|Quote of the Day from the Friars Club Encyclopedia of Jokes: “I like long walks, especially when they are taken by people who annoy me.” – Fred AllenBloomberg Quote of the Day: “A man who limits his interests, limits his life.” – Vincent Price
Bloomberg Top Stories:
*Abe Tries to Salvage Abenomics With Early Japan Election, Sales-Tax Delay – arigato!
*Abenomics Tries to Shake Up Japan to Wake Up Its Tired Economy – good luck!
*German Investor Confidence Unexpectedly Surges as Economy Skirts Recession – that’s good?
*Stocks Advance With Euro on German Confidence as Gold, Pound Strengthen – some rally!
*Bank Indonesia Raises Key Interest Rate to 7.75% as Fuel Prices Increase – increase???
*Greek Bailout Review Is Said Stalled as Furious creditors Demand Savings – 10 yr now 8.09%!
*Fed Dual Mandates Collide as Drop in Jobless Rate View With Weak Inflation – 11.2% is low?
*Russia Predicts Recession Next Year If $60 Oil Adds to Tighter Sanctions – good, but ouch!
*China Steps Up Internet Censorship, Blocks Verizon Cloud Before Conference – LMAO!
*Home Depot Third-Quarter Profit Tops Estimates as Customer Traffic Gains – huzzah!
*Wall Street Banks to Reap $316 Million From Actavis, Halliburton Takeovers
*Keystone Vote May be Too Late to Help Democrats Hold Louisiana Senate Seat
*U.S. Said to Pursue More Mortgage-Bond Fraud Cases After Ex-Jeffries Suit
*Eastern European Elections Surprise As Voters Reject Authoritarian Rule
*Thieves Blow Up ATMs in Crime Wave That’s Leaving Chileans Stuck in Lines – hmmm
*Carnival Enlists Public in Marketing Push to Boos Cruise Industry Image – hah!
*Flash Boys Invade $12.4 Trillion Treasury Market in New Era of Volatility – BAD NEWS!!!
*A Witch Hunt in Finance Won’t Make the World a Safer Place – by Mark Gilbert
*Time for Hong Kong’s Protestors to Think Long-Term – not like Occupy Wall Street, sadly!
Monday’s Market Summary
If you had any doubts that this Friday is options expiration, all you had to do was look at yesterday’s markets. The Russell 2000 -0.7%, Dow Transports -0.5%, and whoa…those Dow Utilities surged 1.3% – so much for their selloff last week. The rest? Dow 30 and S&P 500 both up a whopping (sic) 0.1%, while the Nasdaq’s were down 0.4% and 0.3% respectively. NYSE Financials were flat but within that NYSE Brokers -1%; KBW Banks -0.1%; Nasdaq Banks -0.6% (BofA, usually the most active NYSE stock has been 5th the last two sessions. Since 11/6 it is down 2.5% and on the cusp of breaking $17. A/D’s and Breadth were moderately negative; new 52 week highs rose slightly and new lows declined similarly. Ahem, the VIX which had gotten into neutral/slightly bullish territory, corrected rising to 14.73 before settling at 13.99 +.67…don’t think any of this is options related? Think again!
Total NYSE Volume pretty steady at 3.13B shares vs 3.2B vs 3.46B vs 3.25B vs 2.93B. Average volume since 9/30 is 3.6B shares and now falling, or about 600M more than the 12-month average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume dipped below average at 694M vs 705M vs 708M vs 718M vs 614M (lowest since 9/15) – still trending lower. For comparison purposes, for the prior 12 months it is a historically weak 712M shares…but since 10/1: 828B shares (and falling) – including that HUGE 1.22B share day – highest since 9/19, followed by two more 1B plus days leading to options expiry!. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 16, and FIVE 900M+ days.
A/D’s were modestly negative: NYSE: -1.3x vs +1.1x vs -1.8x vs +1.2x vs +1.1x; Nasdaq -1.9x vs -1.1x vs -2x vs +1.6x vs -1.1x. Breadth was strange: NYSE 1:1? vs +1.5x vs -2x vs 1:1 vs +1.1x; Nasdaq -1.7x vs +1.4x vs -1.2x vs +1.6x vs +1.1x. New 52 Week Highs turned around to 242 vs 207 vs 249 vs 276 vs 339 – their range for the year is 39-612!!! New Lows slightly lower at 115 vs 127 vs 146 vs 113 vs 100 vs 85. The 2014 range is 24-1043!!! S&P VIX rose sharply intraday hitting 14.73 (very negative), then closed near the low of 13.99 +.68 and well back in bear territory – bottom of range was a high 13.84. This is its 15th sub-15 close since peaking on 10/15. Heading back toward those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!)? You decide. The average of the past 12 months is 13.97, with a low of 10.28!…high close of 26.25 on 10/15/14!
U.S. bond market closed slightly lower. The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.34% -1/8; 30’s 3.06% -3/16; and the long TIP 1.01%! -7/8. Overnight slightly better: 10’s 2.33% +1/16; 30’s 3.06% +1/8; and long TIP 1.00% +5/16.
Libor update: 0.232% 3 mos.; 0.326% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% and is steady at 0.09-0.10%. T-Bills: 0.1%, one-month, 0.02% 3 mos, 0.14% one year???
Foreign bond yields lower, except Greece, now back above 8%; watch Japan! (Benchmark is 10yr): Germany 0.79% -1; UK 2.12% –; France 1.14% -1; Italy 2.31% –; Spain 2.09% -1; Portugal 3.13% –; Greece 8.09% +23!!!1 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.50% +3.
Gold closed little changed at $1183.50 -$2.10 – but the range was very narrow. Friday’s session high was $1192.90 – highest since 10/31 AND a ‘positive key reversal for 2nd time in six sessions. 11/7’s low was $1130.40, a new recent low!). The recent intraday high of $1255.60, highest since 9/10/14, was rejected. The last 14 sessions have had prints below $1200 first time since 12/31/13 Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is at $1200 (psychological), then the 40 day at $1206, the 50 day $1211, then the 200 day at $1278, all declining. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. $1130.40. 11/7’s low was $1130.40! Overnight, it is STRONG! $1201.80 +$18.30 and near its high of $1204.10 – first time above $1200 since Halloween! Silver also rising to $16.40 – 2nd day above $16, also highest since 10/31 and back from 11/5’s low of $15.12, more than a five year low.
Crude closed slightly lower at $75.64 -.18, two days after setting a new recent low of $74.07, lowest since 9/17/10!!! 10/25’s high was $84.83. There have been 33!!! 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 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 ($83.63!), then the 50 day ($85.48), and lastly the 200 day (97.14), all continuing to plunge and accelerating to the downside. If it fails here we are now looking at $70! The recent range is now $74.07-$112.24 since 3/1/12. Overnight it is slightly better at $75.92 +.28 with a high of $76.44.
European equities higher, Asia mixed but Japan/Korea strong!!! UK +0.5% vs -0.1% vs -0.1% vs -0.1% vs -0.4%; France +0.7% vs – vs +0.4% vs -0.4% vs -1.1%; Germany +1.2%! vs – vs +0.1% vs -0.2% vs -1.3%; Japan +2.2%! vs -3%!!! vs +0.6% vs +1.1%! vs +0.5% vs +2.1%! Hang Seng -1.1%! vs -1.2%! vs +0.3% vs +0.3% vs +0.8%; Korea +1.2%! vs -0.1% vs -0.8% vs -0.3% vs +0.2% vs +0.2%; India -0.1% vs +0.5% vs +0.4% vs -0.2% vs +0.4%. U.S. equity futures little changed in a narrow range: DOW -3 (range 41?); SPX -2 (6!); NDQ -5.50 (18).
Some random thoughts:
…loser…only if that means earning $1 million a year and a guaranteed $400k bonus! Ah, but that’s next year. He was hired for $400,000, a $400,000 signing bonus and $1 million in restricted stock that vests over five years. Next year, a guaranteed $1 million plus $400,000 in restricted stocks. Moelis says the former college professor turned Tea Party advocate and a House Majority Leader, will add to their boardroom talent (bored room?). Let’s drill down, shall we?
Cantor is a college professor turned Tea Party politician…he has no background in investments (not that that means anything). So while he is licking his wounds from being surprisingly defeated, in the primary no less, by a nobody (a first for a Majority Leader), he gets the deal of a lifetime. Isn’t that special?
Who the hell is Moelis and Company? Founded in 2009 it received accolades from financial publications in 2009-11. But…have you ever heard of them? Not TB, not until now! Well you will hear more starting today as they are doing a secondary offering (IPO was April 15th – interesting date, that)…led by Goldman, Sachs, natch. The IPO wsa priced at $25 and was one of those rarities where it didn’t soar on opening day…high on April 15th was $27.32. It was fallow for about a month then rose to $37.36 on 9/2, closing yesterday at $34.22. So what about today’s offering? Bolster capital? Hardly! The company says the proceeds will allow existing shareholders to sell and while the company will buy some shares, those will be used to buy out employees holdings. Net effect on company – zero…but less equity for management…isn’t OPM great???
So beside Cantor, why the interest in this company by TB? Well…they bill themselves as a ‘boutique’ firm serving international clients…ok…but that word has a lot of bad historical connotations. For instance:
In 1982, when TB was an institutional bond salesman with Merrill Lynch, a firm called Drysdale Securities, ‘couped’ a treasury auction – that is, they bought it driving the price of the bonds high as the other primary dealers were forced to cover. Ah, but then, it came out who owned it and guess what? The bid vanished! (TB knew of Drysdale as a no-impact muni bond dealer so when he was told it was a ‘boutique’ government securities firm, TB was left scratching his head: how does a small firm outsmart Salomon Brothers and Goldman on a huge treasury auction. The answer is: they don’t!) They had to finance it and that was a problem. Hint: when you own most of what there is of anything in a transparent market like U.S. treasuries) more or less. But how?
They tried borrowing but nobody wanted to lend to them…enter Chase: they were ‘retained’ to get repo customers for the paper. Here is what they said to the big banks they called: “would you do a repo with Drysdale?” Answer of course was an emphatic NO! “Okay, would you do it if Chase guaranteed it?” Sure! Why not! So when the firm imploded under the weight of the treasuries, Chase was on the hook (which they tried to deny) for the losses on the repo’s (actually reverse repurchase agreements as the client was putting up the money in return for the bonds as collateral.
Then of course, there was another politician who really turned bad but as a member of two tightly-knit clubs: being a former senator and a governor (NJ): Jon Corzine, former CEO of Goldman Sachs (why does that name always come up???). Interesting as he was preceded by Stephen Friedman who later, while a director of Goldman, and serving as president of the New York Fed, was buying up Goldman shares, even as Lehman was collapsing on insider knowledge that GS would be declared a bank and thus get a bailout…the bailout engineered by Corzine’s successor, now Treasury Secretary Henry Paulson…got it?
Corzine became the CEO of MF Global and with knowledge of its teetering financial condition tried to arrange a sale so he could collect a nice bonus. Failing that, it was shown that client funds were used to inflate the capital of the firm – without their knowledge – which Corzine denied but which the courts held that he was responsible…not that anything happened to him however. What was interesting to TB was that MF was a ‘primary government securities dealer’. TB having worked for two (Merrill Lynch, and LF Rothschild when their application was in to be a primary), and they were closely monitored by the New York Fed. That practice was abandoned by the Fed in the early 1990’s, who said they were not responsible for the financial condition of the primaries. Not responsible??? That is like a bank making a loan with no documentation…an unacceptable excuse! (He was beaten for governor by Chris Christie…who got his own share of scandals).
Back to Friedman, when GS became a ‘bank holding company’ – which is not the same as a bank – he was elected to and served as president of the New York Federal Reserve while a director of GS…a violation of Fed rules, but he got a ‘waiver’. Then while president he began accumulating GS stock claiming it was ‘undervalued’ – this ‘used to be’ known as insider trading. Without admitting guilt he relinquished the shares and disgorged the profits and resigned from the board – of the Fed, not GS! Compare and contrast to Martha Stewart for just one minor infraction!
Enough! How about some other cases of politicians doing well in the private sector:
Let’s start with Sen. Billy Tauzin…ah, another GOP guy. He led the Bush 43 – induced design of the seriously flawed Medicare Part D…insuring that unlike Medicaid, it not be able to contract for prescription drugs. For this he was awarded (after not running again for ‘health’ reasons), was named head of the Pharma lobby and earned several million over the next few years. Nice work if you can get it…and have no morals!
Next, good old boy Sen. Phil Gramm of the great state of TEXAS! Where do we start with him? How about first, his wife Wendy, a former CFTC chair who exempted Enron from commodities regulation, then served on the audit committee of Enron and found nothing wrong, while making a million on the stock. Unbelievable! As for Gramm, he co-authored the Commodities Futures Modernization Act, and then not as a senator violated rules by lobbying on the floor of the Senate. What the Act did was destroy all efforts to regulate derivatives as former CFTC head had attempted, only to be slandered by Rubin, Summers, and of course, Greenspan, who failed to see three bubbles which he oversaw, and never saw a regulation he liked (here is a link to this slime: Phil Gramm/Mother Jones . What did Gramm get?…why to be Chairman of UBS Americas Investment Bank, retiring in 2012.
Getting tired of reading? TB is tired of writing so skipping Larry Summers brief stint being paid by the Wall Street lobby…not as a lobbyist but giving speeches paid for by firms, let’s skip to the wonderful Robert Rubin, former Treasury Secretary…oh yeah and from…Goldman Sachs.
Thanks to the revolving door the Bill Clinton promised to close, he left treasury to become Vice Chairman of Citicorp – without portfolio…and charged with dealing with their biggest accounts (just like Cantor will do!). As a former Citi exec told me, he constantly told them to take more risk…be like Goldman (but Citi really was a bank!), and watched as its assets declined by 70%. Then, when CEO Chuck Prince resigned in the scandal.. Rubin briefly served as Chairman…Sandy Weill stepping aside – wisely! Rubin said he had no idea they were taking risks…despite whistleblowers warning in memos to senior management of undocumented loans!
(Note also that while Treasury Secretary Weill enlisted his support to kill Glass Steagall, which he did and which allowed Citi to do a stock swap for Travelers, which Weill also controlled. Weill, couldn’t even wait for the ink to dry on the bill so he ‘illegally’ did the swap before it died! Nothing, of course, was done.
Get it? Nothing to see here…nothing new…just another quid pro quo…ain’t that special!