12/30/14…five More things to consider for 2015…

Quote of the Day from the Friars Club Encyclopedia of Jokes: “Folks, the president needs a break. He’s like a Black & Decker vacuum. If you don’t recharge his batteries, he can’t suck.” A-lo-ha, Mr. President. Mele Kalekemaka, Haole…

Bloomberg Quotes of the Day: “Where words fail, music speaks.” – Hans Christian Anderson…and with current music, it screams!!!  

Bloomberg Top Stories:

*AirAsia Debris Found in Ocean as First Bodies Retrieved From Downed Plane

*Stocks Decline as Energy Producers Slide; Italy Bonds Rise, Dollar Weakens

*World’s Richest Worth $4.1 Trillion Surge as Russian Billionaires Fall – how special for them!

*FIB Probes Whether Banks Hacked Back as Companies Explore Cyber Offensive

*Ruble Slides as Russia Fails to Arrest Biggest Annual Decline Since 1998

*Ex-Sony Worker Cyber Hacking Theory Casts Doubt on North Korea Involvement – aw, shucks!

*Italy Sells Bonds at Record Low Yield as Greece Politics Seen Contained – ? 1.90% vs 9.32%!!!

*Libya Crude Output Seen Falling to Lowest Since May After Port Attack

*De Blasio Will Meet With New York Police Unions After Boos at Graduation – what a mess!

*Thatcher Was Warned in 1986 U.K.’s ‘Big Bang’ Plan Might Increase Fraud – ah, Reagan years!

 

Monday’s Market Summary:

Adding to yesterday’s Credit Suisse observation that since 1875, 2014 was the first time where the S&P 500 had SEVEN consecutive ‘up’ years…yet ‘the herd’ believes we will have EIGHT!?! But to TB, the factor that is left out is volatility, the big ‘V’. Regardless of what you believe is going to happen (believe being the operative word here), volatility is here to stay, especially in a world as volatile, violent, and variable as today. Honk if you agree…

Next, consider this from (Crestmont Research):

The overall market is highly volatile and affected by generally long secular cycles. You may wonder is it worth the risk?. Further, returns in the stock market depend upon the level of and trend for the inflation rate. In this section, you’ll gain insights toward the obvious question: what can we expect from here?. Ten, twenty, or even thirty years is not long enough to ensure successful returns in the stock market. Current and recent levels for the P/E ratio suggest that expected returns will be disappointing for many investors. Pundits are professing, “Returns will improve when the economy begins to recover!” But hope is not a strategy.

Their research indicates that going back to 1900, the most important factor in returns (before tax, after taxes, after taxes and inflation), is…p/e’s! (stock return matrix) Now, TB knows this will come as a shock to all of you who believe you are smarter than the market…and being compensated well for you wisdom, but as has been proven time and again: over long periods of time…and generally short periods, there are no guru’s…just wealthy men who have convinced others that they are smarter than the market…Buffett did it for a time…so did a few others, including Bill Gross in bonds…but the main cause was timing: make a few pronouncements at the right time and voila! You too can be a guru. Riding this crest currently is John Mauldin who has sent out an ‘invitation’ to join a select group (VIP) to receive his sage advice at a discounted price, but hurry: this offer expires Wednesday: “VIP, as you know, is our elite-level subscription, which delivers $7,679 worth of Mauldin Economics investment analysis for a full year for just $1,745.”

TB lauds Mr. Mauldin (do not confuse with ‘maudlin’), for his ambitions…but some might say he is full of himself. On second thought, TB is going to make a similar offer…all of his columns to you 24 hours before he writes them for just $1,000…but hurry, this offer expires in 24 hours…tick…

Also, TB gives credit to Mr. Mauldin for ‘turning him on’ to Crestmont whose creator Ed Easterling may not be a guru but he is a very wise man. Check out his articles at the aforementioned site.

As for yesterday, all of the action was in the first half hour…again…and it will continue to be so perhaps into early January…after that TB sees a correction, but hey, what does he know, right? Nothing…absolutely nothing but he can still read a chart…with glasses (preferably filled with vino). Every day in at least the last ten has opened with a ‘surge’ to the up or down side, but the last three have either been the session highs or close to them. The last four have ended the session nearly unchanged. Could this mean that positions are ‘squared’ for yearend (bearing in mind that the days following 12/23 are normally the lowest volume of the year. All that remains is the feeding frenzy at the close on 12/31 as index funds do their final rebalancing of 2014.

NYSE Volume was higher but still about 1.2B shares below average, while trades on the NYSE floor rose to just 552M or about 180M below the 12-month average – which is also low! A/D’s and Breadth were positive but WEAK…especially Breadth. New 52 week highs rose to a solid 414 but so did new lows as they rose to a more typical 90. But one again the most important thing was S&P 500 Volatility (VIX) which rose to 15.06 – although that was the session low, high 16.14 – following two days entirely ensconced in the 14’s and breaking a string of FOUR closes there. Note that 14 is still a bearish number, and to be in bull territory requires low 13’s or below. However, despite the strength of stocks this year…well most of it…the 12-month average stands at 14.12 and has been rising since Sept. 30th! Hmmm. For those who don’t know, VIX is a weighted average of the implied volatilities for a wide range of strike prices in options in their 1st and 2nd months (8 days before expiration the 2nd and 3rd months are used and then ridden in).

So, what was the upshot yesterday? Nothing…the best was the highly volatile of late Russell 2000 small cap (+0.3%); the worst, the Dow 30 (-0.1%)…that range persisted for most of the session. Oh, TB forgot again…Dow Utilities rose 1.2% – chalk that up to managers wanting to show that they owned more utilities plus their lowered cost due to plunging oil prices (same goes for airlines). Let’s just leave it at that…shall we? Oh, and banks continue to rise despite a drought in dividend yields…go figure!

Total NYSE Volume was higher but remains weak at 2.42B shares vs 1.7B vs 1.4B (now lowest in 20 sessions – typical for December after options expiry), vs 3.34B vs 5.9B. Average volume since 9/30 which had a 600M cushion over the 12 month average (3.6B shares or so), but continues to be hacked away Shares traded on the NYSE floor (aka REAL), also rose to 552M shares vs  446M vs 349M (a new 2014 low and just ahead of 12/26/13’s 253M share session) vs  613M vs 791M vs 2.49B – 3-year high!!!. For comparison purposes, for the prior 12 months it remains at a historically weak 730M shares (unaffected due to the 2012 low now left out). Since 10/1: 838B shares –  including FIVE 1B+ share sessions), and since 12/1 885M vs 927M vs 961M shares!!! The lowest was 12/24’s 343M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 22 – but just one in Nov, and NINE 900M+ days! FOUR 800M days, FOUR 900M and FIVE 1B share days in Dec.!!!…but that is now history.

A/D’s for NYSE were only slightly positive even worse on Nasdaq: NYSE: +1.4x vs +2x vs 1:1 vs +1.8x vs +1.4x vs +1.8x vs +4.1x! vs +6.7x!!! Nasdaq +1.1x vs +1.9x vs +1.4x vs +1.0x vs +1.6x vs +1.1x vs +3.2x vs 4x!!! Breadth was similar: NYSE +1.5x vs +1.9x vs -1.2x vs +1.1x vs +2.3x vs +8.1x!!! vs +14.3x (-15.5x on 12/16!!!); Nasdaq 1:1 vs +2.3x vs 1.5x vs -1.3x vs +2.2x vs +1.4x vs +4.6x! vs -9.5x!!!. New 52 Week Highs rose again to 414 vs 381 vs 325 vs 488! vs 352 – their range for the year is 39-612!!! New Lows rose to 90 vs a weak 57 vs 59 vs 92 vs 79 vs 82 (12/16’s high was 712!!!) The 2014 range is 24-1043!!! S&P VIX traded up to 16.14 after two days a ‘14’ handle and closed UP again at 15.06 +.56. the session low – compare to 12/16’s high of 25.20, which was highest since 10/17! We remain at risk of those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!). The average of the past 12 months is 14.14 and slowly climbing, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market positive for a 2nd day and appears wanting to go after those recent 12 month low yields from 12/16 (10’s 2.06%!; 30’s 2.69%! and long TIP 0.76%!!!), 10’s closed at 2.20% +7/16; 30’s 2.77% +15/16, and the long TIP 0.86% +5/8. Overnight higher again: 10’s 2.18% +3/16; 30’s 2.75% +3/8; long TIP 0.85% +3/8.

Libor update: 0.257% 3 mos.; 0.357% 6 mos. Steady now and still not that far off their recent record lows! The Fed Funds rate has averaged 0.09% and is currently 0.12-0.14% – at the new 9-month high. T-Bills: –0.01%!!! one-month; 0.02% 3 mos; 0.20% – 0.25% is recent high!

European bond markets mixed after closing strong Monday; PIIGS lower ex-GREECE!!! (Benchmark is 10yr): Germany 0.55% +1; UK 1.80%  +1; France 0.83% –; Italy 1.90%! -7!; Spain 1.60%! -7!; Portugal 2.66%! -6!; Greece 9.32%!!! +6!; look at the last 13 days range: 7.03% to 9.32!!! Not for the faint of heart! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.31% –.

Gold closed weak giving back 2/3 of Friday’s gains with a range of $1186.50-$1178.60. Friday’s high was $1199.10 (failed attempt at $1200). It closed at $1181.70 -$13.60 – CAUTION. The prior Monday’s low was $1172.20, lowest since 12/1! Dragged down by Crude and now below $1200 for the 10th time since 12/2. Last week’s intraday high was $1238.00 – highest since 10/22. This is the 9th straight sub-$1200 close which ended seven straight closes above. Stuck below the 40/50 day! 11/7’s low was $1130.40, the current 12-month low!). Now 38 of the last 39 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 at $1189-1197: the 40 day $1189!, the 50 day $1197, then the 200 day $1261. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. 11/7’s low was $1130.40! Overnight reversing course again and trading to $1200 for first time since 12/22 with a high of $1202.80, but currently $1198.20 +$16.30. Silver above $16 for a 3nd session following a high of $16.31 last Thursday, but following its $17.27 high the prior week! $14.12 is the recent low, not seen in more than five years!

Crude struck yet another low of $52.90, lowest since 4/30/09!!! before coming back to close at $53.61 -$1.12 and remains VERY weak, following a 5-day high of $58.91 Consider: 10/25’s high was $84.83. There have now been 52!!! 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 ($67.95!!!), then the 50 day ($70.71!), and lastly the 200 day ($91.95) – and still plunging. Could have a nice bounce but beware of the 40/50 day res! Still likely to test $50 over the next couple of weeks! The recent range is now $52.90-$112.24 since 3/1/12. Overnight, it traded down to a slight new low of $52.70 and is now $53.31 -.30. 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 stock markets are WEAK!!! UK -1.1% vs -0.2 vs closed vs +0.2% vs +0.3%. France -1.2% vs -0.7% vs closed vs -0.4% vs +1.1%; Germany -1.2% vs -0.8% vs closed vs +0.6% vs +0.4%; Japan -1.6%! vs -0.5% vs +0.1% vs +1.2% vs closed; Hang Seng -1.1% vs +1.8% vs +0.1% vs -0.3% vs +1.3%; Korea -0.6% vs -1% vs +0.1% vs +0.4% vs -0.2%; India flat? vs +0.6% vs +0.1% vs -1.1% vs -0.7%. U.S. equity futures weaker and near their session lows: DOW -40 (range 62); SPX -6.50 (9); NDQ -10.25! (19). Rock and roll!!!

 

Some random thoughts:

…five more things to think about for 2015:

First, hold Congress accountable: make them place investments in a blind trust…they insist on it for cabinet members…why not themselves? That would solve their insider trading issues.

Second, require police related deaths to be investigated by an outside agency – state or federal

Third, place a ‘penalty’ on Senate filibustering when there is a clear majority in favor or opposed to a bill. It would require all members of the filibustering party to remain…take that, Sen. Cruz!

Fourth, reinstate the self-serving castration of Dodd-Frank pieces so that it becomes a tool While we are at it lets enforce Sarbanes-Oxley…not one CEO has been held accountable despite the biggest financial crisis in world history.

Fifth, and TB just learned this yesterday on MPR: aid families of hostages to terrorists to obtain release of their loved ones. We don’t negotiate with terrorists is bullshit! True, we shouldn’t pay ransoms, but we should help families make contact with the terrorists (as we did before 9/11 when it was handled by the FBI)…now the State Department is in control and they do not even communicate with families let alone help them to free the members. THAT is inhumane! In the case of the two recently executed journalists, they didn’t even let the families know that the odds they would be executed were increasing. What kind of ideologues have we become?

Still open to your ideas…

TB

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