March, Friday 23, 2012

DOW + 34 = 13,080SPX + 4 = 1397 NAS + 4 = 3067 10 YR YLD -.04 = 2.24% OIL + 1.40 = 106.75 GOLD + 17.90 = 1663.80 SILV +.65 = 32.34PLAT + 4.00 = 1630.00 Bloomberg News is reporting that Jon Corzine, the former CEO of MF Global gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s accounts with JPMorgan Chase in London. Back in December, Corzine testified that he never intended to misuse customer funds, he didn’t know where the money went, and (quote) “I did not instruct anyone to lend customer funds to anyone.”  Now, investigators have an email from the firm’s treasurer, three days before the company collapsed, and it says the transfer of funds was “Per JC’s direct instructions.” Somebody is going to have to re-hypothecate their testimony. Federal Reserve Chairman Ben Bernanke says the economy is operating below its level prior to the financial crisis. Bernanke said: “Consumer spending is not recovered, it’s still quite weak relative to where it was before the crisis. In terms of debt and consumption and so on we’re still way low relative to the patterns before.” I think what Bernanke is saying is: go shopping; go into debt if you don’t have money but just buy something. The US changed in the early 1980s from a model where rising worker wages were seen as the driver to growth and hence a focus of policy, …

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March, Thursday 22, 2012

DOW – 78 = 13,046SPX – 10 = 1392NAS – 12 = 306310 YR YLD -.02 = 2.28%OIL +.16 = 105.51GOLD – 5.20 = 1645.90SILV -.58 = 31.69PLAT – 17.00 = 1624.00 Do you remember hearing that there will be no more bailouts? Well, it’s not just a lone voice. The Dallas Federal Reserve has just issued its annual report and the title is “Choosing the Road to Prosperity. Why We must End Too Big to Fail – Now”. Ending bailouts is not a new idea, but we’ve never really heard it from one of the branches of the Fed. The letter also voices strong opposition to Dodd-Frank, but not for the reasons you might think; rather, that Dodd-Frank doesn’t go far enough. Dallas Fed President Richard Fisher, generally known as one of the most hawkish and conservative Fed Presidents wrote the letter; I’ll share some of the highlights: Letter from thePresidentIf you are running one of the “too-big- to-fail” (TBTF) banks—alternatively known as “systemically important financial institutions,”—I doubt you are going to like what you read in this annual report. Memory fades with the passage of time. Yet it is important to recall that it was in recognition of the precarious position in which the TBTF banks and SIFIs placed our economy in 2008 that the U.S. Congress passed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act. While the act established a number of new macroprudential features to help promote financial stability, its overarching purpose, as …

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March, Wednesday 21, 2012

DOW – 45 = 13,124SPX – 2 = 1402NAS + 1 = 307510 YR YLD -.08 = 2.29%OIL -.36 = 106.91GOLD -.70 = 1651.10SILV +.01 = 32.27PLAT – 16.00 = 1646.00 Federal Reserve Chairman Ben Bernanke  testified on Europe to the House Committee on Government Oversight and Reform. In his prepared remarks, Bernanke said: “Financial strains in Europe have also shown through to our financial markets. During times when financial conditions in Europe were at their most turbulent, investors around the world retreated from riskier assets. In the United States, these pullbacks decreased stock prices increased the costs of issuing corporate debt, and reduced consumer and business confidence. In addition, U.S. financial institutions that were thought to have substantial exposures to Europe saw their stock prices fall and their credit spreads widen.” “The difficulties in the euro area have affected the U.S. economy,” Bernanke said. “The European Union accounts for roughly one-fifth of U.S. exports of goods and services. Not surprisingly, U.S. exports to Europe over the past two years have underperformed our exports to the rest of the world. In addition, weaker demand from Europe has slowed growth in other economies, which has also lowered foreign demand for our products.” Bernanke said: “U.S. financial firms and money market funds have had time to adjust their exposures and hedge their risks to some degree as the European situation has evolved, but the risks of contagion remain a concern for both these institutions and their supervisors and regulators.” In particular, Bernanke …

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March, Tuesday 20, 2012

DOW – 68 = 13170SPX – 4 = 1405NAS – 4 = 307410 YR YLD -.01 = 2.37%OIL – 2.41 = 105.68GOLD – 12.70 = 1651.80SILV – .76 = 32.26PLAT  – 28.00 = 1659.00 Yesterday the S&P 500 moved above the 1400 level, and we mentioned how it was the highest level since May 2008, and it was 10% below the record high of October 2007. It’s also worth noting that the first time we hit 1400 was July 1999. We could call it a “Lost Decade” but we’re heading for 13 years. Fed Chairman Ben Bernanke delivered the first of four lectures today at George Washington University.Bernanke used  ‘It’s a Wonderful Life’ as template to explain what a central bank can do. Not many of the students have seen it. Bernanke says the Fed is a lender of last resort to banks, and without a central bank, depositors couldn’t get cash from a troubled bank. And financial panics led Congress to consider establishing a central bank. It sounds like Professor Bernanke was smoking something before delivering his lecture. A gold standard is a “partial alternative” to a central bank, Bernanke says. But they are far from perfect. He says, there is an awful waste of resources mining gold and bringing it to the basement of the New York Fed. Under a gold standard, a central bank has no flexibility to lower rates in recession and raise them during periods of inflation. Apparently none of the students were willing to …

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March, Monday 19, 2012

DOW + 6 = 13,239SPX + 5 = 1409NAS + 23 = 307810 YR YLD +.08  = 2.38% OIL  – .31 = 107.78GOLD + 3.40 = 1664.50SILV + .36 = 33.02PLAT + 10.00 = 1685.00 The S&P 500 Index is now at its highest level since May 2008 and 10 percent below the record close of 1,565.15 set in October 2007. Apple rose 15.53 to $601.10 per share, pushing the market cap to $560 billion. It is the first time Apple has closed above $600. The market capitalization makes Apple the most valuable publicly traded company in the world. This is a parabolic rise; Apple is up almost 50% for the quarter. Today’s move followed an announcement they would pay a dividend of $2.65 per quarter starting in July, and also a $10 billion stock buyback program, and also that sales of the iPad 3 topped 3 million over the weekend.  It all sounds a little frothy. I mean, what are they going to do next Monday? Treasuries continued to drop. Thirty-year-bond yield added 7 basis points to 3.48%, a level it hasn’t close above since September. Yields on 10-year notes rose for a fifth day, by 8 basis points to 2.38%, from as low as 2.26% touched during European trading hours. Yields haven’t closed above that level since Oct. 27. Yield moves inversely to prices. In a speech, William Dudley, president of the New York Federal Reserve Bank said “the economy still faces significant headwinds” and inflation is expected …

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March, Friday 16, 2012

DOW – 20 = 13,232SPX + 1 = 1404NAS – 1 = 305510 YR YLD +.02 = 2.30%OIL + 2.04 = 107.15GOLD + 2.80 = 1661.10SILV + .02 = 32.66PLAT – 13.00 = 1675.00 You look at the markets and you’re confused. I know. The markets can be confusing. We heard that the Federal Reserve FOMC was feeling sanguine; the economic outlook was copacetic. And in the pretzel twist that passes for logic, that meant the Fed was not going to approve a new round of Quantitative Easing; the Fed would not shovel free money from a helicopter to rain down on Wall Street. Certainly, the markets would convulse and complain, they would twitch like a junkie past due for a fix. So far, no problem. Pretty much every asset class has been moving higher. Go figure. It’s pretty simple. The Fed will continue to provide free money to their Wall Street banking buddies; that’s what the Fed does. There is no exit strategy from QE. In fact, not easing would be the equivalent to tightening. Really, it’s just a matter of timing and deciding on a good name. It might not be called QE3; it might be called Operation Twist Some More, Maybe they’ll call it the Sterilized Accommodation, or maybe just the New QE. Make no mistake, the Fed will have a purchase program that involves purchases of mortgage backed securities and Treasuries. The Fed’s balance sheet will expand. There are several reasons to expect more free money …

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March, Thursday 15, 2012

DOW + 58 = 13252SPX + 8 = 1402NAS  + 15 = 305610 YR YLD + .01 = 2.28%OIL +.35 = 105.46GOLD + 13.50 = 1658.30 SILV + >39 = 32.64PLAT + 11.00 = 1688.00           Yesterday we talked about the op-ed article in the New York Times written by Greg Smith, an executive from Goldman Sachs who was quitting the firm. He blasted Goldman in the article, saying the firm had changed, and not for the better. Smith chided his employer of nearly 12 years for its “toxic” environment and practice of “ripping clients off” while calling them “muppets.”           One of the stupidest responses came from the editorial board at bloomberg.com. No specific names here, just the “editorial board”.  They replied with an article titled: “Yes, Mr. Smith, Goldman Sachs is all about Making Money”. They say: “If you want to dedicate your life to serving humanity, do not go to work for Goldman Sachs. That’s not its function, and it never will be. Go to work for Goldman Sachs if you wish to work hard and get paid more than you deserve even so.”           And here I thought Goldman Sachs was doing God’s work. That’s what Lloyd Blankfein said; I guess  he was lying? Yep. The Bloomberg editorial board just described a mercenary’s job description. Nobody seriously expects Goldman investment bankers to serve humanity, but it doesn’t mean they should work to destroy it. Bloomberg and Goldman both work in the financial industry. In fact, Goldman …

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March, Wednesday 14, 2012

DOW +16 = 13,194SPX – 1 = 1394NAS +0.85 = 304010 YR YLD +.17 = 2.27%OIL +.27 = 105.70GOLD -31.30 = 1644.80SILV – 1.26 = 32.25 PLAT – 15.00 = 1679.00 There was a pretty remarkable story in the New York Times today. A guy by the name of Greg Smith is quitting his job at Goldman Sachs as an executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa, and he wrote an article explaining why he was leaving and what he believes is wrong with Goldman.  It’s not a revelation about Goldman, the only thing that’s unique about it is that a Goldman drone actually broke away and admitted publicly that Goldman is bad. Let me share a few salient points from the article. If you want to read the whole thing it is entitled: Why I am Leaving Goldman Sachs by Greg Smith TODAY is my last day at Goldman Sachs. After almost 12 years at the firm —  I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it. To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. The firm has veered so far from the place I joined …

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March, Tuesday 13, 2012

DOW + 217 = 13,177SPX + 24 = 1395NAS + 56 = 303910 YR YLD + .08 = 2.11%OIL +.04 = 106.75GOLD – 25.70 = 1676.10 SILV – .20 = 33.51PLAT – 7.00 = 1692.00 It’s a crazy world. Stocks posted their best day of the year. Go figure. The big boost seems to be JPMorgan announcing a dividend, while at the same time 3 banks failed the Fed’s Stress Test. Wait a minute, you’re asking yourself, “Self, am I going crazy or was the Fed supposed to release the results of the Stress Test on Thursday?” And of course, the answer is yes. The Fed, in releasing its annual stress test results, said 15 of the 19 largest banks would have satisfactory capital buffers, even after considering banks’ proposed dividend increases or share buybacks. The regulator said Citigroup, Ally Financial, SunTrust, and MetLife fared worst under the supervisory stress ratios, with Tier 1 common capital ratios of 4.9 percent, 2.5 percent, 4.8%, and 5.1 percent, respectively. The bank holding companies that came out top were Bank of New York Mellon with a Tier 1 common capital ratio of 13.1 percent under the hypothetical financial shock, State Street Corp with 12.5 percent and American Express with 10.8 percent. Bank of America came in with 6.2 percent, and JPMorgan’s result was 5.4 percent. So, only 4 out of 19 enormous financial institutions failed the stress test, meaning that just over one-quarter of the biggest banks in the country could implode at …

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March, Monday 12, 2012

DOW + 37 = 12,959SPX + 0.22 = 1371NAS – 4 = 298310 YR YLD -.01 = 2.03%OIL +.28= 106.62GOLD – 12.70 = 1701.80SILV – .71 = 33.71 PLAT + 11.00 = 1699.00 For the NYSE, relative to the previous 30 session average, volume was -17.48% below the average. For the SPX, the day’s volume was 76.2% of the average daily volume for the last year. Volume was 85.5% of the last 10 day average and 87.6% of the previous day’s volume. Today marked the lowest trading volume of the year. Last week you will remember there were solar flares. There was some speculation the solar storms might cause damage to the electric grid, possibly damaging electronic gadgets, possibly interfering with radio signals. Turns out it is far, far worse than imagine. The reality is that the earth has been knocked from its orbit around the sun; we are now hurtling through the cosmos with no set path. You want proof? O.K., Louis Freeh is the former FBI Director and current trustee for the MF Global bankruptcy case. Freeh has announced plans to pay $1 million in bonuses to Bradley Abelow, MF’s chief operating officer, Laurie Ferber, the general counsel and Henri Steenkamp, chief financial officer; they could make more if salaries and other incentives are approved. You may recall that MF Global lost more than $1.6 billion in customer funds that were supposed to be segregated, and completely safe. Nobody has been able to find the money. The last …

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