3/11/14…on Bernanke, financial education, and more…

Quote of the Day from the Friars Club Encyclopedia of Jokes: “I have a memory like an elephant. In fact, elephants often consult me.” – Noel Coward

Bloomberg Quote of the Day: “Giving up is the ultimate tragedy.” – Robert J. Donovan

Bloomberg Top Stories:

*UniCredit Has Record $20.8 Billion Quarterly Loss on Bad Loans, Writedowns – also did you see Wells, once the biggest subprime lender, but sold them all to Wall Street, is going back into subprime again? Cause for concern? TB thinks so!

*Lloyds Trader Said to Tip Off BP on $500 Million Deal in Currency Markets – why not?

*Stocks in U.S. Fluctuate as Europe Trims Gains; Copper Leads Metals Higher

*Carney Pushes Low-Rate Message as Weale Says Amount of Slack Is Overstated – oh?

*Repo Fire-Sale Proposal Said Within Reach After Fed Sounds Contagion Alarm

*Job Openings in U.S. Rose in January As Hiring Fell on Winter Weather

*Safeway Stuck With Decade-Low Valuation Even as Kroger Bid Looms

*Verizon Offers as Much as $1.5 Billion to Extend Bonds

*Malaysia Says Iranian Using Stolen Passport Had No Link to Terror Groups – asylum

*Feinstein Says She Has Asked for Apology From CIA Over Hacking Congress – !!!

*Boeing Ensdnared in Malaysia Jet Mystery With No Aircraft Wreckage to Study

*N.J. Governor Christie Used Port Authority as Political tool, NYT Reports – !!!

*Detroit Suburbs Devise Ways to Dodge State Takeover as Fiscal Decay Widens

Monday’s Market Summary:

A dull, meaningless ‘down’ session as indicated by the total NYSE Volume of just 3.0B shares…lowest of 2014 and beating Jan. 2’s 3.04B shares. From 12/24 (1.03B) thru yearend to just 2.3B – 12/31 (unusually low). This in contrast to the average of about 3.5B shares! Shares traded ‘on the floor’ plunged from 723M shares (12-month average) to a weak 628M shares. Since 12/20/13 the average has crept up to just 695M shares (23 sessions of more than 700M shares including just five 800M shares and four 900M shae days, the highest being 960M on 2/28 – note that almost all of these occurred on an options expiry, or monthend/quarterend and the burst in volume came in the final 15 minutes! In other words: nobody home…and few that care, other than high freak traders! While Monday was a ‘down day’ the declines were all within a band of flat (Nasdaq Composite) to -0.3% (Dow Utilities?), except the NDQ 100 which was up a weak 0.1%.

Advance/Declines AND Breadth were both negative and have been showing weakness for three days now: A/D NYSE -1.3x/+1.3x/+1.3x, Nasdaq -1.2x/+1.1x/-1.1x; Breadth -1.8x/+1.9x/-1.4x, and -1.2x/-1.2x/-1.2x (note Breadth negative all three days on Nasdaq while A/D’s were 2:1 negative).

New 52 Week Highs fell to 226 vs 382 vs 486 while New Lows rose weakly to 35 vs 20 vs 16 (new low) – still very weak!

Volatility which started on Wednesday at 13.89 has been deat at 14.21 vs 14.11 vs 14.21, slightly elevated and nervous…or at least it makes TB nervous like a temporizing bid in Bridge.

Overnight Comments:

Bonds: have been little changed for three days after rallying from 3/3-3/7 by 19bp’s on 10’s and and 18 on the long bond. The long TIP which had rallied from 1.44% on 2/21 to 1.27% on 3/3 as backed up to 1.38% – the best performer from being the worst as inflation fears have emerged. Overnight, slighty weaker across the board: 10 yr 2.78% -1/16; 30 yr 3.72% –; TIP 1.38% -1/32. Recent ranges: 30 yr high was 3.97% on 12/31; the 10 yr recent high 3.03%! Long TIP recent high was 1.64% The (record?) low of 0.36% was set on 4/5/13.  Libor update: 0.233% 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 yields mostly slightly higher led by Greece – rally should have been suspect, Portugal best: Germany 1.64% +2; UK 2.79% -1 – recent high 3.03%! France 2.22% +2; Italy 3.40% +4; Spain 3.33% +3; Portugal 4.37% -6!!! Greece 6.93% +13 – and well above last Wednesday’s intraday low of 6.57%. Recent range now 6.57% to 12.57%. Japan: 0.62% –.

Gold closed higher in an ‘inside’ session closing at $1341.50 +$3.30. It has closed above the psychological $1300 every day since 2/12! It has also been above the 200 day since 2/14, which is major support at $1305. 3/3’s high was $1355.00 and 2/27’s high close of $1351.80 were 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, $1305! Critical support at the 40 day ($1288) and the 50 day ($1275), both rising again. Currently $1347.70 +$6.20.

Crude closed lower after working higher for two days to end the week and has now wiped out all gains since Valentine’s Day’s big up move. It closed at $101.12 -$1.46. Last Thursday’s low was 100.13 – right at the 200 day – too close for comfort but bounced.  It has held ‘par’ since 2/12 – 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 ($98.98), and the 50 day m/a ($98.35), both now RISING! FIRST SUPPORT at the 200 day ($100.12). The recent range is $85.61-$112.24 since March 1, 2012. It is currently $100.740 -.38 with a session low of $100.52 – just inches from the 200 day m/a!

Overnight global equity markets slightly higher, ex-France: UK +0.1%. France -0.1%; Germany +0.6% vs -1.3! Japan +0.7% vs -1%; Hang Seng – vs -1.8%!! Korea +0.5% vs -1%; India-0.5% vs +0.1%. U.S. equity futures little changed with another narrow trading range: DOW +13 (range 40); SPX +1.50 (5); NDQ +7.50 (13).   

 

Some random thoughts:

Much has been made of Bernanke’s $250,000 forty-minute speech in Dubai…even though that is ‘chump change’ there where they round off to the nearest million. To TB’s way of thinking he deserves every penny of it for the constant battles he had to fight with Congress, Obama’s not giving him the opportunity to announce his own resignation, and the fact that he, almost single-handedly led the other central banks in putting out the fires of the financial crisis. Was he right? Time will tell but had we done what the extremists in Congress had wanted to do it would have been…let them fail…and all will be well. TB has to wonder if the wealthy liked it because while they too lost money, most of theirs is not in stock but in real estate and other investments and look how well those properties have held up: in San Francisco, prices never fell on the prime residential properties…not so commercial due to plunging occupancy rates (TB recalls Gerald Hines turning over the keys to his California St. high rise to BofA…in 2012 however he finalized plans for a 100 story building in San Francisco so safe to say his confidence at least is back!

The remainder of today’s column refers to articles in the past two Sunday editions of the WSJ:

  1. An article by Al Lewis condemning Bernanke not only for this speech but for ‘lining up’ more which he says, while noting that both Greenspan and even Volcker (eventually), did the same…implies a ‘pay for play’ since Citi was a sponsor of the conference…perhaps Mr. Lewis is just jealous. Would you want the job for just under $200k a year…and less than Bill Dudley, President of the NY Fed, makes along with a bigger office and a limo plus other perks?
  2. Several articles on retirement and investing…mocking the ‘buy and hold’ and ‘it’s always a good time to buy stocks’ mentality. Very credible to with references to Rob Arnott, Peter Bernstein, and Robert Schiller. The big gains came, as TB has previously stated when p/e’s were low…feeble above 13x – although the new mentality sees them as fair even though dividends have been halved, yet the street still tries to sell you on 10% returns when ‘IF’ p/e’s return to the old 10-12x historical averages, returns would plummet – to negative – and a more reasonable expectation from here rather than 5% would be 3.5%. An example is provided where $10,000 for 20 years at 10% gets you $70,000, but at 3.5%, just $20,000. Tell that to Wall Street. But then they have always been like realtors…now is a great time to buy…ever hear a realtor tell you ‘not to buy’? Why would they? You would simply buy from another broker…same goes for stocks! Pretend there is no downside.
  3. Also good articles on the ACT…objective ones. Another on luxury goods prices which are off the wall…why not? They only sell to those who have prospered over the past five years…but even they are saying enough is enough (did you see yesterday where Tesla’s dealers are mad as hell over the company selling cars direct???
  4. A couple of articles on education costs…says to start putting money away for college when the child is born…but aren’t you also supposed to be saving for retirement? For about 75% of the population that is a rare feat…unless you starve yourself, dress in rags, and drive an old clunker (which will get you in repair costs!).

Lots more so if you have the paper you might want to look them up and think for yourself.

 Have a great day!

 TB

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