Friday, October 15, 2010

Bennie Talks, Angelo Walks, BofA Balks

Our markets are indeed funny creatures. After the Fed issued a $4.7 billion POMO, all the cumputers went out and bought shares of Apple (AAPL), the darling of the tech sector and the one stock - according to some estimates - that makes up 20% of the entire NASDAQ every day in volume.

Apple was up more than 4% on the day in anticipation of earnings which come out on Monday, Oct. 18.

Share of Google were catapulted into the stratosphere, up 60 points (11%) to just over $600 per share after the company reported earnings that beat aggressive estimates for the third quarter.

Otherwise, the rest of the market wasn't very impressed with Ben Bernanke's speech in which he almost gushed openly about QE2 and the need to re-inflate the economy. In other words, Ben simply can't wait to print up more money and debase the currency further.

One little problem - well, two - with Ben's strategy is that interest rates are already at record low levels and people are still reluctant to spend, and, that second little annoyance: unemployment continues to hang around the 10% level and isn't seen improving until sometime in... well, make your best guess.

So, besides the ultra-bubbly-looking NASDAQ stocks, the rest of the market drifted below the unchanged mark for almost the entire session. The Dow ended lower, the NASDAQ was on a launch pad and the S&P barely budged. What all of this is saying is that there's a great deal of dislocation between the stocks, the indices and investors. Divergence is usually a good harbinger for an impending crash, to which we alerted the world yesterday. We're still on that tack, but POMO, QE2, elections and jerry-rigging the markets aren't going to help achieve the desired unwind.

Angelo Mozilo, former head of former Countrywide Financial, settled his SEC case for $67 million, along with two of his henchmen, Eric Sieracki and David Sambol. The coverup and deceit of the federal agencies continues. There is still an open DOJ criminal investigation, but with the invisible man, Eric Holder, not particularly interested in prosecuting anybody for anything, the chances of it being dropped are approaching 100%.

As usual, nobody admitted any guilt and the odd twist is that Bank of America, which bought the company in 2007, will pay a good deal of the disgorgement and fines.

Prior to the Mozilo deal, BofA had already been downgraded by Standard and Poors, from a buy to a hold. The stock skidded all day, along with other bank stocks associated to the foreclosure fraud issues which continue to be played out, talked about and eventually likely will be extensively litigated.

Dow 11,062.78, -31.79 (0.29%)
NASDAQ 2,468.77, +33.39 (1.37%)
S&P 500 1,176.19, +2.38 (0.20%)
NYSE Composite 7,520.60, -25.99 (0.34%)
NASDAQ Volume 2,246,778,000
NYSE Volume 6,512,256,500

Despite the split decision in the indices, declining issues led advancers by an unhealthy amount, 3625-2778. New highs continued to dominate new lows, 607-65, though it is notable that the number of new lows is beginning to rise off absurd lows in the 20s, now up two straight days. Volume was very strong, though this being an options expiration day on top of the fat fiat money sent through on the POMO, that's not unexpected.

For a change, the major commodities were all lower. Oil lost $1.44, to $81.25. Gold fell $5.60, to $1,372.00. Even silver, which has been on a tremendous tear, shed 15 cents, to $24.29, still mighty pricey.

With elections just twelve trading days away, we anxiously await the essential "October surprise" moment. Will it be in the form of a market crash, a terror event or a political gaffe.

Ladies and gents, place your bets and have a nice weekend. Take the Jets!

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