END OF DAY

It's beginning to sound like an old Bernanke tune in Europe as the ECB played down deflation fears today and dealt the old ready-to-act-if-you-need-us card. Instead of rain these officials and those in Japan pray nightly for a little inflation. The bank left its interest rate at a record-low of 0.25% and left a window open for some Bernanke-like big buys of financial assets if need be.

The DJIA closed at 16,572.55, down just a fraction. The S&P 500 dropped off 2.13 points to close at 1,888.77 and the Nasdaq closed down almost 39 points at 4,237.71.

Where oh where have all the buyers and sellers gone. No, we're not talking equities, we're talking US home sales. According to an AP wire story, home prices are up nearly 14% over last year but sellers are not selling and buyers remain few owing to higher home prices and higher rates. Meanwhile, rents continue to rise with concerns growing that 2014 will be the fifth straight year rents are up. Again, according the the AP, 50% of renters now pay more than one-third of their pay for shelter.

Note that the S&P 500 closed today at 1,888.77. Now this is not about highs and lows, just observations. About a month ago, on 3/6/14 in fact, the index closed at 1,877. There is something called the Tobin Q ratio, created by the late James Tobin, a Yale economists, to gauge the value of  corporate assets versus their replacement cost. 

No big deal here, just this: The Tobin Q on 3/6/14 was indicating that at 1,877 the market was overvalued by 76%.  Only two times in the past has the market been more overvalued, in the late 1920s and the late 1990s.

Now one indicator does not a market overvalued make. But it's worth watching.

BUBBLES

Bubbles always have more than one element. If that weren't true, nearly everyone would see them coming. But that's never going to happen.

Lately, in their quest for yield and a large dose of impatience, investors are chasing the weak, the lame and the higher yielding to satiate their income hunger. Now we're not calling this current market a bubble. Not yet.

But places and pieces go together just as ducks eventually get lined up. And not even the twisted utopian-seeking minds of politicians who try to legislate one of today's buzz terms--outcomes--have a clue.  If anything their twisted thinking contributes to most bubbles. Equal opportunity is one thing, equal outcomes another.

http://online.wsj.com/news/articles/SB10001424052702303754404579312451913879802?KEYWORDS=chasing+higher+yields&mg=reno64-wsj&url=http%3A%

WHAT'S THE VIEW FROM HERE?

If you're looking for a unified West against what's been going on in the Ukraine, better keep looking. 

And while you're  at it you might want to send a wake-up call to all our beloved Washington politicians that our foreign policy ain't cutting it. And it hasn't been for a long time.
http://www.spiegel.de/international/germany/prominent-germans-have-understanding-for-russian-annexation-of-crimea-a-961711.html

MARKET HITS NEW HIGH

A lot of people remember exactly where they were when something big happens like 911 or the assassination of Kennedy or October 19,1987, when the stock market crashed 508 points, taking nearly a trillion dollars and 20% of the value of the Dow down with it.

Newly appointed Fed Chairman Alan Greenspan wasn't Sir Alan yet. Nor was he dubbed the "Maestro" yet by Bob Woodward the Washington Post reporter of Watergate fame. He was just a wanna-be Woody Goodman former clarinet player who ran an obscure New York economics consulting firm who as luck would have it occasionally consulted with presidents.

Just a couple of months earlier in mid-August President Ronald Reagan appointed Greenspan to replace then chairman Paul Volcker whose term was expiring.  The economy that summer many believed was getting ahead of itself. Though tame by most indicators some were beginning to openly worry about the big I word.

In early September under somewhat unusual conditions Greenspan hiked interests 50 basis points, less than three weeks after taking office. The stock market hardly blinked over the next few weeks, but the long end of the bond market told a different tale, one that posed a threat to equities.

Greenspan boarded an airplane that afternoon headed for Dallas where he was scheduled to give another one of those boring Fed speeches to the American Bankers Association. It was just another routine chore in the routine life of a newly appointed Fed chairman.

The market opened that morning slightly down but rallied before fading again toward the afternoon. One needs to keep in mind back then wall-to-wall, 24-7 financial news didn't exist. Many of the someday-to-be Wall Street television celebrities were just that, someday; and someday hadn't arrived yet.

In Los Angeles a local VHS station broadcast financial news from the time the market opened until it closed. And driving the freeways one might catch, if one were lucky, a five minute update every hour during market hours by some guy named Jerry Laird at the Pacific Stock Exchange in downtown Los Angeles. So financial news was scarce. Some people, members of the hardcore school, would go nearly everyday to the local library on their lunch hour to read Value Line.

People often talk about situations they've been in where all hell breaks loose. If you wanted to make a trade, you had to call your broker. Then you had to be lucky enough to get through. And if you did you'd better damn well know what and if you were buying or selling. Quotes changed faster than a friend of mine in college used to change girlfriends. Stability was just another word politicians use when they have no idea what's up, which is most of the time.

 When I reached the office a colleague and I commandeered the phones and started buying everything we could. But it wasn't like we had unlimited resources. That was the first time I learned the importance of having some dry powder. Lots of dry powder to be exact.

Hall of Fame hockey player Wayne Gretsky, asked what made him a great player, stated he always tried to skate to where he thought the puck would be, not to where it was. And that's just another, more aggressive way of saying better keep some powder dry.

COPPER PRICES JUMP AFTER QUAKE

What with all the talk about a global slowdown the price of copper has been in the doldrums for so long now it took an 8.2 earthquake off the coast of Chili to provoke an upward move in price for the industrial metal.

Maybe some enterprising traders can come up with a future earthquake predictor and trade the bounces.
http://www.businessinsider.com/copper-production-by-region-2014-4

M&A DEALS ON THE RISE?

Corporations have been booking some nice profits of late. But much of those profits are going to buttress shares prices in stock buyback programs or hike dividend payouts or both.

But there another well-known activity inflated equity prices can be used for, merger and acquisitions. Low interest rates also make many deals easier. And from the look of the landscape their on the rise. http://soberlook.com

First quarter activity is the best since 2011. Nor is this corporate activity limited to the U.S. Here's how a piece in the Financial Times described it: "A pick-up in merger activity helped Europe’s main equities markets kick off the second quarter with gains."

For more here's another link.

http://www.mergermarket.com/pdf/MergermarketTrendReport.Q12014.Global-

HISTORICAL RECOVERIES

So what kind of recovery has it been? Here's an interesting graphic from CrestmontResearch.com.
http://www.crestmontresearch.com/docs/Economy-Recoveries.pdf

THE EU PLOT THICKENS

Not that long ago voters in France elected a president. At the time it was viewed by some as a mandate. But given France's economic woes, so much for mandates, real or imagined, as recent local elections seemed to suggest. Voters breathed new life into the center-right UMP. And President Hollande's party lost more local elections than it won

France has overshot the debt restrictions imposed by the Maastricht Treaty more than once. Now Hollande will be pushed to ask for more time, not a good thing when you're trying to get other countries to abide by the agreement when you can't do it yourself. That's called EU leadership.

http://www.marctomarket.com

PIMCO SPEAKS

This time it about the economy. Once a quarter the big firm gathers its big hitters to discuss what's up on a global scale. Here's the latest.
http://www.minyanville.com/business-news/markets/articles/Pimco-Cyclical-Outlook-for-the-Americas/3/31/2014/id/54398

STATINS

Who doesn't love a big market?

An article in today's WSJ, "New Drugs Emerge To Cut Cholesterol," states the size of that market: 50 million Americans.

What about them, what do they have in common? Well, they are all, according to some, candidates for the "most widely used and most lucrative drugs ever developed by the pharmaceutical industry," statins.

These are what some refer to as Wing-and-a-prayer announcements or priming the pump. To be sure, as one physician who was not connected with these new studies, noted: "There's not a shred of doubt that this is a very efficacious way to lower LDL (bad)" cholesterol.

But that's the wrong question getting answered. There is even less evidence that these findings will translate to preventing heart attacks and strokes, the so-called end point or reason for their existence.

With recent patent expirations popping up like spring flowers, a cynic might argue along with the aroma of spring flowers the odor of new patents is also in the air. And it's a very lucrative one.

http://online.wsj.com/news/articles/SB10001424052702303978304579471072404353460?mg=reno64-wsj