Interdum stultus opportuna loquitur...

Monday, November 24, 2008

USRant: Citi Saved... Eleventy-Gajillion!!1! U.S.A! U.S.A.! Duuuuh...

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

I often put little bits of wisdom in the oddest places... like last Thursday's exhortation to buy the Australian dollar. It was snuggled away down in the Currencies section of the USRant  from last Thursday (USRant: Falling Markets Make Baby Jeebus Cry...)

Currency futures lent a bid to the USD again... a short is setting up. The Australian dollar got absolutely belted. Buy AUD pretty much right now.

You see, dearest Reader... you have to read the whole thing. On that day, EC futures closed at 0.6118 or thereabouts... today they closed at 0.6467, for a gain of $3500 per contract in a couple of sessions. Initial margin is $6345, so it's a gain of over 50%.

Let's move on to something a little bit less 'toot'-y.

The US government has been reduced to the level where it has to adopt the tactics of the shonkiest of "pump'n'dump" stock touts. Rene 'Abednego' Rivkin must be spinning in his grave (unless he was cremated, I guess). You will recall that naughty Rene got in big trub - and went to priz - as a result of doing stuff that was orders of magnitude less dishonest than what the US government is doing right now.

I guess the view of the US political class is that market manipulation is a bit like murder - if you're the government, you can pretend it's noble.

The 'weekend announcement' ploy was pretty predictable - as the excerpt from Friday's OzRant makes clear:

Maybe some index shorts were spooked about holding over the weekend, and got worried that the Yanks will do everything possible to jawbone the market up - including weekend surprise announcements about how politicians once again have a Plan To Save Us All.

One very interesting aspect of today's meltup: what happened in the last twenty minutes of the session. After just failing to touch 8600 (the high was 8598.94) at 3:42 p.m. NY time, the Dow fell over 230 points in ten minutes. At that rate of change, the bounce off Friday morning's lows could be given back in a little over a half an hour. 

Without the government touting this and that Plan To Save Us All, and the Fed and Treasury buying index futures, the market would be in the low 6000s already. It will eventually be there anyway, since government can not change the long-run endgame - ever.

Still, we Rant readers (and writers) aren't remotely concerned about yet more US taxpayer effort being thrown onto the Bonfire of Vanity. If those who run the US government weren't so desperately vain and insecure, they would not feel compelled to try to corrupt the beauty of the market.

But since we're all here, let's think a bit harder about the Citigroup bailout. The US government is going to 'back' up to $300 billion (note: that's 1/7th of a year's tax receipts), plus hand over $20-some billion in cash, in exchange for Citi preferred stock. 

Citi had a market capitalisation of $20.4 billion as of Friday - so does that mean that the US government just bought an entire bank?

Oh no, dear Reader - don't be silly. You can bet your snug little bottom that the US government will pay that $20 billion for an absolute sliver of Citi equity. After all, they're not investing - they're bailing.

You should also print out the following paragraph and sticky-tape it to the fridge, or save it to a file called "GT's Brainy Calls That Were Subsequently Proved Right". Well, maybe there's no need, because you just know I am going to remind you...

The $300 billion 'backstop' will wind up being 1.3 trillion - at least - and it will all be used, and the money will all be lost. 

Now you will recall that I have already said that the US government's bailout plans would wind up being in the trillions of dollars. That was way back at the end of September (less than three weeks after the Lehman collapse)...

From OzRant: Back Up The Truck... (September 30th, 2008)

...The Tycoon's Whores in the US are undertaking a little bit of political-campaign theatre in order to wring as many posturing-points as possible out of this event. In the end tthey will do what they're paid to do - drop to their collective knees and administer the trillion-dollar blowjob that Wall Street is demanding - which will give the world financial system the equivalent of gonorrhoea crossed with Ebola, and which will have an eventual price tag of $5-6trillion.

That's the 'bullshit gap' for this bill. The political class is not willing to give any hint to the polity that the bill will be that high, though. I'm sure you all now recall the similar underquotes given for other little projects... the Iraq War was going to be a short affair that paid for itself (Perle, Wolfowitz), or would cost $50-70 bill (Rumsfeld in response to Summers) or would cost $200 bill (Summers, just before being fired for saying so).

And what do we have today, from Bloomberg?

The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

So if anything, I can be accused of lowballing my initial estimate.

And guess what? They've already SPENT over $3 trillion.

Have you noticed how newsreaders no longer say BILLion? They used to pronounce the BILL bit really loud, to make sure that the viewer understood that a BILLion was way way WAAAAAY more than just a million.

Now they just say 'billion'. Even 'trillion' is pronounced rather sedately.

Economic News

Existing Home Sales fell to an annualised rate of 4.98 million -  well below the consensus guess of 5.06 million. The median house price fell 11.3% compare to the same period last year, bringing median house prices down to levels not seen since 2004.

I have said before that the housing endgame will see houses back to prices last seen in 1992 - at best.


Headline Indices

The Dow Jones Industrial Average advanced 396.97 points (4.93%) to 8443.39 points. The index high for the day was 8598.94, set at 3:42 p.m. NY time. The low was 8048.09 at the open.

The total volume traded in the 30 Dow components was 2.19bn units. Within the index, 29 Dow stocks rose, with aggregate volume of 2164.53m units; just one Dow component (Wal-Mart, down 0.3%) fell, on volume of 29.96m units.

The biggest percentage gainers in the Dow were -

  • Citigroup (C) +2.18 (57.8%) to $5.95 on volume of 799.91m shares;
  • Bank Of America (BAC) +3.12 (27.2%) to $14.59 on volume of 195.19m shares;
  • JPMorganChase (JPM) +4.86 (21.4%) to $27.58 on volume of 135.37m shares;
  • General Motors (GM) +0.53 (17.3%) to $3.59 on volume of 33.94m shares; and
  • American Express (AXP) +2.49 (13.3%) to $21.18 on volume of 24.03m shares.

The S&P500 Index advanced +51.78 points (6.47%) to 851.81 points - at one stage the S&P was up 8%. The total volume traded in the index was 6.34 bn shares. Of the 500 index components, 453 issues rose, and advancing volume was 5.98bn shares. Only 33 S&P stocks fell, and declining volume was  348.32m units. A tilt to the advancing volume of 17:1 - again, a tilt usually associated with blowoff tops in markets.

Contributing to the advance were -

  • General Growth Properties (GGP) +0.59 (143.9%) to $1 on volume of 27.38m shares;
  • Genworth Financial Inc. (GNW) +0.8 (88.9%) to $1.7 on volume of 15.71m shares;
  • Citigroup Inc. (C) +2.18 (57.8%) to $5.95 on volume of 799.91m shares;
  • CB Richard Ellis Group (CBG) +1.57 (45%) to $5.06 on volume of 10.29m shares; and
  • Merrill Lynch (MER) +3.19 (38.2%) to $11.53 on volume of 63.63m shares.

The Nasdaq Composite advanced 87.67 points (6.33%) to 1472.02 points and the Nasdaq100 advanced 68.77 points (6.33%) to 1154.34 points. Total volume traded in the Nasdaq100 was 1.2bn shares. Of the 100 stocks in the index, 96 rose, and only 2 fell. Advancing volume was 1.19bn sharesas compared with declining volume of just 11.94m units - a tilt of over 100:1..

Major percentage gainers in the Nasdaq100  were -

  • NII Holdings (NIHD) +3.5 (24.9%) to $17.55 on volume of 4.2m shares;
  • Cadence Design Systems (CDNS) +0.72 (23.1%) to $3.84 on volume of 4.73m shares;
  • Virgin Media (VMED) +0.74 (22.7%) to $4 on volume of 8.82m shares;
  • Whole Foods Market (WFMI) +1.78 (21.7%) to $9.97 on volume of 4.89m shares; and
  • SanDisk (SNDK) +1.15 (20.4%) to $6.78 on volume of 10.61m shares.

Volatility

The CBOE Volatility Index lost 8.01 points (11.02%) to 64.66 points and the CBOE Nasdaq100 Volatility Index lost 8.36 points (11.74%) to 62.84 points..

Breadth and Internals

A total of 3777 issues traded today on the NYSE; today's total volume was 4.77bn shares. A total of 3261 stocks posted gains for the day, and volume in advancing issues totalled 3.61bn shares. Exerting downwards pressure on the index were 489 losers, which accounted for a total declining volume of 720m shares. 2 stocks made new 1-year highs on the NYSE, while 154 shares plumbed new 52-week depths.

On the Nasdaq 3038 tickers traded today; total Nasdaq volume was 2.55bn shares. A total of 2211 stocks posted gains for the day, with aggregate volume of 2.4bn shares changing hands in the day's winners. The red zone of the Nasdaq exchange comprised 724 losers, and total declining volume was 140m shares. 3 Nasdaq-listed stocks hit new 52-week highs, while 264 shares dipped to new 1-year lows.

I said it on Friday, and I'll say it again - marekt internals such as those seen Friday and today, indicate excessive bullishness. They are associated with market tops rather than market bottoms.

Major Market Statistics
Index Close Gain(Loss) %
Dow Jones Industrial Average 8443.39 +396.97 4.93%
S&P500 Index 851.81 +51.78 6.47%
Nasdaq Composite 1472.02 +87.67 6.33%
Nasdaq100 1154.34 +68.77 6.33%
CBOE Volatility Index 64.66 -8.01 -11.02%
CBOE Nasdaq100 Volatility Index 62.84 -8.36 -11.74%


Dow Darlings

  • Citigroup (C) +2.18 (57.8%) to $5.95 on volume of 799.9m units
  • Bank Of America (BAC) +3.12 (27.2%) to $14.59 on volume of 195.2m units
  • JPMorganChase (JPM) +4.86 (21.4%) to $27.58 on volume of 135.4m units
  • General Motors (GM) +0.53 (17.3%) to $3.59 on volume of 33.9m units
  • American Express (AXP) +2.49 (13.3%) to $21.18 on volume of 24m units

Dow Dud:

  • Wal-Mart (WMT) -0.15 (0.3%) to $52.77 on volume of 30m units

Most Traded Dow stocks:

  • Citigroup (C) +2.18 (57.8%) to $5.95 on volume of 799.9m units
  • Bank Of America (BAC) +3.12 (27.2%) to $14.59 on volume of 195.2m units
  • General Electric (GE) +1.23 (8.8%) to $15.26 on volume of 157.8m units
  • JPMorganChase (JPM) +4.86 (21.4%) to $27.58 on volume of 135.4m units
  • Microsoft (MSFT) +1.01 (5.1%) to $20.69 on volume of 123m units
Precious Metals

Precious metals futures had a good day -

Precious Metals Futures
Index Close Gain(Loss) %
Gold 821.4 29.6 3.74
Silver 10.52 1.04 10.97
Palladium 196.15 17.3 9.67
Platinum 870.5 44.8 5.43

The Gold Bugs index (XAU) contains 16 components; the total volume traded in the index was 198.47m units. All 16 stocks in teh index rose today.

Today the index rose by 6.02 points (6.78%) to 94.82 points. Contributing to the advance were -

  • Coeur d'Alene (CDE) +0.12 (24%) to $0.62 on volume of 11.89m shares;
  • Yamana Gold (AUY) +0.76 (17.2%) to $5.17 on volume of 32.59m shares;
  • Freeport McMoran (FCX) +2.59 (13.4%) to $21.92 on volume of 24.42m shares;
  • Harmony Gold (HMY) +0.91 (12.7%) to $8.07 on volume of 4.57m shares; and
  • Royal Gold (RGLD) +3.36 (9.7%) to $38.09 on volume of 1.46m shares.
Energy Complex

Energy futures went gangbusters -

Energy Futures
Commodity Close Gain(Loss) %
Crude Oil 54.5 4.57 9.15
Heating Oil 1.7964 0.0878 5.14
Natural Gas 6.94 0.46 7.1
Gasoline RBOB 1.145 0.0807 7.58
Ethanol 1.642 0.064 4.06

The Oil Services index (OSX) contains 15 components, all fo which closed with a gain; the total volume traded in the index was 131.55m units.

Today the index rose by 10.19 points (8.8%) to 125.92 points. Contributing to the advance were -

  • Global Industries (GLBL) +0.54 (25.1%) to $2.69 on volume of 1.65m shares;
  • National Oilwell Varco (NOV) +3.6 (16.7%) to $25.12 on volume of 14.71m shares;
  • Nabors Industries (NBR) +1.54 (13%) to $13.39 on volume of 8.48m shares;
  • Rowan Co (RDC) +1.66 (12.3%) to $15.16 on volume of 4.5m shares; and
  • Smith International (SII) +2.68 (11.4%) to $26.21 on volume of 4.32m shares.
Currency Futures

The USD has topped - as I said a while back. It could get very ugly very quickly. -

Currency Futures
Index Close Gain(Loss) %
U.S. Dollar Index 86.06 -2.355 -2.66
Euro FX 1.287 0.0374 2.99
Swiss Franc 0.835 0.0175 2.14
Soybeans 884 44 5.24
Australian Dollar 0.6467 0.0299 4.85
Canadian Dollar 0.8082 0.0313 4.03
Japanese Yen 1.0332 -0.017 -1.62
New Zealand Dollar 0.5413 0.0153 2.91

Bellwethers

The nine-stock group that makes up the Rant bellwethers advanced on average by 11.7%. The fallout occurred as follows:

  • General Electric (GE) +1.23 (8.77%) to $15.26 on volume of 157.84m units.
  • Citigroup (C) +2.18 (57.82%) to $5.95 on volume of 799.92m units.
  • Wal-Mart (WMT) -0.15 (0.28%) to $52.77 on volume of 29.97m units.
  • IBM (IBM) +5.01 (6.69%) to $79.89 on volume of 14.69m units.
  • Intel (INTC) +0.45 (3.43%) to $13.56 on volume of 96.63m units.
  • Cisco Systems (CSCO) +1.23 (8.11%) to $16.40 on volume of 78.2m units.
  • Google (GOOG) -4.99 (1.9%) to $257.44 on volume of 9.98m units.
  • Fannie Mae (FNM) +0.04 (13.33%) to $0.34 on volume of 35.76m units.
  • Freddie Mac (FRE) +0.04 (9.76%) to $0.45 on volume of 14.22m units.
Other Indices of Interest...

The Banks index (BKX) contains 24 components; the total volume traded in the index was 1502.82m units. Within the index, 23 issues rose, with aggregate volume of 1502.82m units; 0 issues fell, with aggregate volume of 0m units.

Today the index rose by 6.54 points (17.72%) to 43.45 points. Contributing to the advance were -

  • Citigroup Inc (C) +2.18 (57.8%) to $5.95 on volume of 799.91m shares;
  • Keycorp (KEY) +1.84 (29.3%) to $8.11 on volume of 15.31m shares;
  • Wachovia (WB) +1.16 (28.1%) to $5.29 on volume of 64.61m shares;
  • Bank Of America (BAC) +3.12 (27.2%) to $14.59 on volume of 195.19m shares; and
  • Suntrust Banks (STI) +5.86 (26.1%) to $28.31 on volume of 11.76m shares.

The Semiconductor index (SOX) contains 18 components; the total volume traded in the index was 287.26m units. Within the index, 18 issues rose, with aggregate volume of 287.26m units; 0 issues fell, with aggregate volume of 0m units.

Today the index rose by 10.98 points (6.09%) to 191.2 points. Contributing to the advance were -

  • Sandisk (SNDK) +1.15 (20.4%) to $6.78 on volume of 10.6m shares;
  • Micron Technology (MU) +0.23 (12.3%) to $2.1 on volume of 23.43m shares;
  • Infineon Tech (IFX) +0.26 (11.9%) to $2.44 on volume of 1.9m shares;
  • Teradyne (TER) +0.31 (9.9%) to $3.45 on volume of 2.59m shares; and
  • Broadcom (BRCM) +1.31 (9.3%) to $15.4 on volume of 11.1m shares.

The ChildKiller ("Defence") index (DFX) contains 17 components; the total volume traded in the index was 204.97m units. Within the index, 13 issues rose, with aggregate volume of 192.7m units; 3 issues fell, with aggregate volume of 12.21m units.

Today the index rose by 8.06 points (3.57%) to 234.05 points. Contributing to the advance were -

  • Esterline Tech (ESL) +4.08 (14%) to $33.28 on volume of 0.51m shares;
  • Gencorp (GY) +0.27 (12.4%) to $2.45 on volume of 0.54m shares;
  • General Electric (GE) +1.23 (8.8%) to $15.26 on volume of 157.63m shares;
  • United Technologies (UTX) +2.44 (5.2%) to $49.11 on volume of 9.7m shares; and
  • Alliant Tech (ATK) +3.82 (5%) to $79.58 on volume of 0.53m shares.