8/15/14…party like its 1914 all over again…

Quote of the Day from the Friars Club Encyclopedia of Jokes: “The other day I bought a wastebasket and brought it home in a paper bag. And when I got home I put it in the wastebasket.” – Lily Tomlin

Bloomberg Quote of the Day: “It is never too late to be what you might have been.” – George Eliot – well, unless you are dead that is…

Bloomberg Top Stories:

*Investment Outflow in U.S. Reached Record as China, Japan Sell Treasuries – see below!

*Wholesale Prices in U.S. Rose at a Slower Pace in July as Fuel Costs Fell

*Fragile Five Currencies Looking Fragile Again as U.S. Rate View Takes Root

*Janet Yellen Channels Grace Slick a Surrealistic Economy Shows ’67 Claims

*Junk-Bond Funds Abstract $680 Million as Demand Reappears in Credit Markets

*Housing Debt Bulge as U.K. Wages Decline Seen Heightening Risk of Defaults – but not here!

*Canadian July Job Creation Corrected to 41,700 From 200(?); Rate Unaffected

*Shoppers Ditching Colgate Total Toothpaste as Triclosan Fears Damage Brand

*London Silver Price Set in First Step to More Transparency In Benchmarks

*Biggest Losers From Argentine Default Are Short $4 Billion to Fill Orders – danger of shorting!

*Dead Migrants Without ID’s Become Texas Medical Examiner’s Macabre Mission

*Ukraine Tangles With Russia Over Military Incursion as Aid Convoy Stalls

*EU Warns Russia Against Using Ukraine Aid Convoy to Send Troops Into East

*Putin Pacific Gambit Threatens Rising Japan Trade With Ukraine Handbook

*SeaWorld Plans to Double Size of Killer Whale Habitats to Quell Criticism

 

Thursday’s Market Summary:

Yes, indeed…a rally – of sorts – but what was the biggest gainer? Don’t look it up! Dow Utilities up 0.8%!!! Followed by Dow Transports up 0.7%! The rest were up 0.4-0.5% except the plagued Russell 2000 up just 0.1%. Volume slumped again and shares traded on the NYSE floor plummeted to 517M – a new low for 2014 – we have had three of the lowest five volume sessions this week…and its only Thursday! Nevermind, rally or swoon, it doesn’t matter as today is another options expiry…round and round she goes, where she stops only high freaks know!

Total NYSE Volume fell again to its weakest level since July 3rd’s 2.07B share session. This vs 2.7B vs 2.59B vs 2.76B vs 2.87B. Real NYSE Volume set a new low for 2014 with just 517M shares…and just 448M at the closing bell! vs 559M vs 543M vs 596M vs 629M vs 670M vs 689M vs 703M. There have been just four sessions above 800M since 4/28! The 12-month average remains at a very weak 703M shares. Since 4/30 the average volume has been just 666M (the hex) shares ranging from 517M to 927B….12 month high is 2.06B shares on 9/20/13!

A/D’s were positive for the 4th time in five sessions so what! NYSE +2.1x vs +2.9x vs -1.4x vs +2.8x vs +3.1x; Nasdaq +1.3x vs +2x vs -2.1x vs +2.7x vs +2.3x. Breadth was worser: NYSE +1.8x vs +2.1x vs -1.8x vs +2.9x vs +4.2x!; Nasdaq +1.6x vs +3x vs -2.1x vs +3.7x vs +2.3x. New 52 Week Highs were stable at a below-average 141 vs 140 vs 96 vs 155 vs 86 vs 67 vs 49 – recent range is 46-580!!! New Lows slightly lower again at 72 vs 79 vs 84 vs 64 vs 145 vs 167 – recent range is 24-260! This is a perfect set-up for options expiration! Beware! S&P VIX continued to fall and is well in bull territory at 12.42 -.48! The range was 12.48-13.13. No ‘14’s for a 2nd day! Put options are very cheap…consider!

Bonds closed not only higher but at new 12 month low yields taking out the ones set just a week ago! 10 yr closed at 2.40%! +1/4; 30 yr 3.19%! +15/16; the long TIP 0.88% +1-1/16 (its low yield remains 0.86%! Overnight they are rallying again and at new 12-month highs! 10’s 2.39% +1/8; 30’s 3.18% +3/8; and long TIP 0.86% +5/8. Cycle highs yields: 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.; 0.331% 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 at 0.08-0.10% where they have been for weeks! Foreign bond yields lower across the board for a 2nd day!!!…especially the PIIGS! Germany 1.01% -1; UK 2.41% -3; France 1.39% -2; Italy 2.60% -6!; Spain 2.41% -7!; Portugal 3.47% -6!; Greece 5.79% -13; -36bp’s in 2 days!!! The recent high on selloff was 6.75%. Recently 5.42% to 12.57%. Japan: 0.49% -1.

Gold closed slightly higher at $1315.70 +$1.20, in another parallel session to Tuesday – narrow range! It is now well above all three moving averages and the psychological support level of $1300! 7/17’s session high was $1346.60, highest since March 19th!!! 6/9’s $1240.20 was lowest since 1/31/14!!! First support is at the 40 day $1311, then the 50 day at $1301, and the 200 day at $1286 – these are VERY tight supports! ALL are critical support levels! Note the recent high of $1392.60 on 3/17, highest high since 9/4/13…that too ended the session with a negative key reversal sparking the downturn! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is sharply lower at $1307.90 -$7.80.

Crude took a header trading down to 95.26 – lowest since 1/27/14 – before coming back to close at $95.58 +.22. This four days after trading down to $96.55 – lowest since 2/4! – Now ELEVEN handles since 6/30! 7/22’s high was $105.20, still highest since 7/2. 7/15’s session low was $90.01 – lowest since 3/21. 6/20’s run to $107.73 was highest since 9/19/13 (a huge down session which put it in freefall. 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. RES at the 200 day ($99.78), then the 40 day ($10190), then the 50 day ($102.54)…the latter two now in freefall! The range is $85.61-$112.24 since March 1, 2012. Overnight it is little changed at $95.69 +.12. Note session high of $97.20 – re-jected!

Global equity markets strong…ignoring all potentially bad news – slower growth is better? For bonds, for sure…but???: UK +0.8% vs +0.5% vs +0.1% vs -0.1% vs +0.9%; France +1% vs +0.3% vs +0.6% vs -0.6% vs +1%; Germany +0.9% vs +0.3% vs +0.9% vs -0.7% vs +1.7%! Japan flat vs +0.7% vs +0.4% vs +0.2% vs +2.4%!!! vs -3%!!!; Hang Seng +0.6% vs -0.4% vs +0.8% vs +0.2% vs +1.3%!; Korea closed vs – vs +1%! vs +0.1% vs +0.4% vs -1.1%! India closed vs +0.7% vs +0.2% vs +1.4%!!! vs +0.8% vs -1%!. U.S. equity futures higher: Dow +43 (range 58); SPX +4.20 (8); NDQ +12.75 (14)…ignore all of them and wait for options expiry!

 

Some random thoughts

…history does have a way of repeating itself and those who ignore it have a habit of getting screwed. Last week, TB mentioned a new book that people are taking note of: War and Gold: a Five-Hundred Year History of Empires, Adventures, and Debt, by Kwasi Karteng. TB is now up to WWI and starting the years between it and WWII. As readers know, TB hasn’t ‘exactly’ been bullish on stocks – especially when for a third day now of late, stocks and bonds are not only both up but at/near their 12-month highs. On Wednesday, Deere lowered its 12-month profit expectations, and yesterday, Wal-Mart followed suit! That and slowing retail sales, no significant earnings growth (CEO’s excepted…nice to have your bonus tied to stock prices…especially after a financial crisis, right?), and a world in turmoil – but who cares? Certainly not the Flash Boys, who seem to be the only action out there (retail fell to a new 12-month low…and we have had the three lowest volume days of the year this week! Let’s see what happens on today’s options expiration.

Back to the book…bet you didn’t know this: the Archduke Ferdinand and his wife Sophie, were assassinated on June 22, 1914 and that is billed as the catalyst for WWI. But as early as the previous spring it was apparent the world would be at war. The stock market ignored it…and in fact it was nine days after the assassination that the market reacted on July 31, 1914! No sense of alarm – initially – until everyone started cashing in their pounds for gold…led by the bankers who in turn refused to let their customers have the gold! Typical, right?

So on July 31st, the Bank of England ordered the stock exchange closed – and it remained closed for the remainder of 1914! This in turn caused the NYSE to close and it too remained closed for the duration of 1914! One hundred years ago…almost to the day…why wasn’t this one of the anniversaries we seem to be getting nearly every day?

What did it achieve?…it bailed out the Bank of England whose gold reserves were extremely low in the first place. It also created a panic because as TB is fond of saying: in a liquidity crisis you sell what you can sell, not what you want to sell! So what did that leave? Bonds! Hmmm.

So back to the future…here we are…stock market near record highs not even six years after the financial crisis began…the biggest in world history and affecting all countries…normally it would take eight or more years to recover…ours began in six months!!! Call us cock-eyed optimists, right?

But look what is happening: the majority of the world is on fire…en fuego…we can’t even cover all the hot spots in one night on the news; Egypt, Syria, Iran, Iraq, Israel, Palestine, and of course Africa, which now has Ebola to deal with! But as Alfred E. Newman would say, “what – me worry?“ …or as Pogo would put it: “we have met the enemy and they are us.”

So, just keep pumping your money into stocks, boys and girls…we are due for new highs…climbing higher and higher…until it doesn’t! Meanwhile, those who played it safe are now stuck in their zero percent money market funds and savings accounts or bond funds that are ignoring risk.

Nice to have something to think about this weekend…like another Black Friday? Just kidding…sort of…

Have a fun and exciting weekend…not too exciting, mind you!

TB

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