1/31/14…Blinder and Rakoff – great Americans!

Quote of the Day from the Friars Club Encyclopedia of Jokes: “There are three ways to get something done: do it yourself, hire someone, or forbid your kids to do it.” – Anon

Bloomberg Quote of the Day: “If winning isn’t everything, why do they keep score?” – Vince Lombardi…because, Vince…it gives them bragging rights, oh so macho

Bloomberg Top Stories:

*Chicago Purchasing Managers Index in Jan. declined to 59.1 vs 60.8 – a bad miss!

*Stocks Tumble as Emerging-Market Currencies Drop with Copper; Bonds Climb

*Consumer Spending in U.S. Rises More Than Forecast While Incomes Unchanged

*Wal-Mart Reduces Fourth-Quarter EPS Forecast on Weather, Food-Stamps Cuts 

*MasterCard Quarterly Profit Misses Analysts’ Estimates as Expenses Climb

*Microsoft Board Said Set to Name Nadella as CEO, Discussing Gate’s Role

*Bond Bears Wrong in Best Start Since 2008 as (Sub)merging Markets Sink Stocks

*Amazon Shares Fall as Boundless Spending Tested After Sales Growth Slows

*Fannie Mae Fix Fades as U.S. Senate Democrats Split on Housing Legislation

*Argentine Devaluation Felt in Sao Paulo as Selloff Deepens

*Goldman’s Blankfein Joins Wall Street CEOs Avoiding Pay Crunch for Traders

*Wall Street Picks Up $70 Million Tab for Super Bowl Played in Its Backyard – heh heh!

*Keystone Report Said to Disappoint Pipeline Foes on Climate Change Finding

*Boehner Backs Immigration Revamp With Legal Status Rather Than Citizenship

*Syrian Peace Talks’ Failure to Open City of Homs Bodes Ill for Larger Goal

*Rowan Trying to Stop Natural Gas Flow From Well Blowout in Gulf of Mexico

Thursday’s Market Summary:

Huzzah! Huzzah! A rally, not a bad one either – under normal circumstances that is, not after a sharp decline and it still does not come anywhere close to even a ‘dead cat’ bounce! The Dow is trapped halfway between the 200 day m/a (support) at 15460, and the 50/40 day (now resistance) 16154/16486. Note Wednesday’s low print of 15709 was just FIVE points above the 12/12/13 low, thus negating the entire rally! The next support level is the 11/6/13 low of 15522 which if it fails to hold leads directly to the 200 day! Ditto the S&P 500 at 1768 – Wednesday’s low was 1770! Capiche? Need TB go on? NO!

The Dow rose 0.7%, but look at the others: NDQ 100 +1.9%; Composite +1.8%; Dow Transports +1.6%; Russell 2000 +1.5%, and the S&P 500 +1.1%. But look: DOW UTILITIES +1.6%!!! vs -0.2% vs +0.4% vs +0.2%..the others would kill for that kind of performance! NYSE Financials gained 1.4% vs -1.4% – tit for tat and all sectors of it rebounded part if you have a weak stomach: Dow -5.1%; Transports -2.8%; S&P 500 -4%; Composite -3%; NDQ 100 -3.5%; Russell 2000 -3.8%. Dow Utilities you ask? +0.8% vs +0.2%. NYSE Financials +1.1% vs -1.2% vs +1.4% vs -0.9% vs -2.5%. Drilling down: NYSE Brokers +1.4% vs -1.4% vs +1.4% vs -2.1% vs -2.4% vs -1.4%  KBW Banks +1.1% vs -1.3% vs +0.9% vs -0.9% vs -2.6%;  Nasdaq Banks +1.1% vs -1.5% vs +0.1% vs -1.1% -1.5%. Remember what TB said about financials? Why stop here? Shouldn’t we try for a 10% pullback…seems to be in order since we have been in a fog since last August…a fog of denial!

Note the volume once again was low – high on selloffs, average to low on rebounds: 3.5B shares vs 3.95B vs 3.43B. REAL NYSE Volume was similar: 655M vs 736M vs 622M shares – lowest since 1/3/14!

New 52 week highs doubled (?) to 162 vs 76 where it sat for three days, while new lows were halved 70 vs 135! vs 71 vs 148. Volatility (VIX) was stable but compare the daily changes: 17.29 -.06 vs 17.34 vs 15.80 vs 17.42 vs 18.14 vs 13.86.

Stay put until Groundhog Day…at least!…ok, at least for now…

Advance/Declines and Breadth were positive but simply offset Wednesday’s negatives.

AAPL and MSFT continue to diverge but were minor players yesterday in the NDQ 100: MSFT +1.6 index points vs +2.9 – the big winner; AAPL -0.9 vs -5.1 and biggest loser! Biggest winner was FB +12.5! followed by AMZN +7.5; GOOG +6.5; and ALXN +4.9!

Dow 30 +0.7% vs -1.2%! vs +0.6% vs -0.3% vs -2%!!! vs -1.1%!Dow Transports +1.6%! vs -1.2% vs +1.1% vs -0.8% vs -4.1%!!!Russell 2000 +1.5%! vs -1.3% vs +1.2% vs -1.4%! vs -2.4%!!! vs -0.9%; Dow Utilities+1.6%!!! vs -0.2% vs +0.5% vs +0.2% vs -1%; S&P 500 +1.1% vs -1% vs +0.6% vs -0.5% vs -2.1% vs -0.9%; Nasdaq Composite +1.8%! vs -1.1% vs +0.4% vs -1.1% vs -2.2%! NDQ 100 +1.9% vs -1.1% vs -0.1% vs -0.9%! vs -2%!!!

*NYSE Volume slumped to an average 3.5B shares vs 3.95B vs 3.43B vs 3.99B vs 4.64B. The 2014 low is 2.76B. The record high (?) is the 4.97B shares of 12/20/13 and Q3 end of quarter while 11/29’s 1.59B is weakest of 2013). REAL NYSE Volume also slumped to not much above Tuesday: 655M shares vs 736M vs 622M (lowest since 1/3/14) vs 780M vs 919M vs 771M. It has been above 700M just nine times since 12/20! The 12-month low is 272M on 12/24. The average since 12/20 is just 652M shares. The 12 month is still 721M shares. Last year there were just TEN 1B+ share sessions! There have been 41 800M+ shares since 12/31/12: 18 up, 21 down, three mixed.

*New 52 week highs have ranged from 33-864. They doubled to 162 vs 76 vs 75 vs 74 vs 81 vs 211 vs 440 vs 498. 74 is the recent low eclipsing 201! Recent high is a super-strong 890!!! New lows were halved to 70 vs 135 vs 71 vs 148 vs 110 vs 62 vs 46 vs 37. Recent high is 353; low 20!!!  

Advance/Declineswere positive but…+3.2x vs -3.3x! vs +3x vs -2.8x vs -6.3x! (recent range -17.5x to +6x) on NYSE and +3x vs-3.2x! vs +2x vs -3.4x vs -4.6x!!!(recent low -4.6x!!! to +3.8x). Breadth was similar: +3.2x vs -3.5x! vs +5.3x!!! vs -2.5x vs -13x!!! vs -3.2x(recent -18.6x!!! to +7.2x!!!) on NYSE and +4.9x!!! vs -2.6x vs +2.2x vs -3.9x vs -4.6x!!! (recent -12.8xto +6.5x). 

NYSE Financials +1.1% vs -1.2% vs +1.2% vs -0.9% vs -2.5%! vs -1.4%!!! BofA most active per usual: +1.5% vs -0.2%? vs +2.6% vs -0.9% vs -2.4% vs -1.7%. Closed $16.93 +.25. The high print was $17.42 on 1/15/14 – highest since 5/10/10!!!C also a most active again: +0.5% vs -2.9%!Brokers +1.4% vs -1.4% vs +1.4% vs -2.1% vs -2.4% vs -1.4%;KBW Banks +1.1% vs -1.3% vs +0.9% vs -0.7% vs -2.6% vs -1.6%.Nasdaq Banks +1.1% vs -1.5%! vs +0.1% vs -1.1%! vs -1.5%! vs -1.2%!

Volatility (S&P VIX) had a range of 15.96-17.39 BUT despite the rally barely budged at the close: 17.29 -.06 and weak!ng a warning again to 17.34 +1.54 AND with a range of 16.71-18.04! Just over a week ago it was at 11.81! It remains well above the 40/50 day (13.87/13.65) and the 200 day. 14.43. 12/26’s 11.69 was lowest since 3/15/13!!! Recent high on 1/2 was 16.67! The recent range is 11.83-21.01!!! It peaked at 22.79 on 12/28/12…the range since 12/31/12 is 11.05 (3/14) to 21.92 (6/24)!

Bonds were weaker but holding tight. Yields higher but just above lowest since mid-Oct. Stronger overnight: 30 yr 3.61% +9/16 – the high was 3.97% on 12/31; the 10 yr 2.66% +5/16, recent high 3.03%! Long TIP 1.32% +1/2. The (record?) low of 0.36% was set on 4/5. The recent high yield: 1.64%! Libor update: 0.237% 3 mos,0.336% 6 mos. BOTH just above NEW record lows 0.234%!!! and 0.332% respectively!). NOTE that the Fed Funds rate has averaged 0.08% since 5/22/13 and is currently 0.04%!!! Foreign bond yields lower, ex-Greece: Germany 1.65!!! -6!; UK 2.69%! -6 – recent high 3.03%!; France 2.24%! -7!; Italy 3.80% -2; Spain 3.67% -2; Portugal 5.01% -4; Greece 8.41% +2. Recent range 7.51%-12.57%. Japan: 0.61% -1. Yen stable after rising to 101.77!!! on Monday. It is now 102.27. Recent range 101.77-105.44 last week – weakest since 10/1/08!!!

Gold gave back double Wednesday’s gain closing at $1242.50 -$19.70! Session low was $1237.50, lowest since 1/23! Monday’s intraday high was $1280.10, highest since 11/18!!! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!!  Recent high is $1375.40 back on 9/19. Psych levels: $1200 sup; $1300 res, with major sup/RES now at the 40 day ($1235) and the 50 day ($1238). The 200 day is $1321 and major res. Overnight it is higher at $1253.40 +$10.90.

Crude closed higher at $98.23 +.87 with an intraday high of $98.59 – highest since 1/2/14! 1/14’s low was worst since 5/2/13: $91.24! Note 12/27 was first time above $100 since 10/21! 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 is back above the 40/50 day m/a’s which are major sup/res: 50 day m/a ($95.83), 40 day (96.41), crossed and rising!!! and the 200 day ($99.11!!!) –  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 $97.39 -.84, with a high of $97.97!, highest since 1/2/14 .

Overnight markets:

Global equity markets WEAK!!!: UK-1.5%!!! vs -0.4% vs +0.2% vs +0.2% vs -1.3%! vs-0.9%; France -1.6%!!! vs -0.4% vs -0.1% vs +0.4% vs +0.2% vs -1.5%; Germany -2%!!! vs -0.4% vs +0.2% vs +0.1% vs – vs -1.2%; Japan -0.6% vs -2.5% vs +2.7% vs -5.1%!!! vs -2.5% vs -1.9%; Hang Seng closed vs -0.5% vs +0.8% vs -0.1% vs -2.1%!!! vs -1.3% vs -1.5%; Korea still closed vs +1.3%! vs +0.3% vs -1.6%! vs -0.4% vs -1.2%!India +0.2% vs -0.7% vs -0.2% vs -0.1% vs -2%!!! vs -1.1%! U.S. stock futures TANKING with global markets: DOW -170!;SPX -17.50!; NDQ -18!!!


Some random thoughts:

A friend wrote in response to yesterday’s column on Alan Blinder’s book, After the Music Stopped, asking why Holder hasen’t prosecuted Fuld (he is a former Lehman employee), or Mozilo.

There are two separate issues here: Fuld could easily be found negligent, but would that constitute a ‘crime’? Lehman’s Repo 101 would indicate yes…but proving he had full knowledge would be a stretch. Still TB believes firmly in the perp walk!

Mozilo is a crook…so why wasn’t he tried and convicted the same as Ken Lay and Andrew Fastow? The good thing that came from Enron was Sarbanes-Oxley, yet despite the greatest global financial crisis of all time, there is still not one executive that has been convicted…or even charged under it. Call it dereliction of duty by Congress! Period!

What Mozilo did was the same as Lay (who by the way, since he was appealing when he died, cannot be considered a convicted felon…another travesty!), he hyped the company while selling his enormous holdings knowing full well that it was going down! So what happened to him…he was charged with mass fraud – by the SEC, not Justice – and a trial date waas set for October 2010. Just FOUR days before he settled: no jail time, a $67.5 million fine – and get this…$20 million of even THAT puny amount was covered by Countrywide…er…BofA! Between 2000-2008 he made more than $500 MILLION! So why didn’t they collect treble damages on the insider trading (or send him to jail like they did Martha Stewart for a ‘minor’ transgression! To quote Matt Taibbi in a Rolling Stone article from 12/28/12 ( who would have thunk that Rolling Stone and Vanity Fair would become the only two investigative reporting tabloids left???):

If you were going to assign blame to any single person for the financial crisis, Angelo Mozilo would rank right up there with people like Lehman’s idiot CEO Dick Fuld, deranged credit-default-swap peddler Joe Cassano of AIG’s Financial Products unit, and deregulatory pioneers like Bob Rubin and Phil Gramm. Mozilo’s role, however, was probably the single most shameful, as he represented the conscious decision of mortgage underwriters to abandon lending standards in order to claim ever-larger chunks of market share.  

Note those others: Rubin and Gramm who destroyed Glass-Steagall and were rewarded for their services…Rubin by Citi’s Sandy Weill who got the ball rolling, and Gramm who  became Chairman of UBS Americas (note his wife, Wendy, former head of the CFTC was not only a director of Enron but on the Audit Committee). By the way, Mozilo still has a net worth of $600 million…hell he could have spent the $67.5 million – oops, $47.5 million on a corporate jet – some penalty! In Blinder’s book he especially attacks Cassano who not only brought AIG to its knees but demanded – and got – $1 million per month to stay on and unwind it…he is happily residing in London according to a friend who met him at a cocktail party!

Another friend sent TB an incredible article from The Daily Kos titled Why No Corporate CEOs Were Prosecuted for Causing The Financial Crisis –finally it took a 70-year old federal judge…who has been a thorn in the side of the Justice Department in the past…for refusing to let the government accept a plea bargain from Citi over misleading statements over the sale and packaging of CDO’s. Justice was furious at his rejection of a $285 million settlement – without an admission of guilt by Citi – saying it was laughable compared to how much they earned from the product. Kudos to him! The article states incorrectly that Justice transformed their ‘deals’ but this was in 2011 and despite being fined several times since, JPMorgan’s first guilty plea was in the last settlement! Must have been another judge who thought the fines were ‘a lot of money’!

But Rakoff’s objections don’t stop there. As noted above about Rubin and Gramm, he states that Congress, the regulatory boards, and every president back to Reagan are culpable. What do politicians hate? Bad press. Think of it as anyone who gets a bribe or even an expensive ‘gift’. In discovery it will come out and that, folks, is why there have been no prosecutions…nor will their be!  Also, the incentives to the banks allowed them to say ‘we were just doing what the government wanted us to do. Republicans, don’t be fooled: George W. Bush signed on to FNMA/FHLMC and trying to put every American in a home. Also, what is Gramm? Republican! Get the picture…it was one of the few bipartisan actions since the millennium!

Whew! Hope you found that useful…and shocking…now do something about it!

Have a fun weekend…stay warm my friends…go Broncos!!! Curse you, Sherman!



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