3/13/14…the invisible hand…

Quote of the Day from the Friars Club Encyclopedia of Jokes: “A conference is a gathering of important people who singly can do nothing but together can decide that nothing can be done.” – Fred Allen…sounds like Congress, no?  

Bloomberg Quote of the Day: “If the wind will not serve, take to the oars.” – Latin Proverb…there’s a lot of wind in Congress but few willing to row!

Bloomberg Top Stories:

*U.S. Retail Sales Rose 0.3% in February, ex-Autos +0.3% – first increase in 3 months

*JPMorgan Said to Face Rate-Rigging Fines With ICAP as Alumina Parting Shot L

*Investment-Bank Revenue Likely to Drop 11% in First Quarter, JPMorgan Says – this after investment bankers booked a 15% increase in bonuses last year!

*Jobless Claims in U.S. Decline to Lowest Level Since November – duh! No emergency! *ETFs Get $41 Billion Erasing Global Withdrawals as Economic Optimism Rises – ?

*Draghi Reinforcing Guidance Convinces Economists ECB Will Keep Rates Low – duh!

*GM Engineers Joined Media Flagging Ignition Fault Long Before Recall – oops!

*Pound Confronts Roadblock as Bank of America Sees Slump

*Why Are we Hung Up on Candy Crush’s $7.6 Billion Valuation – it’s overpriced!

*Target Misses Its Own Warnings Set Up to Thwart Largest Retailer Hack – oops!

*Missing Malaysian Plane Said to Have Flown West After Dropping Off Radar

*Death Toll Climbs to Seven After Explosion at New York Apartment Buildings-Harlem

*Middle Class Protesting Venezuela’s Shortages Driving Poor to Back Maduro

*Nations chasing Harvard Merge Universities to Move Up in Global Rankings

*Judge Grants U.S. Request to Store NSA Spy Data for More Than Five Years – why?

Wednesday’s Market Summary:

A mixed day that started very weak following Asia and Europe’s lead, then came back but no significant changes except Dow Utilities which rose 1%! Both Nasdaq’s and the Russell 2000 were up 0.4%, Dow Transports +0.3%, the Dow -0.1%; S&P FLAT, and NYSE Financials -0.2%. NYSE Volume slightly lower at 3.24B shares vs 3.37B vs 3.0B …lowest of 2014 and beating Jan. 2’s 3.04B shares. The 12-month average is about 3.5B shares! Shares traded ‘on the floor’ also barely rose again to 658M shares vs 643M vs 628M shares. The 12-month average is steady at 722M shares. Since 12/20/13 the average has crept up to just 693M shares (23 sessions of more than 700M shares including just five 800M shares and four 900M share 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!

Advance/Declines AND Breadth were both positive after being mostly negative for FOUR days: A/D NYSE +1.4x/-2.1x/-1.3x/+1.3x/+1.3x, Nasdaq +1.3x/-2.7x/-1.2x/+1.1x/-1.1x; Breadth +1.1x/-2.4x/-1.8x/+1.9x/-1.4x, and +1.8x/-3.3x/-1.2x/-1.2x/-1.2x. New 52 Week Highs were halved to a WEAK 117 vs 251 vs 226 vs 382 vs 486 while New Lows crept higher to 63 vs 44 vs 35 vs 20 vs 16 (new low) – still very weak!

Volatility which started last Wednesday at 13.89 has been very quiet and closed at 14.47 -.33 vs 14.80 vs 14.21 vs 14.11 vs 14.21, but the intraday: 14.43-15.64! It remains slightly elevated and nervous…with options expiry coming next week.

Overnight Comments:

Bonds: closed little changed after opening much higher but faded as stocks came back and have been little changed for five 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, slightly weaker following jobless claims and retail sales: 10 yr 2.74% -1/8; 30 yr 3.68% -1/8; TIP 1.37% -3/16. 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, 0.332% 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 little changed ex-Greece and Portugal for a THIRD day: Germany 1.59% –; UK 2.76% +1 – recent high 3.03%! France 2.17% -1; Italy 3.40% -2; Spain 3.32% -2; Portugal 4.54% +6; Greece 7.08%!!! +9!!! – back above 7% for first time since 2/26; contrast to a week ago when intraday low hit 6.57%. Recent range now 6.57% to 12.57%. Japan: 0.63% +1.

Gold took off like a rocket to $1371.30, highest high and close since 9/19 and settled at $1370.50 +$23.50!!! 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 $1303. It also took out 3/3’s high of $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, $1303! Critical support at the 40 day ($1296) and the 50 day ($1284), both rising. Overnight slightly weaker, $1367.70 -$2.80.

Crude tanked again and closed at $97.99 -$2.04 and that after a low of $97.53, both lowest since 2/6/14! It had 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. First Resistance is now the 50 day ($98.31) and the 40 day ($99.32). Major resistance now at the 200 day ($100.13). The recent range is $85.61-$112.24 since March 1, 2012. Overnight, $97.71 -.28 and quiet.

Overnight global equity markets mixed: UK -0.2% vs -1%; France – vs -1.5%! Germany +0.2% vs -1.6%! Japan -0.1% vs -2.6%!!! Hang Seng -0.7% vs -1.7%!! Korea +0.1% vs -1.6%!; India -0.4% vs +0.1%. U.S. equity futures slightly higher in yet another narrow range session: DOW +33 (range 60); SPX +4 (7); NDQ +11 (14)   

 

Some random thoughts:

Yesterday, TB posted this quote from (Sir) Alan Greenspan from 2003 – remember he had been Fed Chairman since 1987:

“Except where market discipline is undermined by moral hazard, owing, for example, to federal guarantees of private debt, private regulation generally is far better at constraining excessive risk-taking than is government regulation.”

It came from a piece on one of TB’s favorite’s, The Baseline Scenario, discussing how markets do not regulate themselves and pricing is not rational…not at all at extremes.

For thirteen years, TB attended the Euromoney International Bond Congress in London, one of the worthiest things he did in his career and where he met such luminaries as Franco Modigliani, Edward Gramlich, John Ralf, Robert Mundel, and many more. Heard numerous discussions on the credit default swap market when it was in its infancy and the only backers were Bear Stearns and other big brokers…nothing but a speculative tool as serious investors mocked it; junk bonds – especially at low yields when warnings were given, and of course the Euro – was there before and after ‘the Big Bang’ and the following year ‘y2k’.

That is the reason for TB’s bent towards the bear and why he believes, ‘bulls get rich, bears get rich, pigs get slaughtered’ and far too often the pigs aren’t pigs but are led to the slaughter by Wall Street. Read the article and see an example of why this is happening – in bonds more so as we ‘stretch for yield’ at precisely the wrong time just as people chase rallies in stocks but with far worse consequences since the upside (except in crisis) is limited. Ask the ‘bond king’ (sic). Here is the link:

market-discipline-free-market-weak-hand

Hang in there, the week is coming to a close…

TB

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