The volume on the S&P to the upside has been pathetic and yesterday was no exception with just 92M shares trading on SPY. To put that into context (which we reviewed in yesterday's Live Member Chat Room) – we've had 4 up days and 5 down days in March and the SPY volume on the 5 down days has been 647M while the volume on the 4 up days has been 344M – just half of what the down volume has been.
Nonetheless, despite the massive outflow of funds, SPY is only 3 points below where it started the month, at 210. Even if we give the benefit of the doubt and pretend this isn't a blatant act of market manipulation designed to fool retail investors into buying the dips while Fund Managers and Banksters run for the exits – it's still an indication that this "rally" has a very weak base and could easily collapse in a dramatic fashion.
Date Open High Low Close Volume Adj Close*
Mar 12, 2015 205.26 207.18 205.20 207.10 92,753,300 207.10
Mar 11, 2015 205.29 205.50 204.40 204.50 108,754,600 204.50
Mar 10, 2015 206.71 206.81 204.93 204.98 153,901,500 204.98
Mar 9, 2015 207.74 208.79 207.55 208.36 89,397,100 208.36
Mar 6, 2015 210.46 210.46 207.10 207.50 169,087,400 207.50
Mar 5, 2015 210.62 210.80 209.85 210.46 75,456,600 210.46
Mar 4, 2015 210.40 210.49 209.06 210.23 105,665,800 210.23
Mar 3, 2015 211.47 212.05 210.08 211.12 110,325,800 211.12
Mar 2, 2015 210.78 212.06 210.72 211.99 87,491,400 211.99
In this morning's news alone, US Steel (X) is idling a Minnesota plant due to lack of demand for steel and 15M tons of coal production went off-line in 2014 due to lack of demand and the IEA says oil prices will continue to fall due to lack of demand and the IDC predicts Global shipments of PC's will decline 4.9% due to lack of demand.
As noted on Dave Fry's XLF chart, FREE MONEY from the Fed(s) has enabled companies to buy back record amounts of their own stock. Last Thursday, we discussed how buyback money accounts for 85% of the inflows into the markets and that inspired the Harvard Business Review to agree with me, publishing a scathing indictment of GM's $5Bn buyback scheme (almost 10% of the stock), calling it "Bad for America and the Company."
GM did $20.4 billion worth of buybacks from 1986 through 2002. If it had saved that money and earned a modest 2.5% on it, the company would have had $35 billion on hand when the financial crisis and Great Recession hit and probably would not have had to file for bankruptcy protection. As Bob Lutz, the veteran auto executive, said recently, stock buybacks are “always a harbinger of the next downturn…in almost all cases, you regret it later.”
But most investors don't care about "down the road", they care about todays move or the month's move and hardly ever the quarter. The average time a US investor holds a stock has dropped to 22 SECONDS. You can thank high-speed trades for that but it wouldn't take too many people holding stocks for 31M seconds (a year) or 315M seconds (a decade) to bring that average up a bit. But they don't – there are so few buy and hold traders left that we have a little club (the Value Investing Congress) where we commiserate once a year.
Sadly, when the market is run to please the 22-second investors, the rest of us suffer. When the shareholders have no loyalty to the company, there is no one to hold the CEOs and the Boards accountable and that means they can feel free to plunder their companies to enrich themselves – after all, who cares what damage they've caused after they've gone?
We don't invest in R&D, we don't invest in Durable Goods, we don't invest in training and hiring employees, we don't invest in infrastructure – even though we know it's a crisis. We're ignoring the cost of Global Warming (another way we pretend there are profits by pushing the true cost of pollution to our children) and it's no wonder the index of our competitiveness fell off a cliff (though back to 3 now that the rest of the World is also failing).
But the stock market is up so all must be well.
Have a great weekend,
- Phil
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