12/22/14…Cuba libre?

Quote of the Day from the Friars Club Encyclopedia of Jokes: “How many paranoid schizophrenics does it take to screw in a lightbulb?” Who wants to know???

Bloomberg Quote of the Day: “Never trust a computer you can’t throw out the window.” – Steve Wozniak…take that IBM!

Next week’s economic calendar is fairly light. The highlight of the week will be the November Personal Income & Spending and Q3 GDP Final (Tuesday).

We will also get November Existing Home Sales (Monday), November Durable Goods Orders, December Consumer Sentiment Final, December Richmond Fed Manufacturing, and November New Home Sales (Tuesday). Courtesy of Economic Advisory Service

Bloomberg Top Stories:
*Stocks Rise for Fourth Day as Crude Rallies: Incredible…see below how stupid this is!
*Rosneft Says Morgan Stanley Oil-Unit Bid Ends as Regulator Balks at Deal – Right on!
*Caesars Entertainment Will Merge With Affiliate to Support Restructuring – Uh oh!
*Meredith Whitney’s Hedge Fund Said to Slump 11% as Office Goes on Market – reminiscent of former Lehman analyst, Elaine Garzarelli, who correctly predicted the 1987 crash – BUT had bought options in a mutual fund which were not a legal investment for it and they had to pay investors even though it was the right call. Last we heard of her she was doing pantyhose commercials for Leggs! LOL
*New York Police Officers’ Killing Prompts Rethinking on Racial Tensions – for one thing the Black community has to accept some responsibility for their own people who are in turn murdering them; until that happens the situation will only get worse, right?
*China Announces Probe of Ex-President Hu’s Aide on Corruption Allegations – no!?!
*The $6.3 Trillion Bidding Frenzy That Vanquished bond Bears in Treasuries – hmmm?
*Ruble Rescue Comes With Economic Cost to Russia as Crude Oil the Wild Card – aww
*Emerging-Market ETF Outflows Last Week at $1.6 Billion as Withdrawals Slow
*No, Central Bankers Shouldn’t Have to Rescue the World Economy – tell the bankers!

Friday’s Market Summary:

Did TB deliver or what??? He promised you a quadruple witching to remember and you got it – in spades! Stocks were up…down…up again…then back down to new session lows than a run-up in the afternoon before diving into the close at nearly even, and ta-da: 5.92B shares traded, with a huge number of those at the close. How many? Hard to say but if we look at shares traded on the floor of the NYSE we will see that at the closing bell volume stood at a strong 1.23B shares…which alone would be the highest since 9/19 (yep, another expiry!), but then came all those settling trades and voila! 2.47B shares – not only a new 12-month high but highest since 8/8/11!!! WOW!!! So…what can we glean from this? Like the song War says: “what is it good for? Absolutely nothin’!” (TB went to see Motown Saturday night and had to add that! This rally (sic) is in deep trouble as now we will see the volume dwindle back to 700M shares a day or less – last year on 12/24 it plunged to 272M shares (that too was a 12-month low! 12/24//12 was 206M shares), but so what you say? Well…two things: ONE, never short a ‘thin’ market, and TWO, never short a thin market…or buy into one! TB believes that we will revert to that ‘minor’ but sharp correction from the 12/6 highs to 12/16 of 5.2% (both Dow and SPX), and hopefully present a buying opportunity by making a 20-25% correction to finally put some value in the market. (Dow to 13,500; SPX 1,560)…a good time to re-enter would be 14,500 on Dow and 1,650 SPX…greed is never a good thing…nor is ignorance or complacency. Back to Friday, All indices ranged from flat (Dow Utilities to +0.5% (SPX). NYSE Financials were up a scant 0.1%
A/D’s and Breadth were positive but nothing to write home about; new 52 week highs bounced back to 467 while new lows inched up to 83; as for SPX VIX, it had a broad range that matched the intraday indices, surging to 17.20 then plunged to the session low of 16.11, then back to almost the session high then back down to close at 16.49 -.32 – and that folks is still bearish!
Sooo….with volume being near or exceeding the year’s lows, it might well be a good time to build a cash reserve…no way you can buy ‘puts’ here…too expensive…but you ‘could’ set sell limits – although volatility could make that risky…also, some stocks may do well…what’s a mother to do?

Total NYSE Volume was a huge 5.9B shares vs 4.9B vs 4.93B vs 4.9B vs 4.38B. Average volume since 9/30 continues to climb from about 3.6B shares or about 600M more than the 12-month average! Shares traded on the NYSE floor (aka REAL), an incredible 2.49B shares – 3-year high!!! vs 976B vs 1.05B vs 1.02B vs 980M vs 941M. For comparison purposes, for the prior 12 months it is a historically weak 732M shares, but since 10/1: 858B shares –now including FIVE 1B+ share sessions), and since 12/1 913M shares!!! The lowest was 11/1’s 619M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: now at 22 – just one in Nov, and NINE 900M+ days! FOUR 800M days, FOUR 900M and now FIVE 1B share days in Dec.!!!

A/D’s were very positive for a 3rd day but nothing to see here: NYSE: +1.8x vs +4.1x! vs 6.7x!!! vs -1.4x vs -3.1x! vs -3.8x!!!; Nasdaq +1.1x vs +3.2x vs 4x!!! vs -1.2x vs -2.5x vs -2.4x. Breadth was similar: NYSE +2.3x vs +8.1x!!! vs +14.3x!!! vs -1.2x vs -4.1x! vs -4.7x!!! vs +1.2x vs -15.5x!!! (Unbelievable!); Nasdaq +1.4x vs +4.6x! vs 9.5x!!! vs -2.1x vs -3.3x!!! vs -2.6x. New 52 Week Highs up 50% to 467 vs 330 vs 118 vs 56!!! vs 78 – their range for the year is 39-612!!! New Lows slightly higher at a ‘normal’ 82 vs 73 vs 223 vs 712!!! vs 640 vs 603. The 2014 range is 24-1043!!! S&P VIX had a high of17.20 right after the open, then down to 16.11 closing at 16.49 -.32 – compare to Tuesday’s high 25.20, which was highest since 10/17 During the prior brief ‘rally’ it only made back down to 15.94! We remain at risk of those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!), and now a big possibility with options expiry this Friday! The average of the past 12 months is 14.08 and slowly climbing, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market closed strong and closing in again on those new 12 month low yields (10’s 2.06%!; 30’s 2.69%! and long TIP 0.76%!!!), 10’s closed at 2.16% +3/8; 30’s 2.76% +1-3/8!, and the long TIP 0.85% +2 points!!! Overnight weaker: 10’s 2.18% -3/16; 30’s 2.78% -9/16; long TIP 0.85% -5/8. Talk about volatile!!!! Bonds???
Libor update: 0.252% 3 mos.; 0.350% 6 mos. Both higher again but still not far off their recent record lows! The Fed Funds rate has averaged 0.09% and is currently 0.13-0.14% – at a 9-month high. T-Bills: 0.01% one-month; 0.03% 3 mos; 0.25%!!! – STILL climbing slowly!
Foreign bond yields little changed, ex-PIIGS which are lower again, led by Greece! (Benchmark is 10yr): Germany 0.61% +1; UK 1.84% -1; France 0.89% –; Italy 1.94% -1; Spain 1.66%! -3; Portugal 2.67%! -3; Greece 8.00%!!! -16!!!; look at the last TEN days ranges: 7.03% to 8.88%!?! Not for the faint of heart! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.33%! -2.

Gold closed slightly higher for a 2nd day but barely topped $1200 before settling at $1195.20 +$1.20, in an ‘inside’ session, following Wednesday’s low of $1184.00, lowest since 12/1, and below $1200 now for the 5th time since 12/2 – $1200 is again resistance! Rally’s over…right? Last week’s intraday high was $1238.00 – highest since 10/22/ This is the 4th straight sub-$1200 close which ended seven straight closes above. Stuck below the 40/50 day! 11/7’s low was $1130.40, a new 12-month low!). Now 33 of last 34 sessions with prints below $1200. Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! MAJOR RESISTANCE now at at $1200-1202 (psych), the 40 day ($1194!), the 50 day $1202, then the 200 day $1266. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. 11/7’s low was $1130.40! Overnight high is $1203.60, now $1195.60 -.40, low $1193.80. Silver right at $16, following its $17.27 high last week! This after a $14.12 recent low, not seen in more than five years!

Crude rallied in an inside session but remains VERY weak, following a two day high of $58.91. It closed at $56.52 +$2.41!!!, three days after plunging again to $53.60, lowest since 5/6/09! Consider: 10/25’s high was $84.83. There have been 51!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 5/15/09 is $56.07: $89.85 is the average! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($71.20!), then the 50 day ($73.54!), and lastly the 200 day ($93.25!), all STILL increasing their rate of decline! Did we just avoid $50? The recent range is now $53.60-$112.24 since 3/1/12. Overnight, it is slightly weaker after a probe to $58.53! Currently $56.74 -.39. Note that following the financial crisis it traded down to $32.40 on 12/31/08 from a high of $147.27 just three months earlier (-78%!!!).

Overnight Global Equity Markets:

Global equities strong, Japan flat?: UK +1% vs +0.4% vs +1.6%! vs -0.8% vs – vs -0.3% vs -1.5%!; France +0.7% vs -0.7% vs +2.9%!!! vs -0.7% vs -1%! vs +0.1% vs -1.5%; Germany +1.1% vs -0.8% vs -0.9% vs -0.6% vs +0.1% vs -1.4%! Japan +0.1%? vs +2.4%!!! vs 2.3%!!! vs +0.4% vs -2%!!! vs -1.6%; Hang Seng +1.3%! vs +1.3%! vs +1.1%! vs -0.4% vs -1.6%! vs -1%! Korea +0.7% vs +1.7%! vs -0.1% vs-0.2% vs -0.9%; India +1.2% vs +0.9% vs +1.6%! vs -0.3% vs -2%!!! vs -0.1% vs -0.9% vs -0.8%. U.S. equity futures not sure what to do: DOW +20 (131); SPX +2.60 (15); NDQ +7.75 (26). Hmm

Some random thoughts:

…crap spin! That’s the GOP and even some defensive Dems reaction to Obama’s opening diplomatic relations with Cuba. Until TB got more info, he believed Obama was having a ‘death wish’ – politically speaking. But over the weekend more became clear:
First, recall that 52 years ago (how time flies when you are having fun!), was the Cuban Missile Crisis – you know the ‘nucular’ threat. JFK made the courageous decision to tell all the military ‘eggspurts’ to back off and avoided a war. Since then the only thing we get from Cuba are Havana cigars (illegally…and note even JFK continued to have them on his desk…perhaps that is even what Bill used in the ‘oral office’). What did we accomplish besides stopping the nuclear threat? Well…Fidel Castro became the longest governing ruler of the 20th century! Impressive!
And while ‘we’ (some of ‘us’), rip universal health care to shreds, they have had free health care – and good care at that – throughout.
Ah, but aren’t we rewarding them of bad conduct you ask? Well, it didn’t work for over 50 years so perhaps we need a new tack? First, let’s put a few things in perspective:
1. Imagine recognizing a communist dicatator! Why not? We recognized…and for the benefit of the Mafia…a fascist one: Batista for decades. Also, Castro approached the U.S. and had we not chosen to support Batista who knows what might have happened. Consider: I once heard a Cuban bandleader and refugee say that just before he came to the U.S. he saw a cover of TIME with Fidel’s picture on it and praising him…shocked, he bought a copy in the U.S….same cover, different story. You don’t think TIME did this on their own do you?
2. Why didn’t we make overtures to Raul when Fidel became ill and try to end this mess. Bush 43 wasn’t opposed to it, but Florida got him elected so don’t mess with success. Why did we send little Elian Gonzalez back? Meanwhile the Europeans courted the Cubans and built the casinos and it is a huge tourist attraction for them. Why are we always fighting the last war?
3. GOP presidential hopeful, Marco Rubio nearly going postal and he of Cuban descent…but out of touch as most young people in Florida see opposition as a bunch of old men wearing Sansabelt’s and playing chess in the park as the past and old guard. Worse for him, Rand Paul is on the other side! Jeb Bush?
4. Now get this: Putin has forgiven the Cubans of $80 billion of loans and ‘all’ he wants is to set up a spy station in Cuba. Could THIS be the real reason for the timing? Also, did you know that Putin has been quietly negotiating with us over a Ukraine compromise? TB didn’t and another reason Obama may have acted when he did.

So you see, things aren’t always as they appear…but don’t let that stop some politicians (who probably opposed Nixon opening relations with China as a bad idea too), from speaking ideologically for their own well-being. Whatever happened to: “Hold your friends close and your enemies closer? Think about it and you decide.

Have a great (short) week!

TB

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