1/22/15…Draghi does it!!!…and what to do about the banks (commentary)

TB’s Wine Quote of the Day: “She gets to keep the chalet and the Rolls, I want the Montrachet.”   – Forbes Magazine, May 6, 1996…sounds like an awesome divorce! TB

Bloomberg Quote of the Day: “Make learning your business, speak little, do much, and receive everyone kindly.” – Shammai…and in today’s world they will label you: LOSER! Is that so bad?

Overnight Global Markets:

European equity markets WERE consolidating, now rallying on Draghi: UK +0.3% vs +0.7% vs +0.5% vs -0.1% vs +0.6% vs -2.8%!!! France +0.7% vs +1.4% vs +0.5% vs +0.3% vs +1.1% vs -1.5%! vs +1% vs +1%; Germany +0.4% vs +0.3% vs +0.7% vs -0.1% vs +1.1% vs -1.4%! vs +0.9% vs +1.2%; Japan +0.3% vs +2.1%!!! vs +0.9% vs -1.4% vs +1.9% vs -1.7%; Hang Seng +0.7% vs +1.9%!!! vs +0.9% vs –1.5% vs -1% vs +1%; Korea flat vs +0.2% vs +0.8% vs +0.8% vs -1.4%!; India +0.4% vs +1.9%!!! vs +0.5% vs 0.2% vs +2.7%!!! U.S. equity futures: DOW not impacted much by the Draghi/EU news, but look at NDQ: DOW +29 (range 59); SPX +4.90 (21!?!); NDQ +11.25 (39!!!). U.S. market opening Bizarrely: Dow -52?; Trans UP 71!?!’ SPX +5; Comp -22!!!; NDQ 100 -15!!!; Russell 2000 +3.75; Dow Utiities -1.50. What to do???

Global Money Markets: Libor: 0.257% 3 mos.; 0.356%; 6 mos. – still hovering near their recent record lows! The Fed Funds rate has averaged 0.09% and is now 0.12-0.14% – which remains the 9-month high. T-Bills: 0.01%, 1 mo; 0.02%, 3 mos; 0.07% 6 mos.; 0.16% 1-yr. – back from 0.25% – the 12-month high, set on 12/22/14!

U.S. Treasury Bonds: were pounded again overnight after suffereing a blistering beating Wednesday! Under 10 years barely budged though, but has since turned around. Look: 10’s 1.82% +7/16 vs 1.91%! -3/8; 30’s 2.42% +1 point vs 2.51% -1 pt! Long TIP: 0.65% +1-3/4 vs 0.76% -1-1/4. Incredible turnaround on Draghi $1.3 TRILLON stimulus plan to fight DEFLATION!

European Bonds: yields WERE higher across the board, ex Greece, then an incredible turnaround on Draghi $1.3 TRILLON stimulus plan to fight DEFLATION! Now at new low yields!!! Germany 0.44% -8!!! from 0.56%; UK 1.48% -2 vs 1.57% (low is 1.46%; France 0.60% -11! vs 0.75%; Italy 1.58% -11 vs 1.71%; Spain 1.41% -11 vs 1.55%; Portugal 2.58% -17!!! vs 2.74%; Greece 8.92% -16!!! – recent range: 7.03% to 10.29%!!! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.30% +7! – off a new low of 0.19%!!!

Dollar Index slightly lower but coming off 93.362, highest since 12/31/03! Currently 92.53 -.38. Euro: traded down to 1.1618 but is now 1.1633 +.0006; coming off 1.1460 on 1/16, a 9-year low; Sterling remains weak $1.5190, negating the double top at $1.5269 last week following Jan.8’s 9-year low ($1.5035), weakest since 9/30/13; Yen struggling at 117.55 -.16, Thursday’s 115.86 was best since 12/17/14’s 115.57 – weak since peak Oct. ‘14: 105.23; recent best 2/4/14 @ 100.76!!! Record: 12/30/11: 75.35!!!

Commodities: Gold was weaker again o/n after closing below $1300 yesterday, for the first time since 8/15! Traded down to $1283.80, but on Draghi it is now $1302.56

$8.80. Reps/Sup again $1300-02, next sup $1296.40, the 8/28/14 high! Silver back up at $18.30 following Weds. High of $18.55 right at the 200 day! Crude continues to struggle and is not benefitting from Draghi news: $47.59 -$.16, with res at $51.27, the 1/15 high from last Thursday’s failed attempt to breakout. Note 1/13’s low was $44.20, lowest since 4/21/09!!! $32.40-.70 is the 12/19/08 and 1/20/09 low is final support! THAT had BETTER hold!

Wednesday’s Market Summary:

All indices were up, except the Russell 2000 -0.4%!…aren’t small caps supposed to be an indicator of economic strength? Not any more TB guesses. The rest were led by Dow Utilities – no surprise there, right? Up 0.9%! The rest were between +0.2% (Dow 30) and 0.5% (NDQ 100). Volume slipped to about average, A/D’s and Breadth ho-hum, on NYSE BUT have been showing WEAKNESS on Nasdaq, new 52 week highs fell along with new lows. VIX sharply lower but just to 18.85 – still VERY bearish!

Total NYSE Volume slipped to an average 3.64B shares vs 3.9B vs 4B vs 4.18B vs 4.37B – 12/24’s 12-month low was 1.4B shares. Shares traded on the NYSE floor declined again to a near average 771M shares (with 130M at the closing bell, 2nd lowest of ’15) vs 861M vs 976M shares – the ‘15 high – vs 879M vs 929M. 12/24’s 349M was the 12-month low…average is 740M shares! Since 1/5 the average is 851M shares, and for last week, a huge 898M shares! – still heavily waited to the downside. The average for Dec. peaked at 979M shares on Dec. 22nd and has been declining steadily.

Advance/Declines were mixed with NYSE moderately positive for only the 2nd time in 7 sessions, Nasdaq in the red! NYSE: +1.7x vs -1.6x vs +4.4x! vs -1.9x vs -1.5x; Nasdaq MINUS 1.4x vs -1.5x vs +3x! vs -3.5x!!! vs -1.7x; Breadth was better on NYSE but only slightly positive on Nasdaq: NYSE +2.8x vs -1.5x vs +6.9x!!! vs -2.3x vs -2.1x; Nasdaq +1.3x vs 1:1? vs +3.3x! vs -4.9x!!! vs -2x. New 52 Week Highs fell sharply to 200 vs 327 vs 323 vs 260 vs 211 vs 350 – their range for the last 12 mos. is 39-612!!! New Lows also declined to 177 vs 237 vs 216 vs 282 vs 386 vs 157 (12/16’s high was 712!!!) The 12-month range is 24-1043!!! S&P VIX had a range of 18.64-21.28, closing at 18.85 -1.04 –over 2 pts in 2 days but still very bearish! 23.36, Thursday’s high is highest since 12/16’s 25.20, which was second only to 10/17’s (31.06!) – highest since 11/2//11!!! Average of the past 12 months is 14.52 and now steadily climbing, with a low of 10.28!…high close was 26.25 on 10/15/14!

U.S. Bond Market closed WEAK: (10’s 1.87% -3/4 (1.72% low yield); 30’s 2.46% -2 points! (2.36%); Long TIP 0.72%!!! -3-1/4!!! vs 0.57%. The score is now 12 rally days in the last 18.

Gold surged to $1297.20, highest since 8/19/14! – closed at $1294.20 +$17.30, the high has not been seen since Sept. ‘14! Note that it took out the 200 day ($1255) easily. With the 200 day out of the way and now first support, $1300-02 is next resistance! 11/7’s low was $1130.40, the current 12-month low! There hasn’t been a close above $1300 since 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! MAJOR SUP at the 200 day $1255, then the 40 day $1208, followed by the 50 day at $1201. The 12-month high is $1392.60 on 3/17/14, highest high since 9/4/13. Silver, Ran up to $18.05 – another new recent high and closed at $18.01 +.26 Is this the long awaited breakout? $14.12 is the recent low (12/1/14), not seen in more than five years!

Crude, which hit $51.27 on Thursday, highest since 1/5, traded down to $46.55 yesterday before higher but still weak at $47.78 +$1.31 – fourth straight direction reversal without going anywhere. The pain trade is still not over as $50-52 remains formidable resistance. Tuesday’s low was $44.20, lowest since 3/09. 12/17’s high was $58.98 Consider: 10/25/14’s high was $84.83. There have been 63!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13, and if is off 57% since then! The record high of $147.27 was on 9/30/08. RES at the 40 day ($57.41!!!), then the 50 day ($61.16!!!), and lastly the 200 day ($88.11) – be careful as the averages are falling so fast that they could become support soon precipitating a rally! The range is $44.20-$112.24 since 3/1/12. 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%!!!). TB’s bet? $43.83, or else…that is the June 2009 low if that fails, a test of that $32.40 low…by the way the decline from the 9/20/08 high to the low took EXACTLY 6 months – we are now in the 8th month of decline!!!

Some random thoughts (this has been eliminated since yearend and will only be used sparingly when something truly important is occurring.):

If you weren’t upset about our ‘new’ improved (?) Congress passing the first bill of the new term – the budget extension – you weren’t paying attention! Bill Moyers has tried to get the point that Sen. Elizabeth Warren (TB’s choice for Dem presidential nominee as she is the only one who cannot be bough! Hillary proved she would when she argued for the increase in the minimum wage then voted against it!), made on the passage. She stated that Citigroup’s lobbyists submitted a memo that was put in the bill verbatim except for THREE sentences which were omitted. This is worse than shameful!

As she said, this effectively guts Dodd-Frank and insures yet another financial crisis. How so? It allows banks to continue to buy risk securities under their banking umbrella, a direct contradiction of the Volcker Rule in Dodd-Frank, until 2019! They have now had it extended THREE times, their lobbyists claiming to divest would cost the banks $3.6 billion – concentrated in the top three…mainly Citi and JPMorgan! Where did that numbere come from? An ‘early’ CBO estimate made before the market came back. So, even ‘if’ you believe this is a good thing, why should they be allowed to continue to ADD to their positions. This is a contradiction in terms: if the securities are so risky why should they want to increase the risk of even more losses? There is one simple answer: they are TBTF and expect the government (read: we, the people) to bail them out once again further punishing Main Street for their greed! At the very least, all risk transactions should be in the investment arm, under the holding company umbrella, and out of the banks, then of they want to play fine…but the risk, as with Lehman, will be and should be theirs!

Here is a link to an excellent piece by James Kwak, of The Baseline Scenario and two links that are included in the article…read them…one is on how directors have violated their fiduciary duty to shareholders as they blindly (?) serve the CEO…especially true with JPM’s Jamie Dimon.

Why Capitalism is Against the Banks

Fiduciary Duty of Directors

Folks, it’s later than we think…and without our Congress, or the Supreme Court, or even our president who has been ‘captured’ by Wall Street, it is time to do something positive. There is no strong voter support to break up the big banks…and Elizabeth Warren is the one who can…and if allowed to…will do just that. You decide.

Have a great day…and do something positive for you and for America!

TB

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