Quote of the Day from the Friars Club Encyclopedia of Jokes: “I wouldn‘t mind being the last man on earth – just to see if all of those girls were telling the truth.” – Ronnie Shakes
Bloomberg Quote of the Day: To conquer oneself is a greater task than conquering others – Buddha
US economic data in the past two weeks has been turning modestly positive. The trend in jobless claims improved moderately, suggesting a stronger NFP number for the month of May. Regional manufacturing surveys were mixed but indicate a positive bias for ISM Manufacturing this month. Retail sales improved slightly in April but indicate a stronger Q2 GDP, current estimates are for 3.3% qoq growth vs. our estimate of 3.65%. Next week’s economic calendar is fairly light. The highlight of the week will be the FOMC Meeting Minutes (Wednesday).
We will also get April Leading Indicators and April Existing Home Sales (Thursday) and April New Home Sales (Friday). Courtesy of Economic Advisory Service
Bloomberg Top Stories”
*Deutsche Bank Gains Qatar Royals as Shareholders in $11 Billion Stock Sale – !!!
*Stocks in U.S. Fall as Investors Weigh Growth Prospects Amid Deal Activity
*AstraZeneca Rejects Pfizer’s Sweetened $117 Billion Offer; Shares Plunge – foolish???
*AT&T Agrees to Buy DirecTV for $48.5 Billon to Add Streaming-Video Users – good deal???
*Italian Banks Lead European Equity Decliners as Yields Rise to Month High
*Draghi Comfort Seen as Near Guarantee ECB to Ease Monetary Policy in June
*Staples Options are in Grip of Bears as Rivalry With Amazon Curbs Growth
*Nickel Still Best Metal Even After Worst Slide Since ‘11
*Wall of Worry Rebuilt as Nasdaq Rout Sends Investor Cash to Two-Year High
*Putin Orders Russian Troops Near Ukraine Back to Base Six Days Before Vote
*Worst Balkan Floods on Record Leave 34 Dead as Foreign Aid Starts Arriving
*Nigerian Islamist Militant Attacks Deal Blow to Female Education in North
*Alumni Networks Fighting Sexual Assault on U.S. Campuses Push for Change
Friday’s Market Summary:
Friday was positive but TB was non-plussed. Best performer was Dow Transports +0.8% while the two Nasdaqs and the Russell 2000 were up 0.4-0.6% and the Dow, Dow Utilities, and NYSE Financials were all up 0.3% – nothing to write home about, eh? Within Financials BOTH bank indices were slightly negative (KBW banks -0.2% and Nasdaq banks -0.1% while NYSE brokers rose just 0.3% (BAC was second to JCP in most actives and fell 0.3% and is back down to just $14.51…expect more bad news for them this week.
Total NYSE Volume plunged back to a ‘weak’ 3.18B shares (remember THIS was an options expiration!) from an average 3.53B – on a ‘down’ day! vs 2.81B vs 2.86B vs 2.98B vs 3B – that is a 2.9B share average or about 600M below average and you can bet that a big chunk of that came in the final fifteen…mainly five minutes and at the close! This is not a market…it’s a goddamn casino with loaded dice, marked cards, and magnets on the roulette wheel! Real trades on the floor of the NYSE however rose to 775M shares vs 750M (the 12-month average is 750M so not a strong number but relative to recent weeks ‘passable’ as a market)…consider the average since 5/4 was just 661M shares with now just two sessions registering more than 700M shares (April 30th’s 908M – monthend!). Since 3/31’s (quarterend) 2.0B shares and one of the highest ever there have been exactly FIVE 800M share days and just that one 908M share day on 4/30. Now look at this: every day trades ‘at the close’ ran 50M shares with 50-100M posted after the close…that is pathetic! – yesterday it was 120M shares!!! Starting 15 minutes before the close 218M shares traded…retail? Ya, sure, ya betcha!
A/D’s were positive but lackluster: NYSE +2.1x vs -2.3x vs -2.1x vs -1.2x vs +3.7x; Nasdaq +1.5x vs -2.1x vs -2.8x vs -1.9x vs +3.7x. Breadth was boring: NYSE +1.5x vs -4x!!! vs -2.1x vs -1.1x vs +5.2x; Nasdaq +1.5x vs -2.5x vs -3.3x vs -1.3x vs 5.3x. Oh, wait…there’s more: New 52 Week Highshave plunged the last two session: 71!!! vs 107 vs 208 vs 233 vs 93!!! Now look at New Lows: 180 vs 102 vs 62 vs 65 vs 214!!! Wake up, bulls!!!
On Tuesday the Dow eked out a new record high of 16735…the old one set on 4/4 was 16631 before plunging to 16015 (-4.4%) on 4/11…just SIX days later; S&P was even worse…1902 vs 1897 with the same drop as the Dow to 1814 (-4.4%). The Nasdaq Comp peaked on 3/6 and is off 6.2% since then…the 100 -3.9%. Dow Transports are the best but with minor gains but still look vulnerable. How about the Russell 2000 small cap – a proxy for broad economic strength vs earnings -peaked on March 4 at 1213 and is still down -8.5%!!! As for the winner year to date, Dow Utilities, they peaked on 4/30 and are off 3.3% since then but still positive for the month and quarter.
Lastly volatility…S&P VIX has been bullish…managed to decline again to 12.44 – but only after printing 13.66 earlier…a new options cycle is beginning…are we having fun yet?
Overnight markets currently unavailable…here are Friday’s closes:
Bonds sold off…but remain strong with many suggesting that 2.5% on the 10 year is the new normal. Yield changes from Monday’s close, prices as of Friday: the 10 yr closed at 2.52% -5/16 vs 2.66%; 30’s 3.35% -7/16 vs 3.50%. The long TIP was as low as 1.05% on 5/2, rose to 1.19% Monday and closed at 1.00% Thursday, +1-9/16…it closed Friday at 1.02% giving back just 11/16 of its 3-1/2 in the prior two days!!! Overnight slightly higher regaining about half of Friday’s loss 10’s 2.51% +1/8; 30’s 3.34% +3/16; and long TIP 1.02% +1/8. Cycle highs: 30 yr high was 3.97% on 12/31; the 10 yr recent high 3.03%! Long TIP was 1.64%. The (record?) low of 0.36% was set on 4/5/13.
Libor update: 0.227% 3 mos.; 0.323% 6 mos., both just off their record lows, set in past week: 0.222% and 0.320% respectively! NOTE the Fed Funds rate has averaged 0.08% since 5/22/13 and is 0.07% -0.09%. Foreign bond market yields higher across the board: Germany 1.35% +2; UK 2.59% +3; France 1.81 +2; Italy 3.14% +8! Spain 2.99% +4; Portugal 3.81% +9!!! Greece was coming back from a rough period after hitting 5.83% on 2/24 then rising to 6.33% on 4/28, now 6.70 –, but look: 6.75% +11 vs 6.62%!!! +44!!! vs 6.16%. Range is 5.77% to 12.57%. Japan: 0.58% +1.
Gold closed little changed and the high missed $1300 ($1293.40 -.20, this after hitting $1309.20 last Wednesday, closing at $1293.40 -.20. It remains below the 40/50/200 days and the psych support level of $1300 with first res at the 40 day $1299, then the 200 day $1300, and the 50 day $1310. Following the ‘key reversal’ on 3/17 after printing new recent high of $1392.60, highest high since 9/4/13 – that ended in an outside day and nearly a negative key reversal! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight higher and finally above $1300 again at $1300.90 – session high $1305.70!
Crude closed a tad higher at $102.02 +.52, following Wednesday’s session high of $102.65 – with a range of $101.39 to 102.23 – nothing to see here. 3/2’s session low was $97.37, lowest since 2/4! 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. It remains above all three moving averages with support at the 40 day ($101.33) then the 50 day ($100.99), and 200 day $100.41. The recent range is $85.61-$112.24 since March 1, 2012. Overnight $102.77 +.75, high $102.95.
European equity markets little changed and mixed, Asia weaker: UK -0.3% vs -0.1% vs — vs -0.2% vs +0.1%; France +0.1% vs +0.1% vs -0.2% vs -0.1% vs +0.3%; Germany -0.1% vs -0.3% vs – vs -0.1% vs +0.6%; Japan -0.6% vs -1.4%! vs -0.8% vs -0.1% vs +2%!!! Hang Seng – vs -0.1% vs +0.7% vs +1%!!! vs +0.4%; Korea +0.1% vs +0.2% vs – vs +10.4% vs +0.9%; India +1%!!! vs +0.9% vs +0.4% vs -0.2% vs +1.4%! Result of Modi winning elections! U.S. Stock Indexes mixed: DOW -20; SPX –; NDQ +6.25. U.S. opening: Dow -7; TRANS +35!!!; S&P -1; Nasaq Comp +9; NDQ 100 +4; Russell 2000 -0.90; Dow Utiities -2.70
Some random thoughts:
“This country has noting to fear from the crooked man who fails.
We put him in jail.
It is the crooked man who succeeds who is a threat to this country.”
– President Theodore Roosevelt, 1905
…so begins the first chapter of Nomi Prins’ book, All the Presidents BANKERS. What the book teaches us (and TB hasn’t read it all yet) is that there is nothing new to the way the bankers (“perps”) were treated during the financial crisis. Fast forward to Timothy (Tiny Tim) Geithner’s new book, Stress Test (which TB has not read yet was covered in interviews Sunday on the talk shows. Wonder if there is a chapter on: how I cheated on my taxes and got caught but after the five year limit so it didn’t cost me anything?
Geithner spoke at length on how bailing out the banks was the right thing to do…also some recent data shows the government actually ‘made money’ on the crisis. Really? This is like taking the 3 to 5 odds on California Chrome with a five spot and claiming you won $8! Only the denominator is much smaller… 0.0001:5? …without getting all of the denominator back! Nice when you are dealing with hundreds of billions dollars so you can ‘selectively’ talk just about the money made. Consider if you were in need and went to see your ‘friendly’ banker (does one exist in a large bank anymore?). After pleading your case he would direct you down the street to a ‘pay day’ lender (who his is probably lending too) where you could get the money and pay a ‘usurious’ rate of interest…oops forgot…thanks to the SCOTUS (the Supreme Court), usury was abolished decades ago and Congress lovingly failed to pass a law in a manner which would have reinstated it! (Remember Greenspan and others believe that if you need money you should be able to get it, even if the compounding puts it over 100%! – hey, at least you won’t get your kneecaps broken by Tony Soprano’s boys!).
Now a few articles from the Sunday edition of the WSJ:
1. Going Long – foreign markets could be ready to take off…a compelling argument for buying foreign NOT U.S. stocks…yep, like TB says they are way overvalued and provides stats to prove it…got TB’s attention.
2. Some Life Advice for the Class of 2014 – by WSJ vet Jonathan Clements…seven points to give to your kids that will help them…IF they will heed them…or they might just be like we were…remember how much you knew when you were 18 and how much you found out your parents ‘had learned’ by the time you reached 30?
3. Do ‘Telemed’ Services Lower the Quality of Care? – imagine calling your doctor (who knows your history) and telling him what is wrong with you and he writes you an Rx over the phone? Doesn’t anyone listen to the disclaimers on the drugs advertised on TV? For most you would have to have been given two weeks to live to try them!
4. Mortgages for the Masses – on how Fannie and Freddie continue unabated making mortgage loans – not directly, just buying them from the banks who as TB has repeatedly said, pocket the origination fee, dump the 4% or less loans on FNMA and FHLMC and then continue to service said loans earning 0.5% – that’s better than the 0.25% the Fed is paying them on excess reserves. Again, as TB has said, the Fed has to pay this to keep the money at the Fed so they can continue to hold the loans they bought (and continue to by from FNMA and FHLMC…a daisy chain if you will…or won’t!). It’s good to be a banker: recycle the money earn 1% or so in origination fees, 0.5% in servicing fees, get the risky loan (which will be a loser if rates rise) off your books and have the Fed pay you 0.25% on the underutilized funds! You do the math…it makes TB sick to do it!
Several articles over the weekend on the strength of the housing market AND rebound in second homes! The R/E bulls continue to point to family formation, an improved economy, blah-blah-blah while ignoring the fact that not only are incomes low and rising at the pace of a wounded snail (except CEO’s of course!), which causes the bears to retort: if prices are rising, who is going to be able to sustain them? Aha, another bubble! TB is taking the middle ground: that they may have plateaued with smaller up or down changes – except in the higher priced homes in areas where the wealth gap prevails…but if this goes much further the bears may be right. Hell, we can’t even get the retarded minimum wage raised to $10.10…and yes, Seattle is on the right track at $15 an hour…that is if you want to create a strong economy! Sure it would hurt smaller businesses, but most of those aren’t subject to the Federal Minimum Wage laws…
A high school senior wrote an article in the Minneapolis Star Tribune on what she learned about the minimum wage last summer and how it is wrong to label those adults who work for them as lazy…how many lazy people do you know who work two or more six hour shifts? None! Natalie Ghaffari – part time jobs This is one senior I would hire in a New York minute!!! Are you listening you right wing bigots???
Oops, just checked my manometer…got to stop now!…NOW!!!
Have a terrific week…even if it kills you!