7/7/14…send ’em back!

Quote of the Day from the Friars Club Encyclopedia of Jokes: “I am one of those cliff-hanging Catholics. I don’t believe in God, but I do believe that Mary was his mother.” – Martin Sheen

Bloomberg Quote of the Day: “If you can’t explain it to a six year old, you don’t understand it yourself.” – Albert Einstein…who did not say, “insanity is doing the same thing over and over and expecting different results.” …nor did Ben Franklin! Amazing no one wants credit for it, no?
This week’s economic calendar is fairly light. The highlight of the week will be the Fed Minutes June 18th – 19th Meeting (Wednesday). We will also get May JOLTs Job Openings and May Consumer Credit (Tuesday), May Wholesale Inventories (Thursday) and June Treasury Budget (Friday). Courtesy of Economic Advisory Service

Bloomberg Top Stories:
*European Stocks Decline With S&P 500 Index Futures as Commodities Retreat
*Goldman Sachs Brings Forward Rate Increase Forecast as Treasuries Decline
*Bond Anxiety Grows in $1.6 Trillion Market for Repos as Failed Trades Soar – IMPORTANT!!!
*Citigroup Bids Where Goldman Won’t Tread as Block-Trade Competition Mounts – go with GS!
*Archer Daniels Midland Agrees to Buy Wild Flavors for $3 Billion in Cash
*Mexico Seen Leapfrogging Brazil as Latin America’s Top Auto Manufacturer
*Icon Carney’s Hawkish Turn on Rates Seen as Policy Trendsetter for Yellen
*Gowex to File for Insolvency as CEO Garcia Resigns on Fictitious Accounts – Wi-Fi provider!
*Top Forecaster Backing Dollar on First-Quarter Fed Rate Boost – good luck on that one!
*Bed Bath & Beyond authorizes Buyback of Up to $2 Billion in Shares
*Ukraine Aims to Destroy Rebel Bases in Easdt While ruling Out a Cease-Fire
*Liberman to End Alliance With Israel’s Likud Over Rocket Attacks From Gaza
*Nigerian Women Escape From Islamist Group Boko Haram After June Abductions
*Agent Tackles Rhino Horn Trade at $60,000 a Pound With Miami Hotel Sting – good!

Thursday’s Market Summary:

Just as one might expect of the day preceding a long weekend (especially in summer), Thursday had skimpy volume of 1.99B shares (just 537M on the NYSE floor, second lowest since 4/30!), and the market was up from m0.5% (Dow) to 0.8 (Transports). Bonds which had an early close (as usual) were slightly weaker except long TIPS which were beaten up last week gained 5/16 to close at 1.09%…before the selloff they traded up to 0.98%! Not much else worth commenting on but NDQ 100 advance/declines ran 15.7:1 positive, and the VIX closed at 10.32 -.50 and is now in EXTREMELY bullish territory…is it warranted? You decide…

The payrolls report kicked it off but the rest of the date is indicative of just 2% GDP growth, while earnings continue to grow at just 2% so the prospects for doing better than that are slim to none. !

Total NYSE Volume was nearly halved to an extremely weak 1.99B shares from an already weak 2.83b vs 3.15B vs 3.02B vs 4.25B (end of quarter) vs 2.78B. 6/30 and June options expiration were the only high volume (4+B) days last month! Real NYSE Volume plunged to 537M shares, second weakest since April 30th vs 597M vs 686M vs 792M vs 1.49B shares – that and options expiry’s 1.72B shares the only ones above 800M since 4/28! The 12-month average continues to slip and is at a very weak 706M. Since 4/30 the average volume has been just 681M shares ranging from 531M to 1.72B.

A/D’s were slightly positive: NYSE +1.3x vs -1.6x vs +2x vs +1.5x vs +2x; Nasdaq +2.1x vs -1.2x vs +2.7x vs +1.3x vs +1.7x. Breadth was marginally better: NYSE +2.8x vs +1.05x vs +2.1x vs +1.2x vs +1.3x; Nasdaq +2.2x vs -1.01x!?! vs +3.7x vs +1.7x vs +1.5x. New 52 Week Highs were stable at a normal 324 vs 319 vs 580 vs 392 vs 301 – recent range is 71-580!!! New Lows were also stable but at a very weak 27 vs 26 vs 27 vs 34 vs 42 vs 51 – recent range is 24-214.
S&P VIX dropped again to 10.32 -.50 – extremely bullish! …overly??? For the 3rd time in 9 sessions the high end of the range was below ‘12’: 10.28-10.76 – 3rd straight ‘10’ handle on the low end and first time high end of range was below ‘11’! Close is a new recent low taking out 10.34 on June’s options expiration!

Overnight markets:

Bonds closed weaker – except the long TIP! 10 yr closed at 2.64% -1/8. 30 yr closed 3.47% -3/16. The long TIP, which hit a low of 0.978% on 5/29, closed 1.09% +5/16. Overnight they are moving higher again: 10’s 2.63 +1/16; 30’s 3.45% +5/16; and long TIP 1.08% +3/8. 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: 0.234% 3 mos.; 0.328% 6 mos., both remain near their record lows, set recently: 0.222% and 0.320% respectively! NOTE the Fed Funds rate has averaged 0.09% since 5/22/13 and is 0.08-0.10% where it has been for weeks! Foreign bond yields little changed: Germany 1.26% –; UK 2.73% -2; France 1.69% –; Italy 2.81% -2; Spain 2.67% –; Portugal 3.56% +1; Greece 5.81% –. The recent high on selloff was 6.75%. Highly volatile!!! Recent range 5.42% to 12.57%. Japan: 0.56% –.

Gold closed lower at $1320.60 -$9.90 with the low at $1310.00, lowest since 6/20 while 7/1’s high was $1334.90 – highest since 3/24! This is the 11th straight close above $1300 since 4/14! 6/9’s $1240.20 was lowest since 1/31/14!!! It is well above all three key moving averages which are nearly locked: 50 day $1289, then the 200 day $1288, and the 40 day $1286! Key is the psychological $1300 level. It is coming back from a selloff that has been in place since 3/17 when it set the recent high of $1392.60, highest high since 9/4/13! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight is weaker at $1316.30 -$4.30 in a narrow ‘inside’ session.

Crude continued its selloff: plunging to $103.67 intraday – now lowest since 6/9 before coming back to close at a weak $104.05 -.43 (7th straight close below $106 and 2nd below $105!!!). 6/20’s run to $107.73 – highest since 9/19/13, a huge down session – has left it in limbo and showing signs of more weakness to come. 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 is almost at the 40 day moving average – which is rising! 40 day $104.02, 50 day $103.28 then the 200 day $100.01. The range is $85.61-$112.24 since March 1, 2012. Overnight it is weaker againl at $103.89 -.17 with a session low of $103.67 – just .02 above Friday’s low!

Global equity markets weaker, ex-India: UK -0.5% vs +0.5% vs +0.3% vs -0.1% vs +0.1%; France -1%! Vs +0.4% vs – vs -0.3% vs –; Germany -0.5% vs +0.6% vs +0.2% vs +0.2% vs +0.1%; Japan -0.4% vs -0.1% vs +0.3% vs +1.1%! vs +0.4% vs -1.4%; Hang Seng – vs -0.1% vs +1.6% vs closed vs -0.1% vs +1.5%; Korea -0.2% vs -0.2% vs +0.8% vs -0.2% vs +0.7%; India +0.5% vs -0.1% vs +1.3% vs +0.4% vs +1.3%; U.S. Stock Index Futures weaker in a more normal trading range: DOW -40 (range 48 vs 29); SPX -5.30 (6 vs 4!!!); NDQ -10(6 vs 3!!!).

Some random thoughts:

…the two hottest issues, which are growing in support are the wealth gap (which TB has reported on extensively and is a major concern for economic growth), and immigration reform which as was pointed out on Fareed Zacharia’s show yesterday is not only gaining in intensity here and becoming a major election issue (as seen in Eric Cantor’s stunning defeat), not only in the U.S. but France, Germany, and undoubtedly in Turkey and other countries that have had to accept refugees.

It is overblown but a serious issue. Overblown you say? Yes, because it is being used as a political divide with outright lies being stated (disinformation) by Republicans on the talk shows while Obama’s Jeh Johnson on Meet the Press never answered any questions honestly despite David Gregory rephrasing them several times…instead resorting to canned sound bites which made him and the Administration look…well…stupid and evasive. People want honest answers and when they don’t get them they assume (logically) that there is a cover-up.

Guess what? Immigration was THE leading cause of Prohibition! You didn’t know that…guess why? First, the beer was made by Germans and men were drinking enormous quantities of it. As if this wasn’t enough Adolphus Busch resorted to horrible tactics to stop those in favor of it. Second, the Irish drank…let’ keep them away! Lastly, the Italians were huge wine drinkers. Lastly, it was blacks in the south and this paved the way for the KKK to not only come into being but become a force to reckon with and with the full support of the drys!

Underpinning this then was immigration…amazing for a country of immigrants themselves who wanted the door shut after they were here. Sound familiar?

Hope you all had a great Fourth…and a fun rest of the weekend.

TB

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