3/5/14…making a living…wage?

There was no commentary yesterday so you can give up looking for it. TB

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Why are builders afraid to have a thirteenth floor, but book publishers aren’t afraid to have a Chapter Eleven?

Bloomberg Quotes of the Day: “Do one thing every day that scares you.” – Eleanor Roosevelt…TB does! He writes this blog!…and…

“If I see an ending I can work backwards.” – Arthur Miller…aka: reverse engineering!

Bloomberg Top Stories:

*Putin’s Ukraine Gambit Stings Russian Economy as His Allies Lose Billions – !!! Still not over…what will the oligarchs do? Robert Gates warns Obama to use caution!

*Emerging-Market Stocks Advance With Spanish Bonds as Natural Gas Retreats

*BOE Suspends Employee as notes Show Currency Manipulation Raised in 2006

*First China Offshore Default Looms as Chaori Solar Can’t Pay Bond Interest

*Smart Beta ETF’s Squeezing 256% From S&P 500 Get Record Cas From Investors

*U.S. Companies Added Fewer-Than-Forecast 139k Jobs Last Month ADP Says – !!!

*China Retains 7.5% Growth Target for 2014 as Challenges to Economy Mount

*JPMorgan Repeats at Top in Fees as Investment Banks Anticipate More Deals

*Frigid U.S. Weather Causing Highest Electricity Prices Since 2008 – do tell!

*Saturdays Off Can’t Beat Cash as Buyout Firms Speed Up Young Banker Hiring

*Russia Defies West’s Pleas on Crimea Occupation as EU Offers Financial Aid

*Israel Says It Seized Ship From Iran Carrying Syrian Arms Bound for Gaza

*Qatari Support for Muslim Brotherhood Roils Gulf Union as Envoy Withdrawn

(Due to a bout of jet lag no blog was published Monday. Publishing both days for reference.TB)

Monday’s Market Summary:

War is hell: on equities! Bonds rallied…but note Dow Utilities were down as much as the Dow 30 (0.9%!), in a tie for the ‘goat’ (Boch in German) award despite their income producing characteristics!  Total NYSE Volume was about average but floor trades were about 35M below average. Both Advance/Declines and Breadth were negative. New 52 Week Highs plunged to 162 from 446 while New Lows rose modestly to a still weak 43 from 37.  Note that the subset NYSE Financials fell by 1.2% (BofA most active falling 1.8%!): NYSE Brokers -1.4%!; KBW Banks -1.1%; Nasdaq Banks -0.7%!!!

Lastly Volatility Surged to 16.00 +2 ro 14.3%!!! with a range of 15.38-16.78 and there is a now BIG GAP up from 14.79-15.38!!! Bearish indicator…but what the hey, right? Will the Ukrainian situation go away soon…not if what TB read in Robert Gates book is correct! (Duty: Memoirs of a Secretary of War – a chilling and ‘must’ read!!! Truth!!!

Bonds as might be expected had a good day, led by the 30 yr TIP 1.26% +1-7/8!!!’ 10’s 2.60% +3/8; 30 yr 3.55% +1/2! Giving back much of that overnight!

Tuesday’s Market Summary:

 Not going to dwell on it but Friday turned out to be a mixed bag. Best performer? DOW UTILITIES UP 0.6%!?! Dow, S&P, Dow Transports and Nasdaq Composite all up 0.3-0.4%…that’s it!  Meanwhile the NDQ 100, Russell 2000 and NYSE Financials were all off 0.3-0.4%! Narrow range, eh what? Well…had the market closed around 2pm EST it would have been a completely different story…Dow was up nearly 120 points and a new high!…followed by a plummet to -50 (like Minnesota temps!). As TB said in the last commentary before leaving: aren’t we running out of reasons to rally yet?

One thing TB was wrong about was options expiry…not only did stocks continue to climb but volatility ROSE? from 13.57 (and 14.14 on 2/13) to 15.47 (Weds before options expiry!), and ended the month at 14.00…rising even as Dow rose 1% for the two weeks, S&P +1.3% – and a record high close?; but Transports up just 0.6%; NDQ 100 +0.9% and closed just 3 points below Thursday’s record high close??? The Nasdaq Composite rose 1.5% and closed just 9 points below Thursday’s record high close. Freaky huh? Dow Utilities, which are the best performer ytd (+5.8%) and barely in 2nd for the last three months at +6.3%, were FLAT for the two weeks? Question: why are income producing stocks doing so well…even for 12 months, 7.8% is nothing to sneeze at although eclipsed by all the others double digit gains…but the year is young…no?

A note on volume: unimpressive and weak for the most part, with a NYSE low for the period of 3.09B shares on Valentine’s Day and a high of 3.99B shares on Friday’s monthend! Not even an average 3.5B shares on options expiry. Real Volume on the floor was generally weak…about 100M below average with three exceptions: most notably last Friday’s 960M shares – highest since 12/20 but again it was monthend; 808M on options expiration;  and 845M shares on the following Monday. Average is about 723M shares! It has been above 700M just 18 times since 12/20 and the average is just 694M shares. Last year there were just TEN 1B+ share sessions! There have been 48 800M+ shares since 12/31/12: 20 up, 24 down, 4 mixed.

GOLD closed sharply higher with a session high of $1355.00 highest since 9/23/13 and settled at $1350.30 +$28.30! Crude rose sharply too $105.22, highest since 9/20/13, and settled at $104.92 +$2.43!!! Both are weaker overnight giving back half their gains.

As for bonds, the 30 year yield declined by 12 basis points to 3.58%, and the 10 yr by TEN. Both of these are stronger by 3-5bp’s overnight too!!! TIPS performed similarly.

Here is the scoreboard thru Monday:

 

Index

March

YTD

3 mos.

12 mos.

Returns

3/4/14

3/4/14

3/4/14

3/4/14

Dow 30

+0.5%

-1.1%

+3.2%

+16.1%

Transports

+1.6%

+0.9%

+4.3%

+23.5%

Dow Utilities

+0.0%

+5.7%

+6.1%

+6.8%

S&P 500

+0.8%

+1.4%

+4.5%

+22.9%

NASDAQ Comp

+1.0%

+4.2%

+7.8%

+36.8%

NDQ 100

+0.6%

+3.6%

+6.8%

+34.8%

Russell 2k

+0.8%

+1.9%

+7.8%

+31.9%

NYSE Fin

+0.6%

-0.4%

+1.8%

+16.7%

 KBW Banks

+0.9%

+0.5%

+3.7%

+27.1%

 NDQ Banks

+1.8%

+0.9%

+4.3%

+30.0%

Comments:

  1. Dow Utilities continue to be the best performer ytd and only lag the Nasdaq indices and Russell 2000 for the three months. 12 mos is respectable too
  2. Note the Nasdaq Composite is outperforming the NDQ 100!
  3. Transports are lagging ytd along with the S&P 500 while the Dow is still negative this year as are NYSE Financials!
  4. Remember the year is young…and fraught with RISK! Especially Russia!!!

Overnight Comments:

Bonds: Friday closed little changed and mixed. Monday closed up solidly and finally below the mid-Oct. levels, when the storm hit. Yesterday, gave back all of those gains and then some in correction on Russia…don’t even think this is over…not yet! 30 yr 3.65% vs 3.55% – the high was 3.97% on 12/31; the 10 yr 2.70% vs 2.60% – recent high 3.03%! Long TIP 1.34% vs 1.26%! – recent high was 1.64% The (record?) low of 0.36% was set on 4/5.  OVERNGHT: mixed with minor changes: 10 yr 2.71% -3/32; 30 yr 3.64% +1/16; TIP 1.33 +5/16.

Libor update: 0.234% 3 mos, 0.331% 6 mos. –  record lows set recently: 0.329% 6 mos! 3 mos  0.233%!!!). NOTE the Fed Funds rate has averaged 0.08% since 5/22/13 and is steady at 0.07-0.09%!!! Foreign bond mixed, Greece and Portugal yields PLUNGING!!! Germany 1.62% +2; UK 2.73% +4- recent high 3.03%! France 2.18% +1; Italy 3.38% -4; Spain 3.37% -6; Portugal 4.68% -13!!! Greece 6.69% -14!!! – another new low taking out  6.83%! Recent range now 6.69% to 12.57%. Japan: 0.60% +1.

Gold closed lower following Monday’s big rally but still retaining more than half the gain, closing at $1337.90 -$12.40 on an ‘inside’ session. It has closed above the psychological $1300 every day since 2/12! It has also been above the 200 day since 2/14! That is major support at $1306. Monday’s high was $1355.00  – highest since 9/23/13 before the selloff began!!! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!!  Recent high is $1375.40 back on 9/19. Psych levels: $1200 and $1300 support, with support at the 200 day, $1306! Critical support at the 40 day ($1277) and the 50 day ($1263).  Overnight high is $1350.50 replacing the 2/26 high and is currently $1336.80 -$1.10.

 

Crude closed lower but still retained almost half of Monday’s big gain and highest close since 9/20/13, closing at $103.33 -$1.59 also on an ‘inside’ session but well above the $100.30 on 2/14! It has held ‘par’ since 2/12 which was the first time since 12/27/13! 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. Distant support is at the 40 day m/a ($98.09), and the 50 day m/a ($98.14), both starting to climb! FIRST SUPPORT at the 200 day ($99.97). The recent range is $85.61-$112.24 since March 1, 2012. It is currently $102.97 -.36.

Overnight global equity markets mixed: UK -0.6% vs +1% vs -1.6%! France -0.1% vs +1% vs-2.3%!!! Germany -0.2% vs +1% vs-2.9%!!!; Japan +1.2% vs +0.5% vs -1.3%!Hang Seng -0.3% vs +0.7% vs -1.5%!!! Korea +0.9% vs -0.5% vs 0.8%; India +0.3% vs +1.3% vs -0.8%. U.S. equity futures little changed: Dow -3 (range 45); S&P -0.40 (6.60); Nasdaq +2.50 (8)   

 

Some random thoughts:

TB alluded on Monday to a conversation on unemployment with the owner of the shuttle company we used to the airport. He said far too many people are collecting unemployment in France and that led to a discussion on wages. Have been doing a lot of thinking since and that gave me a block yesterday which is why none was produced.

Explained to him how our unemployment works and how Congress cancelled the extended unemployment program using the under 7% rate as cover. Actually over 10% when you adjust for discouraged workers and over 12% when you add-in part-time for economic reasons – two statistics not to be proud of. Add to this Congress’s inability to even consider raising the minimum wage to a still below the poverty level which is why some states are using a ‘living wage’ instead.

Tb is sick and tired of Paul Ryan and other ‘conservatives’ complaining about welfare costs…well if people could earn more than they collect on unemployment (assuming that is they can find a job which is near impossible if you have been out of work more than six months and don’t have a college degree…even that doesn’t help when there is long term unemployment! Doesn’t basic economics say if it is more profitable to work than collect benefits that is what you will do? Or should you content yourself to flipping burgers and having one or two other part time jobs…and oh, yes, many of us paid into our unemployment for decades! That is not being on the dole!

We have let the Tea Party and others convince us we are spending too much…so we are sacrificing our infrastructure while we have troops in Iraq, Afghanistan, and South Korea. At what cost??? Where is the benefit from that. Strongly urge you to read Robert Gates book and learn the facts of the military-industrial complex and it will shock you (just like the Congress-financial sector complex and the revolving door for congressmen and staffers to becoming lobbyists…fix it!), it is the most honest and revealing book on what really happens in government…and there are few good guys…Gates excepted…and he doesn’t build himself up and is very self-deprecating and plainly discusses his failures.

The griping about paying people an honest wage makes me ill. Consider that at WalMart, a company who proudly says their employees are their best customers, would only have to raise the price of a $20 item ONE PENNY to allow for a living wage. The sick part of this is that the family and other insiders are in the top ten of Americans in terms of wealth. Merde!!! Shit du merde!

Have they no faith that those employees will then spend more money at the company? Does the Tea Party really not see that 100% of unemployment and welfare (food stamps, disabled, etc.) is returned to the economy. True, that is aside from the ‘moral’ issue but so is sending kids to school hungry and that is where most food stamps go!

TB was reading again where Henry Ford declared he was going to pay his workers $5 an hour…double the going rate. Everyone said he would go bankrupt…oh yeah??? Those workers were then able to buy HIS cars! Also, he didn’t lose the good ones to his competitors. Gratuitous…no, just sound business!

How can any company have the unmitigated gall to tell you they can’t pay more…or even claim that they are being overtaxed when several of the biggest pay NO federal taxes and at least nine pay an average rate of just NINE percent! This while they pay their CEO’s tens of millions for – lets face it, mediocre performance due to targets based on earnings growth after we just came from a slump! At least hedge funds tie their bonuses to the ‘high water market’ – so that to get that extra 20% it is only on the amount above the previous high! That is also why many of them shutter after a market plunge.

We figure our average cost of a dinner in Paris was about 60 Euros ($80 or so). BUT there is no tipping…and obviously it isn’t hurting for the restaurant to pay it. Take our average tab here and add 20% and there isn’t much difference. I can tell you without hesitation that the service was as good or better than here…and no, they weren’t rude!

TB is not a liberal freak, but he knows when something is wrong and getting wronger! How can any sane person deny and not be concerned with the wealth gap…even as the cost of a college education increases and many companies aren’t paying new hires as much as they were in 2007, while those student loan tabs start coming due…imagine!

How can a CEO who cost his shareholders $20 billion even consider taking a $20 million bonus from a bunch of other CEO’s who are doing likewise (that is ignoring all of the fines JPMorgan has had to pay and you had better believe that morality starts at the top!).

How about we FIRE all the male CEO’s and replace them with women (but not Carly Fiorina). Did you know that Ina Drew who was held accountable for JPMorgan’s loss despite being out with Lime Disease for much of the year turned back her $5 million bonus…why not Jamie? Why not others? Just heard of an actual CEO who did so: IBM’s Virginia Rometty. Yep, she turned back her $9 million bonus because she didn’t feel the company performed well enough! How many of you would have the courage to do that? A sum that most people won’t earn in their lifetimes. But that is acting responsible and there is far too little of that in business today…the same business that has bought of our elected officials.  

You may not agree with any or all points but you had better think about what made this country great and strong: the middle class and it is rapidly disintegrating…you decide.

Have a great day!

TB

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