Quote of the Day from the Friars Club Encyclopedia of Jokes: “For every set of horseshoes human beings use for luck, somewhere in this worlds there’s a barefoot horse.” – Allan Sherman…”for want of a nail…a shoe was lost…for want of a shoe…a horse was… – Old Proverb
Bloomberg Top Stories: “Peace is when time doesn’t matter as it passes by.” – Maria Schell – TB can’t recall the last time it didn’t matter…pre-9/11 for sure…when was Bosnia? …and getting worser and worser as we speak!
*European Stocks Fall With U.S. Index Futures as Ukraine Tensions Escalate – WTF???
*Argentina Devaluation Speculation Spurs Biggest Peso Declines Since January – use $!
*Russia Stocks Halt Best Rally Since 2005 as Ruble Drops on Convoy Concerns – well…DUH!
*Dynegy to Buy Duke, Energy Capital Generation Assets for $6.25 Billion
*BofA Gets Credit in Mortgage Settlement for Other Firm’s Consume Relief – oh, how special!
*Fed’s Bullard Says Jobs Gains Pointing to Earlier Interest-Rate Increases – wanna bet?
*Love Affair With Junk Resumes With Biggest Inflows of 2014 – …and when it ends???
*Billionaire Fredrikson’s North Atlantic Buys Rosneft Land Drilling Fleet – Da! ..or nyet?
*Italy Struggling Under Debt Burden Seen Needing Draghi Touch – arrevaderci, Roma!
*Fed Hawks Take to the Air First as Symposium Starts at Jackson Hole – fools that they are…
*Ukraine Says Russia Aid Convoy’s Entry Without Consent Amounts to invasion…and the beat goes on…and on…
*Hunt for Foley’s Killer Expands to Social Media, High-Technology Sleuthing – a very sad case!
*Ukraine Awaits Stabilization Plan From Markel as Germany Flexes Influence – against madman!
*Marijuana Law Mayham Splits U.S. in Half as Travelers End Up in Handcuffs – unintended cons.
Thursday’s Market Summary:
Does anyone recall the TV sitcom, ‘Wings’? One of the characters, a devious older guy (aren’t we all?), would tell one of them something and something else to another until he got them to do what he wanted. He chuckled: “I tell them to do it and they do it!” Why bring this up? Because yesterday’s rally was brought to you courtesy of the Ukraine! It’s better…so stocks rally! Do you honestly believe any credible investor bought on that news? If so, you didn’t look at the ‘unchanged’ weak NYSE Volume…or the total lack of retail! NYSE floor trades up slightly but still near 2014 lows! Just ONE day this week with volume above 600M – by just 5M and that is 100M below the 12-month average – thus far this week it is just 567M shares! That’s 32M below LAST WEEK’s 594M – that with an options expiration! It’s a game…pure and simple. So what was the impetus for the ‘uptick’? Ukraine tensions easing…well, guess what? Today they are worse and as the headline above says. European and U.S. stock futures are weak! Don’t you get it? Fundamentals don’t matter…only headlines, misinformation, and even disinformation!
Even with all that ‘good’ news, Dow Transports were in the red by 0.4%! Biggest gainer was the Dow 30 +0.4%, the rest were up from 0.1% (NDQ 100 and Dow Utilities) to 0.3% (S&P 500) – not much of a rally. Transports SPIKED on the open rising 0.2%+, then plunging within minutes for a decline of 65 points or 0.8% and never saw green again…just slithered into the close. All week they have been mercurial! A/D’s and Breadth were slightly positive; New 52-week highs continue to oscillate but in positive territory while new lows moved up. Volatility was unchanged BUT the high end of the range moved up to 13.51 after two days without a ‘13’ print!
Total NYSE Volume was flat for a third day at a weak 2.62B shares vs 2.56B vs 2.64B vs 2.61B vs 2.96B. Real NYSE Volume up slightly but at a very WEAK 567M shares vs 542M vs 556M vs 605M vs 758M. Last week’s average was just 594M shares! There have been just four sessions above 800M since 4/28! The 12-month average is a historically weak 701M shares. Since 4/30 the average volume has been just 662M shares ranging from 517M to 927B….12 month high is 2.06B shares on 9/20/13!
A/D’s were minimally positive: +1.5x vs 1:1 vs +1.8x vs +3.6x vs -1.3x; Nasdaq +1.2x vs -1.7x vs +1.2x vs +3x vs +1.2x. Breadth was similar: NYSE +1.5x vs +2.1x vs +4.3x! vs -1.3x vs +1.8x; Nasdaq +1.4x vs +1.3x vs +4.8x vs +1.2x vs +1.6x. New 52 Week Highs rose to 266 vs 228 vs 294 vs 266 vs 193 – recent range is 46-580!!! New Lows also rose to 71 vs 53 vs 60 vs 99 vs 72 – recent range is 24-260! S&P VIX steady at 11.76 -.02 from most bullish (overbought?) since 7/24. The range widened to 11.52-13.51 – first ‘13’s print in three sessions
Bonds closed higher…especially the volatile of late long TIP! 10 yr closed at 2.41% +3/16; 30 yr 3.19% +5/8 the long TIP 0.90% +15/16. Overnight the rally continues: 10’s 2.40% +1/16; 30’s 3.18% +1/4; and long TIP 0.89% +3/8. 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: 0.235% 3 mos.; 0.327% 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 it has been for weeks! Foreign bond yields lower ex-Greece: Germany 0.98%! -1; UK 2.38% -1; France 1.37% -1; Italy 2.58% -1; Spain 2.39% -1; Portugal 3.21% +1; Greece 5.76% +12!; The recent high on selloff was 6.75%. Recently 5.42% to 12.57%. Japan: 0.50% -2.
Gold plunged to $1272.00, lowest since 6/18, and closed at $1275.40 -$19.80! It’s 4th straight decline and sub-$1300 close since 8/6. It remains well below the 40 day AND 50 now the 200 day! 7/17’s session high was $1346.60, highest since March 19th!!! 6/9’s $1240.20 was lowest since 1/31/14!!! First RES is the 50 day $1305, then the 40 day at $1307, and now the 200 day, $1285. Next support? $1270 or so! 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 slightly higher in a tight inside session at $1277.70 +$4.00.
Crude inched higher for a second day but the shift to the Oct. contract pushed it further into negative territory. It ‘gapped down’ on the open then plunged to $92.50, lowest since 1/15/14! (why isn’t gasoline following suit? Summer driving?)…it now has had FOURTEEN handles since 6/30! It closed at $93.96 +$.51. 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 ($99.77), then the 40 day ($100.55), then the 50 day ($101.74)…the latter two remain in freefall! The range is $85.61-$112.24 since March 1, 2012. Overnight it is weaker in a narrow inside session at $93.17 -.78.
European equity markets weaker, Asia mixed: UK -0.1% vs +0.2% vs -0.5% vs +0.5% vs +0.7%; France -0.8% vs +0.8% vs -0.8% vs +0.4% vs +0.5%; Germany -0.4% vs +0.6% vs -0.07% vs +0.9% vs +1.5%!; Japan -0.3% vs +0.9% vs – vs +0.8% vs flat; Hang Seng +0.5% vs -0.7% vs +0.2% vs +0.7% vs –; Korea +0.6% vs -1.4% vs +0.1% vs +0.9% vs -0.5%; India +0.2% vs +0.2% vs -0.4% vs +0.1% vs +1.1%. U.S. equity futures weak but coming back: DOW -5 (range 65); SPX -1.90 (8); NDQ — (16).
Some random thoughts:
…BofA posted a 4.2% gain yesterday resuming its role as THE most active NYSE stock. Yes, indeedy, paying a $16.7 billion fine can do that…it can? Oh yes, the rotten government fined them for trying to reneg on the Merrill Lynch deal…extortion! You bet it was! But that was only because Ken ‘I never met a buyout opportunity I didn’t like’ Lewis, originally wanted the deal. Merrill Lynch didn’t sink BOA…in fact it is now arguably its best income producing asset. Unlike, his prior proud purchase of Countrywide which was foolish, arrogant…and a lot of other adjectives – some expletives! (by they way, Mozillo, who paid a $44 million fine without admitting guilt, may again be sued civially…just heard this…and the beat goes on!)
Lots of damning comments yesterday about the Federales…the best was from former Well Fargo CEO Richard Kovacevich who said it was punishing BofA for the sins of Merrill, branding it ‘extortion’. RK has been an outspoken opponent of the government in the ‘bailout’ since his bank was forced to accept a loan…ignoring the fact that the point was to not single out any bank as being clean…thus causing a ‘flight to quality’ to that bank! How do we know this? Continental Illinois in 1985 when Ronald Reagan overrode his Treasury Secretary Don Regan (TB’s former boss at ML), bailing it out and creating moral hazard now known as ‘too big to fail’.
What did TBTF do? It enriched the eight biggest banks – since Continental was #8 – by ‘guaranteeing’ that the government would bail them out. The big banks profited from this at the expense of foreign banks and even more significantly smaller…especially independent banks!
But back to Wells Fargo. Who was THE biggest sub-prime lender? WFC! How many subprime loans did WFC have on its books? Zero, zip, zilch! Those were sold off to the ‘sucker’ brokers likes Merrill…ah but in their greed and profit making algorithm they erred: they took down the profitable home equity loans and unsecured loans which with the ‘first’ added up to 105% of the selling price…in fact they advertised that they wanted ‘you to be able to afford a home’! TB heard the commercial and was shocked that this wasn’t some schlock mortgage company but one of the most respected banks in the U.S. if not the world! They got stung on those ‘profitable’ home equity and unsecured portions when the equity evaporated…poor old Wells. What goes around, comes around…well, sometimes…and in this case it did…in spades…only the magnitude was smaller thus impacting the bank less but they were clearly culpable for the crisis too!
To Kovacevich’s credit, his bank was nearly ‘robbed’ by the Fed when they tried to merge ‘loser’ Wachovia with an even bigger loser, Citi…which made no sense from a business standpoint (too similar an area of customers), and less from a credit standpoint. Wells made a good and substantially better deal for Wachovia…and look how much better everyone fared – financially – then had Citi, which is still way under water from 2007, plus it increased competition with BofA.
Before you think TB is enamored by the ‘work’ of the Feds, recall yesterday’s column…we need more civil suits against the perps at the banks/broker…and AIG was a classic! Let’s stop making shareholders pay for crimes commited by individuals…under the ‘watchful eye’ of their CEO’s!
Ignore all the above if you like bank stocks and their miserable dividends (BofA 0.3%; C 0.08%!; USB 2.3%; JPM/WFC 2.7% – inflation adjusted they are peanuts and with great risk!).
That’s it…you decide! You can still do that, right?
Enjoy your weekend…there is more to life than investing…if you can afford it!