Morning Call [7:58am ET]
The Toronto G-20 is over and the headlines in Canada read “The summit of all taxpaying fears”. The cost to Canadians for security measures alone was US$1 billion. When every man, woman and child in Canada is forced to shell out over $33 apiece to protect, for three days only, the safety of visiting foreign politicians and central bankers from harm by Canadians, something is seriously wrong.
http://www.thestar.com/news/gta/torontog20summit/article/829584--g20-it-...
More on this topic later.
I quickly read the G-20 Summit Declaration and Annexes. What it amounts to basically is that these countries agree to print more money in unison. There is nothing of substance or credibility that caught my eye.
Now we have to see how markets unfold later this week. That will be after the central bankers return home and start to put their pedal to the metal.
Today is my 41st wedding anniversary, so Pat and I plan to enjoy the day. After I finish this morning’s conference call and line up some trades, I’ll leave things to the trading desk.
Have a great day.
CTA Trading Desk Post-Close Report
Traders must have already headed to the beach as prices seesawed back and forth in a very narrow range, volume dwindling as the day wore on. Certainly big money managers were fine-tuning their end of quarter portfolios, hoping just the right mix of growth and value would impress their clients when they receive year-to-date performance reports.
What stood out during this slow day of trading?
1. Apple (AAPL+0.60%) the ultimate one-decision stock, a must for portfolios regardless of price. Right?
2. Risk aversion was evident by the outperformance of defensive stocks Altria Group (MO+3.26%), Pepsi (PEP+1.96%), Coca- Cola (KO+1.69%), Walmart (WMT +1.62%), and Johnson and Johnson (JNJ+1.36%). Some of these gains were undoubtedly caused by the Russell rebalancing weakness on the close Friday, but the constant bid in these stocks even as the broad averages sold off towards the end of the day (S&P-0.20%) meant safety was the name of the game going into month’s end.
3. US bonds (TLT+0.96%) hit a 52-week high as the ten-year yield neared an unfathomable 3 percent (3.03% close). If investors are willing to park money in instruments yielding 3% for ten years, what does that say about their current outlook for equity prices?
4. Consistent with this flight to safety, traders bid up the US dollar and sold Euros (FXE-0.92%).
5. Gold (GLD-1.29%) suffered a nasty near-30-dollar decline after eking out another all-time high. Violent reversals after new highs are always something to pay attention to regardless of your longer term fundamental views. Breaking the uptrend line off the March lows (currently near 119.35) will be another red flag – maybe the deflationary forces of the great credit unwind are trumping the inflationary forces of the seemingly limitless printing presses of the Western World?
The week prior to Independence Day typically has a bullish bias so we expect prices to probe the upside later this week unless S&P 1040 is broken. Volume will continue to recede as the week unfolds, head fakes in both directions keeping independent traders guessing about the near-term direction of equity prices.
In pre-holiday weeks it is best to trade smaller, accepting smaller gains and avoiding large commitments as liquidity temporarily evaporates.
Have a great evening.
Comments
How can you spend 1 billion $ on security?
I simply cannot comprehend how you can spend 1 billion dollars on security.
Don't the police work on salary?
Happy Wedding Anniversary Bill and Pat..
Congratulations on your 41st wedding anniversary. My best wishes to both of you for the rest of your life together. And thank you Bill for all your efforts in helping us all understand the market and how we trade it. Enjoy your day and make it a happy one full of fun and lots of laughter’s..
Congratulations
Hope ya'll have a great day celebrating your 41st anniversary. Life together can certainly be wonderful. I'm grateful to say my wife & I just returned from a week long trip to San Francisco celebrating our 30th.
Re: Happy Wedding Anniversary Bill and Pat..
+1
Wishing you both a wonderful day.
Regards,
BH
Re: How can you spend 1 billion $ on security?
Where I live police have been cut from the force. Those remaining may be "on salary", but that seems only to guaranty a base — they get overtime each week do to the extra hours now. They also get retirement at 55 if over 20 years service and then 75% of their best three years (including overtime).
I don't blame the officers — like the federal government — it is our "representatives" who have brought us to this sorry state of affairs.
Cara 100 Ratings Changes
Good morning.
Surely, the G-20 meetings straightened out the world's economic problems....then I woke up.
AMZN - Amazon.com downgraded to Neutral from Positive at Susquehanna. The firm expects rising competition in the eReader/eBook markets to impact growth rates.
DOW - Deutsche Bank reinstated coverage of Dow Chemical and upgraded the stock to Buy from Hold. The firm cites a compelling valuation and earnings power for the rating change and has a $32 price target for shares.
FSLR - First Solar initiated with a Buy at Goldman. Target $150.
HBC - HSBC downgraded to Neutral from Buy at Nomura.
PFE - Pfizer downgraded to Buy from Conviction Buy at Goldman. Target to $18 from $21.
RIMM - Research in Motion upgraded to Outperform from Market Perform at Raymond James based on valuation. Target $70.
Bank of International Settlement annual report release
http://www.bis.org/publ/arpdf/ar2010e.htm
Re: How can you spend 1 billion $ on security?
So the $1 billion number strikes me as unlikely. The Canadian Defense Budget for the entire year was $21 billion, with 67,000 full time military on duty. Is it likely Canada spent the equivalent of 5% of their entire annual military budget - 20 days fully loaded costs for their entire Army, Navy, Air Force, procurement, salaries, upkeep, pensions, etc on this one operation?
Canada has:
* 15 destroyers & frigates
* 14 army regiments (3 armored, 3 infantry)
* 391 aircraft (100 F-18 fighters)
If Canada concentrated the entire military force of Canada in the operation for 20 days, 1 out of every 37 people in Toronto would have been in the security forces during that time. That's what a billion dollars would buy you. Does that seem likely to have happened?
Happy Wedding Anniversary
Congratulations on your 41st Bill.
thankyou for this community, your guidance has helped me succeed in this market.
skyler
Re: Happy Wedding Anniversary Bill and Pat..
My sentiments as well, heck of an accomplishment! Enjoy the day!
JPH
Cara 100 Update
BUCY - estimates, target cut at Morgan Stanley. Shares of BUCY now seen reaching $77. Estimates also lowered, given the loss of a contract in India. Overweight rating.
JNJ - numbers lowered at Goldman through 2012. European budget concerns and the consumer recall will weigh on earnings. Neutral rating and new $64 price target.
RIMM - Research in Motion downgraded to Market Perform from Outperform at First Global.
XOM - numbers reduced at Goldman through 2013. XTO deal will dilute earnings. Neutral rating and new $65 price target.
Congratulations
My wife and I just celebrated our 40th. Enjoy your day and many more Happy and Healthy years together.
Re: How can you spend 1 billion $ on security?
Dave,
Never underestimate the power of any government to waste far more than is conceivable to us poor mortals.
I only worked on one federally funded project, but know it cost at least 10 times what is could/should have. Anything I suggested was prohibited by law.
• Rigid specs composed by those ignorant of the processes involved.
• Multiple records of the same info.
• The employing of "experts" and second, third opinions.
• And, of course, the many CYA factors at each level
Like the man said, "Pretty soon we're talking some serious money."
Free enterprise isn't really "free", but a lot cheaper than anything by any government.
No double dip>
The G20 solved all the problems, just listen to CNBC and Kudlow and you just gotta believe
XLF XLE
weak this morning and it's now clear where they want gold right now...
EDIT: if this was a "flight to safety" shouldn't gold be rising with the dollar...
Fridays highs not exceeded
Paltry vol. Not going to overtrade. Still own vxx and tza and mostly cash.
Congrats to Bill and Pat
:)
Guaranteed bonuses and hiring back on wall st
Can anyone confirm?
Wall st hiring highest since 2008.
http://bit.ly/aQ3QbV
Maybe I should apply to open a bugatti dealership downtown.
Re: Fridays highs not exceeded
NYUGrad,
Since you trade VXX, you might have already come across these:
http://tinyurl.com/2dntgqv
http://tinyurl.com/338lcwp
Two interesting charts trying to connect VIX and 3-Month treasury yields, lagged by two years.
Re: XLF XLE
In my opinion, gold tanked because of a failed test of the previous (6/21) high of 1266. Perhaps as Bill says, the rising dollar finally took its toll. Since the euro isn't tanking on any new end-of-the-euro scenario, perhaps the old relationships have re-asserted themselves?
One other point. If "they" wanted gold to be crushed, "they" have been doing a remarkably poor job of it. POG is still above the 50 day MA and remains in a clear up trend. JMO.
Krugman Throws in the Towel
Paul Krugman Throws In Towel, Says We're Headed For Another Depression
http://tiny.cc/qwclh
Re: Krugman Throws in the Towel
We have to cut back now, even with the risk cited by Krugman. The reason is that congress and local governments will not cut back on spending when things start to get better. There is zero chance of it. They will increase spending like they always do. The last administration doubled spending in 8 years.
The only chance for cutting spending is now while government is broke. If we care a shred for posterity then we should start paying our own way now. Even though I say that the only chance for cutting spending is now, I don't think we will do it under any circumstances. How much do you think we have to cut to make up for 30 years of reckless spending on the wrong things? The problem is compounded by the fact that there are a number of areas where we actually need to increase spending, i.e. research into alternate fuels and energy, electric grid, and whatever entitlements that we wish to keep.
By my memory, we more or less paid our way prior to Reagan ("the deficit is big enough to take care of itself".) Really Mr. President. By my thinking the deficit and public debt will destroy the future of our nation. It will break the backs of our kids.
All of our entitlement programs, some of which I support, are unfunded. They should have been funded all along but they were not. Trust funds were stolen, highway tolls were stolen. We expanded the public sector where we should not have expanded it (why is the FBI constantly investigating local crimes) but did not expand it where we should have (infrastructure, environment, non polluting energy sources). Our infrastructure is collapsing and our electric grid is antiquated. Government should have helped the nation transition to new transportation fuels 25 years ago after the oil embargo of the 70's (perhaps with gasoline taxes to make alternatives competitive) but we did not. Where will the money come from to do all of this now. There is no way to make the equation work. We can't borrow more from our kids from whom we've stolen financial and environmental security. As I've said before, our kids and grandkids will curse us as "the selfish generation."
EUR/USD down?
The exchange is down, gold is down but the market is up? Isn't a strong $ supposed to push us the other way? I wonder who is pushing especially with the XLF also down.
The Coming Storm, Nice Read from the Barron's
The bulls are ignoring the economic realities.
SOME GOOD SAMARITAN—or if there wasn't one handy (they're pretty scarce in Afghanistan), just about anybody at Goldman Sachs would do fine—should have informed Gen. Stanley McChrystal that a rolling stone gathers no gloss. Because no one volunteered to tell the general that trash-talking about the chief and his staff before a Rolling Stone reporter is like confiding in the town crier, he wound up shorn of his epaulets.
That the war Gen. McChrystal was in charge of hasn't been going well lately wasn't exactly calculated to mollify the president's ire. One could argue, we suppose, that the jocular tone of the general's subalterns in their references to the vice president and other members of Mr. Obama's retinue was simply a case of boys being boys with aspirations of becoming wits. The quality of their remarks suggests they're half-way there.
To put it mildly, it wasn't the best of weeks for the president. Besides having to sack Gen. McChrystal, who was, after all, the architect and executor of the strategy being employed in Afghanistan, the latest Wall Street Journal poll made dismal reading for him. For the first time since he took office, more people gave his performance a thumbs down—48%—than a thumbs up—45%.
http://finance.yahoo.com/banking-budgeting/article...
US Jobs lost due to environmental rules
Tim Sullivan, CEO of Bucyrus, told of a 1000 US jobs to be lost due to the failure of an equipment deal to a power plant complex in India. The US EXIM Bank refused to guarantee loan because although Bucyrus met the initial environmental criteria, the EXIM bank went beyond those standards (carbon impact) and squashed the deal. Bucyrus recently invested $250m in capex at their Wisconsin facility.
POTUS Obama is visiting Wisconsin next week...hope the workers boo him off the stage. Maybe Sen Feingold
can bring home the bacon and get the decision reversed. He is up for reelection in Nov.
Re: US Jobs lost due to environmental rules
I respectfully ask that you think about a few points regarding environmental controls. The way I see it, the choice is whether society wants maximum growth and jobs now at the expense of posterity (our kids) or instead wants sustainable growth that leaves something for future generations. When I ask people the question "do you give your bills to your kids" everyone says "NO". But the same person who says 'no' fails to understand that this is what society, especially the US over the past thirty years, is doing on a massive scale right now. We are borrowing from the future. We are borrowing money that our kids and grandkids will have to repay with interest, destroying hope that they will have prosperity, and we are borrowing from their environment by using up natural resources that are rightfully theirs, and by damaging the enviroment through lax pollution controls that allow maximum profits now at the expense of the future. Do you think BP should have met a higher standard, or that the existing standard should have been better enforced, or was it about right the way it was so long that X number of jobs were kept. The continuation of massive carbon releases by man will very likely lead to catastrophic changes in weather, water supplies and ecosystems. Read the science and you will be convinced. India has a burgeoning population and absolutely must build power stations that meet the most stringent environmental standards. This is for the benefit of their population now and in the future.
Re: The Coming Storm, Nice Read from the Barron's
ever get the idea that O'Bama is in over his head? It will look more and more like that as time goes on......
Re: The Coming Storm, Nice Read from the Barron's
He has always been over his head.
While he was my senator (Well, he thought he was.) he scored a new record for "Present" votes.
He was elected based on "less bad", IMO.
10-Yr Bonds
"3. US bonds (TLT+0.96%) hit a 52-week high as the ten-year yield neared an unfathomable 3 percent (3.03% close). If investors are willing to park money in instruments yielding 3% for ten years, what does that say about their current outlook for equity prices?"
A. It may be investors believe deflation is the greater threat at the moment.
B. They may be doing what I am and "parking" there (bond mutual funds and TLT) until there is some definite sign rates will be raised.
I'm 72 and have no intention of leaving my money in anything for ten years. There are no rules anymore, so I am willing to move on at the slightest discomfort.
Gold in the context of the financial crisis
"The Budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance of foreign lands should be curtailed lest the Republic become bankrupt. People must again learn to work, instead of living on public assistance."
Marcus Tullius Cicero, 55 BC
http://tinyurl.com/22rwwrz
Re: 10-Yr Bonds
Grym,
On your point B: "They may be doing what I am and "parking" there (bond mutual funds and TLT) until there is some definite sign rates will be raised."
Yes, but what will be the "definite sign"? That is the question. The first raise might be too late to avoid a big loss WHICH COULD HAPPEN VERY QUICKLY. What might be a precursor to such a move? I have a few thoughts on that and am sure some others do also but as yet no discussion here or anywhere else that I know of on "signs", definite or forewarning. Timing will be primary.
.................
keep an eye on a micro-cap.. will be a 10 million share day soon on a squeeze ( average volume 1 mil ).. alternative energy ( electrical grid storage ).. first break is .37
Re: Krugman Throws in the Towel
fjd10595
To say 'spending' or 'cutting back' is the right course of action presupposes you are spending and cutting back on the 'right things'. IMHO we have been spending on absurd government programs with enormous inbuilt waste and buying things that have little or no intrinsic value. The value proposition is the thing. What matters and what is worth investing in now? Smaller homes, greener vehicles, recycling and conservation technologies vs. companies and things shown to display abusive largesse and greed?
41 years of marriage:...congratulations Bill and Pat!
Bill and Pat,
To have lasted years and kept your personal perspective in balance in this crazy old world is quite a feat. My parents just celebrated 65 years of marriage and what a miracle that is...to still be holding hands and revering your spouse is a tribute to your both your souls.
Happy Wedding Annniversary
Congratulations and best wishes to both of you!!!
41 years of Bliss
Pat, thank you for sharing Bill with the rest of us.
Katharine Hepburn
It's 1:21 AM EST.
Futures look sh**y.
I quess they fired Jack Bauer
and hired the Boon Dock Saints.
Or it is the best head shake since Kate.
Today will be interesting.
Trade on.
Good luck to everyone.
Re: Katharine Hepburn
What's any of this got to do with Ms Hepburn? :)
Red skies
And blood in the water overseas. Looks like a crazy end of month/qtr
Re: Red skies
Euro broke down, dollar up - Ben the Chopper will be scouring Washington for support for QE 2.
DEBT AND DEFICITS
ALOHA!!
Debt and deficits ... Do they matter?
Why the gold standard matters in one chart ...
LINK: http://research.stlouisfed.org/fred2/series/FYFSD
What happens when our monetary system is backed by egos ...
LINK: http://research.stlouisfed.org/fred2/series/FYGFD
Combine the two charts listed above with this one and you see why America cannot afford a WW3 ...
LINK: http://research.stlouisfed.org/fred2/series/FDEFX
And here is why the average American citizen cannot afford a WW3 ...
LINK: http://research.stlouisfed.org/fred2/series/CPIUFD...
All these charts have one thing in common and that is "Nixon 1971".
ITS THE MONEY STUPID!!
As The World Turns
Hi All - Tough day for the buy & hold types in store, but should be some bargains out there for entry. Here is a nice pictorial of the weather for today in the western Atlantic / Gulf. Happy Trading http://www.ssd.noaa.gov/goes/east/watl/loop-vis.html
THE AUDACITY OF HOPE
ALOHA!!
The "Audacity of Hope" or more to the point in terms of reality, "The Audacity of Audacity"!
Here is the truth about HOPE for 46% of the 15.3 million Americans who are out of work collecting unemployment checks. Close to half have been out of work for six months or more.
The fact is that the real estate boom employed the lesser educated American men between the ages of 25 and 54. Now 1 in 5 of those men in that age group are out of work and form the base of the chronic unemployment along with those who simply have zero education and no HOPE. Also youth in America aged 16-24 have an official 20% unemployment rate with youth aged 16-17 at 29%, these rates are the highest on record since 1947.
According to David Wessell of the WSJ ...
"On average surveys find the unemployed in the US spend 40 minutes a day looking for work and 3.3 hours a day watching TV."
LINK: http://blogs.wsj.com/economics/2010/06/07/longer-u...
I ask then what are the odds that the lines at the welfare office and the food stamp rolls will increase in the future? As of May 40.5 million Americans, or 13.2% of the US population cannot even afford food. It does not matter if Congress votes to discontinue long term unemployment checks since those who were collecting unemployment checks will just walk across the street to the welfare and food stamp lines. No matter what those in power will want to keep the "disenchanted" off the streets as much as possible. The only way to do that is to "pay them"!
To further the US government deficits which essentially stem from the government owned education system in America, whereby every citizen is guaranteed a cradle to grave safety net, you can add in the disturbing statistic that 20% of Americans claim "disabilities".
LINK: http://www.redorbit.com/news/health/1680882/20_per...
Next add in the percent of the US population who are too young to work. Total percent of Americans under the age of 20 is near 28%.
Also total percentage of Americans over the age of 65 is near 18%.
So lets add up the percentages and see who is left to support us all from cradle to grave.
- Unemployed = 9.9%
- Disabilities = 20%
- Children = 28%
- Seniors = 18%
TOTAL = 75.9%
You get the BIG PICTURE?
That takes us back to the ChrisM post dating back to 55BC ...
"The Budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance of foreign lands should be curtailed lest the Republic become bankrupt. People must again learn to work, instead of living on public assistance." Marcus Tullius Cicero, 55 BC
Re: THE AUDACITY OF HOPE
Marcus Tullius Cicero was declared an enemy of the state by the Second Triumvirate and subsequently murdered in 43 BC.
Re: 10-Yr Bonds
Illini,
Yes, I agree. But nobody says it's easy. If it were we wouldn't need to keep reading and suggesting here ;-)
First of all — I'm retired and drawing Social Security. While I hated paying into it for 50+ years, it is the first time in more than 40 years I have had a regular "pay check". Same for medical coverage. I seldom trade short term.
I should also add that I think we will mostly be in deflation for a while, but am not willing to bet the farm since there is so little reality and these days rules are almost nonexistent. I don't think there is any time quite like any other, but all economists are reading from the same textbooks.
I was heavily into the Vanguard High Yield Fund (VWEHX) paying 8%. When it dropped 2 cents after being steady for some time I sold some and then dumped the rest a day later. I seldom luck out in my timing by hitting the peak, but it has continued to fall and I made a good gain.
Now I'm mostly in their GNMA (VFIIX) which beats the money mkt and is as flat as my singing over the long haul.
I'm only playing the long term gov. bond funds (WHOSX, TLT) and short S&P (SH) with 10 to 15% of my money, but have and will leave if it looks bad at any time.
Vanguard has very low cost, but they prohibit repurchase in any fund within 60 days, so I usually have another one as a fall back option. I suggest picking a group of funds to watch and see how they behave under various market conditions before buying. They move far slower than individual stocks due to their size.
My primary goal is to live off our principle without diminishing it — not looking to get rich, just get by.
Re: Krugman Throws in the Towel
Loannetter,
"To say 'spending' or 'cutting back' is the right course of action presupposes you are spending and cutting back on the 'right things'."
What you are saying requires something called "sound judgment" and a concern for the nation and public as a whole.
What those in the public eye seek is to avoid doing anything which can be blamed on them. Therefore "experts" are consulted and sighted when things go badly. Task forces are formed, studies done and computer models developed — all in the CYA mode.
Long term thing is "My next election".
Re: THE AUDACITY OF HOPE
"Marcus Tullius Cicero was declared an enemy of the state by the Second Triumvirate and subsequently murdered in 43 BC." - lessmore
If you're suggesting that Cicero was of no importance because of this, you've not done your homework. Cicero developed the concept of law and was murdered by Mark Antony as Empire usurped Republic.
Re: THE AUDACITY OF HOPE
"If you're suggesting that Cicero was of no importance . . ."
I neither made nor implied such suggestion.
Re: THE AUDACITY OF HOPE
"I neither made nor implied such suggestion." - lessmore
Oh, okay. But then why did you make the statement regarding his prosecution and murder after someone on the blog quoted his famous remarks about restraint? Just wondering. Was it to point out that he's dead? I could have surmised that, my friend.
Re: THE AUDACITY OF HOPE
My purpose was to point out that public figures who speak out against schemes that cater to the popular will are not just courageous but are in peril.
Re: THE AUDACITY OF HOPE
lessmore -
In that case, my bad. I did not understand your point until now.
Cheers.