12/12/13…strange bedfellows at the Nobel

Joke of the Day from the Friar’s Club Encyclopedia of Jokes: He’s so stupid he studied five days for a urine test.” – Norm Crosby…sounds like a potential Congressman!   

Bloomberg Quote of the Day: “One sees great things from the valley; only small things from the peak.” – G.K. Chesterton, but as Henry Kissinger said of Nixon ‘it was as if he were standing on top of a mountain looking over the valley and over the next mountains.’

Bloomberg Top Stories:

*Retail Sales in U.S. Rose in November by Most in Five Months on Discounts – but???

*First-Time Jobless Claims in U.S. Surge in Week After Thanksgiving Holiday!!!

*U.S. Stock Index Futures Little Changed After Retail, Jobless Claims Data

*JPMorgan Is Said to Agree on $2 Billion Payment to Resolve Madoff Probes – once again a ‘perp’ …where does it end and the love affair with Jamie Dimon???

*World Led By U.S. Poised for Fastest Growth Since ’10 as GDP Exceeds 3.3%

*Peugeot Drops on $1.5 Billion Charge as GM Deal Savings Fall Short of Plan

*Draghi Builds Stress Test Credibility as ECB Readies Euro-Area Bank Review

*Budget Accord in U.S. Heading for Passage by Limiting Scope to Ease Cuts

*Biggest Economic Boost From U.S. Budget Deal Is Optimism on Eased Gridlock

*Republican-Tea Party Tension Rises as 41% in Poll Unhappy With Candidates!!!

Wednesday’s Market Summary:

Once again folks…above average volume…DOWN day! Friday was a fluke!!! Both Dow Transports and the Russell 2000 were the goats -1.6%! The two Nasdaq indices lost 1.3%

The S&P 400 lost 1.1%, Dow -0.8% while Dow Utilities continued their losing streak: -0.9% vs -1.1% vs -0.5% vs -1.2%! Where is the love??? There you have it…stocks (including dividend payers), bonds, commodities all down…read and heed. The next six days leading up to the final options expiration of the year will be highly volatile!

Big story in the VIX which after falling sharply Friday and Monday from 14.09 to 13.50  rose 10.9% to 15.42 +1.51 closing at the high! NYSE Volume rose to an average 3.48B shares from a weak 3.08B vs 3.11B vs 3.13B vs 3.32B. The 12-month low of 1.59B shares was 10/29! Real NYSE Volume surged to an above average 741M shares vs 633 vs 696M vs 671M vs 700M.

Advance/Declines and Breadth were VERY NEGATIVE. New 52 week highs were halved to 112 vs 199 vs  322 vs 326, while new lows doubled to 239 vs 123 vs 125 vs 149 vs 190.

Bonds were weak and now closer to the high yields of August and November: 30yr 3.92-3.93%! Gold closed slightly lower, and overnight has negated Tuesday’s rally from a session high of $1267.50, highest since 11/20! Three days ago it printed a new low of $1210.10! Last Wednesday’s ‘positive key reversal’ off that low has been negated as was the prior one! Crude also weak giving back virtually all of Tuesday’s gains! Seven days ago it printed a new low of $91.77 – lowest since June 3rd!

The Nasdaq 100 lost 45 points vs -2 vs +12 vs +26.5vs -5 vs -3.7 vs -2.Breadth was -11:1!!! vs 1:1 vs -9:5 vs +4.8:1. More than a dozen members lost more than one index point, while none gained anywhere near a point: MSFT -3.7 vs +4.2 vs +2.3 vs +2.7 vs -7 vs +4.7; APPL -3.4; GILD -3 vs -3.2 vs +1.6 vs +1.1 vs +1; AMZN -2.3 vs +1.2; GOOG/INTC -1.8; CELG -1.7….and many more!

Dow 30 -0.8% vs -0.3% vs FLAT vs +1.3%! vs -0.4%; Dow Transports -1.6%! vs -0.7% vs +0.4% vs +0.6% vs flat; Russell 2000 -1.6%! -0.9% vs -0.2% vs +0.8% vs -0.9%; Dow Utilities -0.9% vs -1.1% vs -0.5% vs +1.1% vs -0.9%; S&P 500 -1.1%! vs -0.3% vs +0.2% vs +1.1% vs -0.4%; Nasdaq Composite -1.4%! vs -0.2% vs +0.2% vs +0.7% vs -0.1%; NDQ 100 -1.3%! vs -0.1% vs +0.3% vs +0.8% vs -0.2%.

*NYSE Volume rose to near average – once again on a DOWN day! 3.48B shares vs 3.08B vs 3.11B vs 3.13B vs 3.32B vs 3.6B vs 3.44B vs 3.08B vs 1.59B (12-month low). The record high (?) is 4.82B shares on Q3 end of quarter while 11/29’s 1.59B is weakest of 2013, replacing 1.96B as the low). REAL NYSE Volume rose to a well above average 741M shares, highest since 11/26, vs 633M vs 480M vs 674M vs 700M vs 756M vs 770M. Since 11/11 the high is 828M shares on 11/26! The 12-month average is 722M shares. The average since 6/28’s 1.75B share day is just 696M shares, ranging from 482M to 2.025B shares on 9/20. This year there have been just NINE 1B+ share sessions! There have been 38 800M+ shares in 2013: 16 up, 19 down, three mixed.

*New 52 week highs have ranged from 33-864. They plunged again to 112! vs 199 vs 322 vs 326 vs 145 vs 153 vs 151 vs 332 vs 560. Recent high is a super-strong 890!!! New lows doubled to 239! vs 123 vs 125 vs 149 vs 190 vs 126 vs 132 vs 108 vs 35.

  1. Advance/Declines were VERY negative: -4x! vs -1.5x vs 1:1 vs +2.6x vs -1.9x (recent range -17.5x to +6x) on NYSE and -3.3x! vs -1.9x vs -1.4x vs +2.1x vs -1.2x (recent -4x!!! to +3.8x). Breadth was worse: -6x!!! vs -1.5x vs +1.7x vs +2.4x vs -2x (recent -18.6x!!! to +7.2x!!!) on NYSE and -3.6x! vs -1.1x vs 1:1 vs +1.8x vs -1.5x (recent -12.8x to +6.5x).  
  2. NYSE Financials fell by 1.3%! vs -0.3% vs -1% vs +1.3% vs +0.8%. BofA most active -2%!!! vs -0.1% vs +0.2% vs +0.8% vs -1.3%, closing at $15.25 -.31. 11/25’s 12-month high was $15.98, highest since 6/1/10. Brokers -1% vs flat vs flat vs +1.6% vs -0.6%; KBW Banks -1.4%! vs -0.3% vs +0.3% vs +1.4% vs -1%; Nasdaq Banks -1.2% vs -0.9% vs -0.4% vs +1.7%! vs +0.1%.
  3. Volatility (S&P VIX) SURGED 10.9% to close at 15.42 +1.51!!! Session high was just a tick higher at 14.43, low 13.98. This obliterated the ‘island formation’ from 14.22 (note this was Tuesday’s high!)-15.71, 12/4’s range!?! It is now above the 40/50/200 day m/a’s: 13.46/14.25/14.33!!! 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 It peaked at 22.79 on 12/28/12…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

Global stocks weaker across the board: UK -0.5% vs +0.3% vs -0.5% vs – vs +0.5% vs +0.1%; France -0.1% vs +0.8% vs -0.7% vs – vs +0.3% vs -0.1% vs -0.9% vs -1.8%!!!; Germany -0.4% vs +0.1% vs -0.8% vs +0.4% vs +0.7% vs +0.1% vs -1% vs -1.3%!!!; Japan -1.1% vs -0.6% vs -0.3% vs +2.3%! vs -0.8% vs +1.5%! vs -2.2%!; Hang Seng -0.5% vs -1.7%! vs -0.3% vs +0.3% vs +0.1%; Korea -0.5% vs -0.8% vs -0.4% vs +1%! vs -0.2% vs -0.1% vs -1.1% vs -1.1%; India -1.2%! vs -0.4% vs -0.3% vs +1.6%! vs +0.2% vs +1.2%!!! U.S. stock indices opening lower…again.

Bonds closed weak again after grinding higher for two days and still have not recovered from Wednesday’s pounding for the fourth time since last August when the ‘tapering talk’ began closing at 3.89% -13/16 on the 30 yr while the 10 yr closed at 2.85% -7/16! Mixed overnight??? 10 yr Treasury 2.87% -1/8 (recent range 1.63% to 2.99%), and the 30 yr 3.88% +3/16 (recent range 2.67% to 3.92%). The long TIP is 1.59% +1/8. The (record?) low of 0.36% was set on 4/5. NOTE recent high yield: 1.63%! Libor update: 0.243% 3 mos, 0.344% 6 mos. (both above record lows!). Foreign bond yields higher: Germany 1.84% +3; UK 2.91% +5; France 2.44% +3; Italy 4.09% +4; Spain 4.09% +6; Portugal 6.00% +7; Greece 8.57% +4. Recently: 7.71% – 12.57%. Japan 0.65% +1.

Gold closed lower on an ‘inside session’ with a narrow range at $1257.20 -$3.90 a day after trading to $1267.50, highest since 11/20. Last Friday’s low was $1210.10, lowest since 6/28. Recent high is $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 at the 40 day ($1285!) and the 50 day ($1289!), stabilizing. Major resistance at $1375, the 9/19 high. The 200 day is a $1377. Overnight it is WEAK again at $1235.30 -$21.90 with a low of $1232.10, negating the rally, again!

Crude was slammed giving back nearly all of Tuesday’s gains at $97.44 -$1.07 on a parallel session creating a double top at the high of $98.75 not seen since 10/22. Seven days ago it printed a new low of $91.77, lowest since 6/3!!! The record high of $114.83 was on 5/2/11, the low since on 10/4/11 was $74.95: $93.60 is the midpoint!!! This is the first time it has shown any 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 remains above the 40 day m/a ($95.94!) but is now almost to the 50 day (97.29!), both still dropping AND major sup/res! The 200 day is $98.58, and 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 it is a tad higher at $97.85 +.41 in an insides session.

Some random thoughts:

First, how wonderful that TIME named Pope Francis their ‘person of the year’? How fitting…a wonderful man and example to the hierarchy in the church.

Now on to something very strange. The Nobel Prize for Economics was awarded to Robert Schiller who clearly deserved it, BUT they split it with the ‘defrocked’? Eugene Fama for his work on efficient markets. Now Schiller is the one that proved that pricing is not rational or efficient – twice, stock market AND mortgage market! Meanwhile Fama along with the other ‘efficient market’ apostles like Burton Malkiel, have indoctrinated thousands of CFA (Chartered Financial Analyst) candidates that markets are efficient so don’t try to beat them, just remain fully invested (Of course they gave it to Robert Mundell for creating the Euro…see a good idea doesn’t mean it works!). Doesn’t anyone remember that the cause of the stock bubble, or at least what exacerbated it was Greenspan’s frantic easing at the end of 1998 due to the implosion of the darling, Long-Term Capital (mis)Management, which had two of these guru’s on its board. Myron Scholes and Robert Merton who shared the Prize in 1997 for ’a new way to price derivatives’! Funny thing on this….Scholes believed in it until the end going so far as to solicit new capital along with former Salomon Brothers head arb trader John Merriwether. To which Scholes allegedly said, “Myron, it’s just a theory, it doesn’t mean it works.”

Schiller has been TB’s idol since he appeared in a debate on the stock market put on by CNBC. He was ridiculed, made a fool of, but he never lost his demeanor! He just sat quietly through their harangues on Dow 50,000 etc. Then a few years later, he was in a similar debate on the housing market, with mortgage traders and David Lareah, at that time chief economist for the National Association of Realtors, and now head of a real estate investment advisory firm called Reecon Adivisors. ReCon??? Here are some of hs books you ‘might’ want to purchase: Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade—And How to Profit From Them[6] was rereleased in February 2006 as Why the Real Estate Boom Will Not Bust—And How You Can Profit from It.[7]

Having been battle-scarred by the stock market debate, he sat calmly with a slight smirk on his face while he was brutalized by Lareah and a head mortgage trader…neither talking from position of course!

That’s enough for today…but TB is very happy for Dr. Schiller…well done!

TB

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