10/17/14…all that glitters…

Quote of the Day from the Friars Club Encyclopedia of Jokes: “did you know that in some countries the penalty for shoplifting is marriage?”- Anon

Bloomberg Quote of the Day: “The shell must break before the bird can fly,” – Alfred, Lord Tennyson – and before you can scramble the eggs! TB

Bloomberg Top Stories:

*Morgan Stanley Beats Analysts’ Estimates as Trading Revenue Rises – yawn!

*Stocks Jump With U.S. Futures as Italian Bonds Gain on Stimulus Bets – options expiry!!!

*Pimco to Blackstone Preparing to Feast on Junk Bonds After Surge in Yields – caution!

*Yellen Says She’s Greatly Concerned by Growing Inequality in U.S. – Do tell, Janet!!!

*Ten Reasons to Be Optimistic on Global Economic Growth in Cruelest Month – name one!

*Synchrony Profit Tops Analyst Estimates in First Earnings Report Since IPO

*Canada’s Inflation Rate Slowed to 2% in September on Lower Gasoline Prices – $2.85 in MN!  

*Dalio’s Bridgewater Said to Post $1.7% Loss in October During Market Rout – heed!

*Louis Vuitton Can Thrive in ‘Tough Times’ as Chinese Slowdown Hurts Sales – slowdown?!?

*Brazil’s Stubborn China Fever Sticking Farmers With Losses as Soy Plunges – gung hay!

*Monaco Murders Reveal Six Hidden Real Estate Billionaires From Pastor Clan

*Obama Says He’s Open to Naming Ebola Czar as Concern Over Spread Increases L

*Merkel Signals Standstill on Ukraine Talks as EU Leaders Meet With Putin

*Texas Lab Worker Isolated Aboard Carnival Ship on Possible Ebola Contact

*Nepal Rescue Workers Airdrop Noodles to Trekkers After Blizzards Kill 28

*Biden’s Son Said Discharged From Navy After Testing Positive for Cocaine

*Europe Wants Bankers to Stop Worrying About Their Paychecks – but in the U.S.? Hah!

Thursday’s Market Summary:

A mixed day but spent mostly in the RED. Volume was another BIG 5.05B shares (1.07B vs 1.21B shares traded on the NYSE floor!!!), vs that huge 6.06B share day Wednesday! Why so much volatility in the first month of a new quarter? Well, for one, today is options expiration and a lot of folks had the wrong foot on the floor! Now look at this:

  1. Dow Transports rose 1.1%; The Russell 2000 (years big loser) roe 1.3%
  2. Nasdaq Composite up 0.1%; NDQ 100 DOWN 0.6%?

The rest ranged from +0.2% to +0.1%…except NYSE Financials which fell another 0.9%: 2.6% in two days! The S&P VIX declined 1.05 to 25.20 but look at the range: 24.61-29.41 – bad news for bulls! A/D’s and Breadth positive but not compared to the recent negatives! New 52 week lows dropped from that monster 1,043 but to a still high 311 while new highs barely budged to an extremely weak 52 from 49.

Repeating (these are as of Wednesday but you get the point): Before we look at the skeleton, here are the ytd price changes (PRICE ONLY!!!): Dow -2.6%! Dow Transports +7.3% (less than half of 9/30 gains – +8.3% adding dividends)! Dow Utilities…now the unchallengeable leader for the year +13.9%!!! (adding in dividends, UP 17.1%!!!); Russell 2000 despite yesterday’s nice move, DOWN 6.9% for 2014!!! What about the other leader you say? NDQ 100 is now up just 6.4% this year but still up 18.2% for the last 12 months. Lastly, the ‘health’ index…NYSE Financials…recall that they peaked in June 2007 well before the crisis began…a warning shot across the bow! For the 12 months they are now up just 6% since 9/30/13 – and to show the damage of the past two weeks, now DOWN 1% for the year! That includes those niggardly dividends that TB loathes…the only reason to buy ANY bank stock!

Total NYSE Volume slipped to a still extremely high 5.05B shares from 6.06B shares…and that isn’t the worst part: average volume for the first 12 days of October is now up to 3.625B, or about 625M more than the recent average. To show that the ‘drought’ of trading has ended one needs to look at shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: since 4/30 the average Has run just 690M shares…for October it is now 908M shares!!! For comparsion purposes, for the prior 12 months it was a historically weak 708M shares…but for the last 12 days 908M shares including the last two days of 1.07B and Wednesday’s HUGE 1.22B shared day – highest since 9/19 and the low was 10/6’s 696M share session. Since April 30th we ‘had’ had just SEVEN sessions of more than 800M shares…for October so far? Now TEN…think about that: one day missed by just 10M shares. Crazy! Crazy bearish! Yesterday at the bel lvolume was 918M SHARES vs 992M…retail is scared! The 12-month high was 2.06B shares on 9/20/13!

A/D’s were positive but look: NYSE: +2.3x vs -1.1x vs +1.6x vs -3.6x -7.2x!!! vs +4x! vs -3.4x; Nasdaq +2x vs +1.2x vs +1.6x vs -2.7x vs -5.8x vs +2.5x vs -4.2x! Breadth was similar: NYSE +1.7x vs -1.4x vs +1.6x vs -5.8x! vs -12.3x!!! vs +3.8x vs -4.7x!!! Nasdaq +1.4x vs +1.03x vs +1.1x -7.2x!!! vs -4.4x! New 52 Week Highs only slightly higher at 52 vs 49 and haven’t been above 77 since ending at 49 yesterday – their range for the year is 39-580!!! New Lows dropped sharply but to a still very high 311 from 1043!!! – lowest for October is 176. The 2014 range is now 24-1043!!! S&P VIX has gone from ‘put’ protection being cheap on 9/18 at 12.03 to 25.20. down just 1.05 from 26.25 – EXTREMELY bearish as indicated by the high of 31.06 – highest since 11/28/11!!! The average of the past 12 months is 13.83, with a low of 10.32!

U.S. bond market was extremely strong early yesterday before the opening creating more0 new 12 month low yields (2.09% +7/16; 30’s 2.87% +15/16; and long TIP 0.83% +1-1/16!!!), but by the opening these had faded leading to modest losses: 10 yr 2.16% -3/16; 30 yr 2.94% -3/8; and the long TIP 0.87% -3/16 (from a new record low(?) of 0.86? Weaker again overnight: 2.19% -1/4; 30’s 2.96% -1/2; and long TIP 0.88% -3/16.  

Libor update: 0.228% 3 mos.; 0.321% 6 mos., both at/near new record lows! The Fed Funds rate has averaged 0.09% and is now 0.08-0.10%. T-Bills range from 0.02%, one-month, to just 0.10% one year!!! Foreign bond yields reversed their moves yesterday late in the session, again lead by the PIIGS but in the other direction!?! (Benchmark is 10yr): Germany 0.86%! +5; UK 2.17% +8; France 1.29%! +3; Italy 2.50% -8; Spain 2.16% -5; Portugal 3.32% -13!; Greece 7.79% -85!!! from 8.69% +108!!! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.47% -1.

Gold closed slightly lower a day after gapping up to its highest since 9/11/13 ($1247), closing at $1241.20 -$2.90. Still only two prints below $1200 since 12/31/13 – back to back and rejected! Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! SUP/RES is the 40 day at $1239, then RES at the 50 day $1252, and the 200 day at $1284. 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 sdllightly lower at $1238.80 -$2.40 in another very narrow range. Silver holding that ’17’ handle after falling to $16.64 on 10/3 – lowest since 2/9/2010 and very close to $15.73, a multi-decade low!!!

Crude closed slightly higher at $82.70 +$1.01…but look at the range: high $84.83, low $79.78…lowest since 6/27/13!!! There have now been 28!!! handles since peaking at $107.73 on June 13th at $107.73 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 ($91.37), then the 50 day ($92.46), and lastly the 200 day (98.85). The range is now $79.78-$112.24 since 3/1/12. Overnight little changed and tight at $83.72 +$1.02.

Global equity markets strong, ex-Japan/Korea: UK +1% vs -0.7% vs -2.8%!!! France +2.1%!!! vs -1.1% vs -3.6%!!! Germany +2%!!! vs -0.4% vs -2.9%!!! Japan -1.4% vs -2.2%!!! vs -2.4%!!!; Hang Seng +0.5% vs -1%! vs -1! Korea -1%! vs -0.4% vs -0.7%; India +0.4% vs -1.3% vs closed vs -0.1%. U.S. equity futures STRONG!!!,gapping up on the open – but remember this is options expiry!: Dow +169 (range 169 +24 gap!!!); SPX +23 (27 +1); NDQ +54 (55 +6)… looks like another ‘E’ ticket ride today!

 

Some random thoughts:

When TB was working in Nevada 34 years ago, he attended a meeting of mineralogists. They said that in the entire history of the world, the total amount of gold extracted would fit inside a 150×150 foot cube. Think about that…as TB did when he was in Istanbul. His guide looked at him incredulouslyi (obviously more has been extracted since then but certainly isn’t being horded by governments…especially the UK which is why they always say, “God save the queen!” In the U.S. we use another phrase: ”in God we trust” which of course replaced ‘payable to the bearer upon demand in gold/silver’.

Taking it a step further, that 150’ cube is 3,375,000 square feet, and if you crammed people (6’ tall) in it, it would hold 187,500 people…or more accurately, ‘bodies’, as no one could breath. That is about double the number of people in the largest football stadiums, right?

This brings us to the Gold ETF’s. Believe it or not there are now 39 funds that are invested in gold/silver…the largest being the Spyder’s (GLD) with a market cap of $30.33 billion! Taking the price per once at yesterday’s close ($1,233), that is 2,459,854 ounces of gold. At the peak that value was equal to nine years of production!!! See why it has plunged? That is not to say these funds don’t have gold to back them up but it does explain why they have fallen 34% since peaking on 8/19/11! All that glitters is not —-…even if it is!

Just one more thing to think about over the weekend…its up to you to decide how much gold has been mined since 1980…but bet it would still fit in that 150’ cube.

Have a great weekend,

TB

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