Bear Mountain Bull

From Yves Smith at nakedcapitalism:

From the Independent:

Chief executives from the world’s banks discussed the plans at a secret dinner held at Claridge’s, the London hotel, last October, at which several leading British bankers are said to have suggested that the sector should take greater responsibility for its part in the crash, and do more to reduce the vast bonuses paid to staff.

But the recommendations were met by stiff opposition from the US banks JP Morgan, Morgan Stanley and Goldman Sachs, according to one source. “Some of the US bankers were furious about attempts to reduce pay throughout the industry, arguing that any such move smacked of socialism and would be fiercely resisted,” the source said on Friday. “It’s not the way the Americans like to go about their business.”

Yves here. The evidence that US capital markets firms are firmly in the hands of hopeless sociopaths continues to mount.

The fact set is undeniable: the big firms in the industry engaged in a massive campaign of looting, of running enterprises in which the employees were consistently overpaid relative to the risks and true profits of the firms. The result was that they were overleveraged. The only reason the industry survived was due to massive public subsidies, from equity injections to special lending programs to super low rates to regulatory forebearance. By any right, the firms should have failed, and the bankruptcy course should have gone full bore after the pay earned in the bubble years as fraudulent conveyance.

—

The astonishing bit is that the US banking execs have the temerity to self-restraint on pay “socialism”. They are benefitting from what most would call socialism for the rich, but is more accurately termed Mussolini-style corpocracy or good old fashioned pilfering from the public purse.

As Barry says:

That is what happens when we elected to go Japanese rather than Swedish on the financial sector — We saved the Banks, but sacrificed the Banking System.

Even Warren Buffett says that the folks that run these institutions should pay the price:

“It has not been shareholders who have botched the operations of some of our country’s largest financial institutions,” wrote Buffett. “Yet they have borne the burden, with 90% or more of the value of their holdings wiped out in most cases of failure. Collectively, they have lost more than $500 billion in just the four largest financial fiascos of the last two years. To say these owners have been ‘bailed-out’ is to make a mockery of the term.

“The CEOs and directors of the failed companies, however, have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style,” added Buffett.

—

“It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price — one not reimbursable by the companies they’ve damaged nor by insurance. CEOs and, in many cases, directors have long benefited from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well,” he wrote.

With or without a paddle?

Mark Steyn:

While Barack Obama was making his latest pitch for a brand-new, even-more-unsustainable entitlement at the health-care “summit,” thousands of Greeks took to the streets to riot. An enterprising cable network might have shown the two scenes on a continuous split-screen — because they’re part of the same story. It’s just that Greece is a little further along in the plot: They’re at the point where the canoe is about to plunge over the falls. America is farther upstream and can still pull for shore, but has decided instead that what it needs to do is catch up with the Greek canoe. Chapter One (the introduction of unsustainable entitlements) leads eventually to Chapter Twenty (total societal collapse): The Greeks are at Chapter Seventeen or Eighteen.

Are unemployment benefits about to leave a number of jobless workers hanging?

“1.2 Million to Lose Unemployment Benefits Today”

I doubt it. Congress will pass extensions. But it’s my belief that continuing to extend benefits tends to make unemployment worse, not better, as it considerably reduces the incentive to find a job.

If they extend benefits for another year, is there any rush at all for some of these folks to get a job? Any job?

Mish has more on the job situation.

Notes on the latest moves in the industry groups:

• Still only a few groups, like the biotechs, retail and airlines, are edging out to new high ground. We’ll have to see more to get the market moving meaningfully higher.
• Browse through the group charts on your own if you’d like: set #1 — set #2 — set #3 — set #4.
• For a more detailed breakdown of group movement over various time periods, try Prophet.net’s Industry Rankings page, the Industry Group Tracker at WSJ Online, the industry group tools at Finviz.com, or the list of Morningstar industry groups at FreeStockCharts.com.

We mentioned yesterday the continuing ‘games’ going on in the housing arena, as the gov’t tries to ‘prevent’ the inevitable.

I ran across this on Mish’s site yesterday:

Radical Proposal Addendum:

Grrr Writes:

I’ve come up with a radical scheme that could possibly work to end the housing crisis:
1) People that can’t or won’t pay their mortgage lose the house.
2) The banks take the house and sell it to people who can afford it.

There are a few flaws:
1) It doesn’t require massive amounts of government money.
2) It doesn’t protect people from their mistakes.
3) It doesn’t punish responsible people who are patiently waiting for houses to become affordable.
4) It could result in the banks that helped create this mess failing.

In spite of these issues, I believe we should give it a try.

Ya know, that one might just work…

Update: Hmm. Rogers denies making the comments below. (Thanks, Viresh).

So says Jim Rogers — and I’m not one who is all that willing to argue with him:

Jim Rogers, co-founder of the Quantum Fund and founder of the Rogers Commodities Index, was quoted in a recent press release that the United Kingdom Pound is on the brink of utter collapse, which could happen within the coming weeks and there is nothing governments can do about it.

Rogers, making statements prior to delivering a keynote speech at next month’s Global Trading Day seminar in Westminster, believes the collapse of the Pound could foreshadow a global economic disintegration before the end of the year. The last few months of increases in the markets have been a “false bounce” and occurred due to government interference in the market and throwing everything at it except for the kitchen sink.

“But it can’t last. We’ve been applying temporary sticking plasters, not long-term cures. Later this year we’ll see the start of the real recession, with more Lehman-scale disasters and a fallout which won’t stop until the underlying malaise is genuinely cured,” said Rogers.

There are those ’sticking plasters’ again… And everyone’s been so preoccupied with the Euro that they haven’t been paying much attention to the pound.

Our weekend check of charts of the Sector SPDRs finds that the market is making a bet on the consumer, with the Staples and Discretionaries being the only two sectors reaching new high ground. The rest of the SPDRs are still questionable at best, floundering at worst:

The numbers as we move out of February:

Charts courtesy of StockCharts.com

A late start, out west:
Carson River Community Bank, Carson City, NV

Washington adds a second:
Rainier Pacific Bank, Tacoma, WA

The black holes continue to implode. Does this story ever end??

First, there’s AIG:

AIG said Friday it lost $8.87 billion in the fourth quarter as its general insurance business remained weak and the company ran up expenses from paying back government loans.

The troubled insurer also said in an annual regulatory filing that it may need additional support from the government.

And then, after the bell, we get Fannie:

Fannie Mae needs another $15 billion in federal assistance, bringing its total to more than $75 billion. And worse, the mortgage finance company warned its losses will continue this year.

The rescue of Fannie Mae and sister company Freddie Mac is turning out to be one of the most expensive aftereffects of the financial meltdown. The new request means the total bill for the duo will top $127 billion.

And the pain isn’t over. Fannie warned Friday that it will need even more money from the Treasury, as unemployment remains high and millions of Americans lose their homes through foreclosure.

The government is doing so well with its ‘investments’ in these companies, isn’t it?

Sure, just keep flushing our money down the toilet. We’ll borrow more.

An all-day sleeper.

Internals were mixed on rather sickly volume. Advances/declines were 3 to 2 on the NYSE but 9 to 10 on the Nasdaq, with up/down volume 3 to 2 on the NYSE and 10 to 9 on the Nasdaq. New highs/lows were 199/3 on the NYSE and 99/10 on the Nasdaq.

Leaders — Airlines (+3.49%), Hospitals (+1.44%), Transport (+1.10%), Metals (+1.10%), Banks (+0.89%), Gold/Silver (+0.87%), Homebuilders (+0.86%), Broker Dealers (+0.81%)
Laggards — Paper (-3.05%), Insurance (-0.74%), Utilities (-0.67%), Comp. Hardware (-0.25%), Disk Drives (-0.23%), REITs (-0.03%), Software (+0.00%), Commodities (+0.01%)

Treasury Yields — 6-Month: .18%,  2-Year: .80%,  5-Year: 2.30%,  10-Year: 3.62%,  30-Year: 4.56%

Energy Prices — Crude oil: $79.68/barrel,  Gasoline: $2.0879/gallon,  Natural Gas: $4.792/mmBTU

US Dollar Index — 80.387

Precious Metals — Gold: $1116.50/ounce,  Silver: $16.49/ounce,  Platinum: $1539.00/ounce

BMB Note:  
Again, not much to say when the market doesn’t move and attracts no volume.

The first thing we’d like to see to start turning our view to the bullish side would be a move above last week’s retracement highs (not too far up from here), and ideally, a takeout of the January highs in the indices. We’re a ways from those levels, and we’re going nowhere for now.

…coming in housing.

A virtual ‘ban’ on foreclosures, principal reductions…

The games never end. If the economy were in as great of shape as we’re being told it is, would we need to keep playing these games?

On principal reductions, CR says:

This is a pretty limited program. If principal reduction was offered on a widespread basis, millions of homeowners would probably immediately default.

Uh, ya damn right they would. And who could blame them? Anyone at all who’s carrying a mortgage would love to see their principal reduced, wouldn’t they?

I don’t care how ‘limited’ these programs are. All of them are so blatantly unfair to those that have been fiscally responsible, it just makes me spit nails. There is simply no sense of responsibility, or consequences for actions anymore.

Sharp drop in January’s numbers. As always, Calculated Risk has the story and the updated charts:

Possibly. That’s the way Larry McMillan sees things (click here to view column with charts):

The baton is poised to be passed back to the bulls. The one thing that stands between the bulls and a probable test of the January highs is resistance in the 1110 area.

There is resistance at 1130-1150 and support at 1060-1080. Both were strong levels, and so $SPX may spend some time in the trading range between those two levels.

Equity-only put-call ratios rolled over to buy signals this week. You can see that both ratios (Figures 2 and 3) were moving steadily higher for about a month, but now have rolled over and begun to trend downward.

Market breadth was extremely overbought about a week ago, and that led to the stall in the rally and some down days this week. This week’s negative action has served to alleviate those overbought conditions without actually degenerating into sell signals.

The trend of volatility has resumed a downward direction. The previous uptrend in $VIX was broken this week, and the chart ion Figure 4 shows that the current trend is now down. That is bullish for stocks.

In summary, then, if $SPX ascends above the 1110 level, that should be short-term bullish.

Hard decisions are what’s needed, at every level: city, county, state and federal.

But I have yet to see many, if any, of those hard decisions being made:

Neither Obama nor Becerra — nor any other Democrat — addressed the issue of double-counting. And the only response to Ryan’s point about the Doc Fix was a rather oblique statement by Obama that “if what you’re saying is that we can’t make hard decisions on entitlements, then we’re in big trouble.” In fact, that’s exactly what conservatives have been saying: Not only can’t the political class make hard decisions on entitlements, the Democrats are trying to create a new entitlement and hide its cost. And if they succeed, we are in very big trouble.

You can travel the world over — but you’re going to have trouble finding a trend. Well, unless you count sideways…

Charts courtesy of StockCharts.com

Internals were slightly negative, on a bit of a pickup in volume. Advances/declines were flat on the NYSE but 8 to 11 on the Nasdaq, with up/down volume just below the flat line on the NYSE but 7 to 12 on the Nasdaq. New highs/lows were 124/7 on the NYSE and 78/15 on the Nasdaq.

Leaders — Gold/Silver (+2.95%), Metals (+1.76%), Steel (+0.93%), Commodities (+0.86%), Natural Gas (+0.49%), Transport (+0.48%), Disk Drives (+0.39%), Retailers (+0.37%)
Laggards — Comp. Hardware (-1.77%), Hospitals (-1.32%), Banks (-0.97%), Chemicals (-0.70%), Oil (-0.69%), Airlines (-0.68%), Internet (-0.59%), Network (-0.58%)

Treasury Yields — 6-Month: .18%,  2-Year: .82%,  5-Year: 2.33%,  10-Year: 3.64%,  30-Year: 4.58%

Energy Prices — Crude oil: $78.27/barrel,  Gasoline: $2.0456/gallon,  Natural Gas: $4.785/mmBTU

US Dollar Index — 80.689

Precious Metals — Gold: $1105.60/ounce,  Silver: $16.08/ounce,  Platinum: $1531.00/ounce

BMB Note:  
Nothing in the way of new comments. A dearth of interesting news and a schizoid, but range-bound market don’t lend themselves to a lot of stirring discussion.

…is a rumor.

And of a split, no less, which is a zero sum game. Pure lunacy. But at least it explains why the Dow jumped 80 points mid-afternoon. Well, no, on second thought, it really doesn’t…

But it was a good excuse to squeeze the morning shorts out, wasn’t it?

Ron Sen (host of Technically Speaking), on Twitter:

Are you more worried about missing the next “percent” or about capital preservation? Just sayin’…

There has been much talk about the recent Treasury auctions, especially in the area of direct vs. indirect bidders, and it made some waves when 100% of the indirect bids were accepted in this week’s 4-week auction.

I won’t even begin to make believe that I’m smart enough to know what it all means (if anything at all), and in reality, I can barely understand the terminology. Nor do I necessarily want to. But if you want to check out some of the discussion, you can start by looking here and here.

All I know is that if things continue on their current track, it’s going to get harder and more expensive for ANY country, not just this one, to borrow money. Period.

With the futures looking rather bleak heading into the open, it’s a little tough to figure out what’s driving the move.

Durable goods orders were up, helped by a huge bump in aircraft orders. Weekly jobless claims were also up ‘unexpectedly’ — nothing is ‘expected’ these days.

And always worth a look to get your day started, there’s Zero Hedge’s “Frontrunning”.

Michael Comeau on the SEC’s new rule:

But aren’t stocks supposed to be risky?

Maybe I’m a dolt that just doesn’t get it, but the SEC is trying to suck risk out of what is an inherently risky asset class by scapegoating short sellers, who comprise only a small portion of the investing population. And why? Because some of them may engage in “potentially manipulative or abusive short selling.”

Furthermore, if the SEC is particularly concerned about “excessive downward price pressure on individual securities,” it may want to look at the long-only institutions who are the biggest shareholders of basically every stock in the universe. If we want to protect investors from price declines, it’s only sensible to put an equivalent circuit breaker on trades from large institutions. I don’t know about you, but I think the sell button on Fidelity’s trading desk can do more damage to a stock price than any dirty short seller.

But in the regulators’ minds, stocks were made to go up, period. If they violate that new law of financial physics, there’s always a culprit — leveraged ETFs, the President sneezing, or the ultimate boogie man, the shorts. The long-only complex must be protected at all costs.

Look back at 2008 — bureaucracies aren’t all that good at influencing market prices. Restrictions placed on shorting financial stocks didn’t stop companies with bad fundamentals from falling apart.

The SEC is also ignoring the fact that long investors already have access to protection from price declines. Every investor with a brokerage account can tap the options markets, where put options can readily be purchased for downside protection.

And oh yeah, they can sell to avoid the risk they incurred when invested in stocks in the first place.

Internals were positive, but volume backed down again. Advances/declines were 14 to 5 on the NYSE and 12 to 7 on the Nasdaq, with up/down volume 3 to 1 on the NYSE and 14 to 5 on the Nasdaq. New highs/lows were 149/1 on the NYSE and 94/12 on the Nasdaq.

Leaders — Banks (+2.28%), Retailers (+1.96%), Semis (+1.92%), Software (+1.46%), Biotechs (+1.26%), Network (+1.24%), Insurance (+1.11%), Comp. Tech (+1.06%)
Laggards — Disk Drives (-2.68%), Hospitals (-1.55%), Metals (-1.11%), Gold/Silver (-0.66%), Comp. Hardware (-0.46%), Oil Services (-0.28%), Homebuilders (+0.00%), Utilities (+0.07%)

Treasury Yields — 6-Month: .18%,  2-Year: .86%,  5-Year: 2.35%,  10-Year: 3.68%,  30-Year: 4.62%

Energy Prices — Crude oil: $80.05/barrel,  Gasoline: $2.0995/gallon,  Natural Gas: $4.839/mmBTU

US Dollar Index — 80.808

Precious Metals — Gold: $1097.00/ounce,  Silver: $15.93/ounce,  Platinum: $1503.00/ounce

BMB Note:  
Market direction remains a big question, and today didn’t offer much help in that regard as the indices grabbed back a big chunk of yesterday’s losses. We’ll continue to manage existing positions, but likely avoid adding new ones until the picture becomes a little clearer.

More steps to the one-way market:

Federal regulators have imposed new curbs on the practice of short-selling — betting that a stock’s price will fall — hoping to prevent spiraling selling sprees that can stoke market turmoil.

A divided Securities and Exchange Commission voted 3-2 Wednesday to adopt the new rules.

The rules put in a so-called circuit breaker for stock prices, restricting for the rest of a trading session and the next one any short-selling of a stock whose price has dropped 10% or more.

This rule is actually pretty lame, as it isn’t much more than an ‘uptick rule’ for a stock that falls 10% in a day. And as we’ve said before, the full-force uptick rule was in place during the entire market dive in 2000-02. Though they keep trying, they can’t hold the market up if it’s destined to go down, though they can make the trip as bumpy as possible.

No surprise. The message from both Greenspan and Bernanke has never changed, and it never will.

Ron Coby on Twitter:

Helicopter Ben reassuring the stock market today that he will be very kind & gentle to the stock market. He wants to keep the party going.

Of course. Ensuring that every crisis will be that much worse than the previous one, as he continues to feed the boom-bust monster.

Vitaliy Katsenelson says, “Don’t call me Mr. Doom, call me Mr. Realist”:

…finally, I explained our views on Japan. As you’ll see from charts in the attached presentation (“Japan – Past the Point of No Return”), Japan has an enormous amount of debt (second only to Zimbabwe), a stagnating economy, and the oldest population in the world (this explains why the savings rate has declined from the teens towards zero). These factors will lead to significantly higher interest rates.

As an unbiased analyst it is hard to come to any other conclusion about Japan, and I am going to put it lightly: Japan is screwed! As a consequence, we believe higher interest rates globally are unavoidable, as Japan, now the largest foreign holder of the US Treasuries (together with China, the second largest holder), turns from buyer of Treasuries to net seller. So in our portfolio we are making sure that our companies have strong balance sheets and/or significant free cash flows to pay off debt, if (more likely when) interest rates rise.