Interdum stultus opportuna loquitur...

Wednesday, November 17, 2004

Another "Flight to Shite"

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Yank Hubris - Part the First

Over on "Jump Out Your Window", the writer is apparently quite impressed (and, to his credit, dismayed) by the new Hardee's burger, the 1,420 calorie, 107-gram-of-fat "thick-burger".

As Crocodile Dundee might say, "That's not a burger..."

Sure, it's a sign that Boobus Americanus - like the country itself - does many. many things that show little or no regard for any thought of medium- or long-term consequences. So I think of this burger as "US Foreign Policy for your arteries".

The "barge-arsed American" is already a permanent fixture in tourist traps around the world, so where's the news?

Well, the news is that the burger shown on "Jump Out Your Window" is a tiddler compared with (and you have to say this with a fake Greek accent) King John's SuperBurger.

I can't show you a photo of King John's SuperBurger; I know only 2 people who have finished an entire SuperBurger, and one of them didn't eat all the bread. It has 2 eggs, 4 slices of bacon, and a burger from which you could reconstitute a whole cow.

Economic Statistics

The Consumer Price Index was the big-ticket number last night, and turned out (once you massage the numbers lower using the magic of hedonics) to have risen by 0.6%, which was faster than the 0.4 guessed by the people whose living is made by guessing such things. Year over year, the CPI was up over 3%.

But that's OK, pensioners, because the Feddle Gummint knows that nobody uses food or energy, so they kindly let us know what the CPI is for people who don't use pesky stuff. The CPI ex-Food & Energy was much tamer than the headline at 0.2%, which was still double the consensus guess (0.1%).

So there is no noticable inflation in the United States - and if the person responsible for your household budget says different, report them to Alberto Gonzales and they will be tortured until they tell the right story.

In other data, Housing Starts were reported at 2.027m units, which exceeded the consensus guess (1.95m). The housing bubble continues to plod along.

Industrial Production numbers were also out last night (does the US stil have "industries" apart from those that make things with which to kill foreign children? Oh yes.... they make some cars).

The IP report showed an increase of 0.7%, which exceeded the consensus guess (0.4%). Some of the increase was due to rebuilding after the hurricanes that ravaged Florida in the leadup to the election.

Within the IP report, Capacity Utilitsation showed that roughly a quarter of US industrial capacity is still idle; CapU was 77.7%, ahead of the consensus guess (77.4%). CapU below 80% this late in an "expansion", is a signal as to why employment is not growing; most of the new economic activity is being performed by government.

Crude Oil Inventories were up 0.8 million barrels for the week, while Distillate Stocks had another huge fall, down 1 million barrels.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation last night:

  • a $3billion, overnight repurchase with $1.786billion in T-backed collateral .

With the market in "meltup" and several key "stop" levels having been triggered, there's little need for them to throw as much "fragrant grease" into the cogs.

Major US Indices

Apart from the CPI, there was big news in the retail sector last night; Sears, Roebuck is to be acquired by K-Mart.

Remember a couple of years ago, when K-Mart filed for bankruptcy re-organisation? How is it that a company goes from well-nigh insolvency to buying a US retail icon? I bet K-Mart's former creditors (and its former bondholders) are mighty pissed off.

Between those bits of news, and some more massaged earnings from HPQ, the market started with an absolute roar. At one stage the Dow was up over 100 points, and briefly poked its nose above 10600. When the oil inventories number was released, crude oil spiked and the stock market softened (although I seriously doubt that the equities softening had anything to do with the oil market).

By the close, the Dow Jones Industrial Average held on to a 61.92 points (0.59%) gain, closing out the day at 10549.57 points; the broader S&P500 advanced 6.51 points (0.55%), at 1181.94.

Over at Times Square, the Nasdaq Composite gained 21.06 points (1.01%), to close at 2099.68, while larger-cap technology issues fared better with the Nasdaq100 adding 22.59 points (1.46%), to end at 1571.12 points.

And the "brown chip" index - the Semiconductors - was up 2.86%. Another "flight to shite".

NYSE Volume was pretty heavy, with 1.69 billion shares traded, while Nasdaq Volume was super-chunky (over 2 bill), with 2.22 billion shares being exchanged on video-game screens across the planet.

Nasdaq Composite2099.6821.061.01%
NYSE Volume1.69bn--
Nasdaq Volume2.22bn--
US 30-yr yld4.84%-0.06%-1.18%

Market Breadth & Internals

On the NYSE advancing Issues exceeded decliners by 2312 to 1023 for a single-day A/D reading of 1289 (madness!); Nasdaq gainers trumped losers by 2039 to 1092 (ditto - madness).

NYSE advancing volume exceeded volume in decliners by 1255.53 to 412.71 million shares, for a 3:1 ratio in the winners column. Nasdaq volume was even more tilted, with 956.32 million shares traded in advancing stocks as compared with 283.52 million shares in losers.

310 NYSE-listed stocks rose to new 52-week highs, and 4 posted fresh 52-week lows, while on the Nasdaq there were 151 stocks that hit new 52-week highs, and 12 which fell to fresh 52-week lows

Advancing Volume (m)1255.53956.32
Declining Volume (m)412.71283.52
New Highs310151
New Lows412

Market Sentiment

Everything is still screaming "Look Out Below", but the market just keeps on defying gravity (and valuation, and the US economic situation, and the war in Iraq, and the China-Russia nexus).

It's almost as if equities want a blow-off; it's not clear to me what that would achieve, but the dollar is showing us what the rest of the world thinks about US economic prospects.

CBOE Equity Call Volume (000)1046.27250.4131.46%
CBOE Equity Put Volume (000)541.7486.9919.13%
CBOE Volatility Index13.2100%
CBOE Nasdaq Volatility Index18.5-0.1-0.54%
Equity Put-Call Ratio0.52-0.05-9.38%
10-day PCR0.54-0.0162-2.92%
SPX-VIX Ratio89.470.490.55%


Bonds rose along the curve (odd, given the inflation data), with the yield on the benchmark 30-year Treasury bond shedding 5.8 basis points to 4.844%.

The counter-intuitive bounce in bonds was driven by a couple of oddball views, and one interesting rumour.

Oddball View 1: although the CPI data was worse than expected, it wasn't as much worse as it could have been. that's good (say "Yes" [or "Jawohl", preferably], or your IP address will be given to the Department of Fatherland Security).

Oddball View 2: since the US dollar is in the dunny (bad for bonds), the BoJ will intervene to prop up the yen. They will do this by buying US dollars ,which they will then park in... US Treasuries (good for bonds). See how it works? Bad is Good, Up is Down, War Crimes are "Spreding Democracy".

And last but not least, something that makes sense.

Two central banks were rumoured to have been actively buying US Treasuries as part of a hedge unwinding - closing short US Treasury positions which were paired with long Bund positions. The rumour is that the position size was $12 billion, which is a decent whack even in the bond market.

Still, it sounds like horse-scheise to me, because it would involve a central bank being on the right side of a trade.

Also, a large UK hedge fund was supposedly doing the same thing - selling Bunds for Treasuries.

UST 2Y (yld)2.806-0.07-2.43%
UST 5Y (yld)3.465-0.086-2.42%
UST 10Y (yld)4.134-0.07-1.69%
UST 30Y (yld)4.837-0.064-1.31%

The Banks Index advanced 0.08 points (0.08%), ending the day at 102.67; within the index,

  • the Derivative King - JPMorganChase shed $0.20 (0.52%) at $38.27; and
  • Citigroup added $0.13 (0.28%) at $46.18

The Broker-dealer Index rose 2.21 points (1.53%), to end the session at 146.46; the ticket clippers lined up as follows -

  • Merrill Lynch posted a rise of $0.63 (1.11%) to end the session at $57.38
  • Morgan Stanley Dean Witter advanced $0.72 (1.37%) closing at $53.23
  • Goldman Sachs added $0.99 (0.95%) to end the session at $104.71
  • Lehman Brothers rose $0.62 (0.75%) ending the day at $83.60

The Philadelphia SOX (Semiconductor) index advanced 12.24 points (2.86%), ending the day at 439.85

  • Triquint rose $0.28 (6.98%) at $4.29
  • Micron Technology added $0.58 (4.85%) to end the session at $12.53
  • Intel advanced $0.48 (2.01%) to end the session at $24.32
  • Altera gained $0.47 (2.02%) ending the day at $23.73
  • JDS Uniphase added $0.01 (0.31%) closing at $3.19

Gold & Silver

Gold strengthened by $5.30 (1.21%) to $445.10 per ounce, breakig decisively above $440 an ounce and holding that through to the close. The Gold Bugs Index gained 4.25 points (1.76%), to 245.13 points.

Silver rose $0.11 (1.46%) to close at $7.67 per ounce. The Gold and Silver Index (XAU) gained 1.67 points (1.54%), to 110.34 points.

PHLX Gold and Silver Index110.341.671.54%
AMEX Gold BUGS Index245.134.251.76%


The distillate stocks numbers rattled the market, however it still looks pretty weak. For the session, Crude Oil was firmer, rising by $0.55 per barrel, closing at $46.6 per barrel.

The Oil and Gas Index (XOI) posted a rise of 11.09 points (1.59%), to end the session at 709.72 points, while the Oil service stocks (OSX) Index posted a rise of 1.85 points (1.59%), ending the day at 117.89.

Reuters CRB288.541.41%
Crude Oil Light Sweet46.60.551.19%
AMEX Oil Index709.7211.091.59%
Oil Service Index117.891.851.59%


The US dollar looking down the barrel of 100 Yen; very danger. Last night the dollar traded as low as 103.76Yen before rallying into the close.

The US dollar index was also weaker, showing that it's not just bilateral trade numbers that are driving the Yen strength - this is still a US dollar weakness story.

The Euro scaled a new height - rising to close above 1.3025 and falling just short of 1.3050 intrasession. Its session high was 1.3048 - indicating that ForEx specs are still "throwing short" at key levels (every half cent, every full cent). As long as that keeps happening, they will - when they cover at a loss - keep providing the short-covering that is required to drive this thing higher. Then they will give up and go long... at the top.

US Dollar Index83.33-0.55-0.66%
Australian Dollar0.78160.00961.24%
Swiss Franc1.1623-0.0134-1.14%
Canadian Dollar0.83650.00020.02%

European Markets

France's benchmark CAC-40 Index added 49.87 points (1.31%), at 3844.14; the German DAX-30 Index advanced 66.19 points (1.61%), at 4183.41; and in the UK, the FTSE-100 Index added 25.5 points (0.53%), to 4795.9.


Tonight's Pivots (US Market)

R2106661194.771593.17114 11/32
R1106221189.531584.33113 26/32
Pivot105711184.271574.17112 30/32
S1105271179.031565.33112 13/32
S2104761173.771555.17111 17/32