11/22/14…hedge fund plus Sears equals Lampert?

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Wives are people who feel they don’t dance enough.” – Groucho Marx

Bloomberg Quote of the Day: “No particular race is the enemy. Ignorance is the enemy.”

– George Lopez

This week’s economic calendar is fairly light. The highlight of the week will be the August Durable Goods Orders (Thursday) and Q2 GDP 3rd Estimate (Friday). We will also get August Existing Home Sales (Monday), September Richmond Fed Manufacturing (Tuesday), August New Home Sales (Wednesday) and September Consumer Sentiment Final (Friday). Courtesy of Contingent Macro Advisors LLC

Bloomberg Top Stories:

*Stocks Decline With U.S. Futures, Commodities on China Growth; Bonds Gain

*Apple’s First Weekend Sales of IPhone 6, Plus Models Top Record 10 Million – profit???

*Indiana Toll Road Operator Owned by Macquarie, Ferrovial Seeks Bankruptcy

*UBS Must Deposit $1.4 Billion in Money Laundering Case, French Court Rules

*Tesco Probes Accounting After Overstating Profit Estimate; Shares Plunge – honest mistake?

*East Europe at Draghi’s Mercy Afteer Losses in Zloty to Forint

*Hedge Funds Make Record Bet on Declining U.S. Diesel Fuel

*Clorox Exits Valenzuela After Price Freeze, Hyperinflation Hobbles Business

*Islamic State Onslaught Drives Mass Exodus of Kurds to Turkey

*Ukraine to Pull Back Artillery From East as President Sees Tensions Easing

*Khodorkovsky Challenges Putin as Russian Opposition Stages Demonstration

*Kobach Join Brownback as Lightning Rod Amid Republican Revolt in Kansas – now that’s news!


Friday’s Market Summary:

That was one weird options expiration! First, the volume: Total NYSE Volume was 4.65B shares – third largest of the year…and those three are ‘bunched’…and this: shares traded on the NYSE floor was 1.86B (1B at closing bel – not only highest since 3/21 but equal to THREE days trading since 4/30! Now the bad news: A/D’s and Breadth were both negative – NYSE AND Nasdaq! New 52 week highs rose to 222 from 205 but the big deal was new lows which rose by50% to a very high 237!!! VIX on the other hand ranged from 11.52-12..61, closing at 12.11 +.08? ‘Bear’ in mind what TB always says about high volume on down days…ok, it wasn’t totally down. After all, Dow Utilities rose by 0.7% – offsetting Thursdays decline. But Look: Russell 2000 -1.1%! Here’s a strange one: Nasdaq Composite -0.3% BUT the 100 fell 0.8%!!! Dow Transports off 0.5% while the S&P 500 was -0.1% and the Dow +0.1%…this on options expiration? So what? Have you noticed commodities – especially Gold and Crude? Plunging! You decide if market is fair value!

Total NYSE Volume surged to 4.65B shares, 3rd highest of last 12 months! Back to the volume of the ‘good old days’ but on expiration, vs 3.2B vs 3.14B vs 3.14B vs 2.76B. Real NYSE Volume hit 1.85B shares – highest since 3/21 – also an expiration day. Compare to the prior five days: 676M vs 668M vs 649M vs 591M vs 694M (highest since 8/15’s 758M shares!!!). This marks the 1st day above even 700M in 25 sessions! The average for the week ended 8/29 was 522M shares – a new 2014 low – average volume for the year at the bell is just 608M shares! There have now been five sessions above 800M since 4/28! The 12-month average is a historically weak 701M shares. Since 4/30 the average volume had been just 649M shares, ranging from 517M to 927B….but this boosted it to 701M 12 month high is 2.06B shares on 9/20/13!

A/D’s negative following three modest positives: NYSE: -1.5x vs +1.6x vs +1.1x vs +1.8x vs -1.9x vs -3.8x; Nasdaq -1.9x vs +1.5x vs +1.3x vs +1.2x vs -3.2x!. Breadth was similar:: NYSE -1.6x vs +1.2x vs +1.1x vs +2.5x vs -1.6x; Nasdaq -2.2x vs +1.7x vs +1.6x vs +1.9x vs -4.8x!!! New 52 Week Highs climbed again to a solid 222 vs 205 vs 146 vs 84 vs 59 – recent range is 59-580!!! New Lows however ROSE by 50% to a high 237!!! vs 159 vs 125 vs 186 vs 185 – recent range is 24-260! S&P VIX closed below ‘12’ for the 2nd time in 15 sessions with a range of 11.52-12.61, closing at 12.11 +.08 – remember this was options expiration so don’t place much on this. Last Wednesday was a double top at 14.53!

U.S. bond market was strong! 10 yr 2.57% +3/8; 30 yr 3.28% +1-3/16, the long TIP 1.10% (low was 0.87%!) +1-5/16. Higher overnight: 2.57% +1/16; 30’s 3.28% +1/8; and long TIP 1.09% +3/16.  

Libor update: 0.233% 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 remains 0.08%-0.10%, where it has been for weeks! T-Bills range from -0.1%!, one-month, to just 0.12% one year!!! Foreign bond yields lower ex-Greece (benchmark is the 10yrs): Germany 1.03% -1; UK 2.52% -3; France 1.36% -3; Italy 2.36% -1; Spain 2.20% +1; Portugal 3.15% –; Greece 5.71% +5 – after losing ground from the recovery low: 5.42%; Crisis high: 12.57%. Japan: 0.53% -2. Bonds remain ‘risky business’!

Gold closed sharply lower again at $1216.50 -$11.300, just a dollar above the session low of $1213.50 – lowest since 1/6/14 – this marks it’s 24th straight sub-$1300 close. It is way below the 40/50 and 200 day m/a’s. 7/17’s session high was $1346.60, highest since March 19th!!! 6/9’s $1240.20 was lowest since 1/31/14!!! RES is the 40 day at $1278, then the 200 day at $1284 AND now the 50 day – tight and falling! Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is dropped again to $1208.20 – lowest since 1/6 and nearing that multi-decade low, before coming back to $1216.10 +.60. Silver remains weak with a new low of $17.33 – lowest since 2/26/2010!!!

Crude also closed weak at $92.41 -.66 It rejected Tuesday’s session high of $95.19 – highest since 9/2. Last Thursday’s low of $90.43 was lowest since 6/28/13! There have been SEVENTEEN handles since peaking at $107.73 on June 20th. 6/20’s run to $107.73 was highest since 9/19/13 (a huge down session which put it in freefall. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($95.67!!!), then the 50 day ($97.00), and lastly the 200 day (99.73) – 40/50 falling fast. The range is $85.61-$112.24 since 3/1/12. Overnight it is little changed at $92.49 +.08.

Global equity markets weaker, ex-India: UK -0.7% vs +0.6% vs 0.4% vs – vs -0.5%; France –0.1% vs -0.2% vs +0.6% vs +0.7% vs -0.6%; Germany -0.1% vs +0.2% vs +1% vs +0.5% vs -0.6%; Japan -0.7% vs +1.6%! vs +1.1%! vs -0.1% vs -0.2%; Hang Seng -1.4%!!! vs +0.6% vs -0.9% vs +1% vs -0.9% vs -1%; Korea -0.7% vs +0.3% vs +0.2% vs +1% vs +0.4%; India +0.4% vs -0.1% vs +1.7%!!! vs +0.5% vs -1.2% vs -0.9%. U.S. equity futures weak – gapped down on the open this time…following two up-gaps: Dow -45 (range 70 plus 15 on the gap!); SPX -7.60 (11 +2); NDQ -16.75 (16 +2).


Some random thoughts:

…doesn’t anyone remember Alibaba and the Forty Thieves? Apparently not..or even later, the dotcom bust! How about a pricing of Alibaba’s IPO (BABA – sounds like Babar!) at $68. The open didn’t come till later while they haggled over the appropriate price which apparently was decided to be $92.70 because that’s where it opened! It then rose quickly to $99.70, missing the century mark and then dove to $92…from there down to $89.95 and then it inched its way backup to $93.89 $25.89. Want to bet we have seen the high? Perhaps CNBC’s David Faber, who spoke over the past week with several large money managers, and TB were the only naysayers. Faber because the astute money managers…rather than the other talking heads on CNBC who were breathless in praise all morning, knew that they saw it as perhaps a $100 stock – a year from now! TB because he watched in amazement first the dotcoms…then the hedge fund IPO‘s – Fortress and Blackstone…and knew what to expect…heck, even recently Zynga which went public on 12/16/11 at $9 a share, hit $15.91 that day, and by September was trading in the $2’s and $3’s. The two hedgies did similar and guess what else: on Friday we learned that Fortress is paying the expenses of its FOUR top executives to manage their personal fortunes! Sickening especially if you were an original investor on the IPO which came at $18.50 2/9/07 and hit its all-time high of $37 that morning and spiraled down until it bottomed at $0.77 and only made it back to $6 FOUR years later…it closed Friday at $6.72!

Doesn’t anyone know how an IPO works? How the SEC has failed to protect investors from the scum-sucking investment bankers who make nice with the hedge funds. First come the road shows…and they are seldom ‘revealing’ – more like hype shows! Then comes the ‘awarding’ of shares to key clients (aka hedge funds) who agree to buy more in the open market but hold them for no specific time period. Many are out on the first day and even if they buy in high, they still make a healthy profit. A week later the stock is down (consistently for speculative stocks), and keeps falling. Meanwhile if you are ‘lucky’ enough to get in you have to hold it at least 30 days…that is…if you ever want to get ‘in’ again…and if you don’t your broker gets stiffed! By the way, we have Alan Greenspan…why? For making ALL stocks…yes Nasdaq too…marginable from the day of the IPO! Don’t ask any major broker to allow you do to that though…but some e-brokers will.

Sunday’s WSJ reported the Edward S. Lampert’s hedge fund loaned $400 million to ailing Sears Holding (SHLD). So? Lampert is CEO of SEARS!!! Wow…now that is news and some are reporting Sears is now in a ‘death spiral’. Moody’s put it on credit watch with a ‘negative’. Sears has its own blog and to ‘set the record straight’ they said that it was a loan secured by 25 of the stores (2%), most likely the best properties. The rate was 5% ‘and it is expected to be paid off by at the end of the year – or at ESL (the hedge fund and Lampert’s initials), or February 2015 – at the option of ESL. Hard to call this an ‘arms length’ transaction, but ‘fast’ Eddie has some long-reaching arms, no?

A former Louisiana AG has launched an investigation and there will probably be others. What does it mean? Also, Bloomberg says they need ten times that amount…so where’s the ‘juice’? Time will tell…always does! Eddie ain’t dumb!
Have a great week!



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