Kick The Can!

Europe Tries To Kick The Can Down The Road But It Will Only Lead To Financial Disaster

Have you heard the good news? Financial armageddon has been averted. The economic collapse in Europe has been cancelled. Everything is going to be okay. Well, actually none of those statements is true, but news of the "debt deal" in Europe has set off a frenzy of irrational exuberance throughout the financial world anyway. Newspapers all over the globe are declaring that the financial crisis in Europe is over. Stock markets all over the world are soaring. The Dow was up nearly 3 percent today, and this recent surge is helping the S&P 500 to have its best month since 1974. Global financial markets are experiencing an explosion of optimism right now. Yes, European leaders have been able to kick the can down the road for a few months and a total Greek default is not going to happen right now. However, as you will see below, the core elements of this "debt deal" actually make a financial disaster in Europe even more likely in the future.

Ladies and Gentlemen, that was written not today, June 29, 2012, following the latest EU agreements but October 28, 2011 in a blog called "How the Hell Should I know?" Here is the full link blog post.

I quoted this to a friend this morning. It's from Bush 43:
Fool me once, shame on you.
Fool me..........can't get fooled again.

Obligatory weigh-in on ObamaCare

I am rather shocked that SCOTUS backed up POTUS on this one. Or did they? Now the individual mandate is a tax?  I smell a Tea Party!

But I am not well versed in the law itself - who is, right Nancy Pelosi? - so I am not going to go there. But I can tell you that earlier this year our health insurance provider (Empire Blue Cross Blue Shield) got out of the small company insurance business. Our coverage was dropped, thank you very much. Believe me, it was not because we abused it. I did not reach my deductible last year so the premiums were all gravy to the insurance company.

And now we are with Oxford (part of Untied Healthcare) and our premiums are up - 48%!  And the deductible is a bit worse, too.

Is that due to ObamaCare?  You bet your backside it is.

Yes, ObamaCare helps the small business - not.

Fed-die's Dead, That's What I Said

Freddies dead
That's what I said
Let the rap a plan
Said he'd see him home
But his hope was a rope
And he should've known
- Freddie's Dead (Curtis Mayfield -1972)

Substitute Fed for Fred and you see what I mean. You have to love the line "but his hope is a rope" because that is what the Fed is pushing. How much more money can Mr. Bernanke drop from his helicopter? How much lower can he push long-term rates? And when will he wake up to realize it does nothing but line the pockets of the bankers.

First, let me back up a bit. I am not anti-bank. In fact, I applaud them for making as much money as they can in the environment they are given. What would you do if given a choice of a steady income at no risk or a bit more income at high risk? You would take (borrow) the free Fed money and invest in risk-free Treasury bonds and collect the spread.

After all, that is what banks are supposed to do - collect the spread. They borrow from depositors at a low interest rate and loan it to businesses and homeowners at a higher interest rate.

Must I go back to my analogy of lions and zebras? The Fed dumped a zebra on a pride of lions and expected the lions to give it to the hyenas. Then they complain that the lions ate the whole zebra themselves.

Hey Fed, stop giving zebras to lions. Stop the stupid low interest rates and twisting and monetizing of the debt. Banks are not going to loan to businesses when they can get risk free profits on the backs of the taxpayer.

Hey kids, occupy the Fed! Banks are just the face of what is wrong, not the reason it is wrong.

As I said yesterday, let rates go back up so banks have to work for a living. I bet they'll also tone down the stupid derivatives bets, too.

The Fed is dead. They have lost their ability to do anything worthwhile. Maybe it is time to stop this madness, and I mean that word sincerely.

An idea

I posted this on the Facebook page but had to post it here for wider distribution.

Ben "Chubby Checker" Benrnake says, "Let's twist again, like we did last summer."

Seriously, how does this help? 10-year rates are already 1.6%. Will 1.2% get banks to lend money? Not if the Fed Funds rate is zero.

Here's an idea - raise the funds rate and force the banks to work for a living.

My Favorite Weird Chart

This is my favorite bizarre chart that lets me know not only how much volume there was on a given day but when it happened and how the day compared to other days.  It is simply an hourly histogram of NYSE volume.

Each bar is 60 minutes of trading except the bottom-most bars, which represent 9:30 to 10:00 NYT.  The top-most bars represent 4:00 - 4:15 - don't ask me why they do it this way (ask eSignal).

What I see here for June 19 is an average total for the day compared to the past five days with the distorted set of bars for last Friday's quadruple witching options explorations going off the top of the chart.

Next, I see that the final hour 3:00 - 4:00 is always the biggest of the day, again witching days excluded.

Finally, I see that the biggest change from the same hour the previous day occurred at 2:00 - 3:00 (highlighted in gold). What was happening then? Stock prices fell abruptly from their high water mark of the day. Interesting. There was a mini-stampede to get out near the end of the day. 

What happened volume-wise as the market was scooting up in the first half hour of the day? Nothing. Volume was barely more than Monday's volume

You can interpret it any way you like and normally I'd say the market was getting skittish.

But it does not matter. The Fed holds your jewels in its sweaty little hands. Will they squeeze or massage lovingly?

What has become of the markets?

Once upon a time, supply and demand ruled the markets. Supply of shares for sale vs. demand for the prospects for the company's success in the future. We had a a capital asset pricing model and we discounted future earnings and dividends back to the present. Of course, all of that came with a lot of assumptions so a technician like me was not a big fan.

But even I long for those good old days. At least there we had a market that operated under its own power or lack thereof.

Let's list some of the fundamentals that came out recently:

worse first time jobless claims
worse consumer sentiment
worse industrial output
worse NY region factory output
worse retail sales
worse foreclosure starts
worse growth in China
worse current account deficit

As a technical analyst, seeing the stock market rebound as all of this comes out should make me bullish beyond belief. It would mean all the crap is already baked into the cake (yummy!). It would mean a ginormous wall of worry to climb. Any positive spark would light a fire so big Smokey the Bear would relent and get a bag of Jet Puffed and a weenie on a stick.  Admire thine enemy.

But the reason stocks are going up is the specter of rescue. Michael Gayed wrote today that "SuperBen and the League of Extraordinary Bankers are getting their suits on." Free money! Bailout! Save me, sugar daddy!

We have a stand off. Bad reality vs. awesome hope.

But we've already had a taste of what can happen if the market brat does not get what it wants. It throws a hissy.  You tell me how they are going to teach this at conservative investor school. Why Mr. Investor, when you are planning for conservative growth in your retirement account you must keep track of what some idiot is Greece said and of course be ready to reverse course when some idiot in Iran says something. Forget which company has a better business model.

The idea of buying that juice bar in Key West gets more attractive every day.

Grandma

A quote from the financial press today:

“If it wasn’t for Europe, U.S. equity prices would be significantly higher,” XXX added.

Yes, and if Grandma had wheels she'd be a bicycle.
If Almond Joy did not have almonds if would be Mounds.
If Skippy chunky did not have nuts it would be smooth.

How about this one, "If it were not for the specter of QE3 equity prices would be significantly lower."

Why do they pay these people?

This is what failure looks like

Anyone with a financial news source knows that "they" tried to bail out Spanish bank over the weekend. Why does the Clash's "Spanish Bombs" keep playing in my head? But I digress.

So what happened? Well, the predictable monster gap up across the Eurozone in stocks and the euro. Why the currency rallies on money printing is beyond me but that is what happened. The Spanish IBEX jumped 5% on the open but closed in the red. The RED! It rallied 5 bleeping percent but ended down on the day.

I am going to steal from my own blog, dated February 12, 2012:

Affection rejected
And it's effected
My affection for you
And the rest of your kind
Affection rejected
Just as expected
I'm rejected
I'm rejected
- Affection Rejected, The Records, 1979

You know who was rejected first? Did you read that Italy is going to be next on the bailout begging parade? Yep, the Italian MIB index was the first European index to move into negative territory on the day. It ended down 2 3/4%. That is jumbo per-taters, Emmet.

Now let's get to where most of you want to go - the US market. Sorry, globe, that's where my customers are concentrated. The Dow failed at resistance. The S$P failed at resistance. The Nasdaq failed.... You get the idea.

And while volume was still below average, the stench of failure was evident before the open.  Dow futures were up some 170 points overnight but were up approx 50 at the cash market open. Tack on the "fair value" and the cash market was up close to 200 points overnight only to close down 142 at 4pm.  Somebody get me a nose clip.

Should we dig deeper? Apple monster reversal at resistance and the 50-day average. And let's not forget the outside day reversal in the homebuilder sector. My Barron's Online column today was on that sector and I said it was going lower when I turned the piece in at lunch time. The ITB ETF was down only 2% then on its way to a 3.6% down close.

So Pepe, the market was Le Pew today.

Mr. Bernanke, your call.

New Poll

New poll now that visions of sugar plums are dancing in everyone's heads -->

Greece the Skids

As a childhood wise guy, I had a few dumb slogans to rattle off from time to time. One of them was from geography - The Hungary Turkey slipped on Greece. Yes, I know, BFD and silly. But how about changing it to something more relevant.  The pitiful Eurozone slipped on Greece.

PIIGs indeed. What a mess and I am restricting my opinions to charts of their stock markets. Greece was down over 5% today to a fresh, or should I say fetid (feta-d) decade low. The rest are pitiful, too.

And speaking of Hungary Turkey, the Budapest exchange has been trending lower since January. Remember the hot first quarter for global, non-PIIGS markets? Bocs haver.  And the TUR Turkey ETF is in a bear flag under the 50-day average. 


Do you want to know where stocks are holding up nicely? South Africa.What trades there? Gold and diamonds.

Save the Liver!

OK, the title is a stretch as the real topic is what is already baked into the cake in this market.

On the Facebook page, we  had a brief discussion about money printing. Everyone "knows" the market will rally when Ben and his gaggle of international money printers get busy again. I contended that it is already baked into the market and that is why the Dow "only" fell 275 last Friday.

What really is baked into the market? Greek default? Spanish default? Germany throwing in the towel and leaving the euro first?  How about Morgan Stanley going down? or Facebook leading the end of the social media phenomenon?

I think gold's rally was only part in response to possible money printing. Perhaps they are baking safe haven status back into the yellow metal.

It would be fun to ponder all the things the markets can cook if it were not so sad what is happening out there.

And now, to explain the title of this blog.

Way back when, it was Dan Akroyd playing chef Julia Child on Saturday Night Live in a rather (fake) bloody scene extolling the viewer to "save the liver." I thought baked in the cake, then chef, then save the liver. What do you want from a free blog?