Quote of the Day from the Friars Club Encyclopedia of Jokes: “Why do I need a gun license? It’s only for use around the house. “ – Charles Addams – or the NRA!!!
Bloomberg Quote of the Day: “It’s never just a game when you’re winning.” – George Carlin…oh? What about when you are losing?
Bloomberg Top Stories:
*JPMorgan Said to Agree on Sale of Commodities Unit for Up to $3.7B – sell five of them and they would recover the London Whale losses – hah!
*Deutsche Bank Said to Plan Investment Bank Job Cuts as Business Stagnates
*Dollar Strengthens With Ruble as Gold Drops Before Fed Stmulus Decision
*’Ring of Death’ Throttles Georgia (U.S.) as Banks Too Small to Save Leave a Void
*Citigroup Foresees Customized Trades Generating 50% of Derivatives Revenue – read unregulated trades…you know, the ones that created the crisis! Sheesh!
*U.S. 4Q Current Account Deficit at $81.1B; Est. $88.0B – got it, GOP? IMPROVING!
*BMW Sees Refreshed Models Spurring Significant Profit Gain; Shares Climb
*Flaherty Ends Tenure as Canada Finance Minister Amid Clashes Over Policy
*Gabelli Is Best in Decade Picking Value With Mighty Mites; Riskless Return
*Tiger Woods Joins Harvard’s Hedge Fund With the Kardashians – time to get out???
*Brazilian Billionaire Cherishing Life Creates Six-Point Plan to Beat Death-don’t go out
*West Readies Toughened Sanctions on Russia After Putin Seals Crimea Claim– a crime!
*Malaysian Jet Investigators Probe Deleted Simulator Data as Search Narrows -pilots!
*South Africa Ombudsman Says Zuma Guilty of Misconduct for Spending on Home
*Robotic Suits to Help Walking Offer New Tools for Aging, Disabled – nice!
Tuesday’s Market Summary:
This afternoon we get the Fed announcement on whether they will cut the QE buys from $65B to $55B a month.
Another ‘up’ day only less so…AND only on a slight increase in total NYSE volume to a still very weak 2.91B shares from Monday’s 2.84B shared day…even more significant was back to back 2nd lowest volume traded on the NYSE of the year: 585M shares replacing Monday’s 606M share session – proof the rally is meaningless and might even have a correction before Friday’s options expiry…possibly today? The Russell 2000 took honors at +1.4% followed by the Composite +1.3% and the NDQ 100 +1.2%. Meanwhile the Dow was up just 0.6% and the S&P +0.7%, followed by Dow Transports +0.5% with the only loser being Dow Utilities -0.2% – its first decline in five sessions net +2.8%! NYSE Financials rose 0.5% vs +1%.
Advance/Declines AND Breadth were finally pretty strong but offset by the low volume: A/D: NYSE +3.2x/+2.6x/+1.4x/-2.0x/+1.4x/-2.1x, Nasdaq +3.1x/+1.8x/+1.2x/-3.3x/+1.3x/-2.7x; Breadth +3.8x/+3x/-1.2x!/-5.2x!!!/+1.1x/-2.4x, and +3.3x/+1.7x/+1.04x/-3.4x!/+1.8x/-3.3x/-1.2x. New 52 Week Highs were little changed at 269 vs 242 vs 146 vs 164 vs 117 vs 251 vs 226 vs 382 vs 486 while New Lows slipped to 32 vs 36 vs 72 vs 79 vs 63 vs 44 vs 35 vs 20 vs 16 (new low).
Bonds: gained ground early but then closed only slightly higher but remain at lower end of trading range since 3/3 (10’s 2.67% vs 2.69% after hitting 2.79%; 30’s 3.61% vs 3.63% back from 3.73%). Overnight starting to weaken : 10 yr 2.68% -1/16; 30 yr 3.62% -3/16; TIP 1.31% -1/4. 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: 0.235% 3 mos, 0.334% 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/Portugal which are lower: Germany 1.58% +2; UK 2.69% +2 – recent high 3.03%! France 2.13% +1; Italy 3.36% –; Spain 3.30% -0; Portugal 4.36% -4; Greece 6.63 vs 6.70% -8– didn’t stay above 7% for long after trading as weak as 7.1% for first time since 2/26; two week ago intraday low hit 6.57%! Recent range now 6.57% to 12.57%. Japan: 0.60% -1.
Gold closed lower at $1359.00 -$13.90 a day after a recent high of $1392.60, highest high since 9/4/13 – just before the selloff began!!! That ended in an outside day and nearly a negative key reversal!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 $1304. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Psych level: $1300 support, also technical with the 40 day, $1306 and now the 200 day at $1304! Further support at the 50 day ($1293). Overnight, weaker again at $1346.10 -$12.90.
Crude continues to trade weak but spiked yesterday to $99.78 before settling at $99.70 +1.62, a day following a session low of $97.37 lowest since February 6th which resulted in a negative key reversal!!! 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 RES is now the 40 day ($99.81), with first SUP at the 50 day ($98.47), while the 200 day is way above at $100.24! The recent range is $85.61-$112.24 since March 1, 2012. Overnight, $99.57 -.13 and quiet.
Global equity markets mostly higher: UK – vs +0.4% vs +0.6%; France +0.2% vs +1% vs +0.9%; Germany +0.7% vs +0.8% vs +0.8%; Japan +0.4% vs +0.9% vs -0.4%; Hang Seng -0.1% vs +0.5% vs -0.3%; Korea -0.1% vs +0.7% vs +0.4%; India – vs +0.1% vs +0.2%. U.S. equity futures slightly higher in a narrow trading range: DOW +21 (range 55); SPX +2.70 (6); NDQ +6.50 (12).
Some random thoughts:
First and foremost: they events in Russia and the Ukraine are being underplayed. This ‘taking back what belongs to Russia’ is exactly what Germany did under Adolph Hitler while the free world simply watched. Not until they attacked Poland did the react and by then Germany had taken so much land that the war became prolonged (short in terms of Afghanistan and Iraq though!). This is a much more difficult situation but one that will take years…decades?…to play out. Meanwhile, the markets are oblivious. We will pay!
At the risk of appearing lazy, TB is going to defer once again to James Kwak of The Baseline Scenario. We have been spoonfed a theory that government is bad and things like ‘faith-based’ charities are the way to go. The federal government is evil according to Grover Norquist and there is no need for it. These same people love to extol the virtues of states rights and letting them allocate resources. Has anyone bothered to check that out? Do you really believe the states are in a position to provide a lifeline in a crisis?
Ger real! Here is Kwak’s latest column…
Mike Konczal wrote an excellent article for Democracy about the problems with a voluntary safety net and the superiority of government social insurance. The article draws on serious historical research (by other people) to prove two main points: first, there never was a Golden Age of purely voluntary charity; second, and more important, what charitable support mechanisms existed were not up to the challenges of the Second Industrial Revolution of the late nineteenth century and completely collapsed with the onset of the Great Depression.
This shouldn’t come as a surprise. There are basic economic reasons why public social insurance is superior to voluntary charity. The goal here is to protect people against risk: of unemployment, of health emergency, of outliving one’s savings, and so on. For a risk-mitigation scheme to work, there are a few things that are necessary. One is that people actually be covered. This is something you can never have with a private system (unless it’s regulated to the point of being essentially public), since charities get to pick and choose whom they want to help. As Konczal says of private agencies before the Depression,
“They were also concerned they’d lose their ability to stigmatize—or to protect—various populations; by playing a role in determining who wasn’t deserving of assistance, they could shield those they felt worthy of their support.”
Another thing you want is the assurance that the system has the financial capacity to actually protect you in the event of a crisis. That’s why you don’t depend on your neighbors to rebuild your house if it burns down. Besides the fact that they may not like you, they probably don’t have enough money—especially if you lose your house in a fire that burns down the entire neighborhood. As I’ve said many times before, there is no other entity in the country—and not really one in the world—with the financial capacity of the federal government. Even state governments scramble to cut benefits when push comes to shove, which is one reason why some states provide Medicaid coverage to almost no one.
We like to think that we are a nation of generous people who will help each other out, but that isn’t really true. We do have a much larger charitable sector than other advanced economies, where the state shoulders more of the burden. But more than half of our total donations go to religious organizations, private schools, and medical organizations, with only 12 percent going to human services organizations. Some money does filter from other organizations to the poor, but at most you can get to one-third of the total. (The vast majority of my donations have gone to services for the poor, primarily legal services.) I’ve argued elsewhere that we should place limits on the tax deductibility of charitable contributions, which are effectively a way that rich people can force other taxpayers to contribute to their pet charities. But as long as we have this idealized picture of our charitable sector, it isn’t going to happen.