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Quote of the Day

Wednesday, April 04, 2012

April 4, 2012 -- "The greatest lesson in life is to know that even fools are right sometimes." Winston Churchill.

 

Older subscribers probably remember the brilliant Richard Koo. He was the FIRST to warn of the coming balance sheet recession. In yesterday's Financial Times Koo warns that if the ECB cuts back on money creation, Europe could be in for an economic depression.

 

Koo finds agreement from Nouriel Roubini, the famous NYU prof. who was the first to warn of a coming housing collapse. Says Roubini "Europe could get worse than Japan. Japan had a Great Recession and a Great Stagnation, but it never had a Great Depression. But a recession in some Eurozone countries could become a depression, just like the 1930s."

 

The question the European central bank is facing is whether to cut back on money creation (thereby avoiding inflation -- Germany will not tolerate inflation) -- or go full steam ahead, and inflation be damned. So far, it looks as though the ECB is cutting back, and that, warns both Koo and Roubin, will mean recession or depression.

 

Note that even with the ECB cutting back, gold is "standing its ground." How come? The Russell answer: It's the "Chinese Put." China is moving in to scoop up gold on any gold weakness.

 

What we're seeing here is the retail public buying "good stocks" for their dividend yields, because there is no return on bonds. This is strictly buying for yield -- the public is clueless on where or how to buy income. I note that one of the PIMCO funds attracted $1.7 billion during the first quarter. When in doubt, go with Bill Gross.

 

TODAY'S MARKET ACTION:

 

My PTI was down 6 at 6389. The moving average at 6366, so my PTI is bullish by 23.

 

The Dow was down 124.80 to 13074.75.

 

Transports were down 18.32 to 5276.51.

 

Utilities were down 0.04 to 461.23.

 

NASDAQ was down 45.48 to 3068.09.

 

S&P 500 was down 14.42 to 1398.96.

 

There were 595 advances and 2452 declines on the NYSE.

 

There were 30 new highs and 49 new lows.

 

Total Volume on the NYSE and associated exchanges was 3.8 billion.

 

Bonds: Yield on the 10 year T-note was 2.228. Yield on the long T-bond was 3.361. Yield of the 91 day T-bill was 0.076%.

 

Dollar Index was up 0.27 at 79.76. Euro was down 0.79 at 131.41. Yen was up 0.57 at 121.15. Currency Prices as of 1 PM Pacific Time.

June gold was down 57.90 to 1614.10. May silver was down 0.22 to 31.04.

 

May light crude was down 2.54 to 101.47.

 

My Most Active Stocks Index was down 11 at 310.

 

The Big Money Breadth Index was down 6 at 1040.

 

GDX was down 2.04 at 46.71.

 

HUI was down 19.99 to 445.27.

 

CRB Commodity Index was down 5.79 at 304.96.

 

The VIX up 0.78 to 16.44.

 

Permanent Portfolio Fund (PRPFX) was down 0.19 to 48.78 (previous day closing). YTD Return: 5.84%.

 

Late Notes -- Can market action tell you anything? I think on occasion it can. Today the market opened with the Dow down around 159 points. The Dow spent most of the day trying "to come back." By the close the Dow was still down -- but down around 124 points. I took the action as the Dow "trying" all session to go positive, but lacking the buying power. I thought the market was churning, burning up ammunition, but sadly unable even to go positive. Therefore, I gave today's stock market session a D minus, not a good day for the market by my figuring..

 

Gold spent the day down around 58 dollars, but trading the whole time above 1600. At the low 1600s and below 1600 -- it's "enter the dragon."