11/20/13…strange brew…very strange!

Today’s Quote from the Friars Club Encyclopedia of Jokes: “A woman’s dress should be like a barbed-wire fence – serving its purpose without obstructing the view.”  – Sophia Loren

Bloomberg Quote of the Day: “How much better it is to weep at joy than to joy at weepings.” – William Shakespeare

TB’s Thought for the Day: When asked how much money is enough, Ivan Boesky said, you don’t get it, the money is just a counter…it’s about having more than anyone else.

Bloomberg Top Stories:

*Retail Sales in U.S. Rose More Than Expected in October Even With Shutdown

*U.S. Consumer Prices Drop for First Time in Six Months as Fed Under Target

*Sales of U.S. Existing Homes Decline to a Four-Month Low on Rates, Supply

*Gold, Silver Fall Before Fed Minutes as Stocks, Treasuries Little Changed

*McKinsey Says Investment Banks Should Combine Stock, Fixed-Income Trading – ???

*Bernanke Sees Key Interest Rate Staying Low Long After Bond Purchases End -!!!

*Deere Full-Year Forecast Tops Estimates as Construction Demand Seen Rising

*JPMorgan $13 Billion Mortgage Deal Seen as Shield Against Further Lawsuits – oh?

*Russia Revokes Master-Bank’s License Amid Allegations of Money Laundering

*Toronto Borrowing Costs Rise as Mayor Ford’s Drug Scandal Weighs on City

*Barrick Flips Fortunes as Biggest Gold Miner Suspends Dig in Canada

*Porsche Macan Compact SUB Chases Land Rover as SUVs Dwarf 911 Demand

*Yellen’s Nomination as Fed Chairman Wins Republican Backing as Votes Near

*Swiss Rage Against CEO Pay Provokes Sunday Vote on Manager Salary Limits – coming soon to a country near you…very near!

*Iranian Nuclear Deal Is Sought in Geneva Following Objections From Israel

*Chinese Hackers Seen Exploiting Microsoft Cloud Computing to Spy on U.S. – !!!

*Obama Intensifies CEO Outreach as Tea Party Movement Draws Corporate Ire

*Abortion Clinics Closing Across U.S. as Foes Refine Tactics – more extremists!

Tuesday’s Market Summary:

Strange brew indeed! Stocks opened slightly higher then declined. Worst was Dow Transports -0.8%, followed by Dow Utilities -0.8%, while the Dow and S&P 500 were off just 0.1% and 0.2% respectively? The Russell 2000 and both Nasdaq’s fell 0.3%-0..5% NYSE Financials were off 0.2% with big banks higher?

NYSE Volume stagnated again for a fifth day 3.2B shares vs 3.15B shares vs 3.24B vs 3.13B vs 3.35B – all below average of about 3.6B shares. REAL NYSE Volume also stagnated at a below average 646M shares vs 655M vs 796M shares (the only time above 700M last week) – the prior Monday’s was 538M shares was lowest since August 5th !

Advance/Declines and Breadth were both negative for a second day. New 52 week highs plummeted to 171 vs 514 vs 430 vs 444 vs 331 vs 226, while new lows nearly doubled to 93 vs 56 vs 66 vs  102 vs 93 vs 64 (Vets Day – never short a thin market). VIX closed modestly higher at 13.40 +.30, above 13 for a second day which stopped the six closes below 13, AND negating Fridays low print of 11.99, first time below 12 intraday. Yesterday’s high was 13.68!

Bonds closed lower – led by the long TIP which lost 1-1/8! Gold closed up slightly but tanked by $15 on Monday, while Crude remained moribund..

The Nasdaq 100 declined by 11 points (-0.4%), following a 1%, 31 point drop declining! Compare to positives of +9:1, +1.5:1, +1.1:1, +9:1, and -13:1…warning signals? Just TWO members lost more than a point and three barely gained a point: MSFT -3.4 vs -5 vs -1.1 vs -1 vs +6 vs -1.8 vs -1.3 vs +1.9 vs -4.7 vs +11.3!!! vs +5.2; GOOG -1.6; ADP +1; GILD/BIIB +0.9 (fudged it). Not a leader but… APPL -5.2 vs -2.5 vs +6 vs +0.1% vs +0.1% vs -1.1 vs +6.6 vs -6.7 vs -3.9 vs -0.9 vs +5.4;

Twitter (TWTR) see commentary along with BBY/JPM/C/WFC/BAC.

Dow 30 -0.1% vs +0.1% vs +0.5% vs +0.4% vs +0.5%; Dow Transports -1% vs -0.3% vs +0.7% vs +0.3% vs +0.6%; Russell 2000 -0.3% vs -0.8% vs +0.4% vs -0.1% vs +1%; Dow Utilities -0.8% vs flat vs +0.6% vs +0.9%! vs +0.2%; S&P 500 -0.2% vs -0.4% vs +0.4% vs +0.5% vs +0.8%; Nasdaq Composite -0.4% vs -0.9% vs +0.3% vs +0.2% vs +1.2% vs flat; NDQ 100 -0.3% vs -1%! vs +0.2% vs +0.3% vs +1.2%. Caution!

*NYSE Volume stagnated at a weak 3.2B shares vs 3.24B vs 3.15B vs 3.13B vs 3.35B. The record high (?) is 4.82B shares on Q3 end of quarter while 2.52B is 4th weakest of 20131.96B is the low). REAL NYSE Volume slipped to another below average 646M shares vs 655M from a high 796M vs 633M shares vs 678M vs 652M vs 538M, lowest since August 5th (2.06B shares on the Sept. expiry was 3rd highest ever: 6/30/06 3.38B; 7/12/02 2.29B while 482M on 7/3 on a shortened trading session is the 2013 low). The 12-month average is 722M shares. The average since 6/28’s 1.75B share day is just 699M shares, ranging from 482M to 2.025B shares on 9/20. There have been just EIGHT 1B+ share sessions! There have been 37 800M+ shares in 2013: 16 up, 19 down, and two mixed.

*New 52 week highs have ranged from 33-864. They plummeted to 171 vs 514 vs 430 vs 445 vs 331 vs 226. Recent high is a super-strong 890!!! New lows rose to 93 vs 56 vs 66 vs 74 vs 102.  

  1. Advance/Declines were negative again: -2.1x vs -1.6x vs +1.9x vs +1.9x vs +2.2x (recent range -17.5x to +6x) on NYSE and -1.7x vs -1.7x vs +1.5x vs -1.1x vs +2.3x (recent -4x!!! to +3.8x). Breadth was similar: -2.2x vs -1.9x vs +2.3x vs +2.4x vs +4.3x (recent -18.6x!!! to +7.2x!!!) on NYSE and -1.6x vs -3x vs +2x vs -1.1x vs +5.5x (recent -12.8x to +6.5x).  
  2. NYSE Financials slipped 0.2% vs +0.6% vs +0.6% vs +0.8% vs -0.7%. BofA most active soaring 1.9% vs flat closing at $15.21 +.28– highest since 1/14/11!!!. It had struggled since hitting $15.03 on 8/1. Brokers +0.3% vs -0.1% vs +0.9% vs -0.5% vs +1.3%; KBW Banks +0.1% vs -0.1% vs +0.3% vs +0.6% vs +0.9% vs -1.1%; Nasdaq Banks -0.2% vs flat vs -0.2% vs +0.3% vs +0.9%.
  3. Volatility (S&P VIX) rose for a second day afterr trading to 11.89 eradicated Friday’s close of 12.19, ending up at $13.40 +.30 with a range of 12.88-13.68… still only the 9th day to close with a 13 handle since 8/13! The recent range is 11.83-21.01!!! Since March 11th the average has been just 14.44…way below the five year average of 23.32~~~ and the 40/50/200 day: 14.56/14.44/14.36!!! It peaked at 22.79 on 12/28/12…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

Global stocks lower ex-Hang Seng: UK -0.2% vs 0.5% vs +0.5% vs +0.5% vs +0.4%; France -0.3% vs -0.9% vs +0.8% vs +0.3% vs +0.7%; Germany -0.1% vs -0.2% vs +0.7% vs +0.3% vs 0.7%; Japan -0.3% vs -0.3% vs flat vs +2%! vs +2.2%!!!; Hang Seng +0.2% vs +2.7%!!! vs +1.7% vs +0.8% vs +1.4%; Korea -0.7% vs +1% vs +0.3% vs +1.9% vs +0.2%; India -1.2% vs +0.2% vs +2.2%!!! vs closed vs -0.4%; U.S. stock market opening mixed: DOW +4; SPX +1; NDQ +5 – Dow Transports -9.7%!

Bonds gave up ground again and barely up overnight: 10 yr Treasury 2.70% +1/16 (recent range 1.63% to2.99%), and the30 yr range 2.67% to 3.90%, 3.80% +1/16. The long TIP is 1.51% -3/16. The (record?) low of 0.36% was set on 4/5. Recent high yield: 1.63%! Libor update: 0.238% 3 mos,0.350% 6 mos. (both at or setting new record lows!). Foreign bond yields little changed and mixed again: Germany 1.72% flat; UK 2.73% +1; France 2.20% +1; Italy 4.09% +3; Spain 4.09% +3; Portugal 5.97% +6; Greece 8.37% +5. Recently: 7.71% – 12.57%. Japan 0.60% -1.

Gold barely rose a day after falling $15. A week ago the high was $1293.80! It closed at $1274.60 +$2.30. The recent low is $1251 on 10/15 – lowest since 7/10. Recent high was $1375.40 on 9/19.  6/27’s intraday low was $1179.40 – lowest since at least 2011 and critical support. $1300 remains psychological resistance with major res now at the 40 day ($1310) and the 50 day ($1314), both dropping. Major resistance at $1375, the 9/19 high. The 200 day is at $1405. Overnight it is $1256.30 -$17.20, low $1255.30.

Crude closed slightly higher at $93.35 +.32,but with a session low of $92.43, lowest since 6/4. It couldn’t hold on to Friday’s slight high of $94.55. It has shown no sign of strength since 9/18’s surge to $108.49. 9/19’s session high was $108.99! Recent rally high and close are $110.70 and $110.53 respectively. It is way below the 40/50 day m/a’s ($98.65/100.16), both dropping rapidly now, and major resistance! The 200 day ($98.57) and converging with the 40 day!!! Thus very major resistance. 4/18’s low of $85.61 was lowest since 12/11! The recent range is $85.61-$112.24 since March 1, 2012. Overnight is slightly weaker at $93.15 -.19.

 

Some random thoughts:

…strange brew, here are lyrics from the Cream album:

Strange brew, kill what’s inside of you

She’s a witch of trouble in electric blue
In her own mad mind she’s in love with you, with you
Now what you gonna do?
Strange brew, kill what’s inside of you

One of TB’s biggest concerns is the widening of the wealth gap. It has reached unsustainable portions. Here is a visual presentation it is explained…and it ain’t pretty:

http://www.utrend.tv/v/9-out-of-10-americans-are-completely-wrong-about-this-mind-blowing-fact/

Yesterday’s margin debt piece is supplemented today by one on whether there is a stock bubble, courtesy of iShares/BlackRock:

http://us.ishares.com/content/stream.jsp?url=/content/en_us/repository/resource/Investment_Directions.pdf&mimeType=application/pdf&c=DR2&cmp=emaildigest&chn=EMC

The battle rages…are we in a bubble? Are stocks a good buy? Fair value (doesn’t buying at ‘fair value’ imply little chance for a rally? While the stock market has delivered solid returns over the past 12 months…the S&P 500 return since the 12/31/2007 peak, the annualized price return is just 4.21%, reinvesting dividends it is 6.54%…not bad but reinvesting dividends in just T-Bills produces a 5.74% return. To 6/30/13, it is just 1.65%/3.91%/3.29% respectively…again note how close even piddling T-Bill returns come to reinvesting in the index! Hardly impressive and horrible if you are a pension fund. When are they going to get real on the return assumptions? Never! Not in their interest.

Here are a few   stocks from yesterday to prove the point, starting with the headline makers yesterday:

Tesla (TSLA) – despite three fires in five weeks on the new ‘S’ model, prompting a federal investigation, the stock ROSE 3.7%, but since the 9/30 high it is off 35%! Still, the 12 month return is 283%!!!…for an innovative stock but one whose sales forecasts are highly doubtful.

Twitter (TWTR) – it closed at $41.75 +.61 yesterday. Since the IPO it is up 60.5% but from the first day’s high/close it is -16.7% and -5.1% respectively. IF you got shares in the offering, kudos…but you are likely a hedge fund that was profitable to Goldman and the rest of the ‘team’ and even more likely primed it to the highs and bailed on the first day of trading! TB still expects to see it go lower soon…a la Facebook, etc.

Best Buy (BBY) – hyped in the press lately but as TB said, why do you want to buy a stock when the founder and largest shareholder is selling? Sheesh! Yesterday it fell 11% on lower sales and margins and since the 11/11/13 high it is off 17.5%! Hmmm

JPMorganChase (JPM) – once again the legend of Jamie Dimon supercedes fact. A record $13 billion fine and some admission of guilt opening them to possible (but highly doubtful) criminal prosecution, the stock rose 0.7% and is very close to its 5/24/13 record high. Sure, they over-reserved, natch, but keep in mind the shareholders once again bear responsibility for ‘fearless leader’s’ actions…doesn’t the top instill the ethics? You bet! Oh, and don’t believe their ‘spin’ that these risky loans came from a bank they acquired. Bullshit! They packaged them and sold them to investors…that is the issue not just the loan origination. Can Goldamn, now a ‘bank’, or Morgan Stanley, be far behind?

Bank of America (BAC) – despite likely being drawn in with JPM on the mortgage fraud, the stock also rallied, was the most active NYSE stock as usual, and closed above $15 for the first time since August…+1.9%. TB doesn’t get it…do you?

Wells Fargo Bank (WFC) – ah, through their sub, Wells Fargo Mortgage, the biggest originator of risky loans – none of which appeared on THEIR balance sheet. Instead they retained the unsecure portion expecting them to be refinanced and thus earning more…until it all came tumbling down and they were stuck. Closed +0.3%

 

Citigroup (C) – despite a whistleblower’s memo’s to senior management – including Bob Rubin who conveniently doesn’t recall them – they continued to originate and package risky loans and sell to unsuspecting investors. Stock rose 0.7% yesterday.

Note that Moody’s and S&P were both complacent in accepting models provided for by the originators. Secondly, the procedure was to randomly select loans and throw out ones that did not meet the standards…however…they were allowed to submit them again up to a total of THREE times which, with a random selection process, meant it was unlikely one of these loans would appear again and be rejected.

You have to love those financial stocks? Don’t you think we are in a bubble? A big one?

TB

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