2/11/14…who’s at fault? Could it be you?

Notable and Quotable: “ I am not bound to win, but I am bound to be true. I am not bound to succeed, bam I am bound to live up to the light I have.” – Abraham Lincoln

Quote of the Day from the Friars Club Encyclopedia of Jokes: “If you want to have fun sometime, go into a restaurant’s kitchen and yell, “Immigration!” – ‘Uncle Miltie’ Berle

Bloomberg Quote of the Day: “The most courageous act is still to think for yourself. Aloud.” – Coco Chanel…emphasis on ALOUD!!! Can we still do that? Doubtful!

Bloomberg Top Stories:

*Barclays to Cut as Many as 12k Jobs as Profit Drops in 4th Quarter – expansionary?

*Stocks Rise as Treasuries Decline Before Yellen Testimony; Aussie Advances

*L‘Oreal Agrees to Pay $8.2 Billion to Buy Back 8% of Its Stock From Nestle – SELL!

*Portugal Said to Raise 3 Billion Euros in Second Bond Sale as Bailout Ends

*Kazakhstan Devalues After Fed Tapering Sparks Flight From Emerging Markets (does anyone remember John McCain’s reference to ‘Whack-a-Mole’? Push pull…

*Flaherty’s Budget to Keep Canada on Path to Surplus as Spending Cuts Rise

*Bank of England Starts Review Into Currency Meeting Amid Calls for Inquiry – encore!

*Manhattan’s New Towers Fail to Lure Banks Choosing Old Space – a matter of $?

*Oil-Refining Capacity Glut Besets Europe Where Jobs Trump Profit

*Yellen Testimony Guide From Cooling Job Growth to Emerging Market Turmoil

*Google’s Deal Machine Ramps Up to Become World’s Biggest Surpassing Intel

*U.K. Floods Spread West of London as Insurance Cost Climbs to $1.6 Billion

*Afghan Forces Are Struggling to Boost Combat Capability , U.S. Agency Says

*Obamacare Delayed Until 2016 for Businesses With Fewer Than 100 Employees ?!?

*London Underground Suspends Strike Tonight After Management Talks

Tuesday’s Market Summary:

Bifurcated? Wait…all indices were up…not impressively, but still up from 0.1% (DOW) to 0.6% (NDQ 100 AND DOW UTILITIES!)…strange bedfellows. But here’s the thing: Dow Transports plunged 1% – off 1.6% mtd and now 3.1%! ytd! That’s bifurcated and should scare the bejeezus out of anyone who is a Dow Theorist! 17 of 20 Transports declined and some by huge amounts: UNP -11.6 index points! FDX -10.3; NSC -10; GMT -8.7; ALK -6.1 and KSU -4.8!!! Best Was CHRW +2.9…note the breadth of sectors within the index! Worst performers…that gained that is…DOW +0.1; S&P 500 and Russell 2000 +0.2%. Somethings happening here…what it is ain’t exactly clear… (apologies to Buffalo Springfield for being dragged into this!).

Volume swooned to a below average 3.3B shares for the first time in SEVEN sessions! Real NYSE Volume also fell to 654M shares – well below average and even the puny average since 12/20 – which had been rising…finally!

It was the first down day in FIVE sessions that had gone straight ‘up’ after being below the 200 day m/a (for three days!). Where is the follow-thru…did someone look down?…again???

Advance/Declines were slightly positive but Breadth was negative on NYSE stocks (-1.1x) but solid on Nasdaq (+2.4x)

Here is the scoreboard (note 3mo and 12 mo updated thru last Friday):

Index

February

YTD

3 mos.

12 mos.

Returns

Mo. to date

2/10/14

2/7/14

2/7/2014

Dow 30

+0.7%

-4.7%

+0.2%

+12.9%

Transports

-1.6%

-3.1%

+3.2%

+22.5%

Dow Utilities

+0.1%

+3.3%!!!

+0.3%

+6.2%

S&P 500

+1.0%

-2.6%

+1.5%

+18.4%

NASDAQ Comp

+1.1%

-0.7%

+5.3%

+29.2%

NDQ 100

+1.7%

-0.3%

+5.8%

+28.3%

Russell 2k

-1.1%

-3.9%

+1.9%

+19.1%

NYSE Fin

+1.1%

-3.3%

-0.1%

+12.3%

 KBW Banks

+0.8%

-2.1%

+2.8%

+23.2%

 NDQ Banks

-1.1%

-5.3%

-1.0%

+22.7%

Ahem, why the bounce in Nasdaq indices? Look no further than Apple, +5.2% ytd, +6.3% MTD! This despite Icahn ‘declaring’ an end to stock buyback yesterday!

Detailed analysis:

Dow 30 +0.1%? vs +1.1% vs +1.2% vs – vs +0.5% vs -2.1%; Dow Transports -1.1%!!! vs +0.8% vs +1.5% vs -0.8% vs +1.2% vs -3.2%!!!Russell 2000 +0.2% vs +1.1% vs +0.9% vs -0.8% vs +0.8% vs -3.2%; Dow Utilities +0.6% vs +0.7% vs +0.8% vs -0.5% vs -0.5% vs -0.9%; S&P 500 +0.2% vs +1.3% vs +1.2% vs +1.2% vs -0.2% vs +0.8% vs -2.3%!Nasdaq Composite +0.5% vs +1.7%! vs +1.1% vs -0.5% vs +0.9% vs -2.6%; NDQ 100 +0.6% vs +1.8%! vs +1.2% vs -0.4% vs +0.9% vs -2.3%.

*NYSE Volume plunged to a below average 3.29B shares vs 3.74B vs 3.8B vs 3.97B vs 4.04B vs 4.7B vs 4.04B. 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 declined to a well below average 654M shares vs 763M vs 743M vs 755M vs 837M vs 922M vs 952M (highest since 12/20).  622M was lowest since 1/3/14. It has been above 700M fourteen times (superstitious?) since 12/20! The 12-month low is 272M on 12/24. The average since 12/20 is still just 685M shares. The 12 month is 723M shares. Last year there were just TEN 1B+ share sessions! There have been 45 800M+ shares since 12/31/12: 19 up, 23 down, three mixed.

*New 52 week highs have ranged from 33-864. They were slightly higher at a still weak 142 vs 132 vs 92 vs 53 (a new recent low!) vs  56 vs 91 vs 135 vs 162. Contrast to 440 and 498 last month. 53 is the recent low, which had been 201 during the rally days! Recent high is a super-strong 890!!! New lows were sharply lower again at a weak 32! vs  48 vs 72 vs 162 vs 120 vs 216 vs 135 vs 70. Recent high is 353; low 20!!!

Advance/Declineswere modestly positive: +1.4x vs +3.4x vs +3x vs -1.4x vs +2.1x vs -5.6x! (recent range -17.5x to +6x) on NYSE and +1.5x vs +2.4x vs +1.9x vs -2.2x vs +1.7x vs -6.1x!!!(recent low -6.1x!!! to +3.8x). Breadth was mixed: -1.1x? vs +4.6x! vs +3.8x! vs -1.4x vs +2.8x vs -16.2x!!!(recent -18.6x!!! to +7.2x!!!) on NYSE and +2.4x vs +5.5x!!! vs +3.2x vs -2.2x vs +2.2x vs -9.6x!!! (recent -12.8xto +6.5x). 

NYSE Financials FLAT vs +1.1% vs +1.4% vs +0.1% vs +1.1% vs -2.5%! BofA most active: -0.7% vs +2.3% vs +1.9% vs +0.5% vs — vs -2.5x! vs -1.1% vs +1.5%. Closed $16.70 -.12 The high print was $17.42 on 1/15/14 – highest since 5/10/10!!!Brokers +0.3% vs +1.2% vs +1.4% vs -0.9% vs +1.6% vs -3.6%!!! KBW Banks +0.1% vs +0.8% vs +1.7% vs -0.1% vs +1.2% vs -2.7% vs -1.3%.Nasdaq Banks +0.1% vs 0.2% vs +0.8% vs -0.4% vs +1.3% vs -3.1%! vs -1.3%. Where is big ‘mo’?

Volatility (S&P VIX) was little changed after ‘gapping down’ on Friday from 17.09-16.31…watch! It closed at a still ‘slightly’ elevated 15.25 -.04. Contrast to 1/31’s high of 21.48 highest since 6/24/13! Look at the 40/50 day (14.76/14.64 – crossed!) and the 200 day, 14.58. 12/26’s 11.69 was lowest since 3/15/13!!! The recent range is now11.83-21.48!!! 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 closed slightly higher. They remain around mid-Oct. levels, when the storm hit. Weaker overnight: 30 yr 3.67% -5/16 – the high was 3.97% on 12/31; the 10 yr 2.69% -1/8, recent high 3.03%! Long TIP 1.38% -1/4. The (record?) low of 0.36% was set on 4/5. The recent high yield: 1.64%! Libor update: 0.237% 3 mos,0.332% 6 mos. – Both slightly above NEW record lows 0.234%!!! and 0.331% respectively!). NOTE the Fed Funds rate has averaged 0.08% since 5/22/13 and is steady at 0.06%!!! Foreign bond yields little changed EXCEPT GREECE which is plunging!Germany 1.68 –; UK 2.73% +1 – recent high 3.03%!; France 2.27% –; Italy 3.68% –; Spain 3.59% +2; Portugal 4.93% +1; Greece 7.26%!!!! -19!!! Yet another NEW low! New range7.26%!!! High 12.57%. Japan: 0.60% –. Yen little changed at 102.34. 100.79 is 2/4/14’s low. Recent range 100.79-105.44-weakest since 10/1/08!!!

Gold closed strong? $1274.70 +$11.80. Last Thursday’s 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 at the 40 day ($1238) and the 50 day ($1238) – locked again! The 200 day is $1315 and major res. Overnight it is strong again at $1284.70 +$10.00 with a new recent high of $1288.30!

Crude closed slightly higher but first close above $100 since 12/27/13!!! Session high was $100.55! 1/14’s low was worst since 5/2/13: $91.24! 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. Support is at the 40 day m/a (96.53), and the 50 day m/a ($96.43) – crossed! SUPPORT also at the 200 day ($99.41) –  slowly rising! 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 higher at $100.26 +.20.

Overnight equity markets:

Global equity markets strong (?), Japan still closed: UK +0.8% vs +0.1% vs +0.4% vs -0.9% vs +0.3%; France +0.7% vs +0.3% vs +0.7% vs +1% vs +0.1%; Germany +1.5%!!! vs – vs +0.7% vs -0.9% vs -0.2% vs -0.9%; Japan closed again vs +2.2%!!! vs -0.2% vs +1.2% vs -4.2%!!! -2%!!; Hang Seng +1.8%! vs closed vs +1% vs +0.7% vs -0.6% vs -2.9%; Korea +0.5% vs – vs +0.8% vs +0.9% vs +0.2% vs -1.7% vs -1.1%; India +0.1% vs -0.2% vs +0.3% vs +0.3% vs +0.2%. U.S. stock futures higher in another narrow range: DOW +59 (71 range); SPX +6.60 (10); NDQ +15 (17)

 

 

Some random thoughts:

“The inability to keep more than one thing in mind at a time is a natural human limitation. How many times have you seen a meeting’s outcome be determined by the last idea that someone had, regardless of how it compared to all the ideas that came before? But it’s no way to run a country.” James Kwak, The Baseline Scenario…today! A theme TB has often posited! That is the final statement in his piece on why-we-have-a-debt-problem, posted today!

TB believes that it is the ‘fifth’ estate (there were four medieval ones…fourth being Clergy which is still active today in the guise of fundamentalists), journalism and blogs, that is responsible for this. The ‘nightly news’ being ‘sanitized’ for political correctness – with the exception of PBS which truly provides ‘fair and balanced’ reporting…although FOX followers would never believe that as they merrily absorb the preachings of Hannity, Limbaugh, and others under the ‘guise’ of  reporting. (Note that TB takes a strong stand but strives to be honest and asks that you decide…ever hear FOX say that?

At the other end of the spectrum is CNBC but at least their reporting isn’t hateful. (Strange too, when what could be more right wing than the financial markets of which they are always bullish, right?)

Want to reclaim your ability to ‘focus’ on more than one thing at a time? YOU try writing a blog…YOU accept the criticism’s that come with the territory. It’s hard!

Why are there ‘few’ if any true moderates in Congress? Because it doesn’t play well with the electorate? WRONG! It doesn’t play well with the money which gets people elected! One would think that becoming president would allow one to be his own person – especially after a second win and thus becoming a lame duck, right? Wrong…if, that is, President Obama is any indicator…he doesn’t even seem to care about his legacy…is it going to be ‘Obamacare’ that HE allowed to get derailed to assure passage? You bet! He too seems only able to ‘focus’ on one thing…and has forgotten ‘it’s the economy, stupid!’ Where are the jobs? They are just around the corner to have listened to his SOTU speech. “I can do it alone…with or without you…” – was he trying to take a page from Reagan’s book? If so, he failed miserably…to those who remember Reagan as the ‘great uniter’ that is false. TB recalls HIS SOTU speeches where he essentially told the Dems to get on board or it would get done without them…or as Lee Iacocca said, “you can lead, follow, or get out of the way.” Reagan gave them the final two choices…and they followed. Some would say that was the beginning of the nation’s decline…destroying labor unions, breaking the contract with labor (replacing pensions with IRA’s, knowing they would be inadequate), and declaring government to be the problem. Can you say that with a straight face after witnessing the greatest financial crisis in the history of the world (Greenspan said that in his new book!)? It was a lack of government – regulation – that led to the crisis…and all because Greenspan, Rubin, and Summers denigrated Brooksley Born for proposing a solution that would have avoided the crisis…entirely!

Derivatives are, as Paul Volcker said, ‘weapons of mass destruction’ but they didn’t need to be. Standardizing them was the key. Why? Well as Wall Street’s objections proved: take away the profit incentive and they are tamed. All she wanted was to have them ‘traded’ on an exchange. Why does this matter? Two reasons: first, credit default swaps: had they been on an exchange it wouldn’t matter which side a ‘speculator took’ it would be a ‘matched book’ instead of ‘customized’ high profit contracts that could not be unwound…only ‘offset’. A long and a short equals zero…but if you wanted to go long $50 million of CDS, and then wished to close out the position you had to enter into another contract – which enriched Lehman, Goldman, etc. but left you with TWO contracts on your books and now subject to counterparty risk! Now multiply that by ten or 20 times and the risk of a default is greatly enhanced. Remember that if you don’t own the underlying securities it is like buying fire insurance on your neighbors house…or worse, life insurance on him??? Did you know that even early in the game there were more credit default swaps written on GM than the total corporate bond markets capitalization! Think about that as TB did when he heard that at a conference in London around y2k!

Now let’s look at AIG which had the bulk of the contracts betting that no company would default…none (the sad thing is that Joe Cassano, who created that mess was retained by the government to unwind it at a fee of $1 million PER MONTH! But he was the only one who understood them.   

As stated above: all of the crisis could have been avoided had CDS traded on an exchange (by the way London’s FSA found that even six months after being written, most CDS did not have the mandatory signatures of all parties and thus were invalid!)

Ah, but what about mortgages? You mean the subprime ones that when packaged S&P and Moody’s rated triple A? Those loans were created to sell and mortgage companies were pressured (threatened?) by Wall Street to write more…and at higher rates. These were then sold to the dealers – with only ONE month’s recourse…in some cases that was even waived! New Century was threatened by Merrill with losing their business if they didn’t ramp up production. What would you as a businessman do?

Yet six years…six long YEARS since the blowup…the government has done nothing to prevent another occurrence! That is criminal. Meanwhile, the wealthiest people in this country and by dissemination, most of you still believe that it is the fault of the people who took out these loans…those who lost their jobs and homes because of the greed of a few people…oh, and note that those mortgage salesmen who ‘pushed’ people who could qualify for prime mortgages into subprime…for the much higher commissions…got wealthy and nothing…nothing…happened to them. Some of these were former strippers, high school dropouts and more that had no understanding of finance. Those are facts!

So let’s stop blaming Main Street for the actions of those on Wall Street who continue on their merry way…with no shame…no jail time…no fines even…wouldn’t you do it?

Have a great day! …and think for yourself…

TB 

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