by EU in Strike for Funding

*Kerry’s Day-and-Night Pursuit Reaps a Fragile Win no Mideast Peace Talks

*Duchess of Cambridge Admitted to London Hospital in Early Stages of Labor

*Earthquake in China’s Gansu Province Kills at Least 75 People, Agency Says

A very strange options expiry occurred last Friday. Volume was low (3.28B shares vs an average 3.44B), but real trades on the NYSE rose to a strong but not great 872M shares – highest since July 8 (prior expiry on 6.21 produced a huge 2.01B shares, a 12-month high). Despite that the average for the week was still a weak 680M shares and for MTD just 688M, well below even the anemic 12-month average of 722M shares. But what kind of day was it? A nothing day…with the Dow and Russell 2000 flat, the S&P 500 the winner (due to options no doubt) +0.2% and the loser was the Nasdaq 100 down 1.1%!!! and the Composite -0.7%, the rest were all up 0.1%. So why bother writing about it? Well, let’s analyze the NDQ 100: it lost 33 points with 1.1:1 advancing but the real story is within that: six stocks, led by MSFT with a huge 30 point loss combined for 42 losing points (AAPL -5.6; GOOG +3.3; EBAY -1.5; ISRG/INTC -1, while just four gained more than 1 point (AMGN +3.1; GILD +2.6; BIIB +1.5; CELG +1.1), total: 8 points!

But get this: the VIX plummeted 8.9% to 12.54 -1.23, lowest since 5/17 and, at least to TB, makes market not only very rich but vulnerable…you decide. A/D’s and Breadth went nowhere…except Nasdaq breadth was -1.6x!

…here’s the book:

* Dow 30 flat vs +0.5% vs +0.1% vs -0.2% vs +0.1%; Dow Transports +0.1% vs +1.7%!!! vs +0.8% vs -0.7% vs +0.5%; Russell 2000 flat vs +0.7% vs +0.4% vs -0.4% vs +0.7%; Dow Utilities +0.1% vs +0.9%! vs -0.2% vs -0.5% vs +1.6%!!!; S&P 500 +0.2% vs +0.5% vs +0.3% vs -0.4% vs +0.1%; Nasdaq Composite -0.7% vs flat vs +0.3% vs -0.3% vs +0.2%; NDQ 100 -1.1%!!! vs 0.2% vs +0.3% vs -0.1% vs FLAT.

*NYSE Volume slipped to a below average 3.28B shares vs 3.44B vs 3.15B vs 3.05B vs 2.6B (1.96B is the lowest of 2013). REAL NYSE Volume rose was to a strong but not exceptional 872M shares vs a weak 664M shares vs 666M (Hex?) vs 617M vs 562M (lowest since 7/3). The 12-month average is 722M shares! The average since 6/30 is just 688M shares, ranging from 482M to 906M, 482M being the 2013 low! There have been just SEVEN 1B+ share sessions! There have been 28 800M+ shares in 2013: 10 up, 17 down, and now one mixed, but on trades of less than that 89 have been up and 32 down…there have been 27 mixed sessions.

*New 52 week highs have ranged from 33-864. They fell to a still solid 494 vs 690 vs 448 vs 456 from 687. New lows barely rose to a still weak 37 vs 27 –new low – vs 30 vs 37 vs 40 vs 32 vs 29.  

  1. Advance/Declines were listless: 1:1 vs +2.1x! vs +1.9x! vs -1.8x! vs +1.6x (recent range -17.5x to +4.4x) on NYSE and -1.1x vs +1.6x vs +1.5x vs -1.2x vs +1.9x (recent -3.5x to +3x). Breadth was slightly worse: -1.1x vs +2.3x! vs 2x! vs -1.6x vs +1.8x (recent -18.6x!!! to +6.9x!!!) on NYSE and -1.6x! vs +1.3x vs +1.8x vs -1.3x vs +1.7x (recent -12.8x to +6.2x)  
  2. NYSE Financials rose by a weak 0.1% vs +1.3%! vs 0.5% vs -0.3% vs +0.5% vs +0.3% vs +1.5%. BofA was most active again: -0.1% vs +3.1%!?! vs +2.8%!?! vs +0.4% vs +0.7% vs +1.9%???. It closed at $14.75 -.01 a day following a new five year high of $14.85! Brokers flat vs +1.3% vs +0.2% vs -1.2%!; KBW Banks +0.3% vs +1.7% vs +0.6% vs -0.8%; Nasdaq Banks +0.3% vs +1.4% vs +0.4% vs -0.5%. No other financials were market movers…heck, there was no movement!  
  3. Volatility (S&P VIX) PLUNGED to 12.54 -1.23, or 8.9%??? from 13.77, with a range of 12.54 to 13.97 – a positive key reversal??? On an unremarkable session?  It peaked at 20.49, plunged to 18.90 on June options expiry then closed at 20.11 on 6/24 and has been down since – a decline of 33%! 6/24’s session high of 21.91 was highest since 12/31/12 (22.72)!!! The range since April ‘12 is 11.05 (multi year low o n 3/14/13) to 21.9, It is well below the 40/50 day (15.93/15.33) and the 200 day (15.02)!!!…ytd the range is 11.05 (3/14) to 21.92 (6/24)! You might want to entertain puts here…or stop orders with limits…TB’s just sayin’…

European stocks mixed, Asia stronger: UK -0.3% vs -0.2% vs flat vs flat vs +0.4%; France +0.1% vs -0.3% vs +0.3% vs -0.6% vs +0.4%; Germany -0.1% vs -0.2% vs +0.2% vs -0.3% vs +0.2%; Japan +0.5% vs -1.5%!!! vs +0.1% vs +0.6% vs closed; Hang Seng +0.3% vs flat vs +0.2% vs flat vs +0.1%; Korea +0.5% vs -0.2% vs +1.1%! vs -0.5% vs +0.3%; India +0.1% vs +0.1% vs +0.5% vs -0.9% vs +0.4%. U.S. equity futures little changed in yet another extremely narrow trading range: DOW -12; SPX +0.30; NDQ +2.75.

Bonds closed higher on Friday – especially the long TIP, for a 2nd day? Higher overnight: 10 yr Treasury 2.48% +1/32 (recent range 2.74% to 1.63%!!!), and the 30 yr range of 2.82% to 3.71%, currently 3.55% +1/4. The long TIP is 1.23% +5/16 – still the weakest link since the (record?) low of 0.36% on 4/5. Recent high 1.53%! Libor update: 0.265%! 3 mos, 0.397%!!! 6 mos. Both remain near the Jan. 2010 record lows (0.245% and 0.382% respectively). Foreign bond yields lower led by Portugal; Greece weaker: Germany 1.52% -1; UK 2.27% -1; France 2.19% +1, Italy 4.34% -6; Spain 4.60% -7; Portugal 6.32% -30!!! vs 6.62% -21!; Greece 9.95% +17 vs 9.86% vs -13 vs 9.93% vs 10.07% vs 10.02% -16!!! vs 10.27% -19!!! vs 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 0.78% -3! Note daily changes on Greece!!!

Gold closed modestly higher at $1294.00 +$9.50 – two days following a NEGATIVE key reversal (???) and a new rally high of $1301.70 – highest since 6/24. 6/27’s intraday low was $1179.40 – lowest since at least 2011 and now critical support. $1300 is again resistance, then the 40 day/50 day: $1324/1341 – both still falling, and way above, the 200 day – $1571!!! Overnight it is $1323.80 +$29.80!!! O/n high $1326, highest since the huge drop on 6/20!!! Crude closed at $108.05 +.01 – BUT with a new intraday rally high of $109.32!!! It is well above the 40/50 day m/a’s (98.48/97.87) – both up sharply, while the 200 day ($93.06), also rising is distant support. First support is $104.21-36 – a triple bottom from 7/10-7/12. 4/18’s low of $85.61 was lowest since 12/11! It is slightly higher overnight at $108.40 +.35 on a narrow inside session. The range is now $85.61-$109.32 since March 1, 2012.

Some random thoughts:

When are we all going to stand as a group and scream: we’re mad as hell and not going to take it anymore…not from Congress…not from the financial sector…not from Jamie Dimon and Lloyd Blankfein who spit in our faces daily…and certainly not from the Fed, and SEC? When will we stand on our hind legs and yell: enough is enough? Will it be after the top 1% owns all the assets? This is how you destroy a democracy.

Surprise, surprise…an investment in a few forklifts has made $5 billion for Goldman Sachs over the past five years while slowing the flow of aluminum from the producers to the end users. Isn’t that special? Oh, and how did they do this? With a special exemption from of all places…your Federal Reserve…that Goldman infested organization who is supposed to protect we, the people, from the banks (and faux banks), adding about one cent a can to soft drinks and other goods. A pittance…except en toto.

Ah, but thanks to the New York Times, that bastion of liberals, the game may now be over as the Fed, who was ready to renew the exemption from trading limits proposed by the CFTC, is sheepishly rethinking and it seems has no choice but to pull the pin on this lucrative scam. Free market capitalism, my derriere!

But let’s look back before the financial crisis: specifically from February 2008 to – you’re gonna love this 7/11/08…any gamblers out there? Anyone recall what happened and drew attention to Wall Street then? Okay, here goes…Crude in five months rose from $86 a barrel to an all-time record $147.27 – a 170% increase. Why? Middle East turmoil? No, because the banks and brokers taking advantage of an exemption to CFTC rules were stockpiling crude in storage tanks all over the eastern states. Surely, you recall this, right?

What began as the ‘sheep’ – aka pension fund consultants and advisors recommended that the funds diversify into commodities…so, the banks were only too willing to appease their appetites…except the volume exceeded the demand for commodities index swaps.

There are two main commodities indices: the CRB Index which underweights energy and overweights grains, and the GS Commodities Index which grossly overweights energy and is the more popular among those involved in energy…natch!

While the CRB weight is about 35% energy, the GS Commodity Index as of May 2008 was 78.65% energy (40.73% CRUDE!!!). So? The more commodities index swaps that were done…again with banks and brokers having no limits…the more they rose. In addition, due to such visible demand what did the banks/brokers do? The obvious thing: they front-ran the orders so as to profit from creating the swaps. That, not a Mid-East crisis or shortages (except the ones they created), was what drove oil to those record highs! What kind of regulator would allow that to happen…uh…a friendly one (TB is being tactful and kind here)? Of course, once 60 Minutes did an expose on them the game was over…ah but that wasn’t until April 2009!!!…nearly a year late:  60 Minutes oil speculation

But worse than what they did to oil was what they did to food prices and inflation and creating famine…but hey, who cares? Are you beginning to see why TB is so angry at the big banks, Congress, the Fed, and the SEC??? Disgusting. Why would any responsible citizen buy or hold stock in JPMorgan, Goldman Sachs, and the others involved? Too make money, idiot! Isn’t that what life is all about? …and death?

So will the aluminum hoarding story become a 60 Minutes special? Will we have to wait a year for them to get it together? Will anyone pay for it? Will Larry Summers be Fed Chairman by then and give them a pass? You decide but it makes TB sick!

Free market capitalism is a myth…Milton Friedman didn’t get it…or perhaps he was blinded by those involved. Sad to create a monster and not benefit financially from it…seems that’s the least one can do, right?

What kind of country have we become? But the Tea Party mentality GOP continues to coddle and cater to the perps…Dems too but the scale is incredible. Meanwhile, we have a Congress that can’t accomplish a thing…ok, the House can vote down Obamacare 39 times and according to John Boehner will continue to do it until they win in the Senate.

See you have to cut government spending and safety nets in order to not have to raise taxes on those who have created the mess…is this a country you can be proud of? Not TB!

Have a reflective day!

TB

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