12/27/13…Scientology…religion or cult?

NOTE: today’s commentary has nothing to do with investing but everything to do with decay in our society.

Joke of the Day from the Friar’s Club Encyclopedia of Jokes: My sex life if very bad. If it weren’t for pickpockets, I’d have no sex at all.” – Henny Youngman

Bloomberg Quote of the Day: “We make a living by what we get, we make a life by what we give.” – Sir Winston Churchill

Bloomberg Top Stories:

*Stocks in Europe Extend Their Winning Run as Bonds Decline, Dollar Weakens-and yen

*Erdogan Political Crisis Slams Lira, Stocks as Foreigners Dump Turkey Debt

*Treasury 10-Year Yield Rises to 3% on Bets Fed Will Reduce Debt Purchases – but will they after consumption slows and housing demand wanes??? THINK…for yourself!

*Latin America Currency Rout Seen Extending Into 2014 as Short Wagers Jump

*European Credit-Market Slump Stymies March Toward $4 Trillion Sales Record

*Japan Inflation Rising to Highest Since ’08 Raises Stakes for Wage Talks

*Pound Rallies to Two-Year High as Falling Unemployment Seen as Growth Sign

*Colombia Plans Raid to Shut Down Rebel FARC Tungston Mine Supplying World !!!

*UPS Holiday Shipping Delays Slow Perils of Stores Overpromising on Gifts – & UPS!

*Distant Billionaires Rent Addresses in South Dakota to Dodge Taxes Forever – Tea Partiers take note…these and the Koch brothers are what you are defending!

*Erdogan Says Widening Graft Probe Aims to Derail Attempt to Build Turkey – uh huh!

*South Sudan Government Agrees to End Hostilities, East African Leaders Say

*U.S. Budget Easing Automatic Cuts Signed by Obama Along With Defense Bill – sad!

*Nine Decades of Subjugation Unchanged by Reforms for India Women – a  travesty!  

 Thursday’s Market Summary:

The Dow surged to yet another record high, it’s fifth straight, at $16483 and closed just three points lower! This time the point game was solid – 125 points! Oh, but you know how TB can denigrate such an achievement on a little thing like…volume! Yep, it bounced…what else could it do from that pitiful 1.3B share level? Well…it could creep to a feeble 1.97B shares from the 1.3B share 12-month low of Christmas Eve’s shortened session as did REAL NYSE Volume which only rose to 421M shares, second lowest in last 12-months following Tuesday’s 12-month low of just 272M – compare and contrast to the 12 month average of 4212M shares! Disregard everything that happened the last two sessions and do yourself and your clients a favor and question how confident you are that the ‘rally’ (sic) will continue past January.

The Dow took honors with a 0.8% gain, followed by the S&P 500 +0.5%. Modest gains in the other indices of 0.2-0.4% except the Russell 2000 small cap which rose just 0.1%.  Dow Utilities were the goat…again, DOWN 0.4% vs +0.4% vs -0.3%…again the only loser as it was on Monday!

A Bloomberg ‘top story’ yesterday was a warning from S&P (despite the fact that they couldn’t tell a risky mortgage from a gift card!) on excessive leverage of corporations taking advantage of gullible investors and artificially low Fed-induced interest rates (would you rather have deflation?…if you said yes, go to the rear of the class). The last time the Fed issued such a warning (for corporations, not the U.S. Treasury, or U.K.), was in 2007. Market mavens will recall that was the year stock prices peaked (Dow and S&P on 10/11/07). But wait…there’s more as the TV hawkers might say: NYSE Financials peaked five months earlier on 6/4/07…and had fallen by 4% by then…the canary in the coal mine? You decide! Now perhaps, you see why TB follows financials so closely. He also watches the NDQ 100 closely…THAT index peaked on FEB 16th! In case you haven’t noticed the Nasdaq’s are slipping: 3 mos: +10.2%/11%; 12 mos. +39.6%/36.2% (note the Composite is higher than the 100. Now look at Apple, one of THE main reasons for the Nasdaq indices success (by the way it peaked on 12/26/07 but took that out on 10/19/09, way ahead of the market. For the 12 months it is up 16.7%; 3 mos 12.2% – and don’t forget it adds significantly to the S&P 500! Are we due for a 10-20% correction?…as always, you decide. Just don’t shrug it off…why do so many big money manager hold so much in cash?…if you said yield, well…you know!

How about the new idol? Berkshire Hathaway which lagged during the dotcom boom and only began its meteoric rise after the 2000 crash. It was a market performer beginning in 2009…wasn’t everything? But came to fame in its run from Nov. ’12 to July 22nd of this year…and has flatlined since: 3 mos. +32.2%; +2.7%!!! Even apples fall from trees.

Indexing lovers…you all know how John Bogle (of Vanguard fame) touts indexing…mainly to the S&P 500…as ‘no one’ consistently beats the market. Maybe because he and the ‘random walkers’ have viewed it wrong. You are aware of the ‘dogs of the Dow’ theory, right? Buy the worst performing Dow stocks of the prior year and they will outperform the index. A new study shows something even more interesting: the stocks that are removed from the S&P 500 (and TB would dare say the Dow), do well after being removed. This is due to one of the major biases of indexing: not only is the S&P cap weighted but they and the Dow replace the dull stocks with high-flyers which may or may not have already had their run…they don’t think they have peaked but they have a lot of gains behind them and…well…trees don’t grow to the sky! …or do they?

The trick here is that the funds…mainly the indexers are forced to dump them and buy the ones that have already appreciated…this drives the price of the ‘losers’ even lower and thus produces solid returns the next year. Capische? Damn, how did TB become so smart?… he isn’t but he does think about the ‘why’s’ – do you? Do analysts? You decide.

Moving beyond volume, Advance/Declines and Breadth were only modestly positive while the VIX not only declined again to 12.33 -.15 – but with a session low of 11.69, lowest since 3/15/13 – from which it began its ascent. A primer: the VIX (this one is on S&P stocks), is the ratio of puts to calls…thus when it is LOW it indicates heavy buying of calls, and when it is high PUT buying…think of this like Consumer Sentiment. For tax and other reasons you don’t sell when you are worried but you can buy protection so you don’t overpay for a stock or get hammered on a decline. Clearly, potential buyers would rather have the ‘right’ to purchase stocks here then to buy them. The volume supports this theory! They have so many ways to get you…buy many options in your IRA/401(k)?

The Nasdaq 100 gained 12 points vs 3.4 vs +38 vs +32.5 vs -11 vs +40. Breadth was positive again at +3x vs +1.2x vs +2:1 vs +4:1 vs +4:1 vs +3:1. Just five members gained more than an index point, led MSFT again, while AAPL dragged it back down along with EBAY:  MSFT +2.7 vs +3.4 vs -1.1 vs +3.8 vs -2.4; AMZN +2.1; AMGN +1.4; GOOG +1.4; INTC +1.2. The two losers: APPL -3 vs -2 vs +3.4 vs -3.4 vs -2 vs +2.5 vs -4.9; EBAY -1.3.

Dow 30 +0.8% vs +0.4% vs +0.5% vs +0.3% vs +0.1% vs +1.8%!!! Dow Transports +0.3% vs +0.4% vs +0.4% vs +1.1% vs flat vs +1.2%; Russell 2000 +0.1% vs +0.4% vs +0.9% vs +0.9% vs -0.7% vs +1.3%; Dow Utilities -0.4% vs +0.4% vs -0.3% vs +1% vs -0.7% vs +1.2%; S&P 500 +0.5% vs +0.3% vs 0.5% vs +0.5% vs -0.1% vs +1.7%; Nasdaq Composite +0.3% vs +0.1% vs +1.1% vs +1.2% vs -0.3% vs +1.2%; NDQ 100 +0.3% vs +0.1% vs +1.1% vs +0.9% vs -0.3% vs +1.1%.

*NYSE Volume rose but only to the 2nd lowest of the last 12 month! 1.97B shares from the 12-month low of 1.3B vs 2.83B vs 4.97B one of the three highest of all time on options expiry, vs 3.49B vs 4.29B. The record high (?) is the 4.97B shares of 12/20 and Q3 end of quarter while 11/29’s 1.59B is weakest of 2013). REAL NYSE Volume also rose to a well below average 421M shares from the new 12-month low of 272M shares vs 611M vs 1.97B – highest since 9/20’s huge 2.06B shares, vs 701M vs 828M. The 12-month average is 721M shares. This year there have been just TEN 1B+ share sessions! There have been 39 800M+ shares in 2013: 18 up, 19 down, three mixed.

*New 52 week highs have ranged from 33-864. They rose to 659 vs 608 vs 698 vs 550 vs 304. Recent high is a super-strong 890!!! New lows cautiously crept up to a still weak 60 vs 44 vs 68 vs 81 vs 127 vs 131. Recent high is 353; low is 35!  

  1. Advance/Declines were modestly positive: +1.2x vs +2x vs +2.4x vs +3.1x vs -1.4x vs +3.6x! (recent range -17.5x to +6x) on NYSE and 1.1x vs +1.6x vs +2.6x vs +2.6x vs -1.6x vs +2.5x (recent -4x!!! to +3.8x). Breadth was similar: +2x vs +3.1x vs +2.9x vs +2.3x vs -1.14x vs +4x! (recent -18.6x!!! to +7.2x!!!) on NYSE and +1.2x vs +3x vs +4.3x vs +4.6x vs -1.3x vs +3.1x (recent -12.8x to +6.5x).  
  2. NYSE Financials rose 0.3% vs +0.2% vs +0.7% vs +0.5% vs +0.2% vs +2.1%! BofA 3rd most active: -0.3% vs +0.1% vs +0.6% vs -1%! vs +0.4% vs +0.4%, closing at $15.65 -.05. 11/25’s 12-month high was $15.98, highest since 6/1/10. Brokers +0.5% vs -0.3% vs +0.9% vs +1.8% vs -0.6% vs +1.8%; KBW Banks – vs +0.2% vs +0.9% vs +0.5% vs +0.1% vs +2.1%; Nasdaq Banks -0.1% vs +0.1% vs +1.4%! vs +1.3% vs -0.7% vs +1.4%.
  3. Volatility (S&P VIX) fell yet again closing at 12.33 -.15 The range was 11.69-12.50!!! 11.69 is lowest since 3/15/13!!! High for last week was 16.67! It is well below the 40/50 day m/a’s: 13.65/13.76, while the 200 day is 14.38. The recent range is 11.83-21.01!!! It peaked at 22.79 on 12/28/12…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

Bonds lost ground again! 30 yr closed at 3.92 -1/2 while the 10 yr closed at 2.99% -1/8. Long TIP closed 1.62% -1/2. Overnight they have BROKEN DOWN and are at multi-year highs…not seen since 8/3/11!!! Will 4% hold on the long bond? 10’s broke 3% overnight! Not good for housing…which was already showing weakness:

10yr 3.02% -3/16 (goodbye recent range 1.63% to 2.99%), and the 30 yr 3.95% -3/8 (and its recent range 2.67% to 3.92%). The long TIP is 1.64% -3/8. The (record?) low of 0.36% was set on 4/5. Just broke the recent high yield: 1.63%! Libor update: 0.247% 3 mos, 0.349% 6 mos. (both remain just above record lows!). Foreign bond yields higher across the board: Germany 1.95% +6!; UK 3.04%! +7!; France 2.55% +7; Italy 4.20% +5; Spain 4.20% +1; Portugal 5.96% +1; Greece 8.19% +15!!! vs -16 vs -11 vs -3 vs -11! Recently: 7.71% – 12.57%. Japan …0.69% –, Yen at multi-year low…traded at 105.03 overnight!!! Weakest since 10/1/08!!!

Gold still going nowhere with the third straight very narrow range day and but $1200 held, closing at $1213.30 +9.00. Last Friday’s low was $1188…at least still above Thursday’s $1186 – LOWEST since 12/31/02. Recent high is $1375.40 on 9/19. $1200 is sup/res, and $1300, psychological resistance with major res at the 40 day ($1257!) and the 50 day ($1272!). The 200 day is a $1358. Overnight it is slightly lower at $1211.20 -$1.10…zzzzzzzzzzz.

Crude traded in another narrow range, closing nearly unchanged at $99.55 -.02. Last Wednesday’s low was $96.26, lowest since 12/3. On 11/27 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 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. It remains above the 40 day m/a ($95.74) and the 50 day (96.38), both major support! The 200 day is $98.92, and also major sup/res! 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 slightly lower at $99.66 -.11.

Overnight markets:

Global markets higher following the return of the Europeans from ‘Boxing Day’: UK closed vs +0.2% vs +0.5% vs +0.3% vs +0.8%; France closed vs +0.1% vs – vs +0.1% vs +1%; Germany closed vs +0.9% vs +0.6% vs +0.5% vs +1.1% vs +1.1%; Japan – vs +1% vs +0.1% vs closed vs +0.1% vs +1.7% vs +2%!; Hang Seng +0.3% vs closed vs +1.1% vs +0.5% vs -0.3% vs -1.1%; Korea +0.2% vs -0.1% vs +0.2% vs +0.7% vs +0.4% vs +0.1%; India +0.6% vs +0.2% vs -0.3% vs +0.1% vs +1.8% vs -0.7% vs +1.2% vs -0.2%. U.S. stock futures higher in another very tight range: DOW +13 (range 41); SPX +0.50 (4); NDQ +1 (7) – want to be an o/n futures trader???

Some random thoughts:

Getting off beaten track today to something that is upsetting TB beyond belief, a book TB is reading called Beyond Belief, by Jenna Miscaivage Hill. If any of that sounds familiar you may have seen the interview with her on 60 Minutes. She wrote the book to expose Scientology for what it is…a cult! Her mother and maternal grandmother were both indoctrinated in it and her father and his brother (David Micaivage), were both high school dropouts. She saw the rapid rise of the ‘religion’ founded by L. Ron Hubbard (LRH to Scientologists), under the direction of LRH’s successor – her uncle, David Miscaivage (change the ‘v’ to and ‘r’ and you nearly have ‘miscarriage’ – of justice?

TB first became aware of Scientology while a reporter at Dun & Bradstreet. While responding to an inquiry, a colleague – an LAPD reserve officer – set him up to meet with LAPD intelligence which had large files on LRH and the ‘church’. The catch was I couldn’t write a word of it…strictly background. What I found was unnerving.

Later, while a L.A. County Sheriff (harbor patrolman), I ran across the sect again as one of their yachts was berthed at Marina del Rey…with armed guards wearing khaki’s and jackboots patrolling the decks. We could do nothing as they broke no laws.

But TB has continued to follow news on the church (sic), and its celebrity converts: John Travolta, Tom Cruise and Kelly Preston (no longer she due to them trying to separate her from her daughter), Lisa Marie Presley, and other Hollywood notables. A surprise in the book was that Greta van Susteren and her husband who are avowed Scientologists…hmmm.

As for the book, it reads like a diary of Jenna’s childhood. A very sad one. The strength of cults is their power over the individual through destruction of the family (or providing one to someone who has none), strict regulations, separation of husband and wife from the children, and public humiliation. This is true whether it was the Manson family, where he controlled the girls with drugs and the men with sex; Jamestown, the Branch Dividians, or Synanon (we knew a man who was a member, gave up much of his paycheck and gave us a tour of the facilities). In all cases it is about power.

But what makes Scientology different is the amount of money they have been able to raise thanks to the Cruises, Travolta’s, Lisa Marie Presley and others. The estimated wealth of the sect is in excess of $100 billion! AND they are tax-exempt thanks to an IRS decree to prevent them from tying up the government in hundreds of lawsuits…too bad we can’t do that! But the worse thing was their vow to infiltrate every branch of the federal government (and no doubt states too): legislative, executive and judicial, which they have succeeded in doing and thus obtaining information that is unavailable to others.

Back to Jenna. David Miscaivage runs the organization with an iron fist, surrounding himself with the most beautiful of the women…husbands and wives are separated for months and years by assigning them to different spots in the global organization with little of no communication…and from their children who often have no idea where their parents are! When Jenna rebelled, as did her brother before her, after the humiliation and punishment of their mother, they were afraid of them because they had the same last name as the leader. They even made her brother change his name before he could leave.

She however, stoically refused, and is the church’s (sic), most powerful and vocal critic.

As for details you will have to read those for yourself. But here is a snippet…she was made the medical officer for the other children…when she was six years old! She determined whether they were sick or malingering and gave them ‘home remedies’ to cure them. Some like Vitamin A could be given in excess…yet she didn’t know the difference between a teaspoon and a tablespoon! On the other hand, qualified nurses were not allowed to practice within the group as they took a dim view of medicine due to the use of prescription drugs…as they did alcohol. Take a way the cult aspect and much of what they did in that way was modeled after Christian Science, which is a religion.

The reason for this is the long hours of labor, dangerous lifting, etc. that they subjected the children to was not only a clear violation child labor laws but child endangerment and child abuse – yet why haven’t the State of California, and Florida, where the offenses occurred and continue to occur, done anything? For one, Florida tried when a teenager died of dehydration but they applied so much pressure the state dropped prosecution.

Imagine if you did any of these things to your children. Child Protective Services would have you incarcerated or at least remove them from your custody. Money talks!

Hope this struck a note with you and that you will read the book…not a pleasant read but definitely an eye-opener.

You can make a difference…you just have to try…



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