Quote of the Day from the Friars Club Encyclopedia of Jokes: “Baseball’s been called the national pastime. It’s just the kind of game someone deserves who has nothing better to do than to try to pass his time.” – Andy Rooney…and he loved the game!…or was that football??? Whatever…
Bloomberg Quote of the Day: “Unrest of spirit is a mark of life.” – Karl Menninger – I’m so tired.
Bloomberg Top Stories:
*Currency Probe Widens as Prosecutors in U.S. Said to Target Sales Markups – Bastards!
*U.S. Jobless Claims Decrease as Labor Market, Economy Show Steady Progress – but slow!
*Argentine Bonds Fall as Captanich Rules Out Debt-Talks Visit to New York – ignoring us!
*Stocks Rise With Bonds on Fed Rate Outlook While Emerging Currencies Climb – see above?
*KKR Leads $3.5 Billion Cash Injection Into First Data After Debt Ballooned
*BlackBerry Posts Narrower Loss Than Estimated on Cost Cuts; Shares Surge
*Hedge Funds Saba, Brevan Stymied as Central Banks Temper Global Volatility
*Mobile Marketing Stumbles as Pandora App Plays SF Ads to New York Audience – who cares?
*New Silver-Price Benchmark Seen Heralding Revamp for Gold Fix – will it work?
*BMW’s Left at Home as U.S. Candidates Seek Street Cred With Pickup Trucks – false image!
*France Joins U.S. urging Iraq Political Change to Defeat ISIL Insurgency
*Rousseff’s Approval Rating Remains Unchanged at 44% in CNI/Ibope Survey
*Iran’s Power Status at Stake in Iraq as Maliki Attacked by Sunni Militants- that’s one way!
*Felipe VI Says Spain Must Strengthen Democracy While Preserving Its Unity
*Muni’s Record Stretch of Trouncing Treasuries Shows Tax-Free Appeal – how much longer?
Wednesday’s Market Summary:
An unsettled day as the market(s) awaited the statement following the FOMC meeting. It made, as bandleader Billy Eckstein would say, “(Is) everybody happy (?)”. Bonds rallied, stocks rallied, – but mainly bonds! This despite a continued $10 billion tapering of the QE’s. Here is the reason for the ‘glee’: more committee members see 1.25% rates in 2015 than saw 1% previously…BUT…and it is a very big one…seven vs five last year shifted to 1.25% while three vs two saw rates unchanged. Could the BOE move to ‘negative interest rates’ have created confusion? Confusion by the Fed in an otherwise tame market is a good thing…especially for bonds! Yesterday’s release of May CPI was higher in both headline and core: 0.3% vs 0.2%. Still, this is not a problem as it was focused in Food +0.5% and Energy +0.9% – both likely a result of the drought in the lower half of the country and the horribly cold winter…they should moderate. These are not the things that worry the Fed…they are involuntary as opposed to demand driven consumer areas. The Fed is and will be on hold for the foreseeable future.
So besides bonds, who were the winners? The Big Easy goes to Dow Utilities +2%!!! Now up 15.6% year to date. Compare to the second place Dow Transports +1.5% (+10.5% ytd). The S&P 500 rose 0.8% (+5.9% ytd), while the rest were ALL up 0.6%. The NDQ 100 is now up 5.9% ytd while the Dow is up 2% and the Russell 2000 just 1.7%. NYSE Financials are +3.2%. Consider how income producing stocks have fared this year and without the volatility!
Total NYSE Volume was slightly higher at a non-event 3.07B shares vs 2.96B vs 2.91B vs 2.58B vs 3.03B vs 2.67B vs 2.69B vs 2.8B vs 2.84B vs 3.1B – that is one big string of weak sessions! Real trades on the floor of the NYSE also rose but are still 86 million below the 12-month average of 714M shares); this vs 600M vs 604M vs 575M vs 621M vs 532M vs 557M vs 608M. May 1st on the average is an extremely weak 639M shares with a range of 915 to 532M. That is weak!.
A/D’s were positive: NYSE +2.7x vs +1.6x vs 1:1 vs +1.3x vs -1.4%; Nasdaq +1.7x vs +2.1x vs +1.2x vs +1.04x vs -1.8x. Breadth was solid on the NYSE: NYSE +4.3x!!! vs +2.2x vs +1.04x vs +2.2x vs -2.2x; Nasdaq +2x vs +2.7x vs +1.5x vs +1.8x vs -2x. New 52 Week Highs surged to a solid 328 vs 255 vs 251 vs 171 vs 186 vs 193 vs 256 vs 515 – recent low 71!!! New Lows were slightly higher and creeping back at 40 vs 38 vs 34 vs 36 vs 30 vs 25 vs 24 vs 25 – recent range is 24-214.
S&P VIX dove back solidly into bullish territory making puts very CHEAP after holding above ‘12’ for five straight sessions closing at 10.61 -1.45, pulling the range down to 10.57-11.91 from 12.06-12.89 – could Friday’s quadruple witching options expiry be the reason??/ It sure could!!! There had been FIVE straight closes above ‘12’ in 16 sessions. The long-term average is ‘20’!!!
Bonds closed strong following FOMC statement! 10 yr closed at 2.59% +9/16. 30 yr closed 3.40% +3/4. The long TIP, which hit a low of 0.978% on 5/29, closed 1.08%!!! +1-3/16!!! Overnight little changed and mixed: 10’s 2.58% +1/16; 30’s 3.40% -1/16; and long TIP 1.08% –. 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: 0.230% 3 mos.; 0.323% 6 mos., both remain just off their record lows, set recently: 0.227% and 0.320% respectively! NOTE the Fed Funds rate has averaged 0.08% since 5/22/13 and remain slightly higher at 0.09% -0.10%. Foreign bond yields lower across the board following US Treasuries: Germany 1.31% -6!!!; UK 2.72% -2; France 1.77% -8!!!; Italy 2.91% -6; Spain 2.70% -6; Portugal 3.48% -3; Greece, which took out the old lows is now 5.74% -6. The recent high on selloff was 6.75%. Highly volatile!!! Range is now 5.42% to 12.57%. Japan: 0.58% -1.
Gold closed little changed in a very narrow range inside session (just $5!!!)at $1272.40 +.30, two days after a surge in the overnight market to a new high of $1285.10 – still highest since 5/27 when it began its plunge. 6/9’s $1240.20 was lowest since 1/31/14!!! It hit $1304.10 on 5/22 – the last time it saw $1300! It remains way below the 40/50/200 days and the psych support level of $1300 with first res at the 40 day $1280, then the 50 day $1285, and the 200 day $1290 – convergence continues and thus formidable resistance! It has fared poorly since the ‘key reversal’ on 3/17, after printing the recent high of $1392.60, highest high since 9/4/13! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight however it is roaring and is now $1289.40 +$16.70!!! – at overnight high!!! Thanks to Fed!
Crude had its third straight lower high, lower low session after peaking at $107.69 on Friday – highest since 9/19/13 – falling to $105.80 before coming back to close at $105.97 -.37 – first close below $106 since rally began last Thursday over Iraq – that is still highest since 9/19/13 – a huge down day. 6/5’s low of $101.60 was lowest since 5/16. 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 well above all three moving averages: 50 day ($102.76) then the 40 day ($102.55), and 200 day $100.13. The recent range is $85.61-$112.24 since March 1, 2012. Overnight it is weaker again at $105.72 -.27 – with another new low of $105.61!!!
European equity markets slightly higher, Asia mixed – for a second straight session: UK +0.7% vs +0.3% vs +0.1% vs -0.3% vs -1.1%!!! France +1%! vs – vs +0.2% vs –0.6% vs -0.8%; Germany +0.9% vs +0.2% vs +0.3% vs -0.3% vs -0.8%; Japan +1.6%! vs +0.9% vs +0.3% vs -1.1%! vs +0.8%; Hang Seng -0.1% vs -0.1% vs -0.4% vs -0.1% vs +0.6%; Korea +0.1% vs -0.6% vs +0.4% vs +0.1% vs -1%!!! India -0.2% vs +1.3%! vs -0.2% vs -1.4%!!! vs +0.4%; U.S. Stock Index Futures little changed and quiet: DOW +7 (range 22); SPX +1 (3!); NDQ +3.50 (7!!!).
Some random thoughts:
…TB is reading Last Call, by Ken Okrient, the defining book on Prohibition and a must read for any political wonk. It was very much like Congress today during the passage, implementation and ultimate repeal. Even more in common is the hypocrisy by the members themselves. Consider the dry movement began 100 years before the adoption:
1. Alcoholism rampant in the U.S. Schlerosis of the liver was most common cause of death
2. The WCTU and Anti-Saloon League wanted two things: womens sufferage and prohibition
3. Henry Ford and Andrew Mellon were big backers
4. Opposition from Adophus Busch and other brewers since beer not hard liquor was most consumed…20 gallons annually for every man, woman and child in U.S.!!!
5. Congress put up the 18th amendment and then required it be ratified by states in five years…it took ONE year! Most Congressmen drank and continued to drink defying law.
6. Enactment spawned the KKK who along with evangelicals augmented the ASL
7. Women did not drink before the 18th but it became exciting. Adoption of the cocktail.
8. Birth of organized crime in the U.S. Most law enforcers and judges were on the take
9. Canadian whiskey shipped across the Great Lakes and later to St. Kitts by Seagrams
10. Emphasis shifted from prohibition to enforcement with huge fines and sentences
11. More police and judicial time spent on prosecuting minor violations than on all other crimes. More profitable but caused other crimes to escalate.
12. Opposition became strong when Congress (controlled by dry GOP) passed the Jones Act requiring even minor offenses be felonies with mandatory FIVE years imprisonment and a $10,000 fine…if they couldn’t pay it they could work it off at $1 a day tacked on to the original sentence…thus a five year term could be more than 27 years. Uproar on this!
The point is that there were no heroes…only people serving their own interests. Oh, and many of us have come to believe that the Income Tax was begun to pay off WWI debt. That is FALSE…it was a prelude to Prohibition so that the decline in the alcohol tax, the biggest revenue producer, would be replaced by a tax on income! Ultimately, of course, the wealthy changed their position believing that repealing Prohibition would then eliminate the income tax…how wrong they were…what fools all were!
Have a great day!