Thursday, August 15, 9:25 a.m.
Okay, so a short-term correction has been widely expected, and was called for by the short-term technical indicators two weeks ago.
But could it turn out to be something worse, like an intermediate-term correction down to retest the support at the long-term 200-day m.a. again?
Or could it even be the end of the bull market and beginning of the next bear market? Over the last 110 years there have been 25 bear markets or one on average of every 4.4 years.
This is no time to be complacent, as sentiment indicates most investors are right now, but a time to be alert to what is going on.
Billionaires versus public investors.
Should this be legal?
On one hand, with few exceptions corporate insiders are required to report their buying and selling activity to the SEC on Form 4 within two days, where it becomes public information. They were once allowed to choose between the mail or filing electronically. But in 2003 the SEC decided the information had to be made available to the public more quickly than the mail, and required that Form 4 be filed electronically. The SEC also requires that companies that have websites, which most do, must post the form on its website by the end of the next business date after filing them electronically with the SEC.
So that important information for public investors is made available in a very timely manner.
Now look at the very different rules for large hedge funds and billionaire investors like Warren Buffett, Carl Icahn, Bill Ackman, Nelson Peltz, etc.
They must report their holdings only as of the end of each quarter, via form 13F, and also have an additional 45 days, or a month and a half, after the end of the quarter to make the report. So a change in holdings they make in the first week of a quarter won’t be reported until four and half months later.
But further, a little known rule allows them to request that some confidential information be omitted from form 13F or be filed separately with the SEC, and the rule says the SEC “may prevent or delay public disclosure of 13F information for public interest reasons or protection of investors.”
How does that work? Well for instance in November, 2011 Warren Buffett revealed his holding company Berkshire Hathaway had a huge $10 billion stake in IBM. He had begun buying the stake in March, but it hadn’t shown up in his filings for the first or second quarters, but only 45 days after the third quarter had ended.
There is perhaps a legitimate reason for the special treatment. As the billionaires argue, the disclosure of a purchase might cause other investors to jump in and drive the price up before they complete their total purchase.
Yet, it seems that if it suits them in a particular instance, they can appear on television at any time and reveal they like such and such a company and are buying it, driving the price higher on their investment. They can even then sell it without revealing that information to the public until 45 days after the end of the quarter, or perhaps even later than that.
Should that be legal?
It would seem that if they have the special treatment of not having to report changes in a timely manner, and they choose that route, that they should have to keep their mouths shut in the interim and not be free to reveal selected portions of their activities in a way that could be interpreted as market manipulation.
I bring this up because of two events this week.
On Tuesday, with Apple shares trading at $475, Carl Icahn sent out a tweet, “Had a nice conversation with Tim Cook [Apple CEO] today. Discussed my opinion that a larger buyback should be done now. We plan to speak again shortly.”
The tweet went viral as they say, and was all over the financial news, and Apple shares jumped 5% by the end of the day.
Icahn reportedly has a position in Apple of more than $1 billion. How many millions did he make from 2 minutes taken to compose and send a tweet? One conservative estimate is $50 million.
But was it a smart move for investors to jump in on no more evidence than his tweet? There are certainly other opinions of Apple out there, including at least one of his fellow billionaires who has reportedly sold the stock short.
In fact, how could anyone know if Icahn might not be using the artificial strength he created to unload some of his shares? We won’t know until at least 45 days after the end of this quarter.
And in another event, this morning, 45 days after the end of the 2nd quarter, Warren Buffett filed his report for the 2nd quarter. The news media is surprised that with no hint he was doing so, as of June 30 he had sold 88% of his holdings in Kraft Foods, and 91.8% of his holdings in Mondelez.
With public investors hanging on his every word and following him into stocks when he freely announces he is buying, or has already bought, shouldn’t he at least be required to provide equal public access to his thinking when he is selling?
In the case of corporate insiders the SEC requires such information be available to the public in just two days.
To read my weekend newspaper column click here: Withdrawal From Stimulus Addiction Will Be Difficult
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Yesterday in the U.S. Market.
A negative day, but still on light volume of only 0.6 billion shares traded on the NYSE.
The Dow closed down 113 points, or 0.7%. The S&P 500 closed down 0.5%. The NYSE Composite closed down 0.4%. The Nasdaq closed down 0.4%. The Nasdaq 100 closed down 0.4%. The Russell 2000 closed down 0.4%. The DJ Transportation Avg. closed down 0.8%. The DJ Utilities Avg closed down 0.8%.
Gold closed up $12 an ounce to $1,333.
Oil closed up $.01 at $106.85 a barrel.
The U.S. dollar etf UUP closed down 0.1%.
The U.S. Treasury bond etf TLT closed up 0.2%.Yesterday in European Markets.
European markets mostly closed up yesterday.
The Europe Dow closed up 0.4%. Among individual countries, London FTSE closed down 0.4%. The German DAX closed up 0.3%. France’s CAC closed up 0.5%. Belgium closed down 0.1%. Denmark closed down 0.2%. Finland closed up 0.4%. Greece close down 0.4%. Ireland closed up 0.1%. Italy closed up 0.5%. The Netherlands closed up 0.5%. Norway closed up 0.6%. Portugal closed up 0.4%. Russia closed up 1.6%. Spain closed up 0.4%. Switzerland closed up 0.5%.Asian Markets closed down last night.
The DJ Asia-Pacific Index closed down 0.5%.
Among individual markets:
Australia closed down 0.1%. China closed down 0.9%. Hong Kong closed down 0.1%. India closed up 0.7%. Indonesia closed down 0.3%. Japan closed down 2.1%. Malaysia closed down 0.2%. New Zealand closed up 0.1%. South Korea closed up 0.7%. Singapore closed down 0.9%. Taiwan closed down 0.8%. Thailand closed down 0.5%.
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Markets This Morning:
European markets are down this morning.
The Europe Dow is down 0.5%. Among individual markets the London FTSE is down 1.0%. The German DAX is down 0.7%. France’s CAC is down 0.4%. Belgium is down 0.6%. Denmark is down 0.4%. Finland is down 0.5%. Greece is down 0.4%. Ireland is down 0.9%. Italy is up 0.5%. Netherlands is down 0.7%. Norway is down 0.3%. Portugal is up 0.1%. Russia is down 0.9%. Spain is down 0.1%. Switzerland is down 0.9%.
Oil is up $.66 a barrel, at 107.51
Gold is down $8 an ounce at $1,325.This Morning in the U.S. Market:
This week will see a return to a normal schedule for potential market-moving economic reports, which will include Retail Sales, Producer Price Index, Housing Starts, Consumer Sentiment, etc. To see the full list and times click here, and look at the left side of the page it takes you to.
Monday’s report was that the government ran a budget deficit of $98 billion in July, in line with the consensus forecast for a $96 billion deficit. Higher deficits in July are a pattern since there are few tax deadlines for businesses in July.
Global markets were spooked Monday by reports out of Japan and India Sunday night. Japan’s 2nd quarter GDP growth came in well below forecasts, an annualized rate of 2.6% versus the consensus forecast for 3.6%. Business spending fell by 0.1% year over year versus the consensus forecast of 0.6%. Industrial Production declined 3.1% in July from the previous month, and was down 4.6% year over year. And capacity utilization declined 2.3% in June after rising 2.3% in May. And India reported that its industrial production fell 2.2% in June from a year earlier,worse than the consensus forecast for a 1.0% contraction, and the previous report for May was revised down to –2.8% growth from the previous report of –1.6%.
Tuesday’s reports in the U.S. were that Small Business Sentiment ticked up in July to 94.1 from 93.5 in June. And the Retail Sales report was mixed. Overall sales were up 0.2% in July, and by 0.4% if auto sales are excluded. The consensus forecast was for an increase of 0.3% and 0.5% excluding auto sales. So the report missed on one criteria and beat on the other.
Wednesday’s only report was that the Producer Price Index was unchanged in July, while the core rate (which excludes food and energy) was up just 0.1%. That was much more benign than the consensus forecast of a rise of 0.3% in PPI, and 0.2% in the core rate.
This morning’s reports so far are that new weekly unemployment claims fell by 15,000 last week to 320,000. The four-week moving average fell by 4,000 to 332,000. Both numbers were better than the consensus forecast. The Consumer Price Index was up 0.2% in July. The core rate, with energy and food costs excluded, also rose 0.2%. Both numbers were on target with forecasts. The Empire State (NY) Mfg Index slipped from 9.5 in July to 8.2 in August, missing forecasts that it would remain at 9.5. And Industrial Production remained flat in July, missing forecasts.
Still to come are the Housing Market Index, and the Phila Fed Mfg Index, both of which will be released at 10 a.m.
The pre-open indicators have fallen further since the reports, and bonds and gold, previously positive have turned negative.Our Pre-open Indicators:
Our pre-open indicators are pointing to the Dow being down 115 points or so in the early going this morning.
To read my weekend newspaper column click here: Withdrawal From Stimulus Addiction Will Be Difficult
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