This week’s economic calendar has an emphasis on manufacturing activity, housing, and inflation. The highlights of the week will be the December PPI (Wednesday) and the December CPI (Thursday). We will also get the January Empire State Manufacturing Survey (Tuesday), December Industrial Production (Wednesday), December Housing Starts and the January Philadelphia Fed Survey (Thursday), and December Existing Home Sales (Friday).
Bloomberg Top Stories:
*Stocks Rise as Commodities Gain After China GDP Report; Euro Strengthens
*Citigroup Fourth-Quarter Profit, Revenue Trail Estimates, 38c vs 51c – WFC 73c vs 72c
*Spain’s Borrowing Costs Fall at First Auction since S&P Rating Downgrade
*Euro Advances as Spanish, Greek Borrowing Costs Decline at Debt Auction
*German Investor Confidence Jumps on Signs Crisis May Have Passed – are even they blind?
*Greece Running Out of Time as Debt Forgiveness Talks Stumble – no problemo…worry beads!
*Europe Bailout Fund Says It has Enough Cash To Deal With Sovereign Crisis – uh huh…
*Morgan Stanley Said to Limit Cash Bonuses to $125,000, Increase Deferrals – WOW!!!
*Citigroup Debt Traders Bansal, Yanney Exit Firm as Pandit Pares Workforce – more to follow
*Emerging Stocks Failing to Lure Buyers Even at 2009 Low
*Carnival Hires Salvage Team to Prevent Liner Fuel Spill Into Marine Park – aint’t that swell???
*Romney Anti-Immigration Pitch Will Make It Harder to Appeal to Hispanics – death spiral?
*Debt-Limit Debate Returns to Congress While Budget Decisions Will Wait – Debate??? Hello???
*Wikipedia to Shut for 24 Hours to Protest Proposed U.S. Anti-Piracy Laws – internet freedom
*Obama’s Export Reshuffle Will Help Boost Jobs and Growth – GOP will kill it!
Volume dropped to 3.65B shares from 3.93B ahead of the long weekend in a weak session with every index in the red. This Friday is options expiry, be advised! Is the January effect kaput?. NYSE stocks executed on the Big Board rose to 828M shares from 770M shares, still about 200 million short of the twelve month average and indicative of a lack of retail participation. 41 of the last 44 sessions have been less than 1B! Advance/Declines were negative: -1.9:1 vs +1.7:1 vs +1.2:1 vs +3.3:1 vs +1.8:1 on NYSE and -2.1:1 vs +1.5:1 vs +1.5:1 vs +3.6:1 vs +1.3:1 on Nasdaq. Breadth was similar: -3.2x vs +1.4x vs +2.1x vs +4.2x vs +2.1x vs on NYSE and -1.8x vs +2.1x vs +1.4x vs +2.7x vs +1.9x vs on Nasdaq. New 52 week highs slipped to 165 from 182 while new lows rose to 53 vs 43. The ratio is now about 3x positive. The S&P VIX rose3 to 20.91 +.44 from Thursday’s 20.47 – lowest since 7/26!.
Here are the results of the past five sessions: Dow -0.4% vs +0.2% vs -0.1% vs +0.6% vs +0.3% Transports -0.6% vs +0.3% vs +0.5% vs +1.4% vs +0.6%; Dow Utilities -0.1% vs flat vs -0.4% vs +0.1% vs +0.3%; S&P 500 -0.5% vs +0.2% vs flat vs +0.9% vs +0.2%; Nasdaq Composite -0.5% vs +0.5% vs +0.3% vs +1% vs +0.1%; Nasdaq 100 -0.4% vs +0.4% vs +0.2% vs +0.7% vs -0.2%; Russell 2000 -0.8% vs +0.4% vs +0.3% vs +1.5%! vs +0.5% vs -0.3%; NYSE Financials -0.8% vs +0.6% vs +0.6% vs +2%!!! vs -0.6% vs -0.9%. Look at NYSE eaders!!! BAC -2.7% vs -1.2% vs +3.6% vs +5.7%!!! vs 1.5% vs -2.1% vs +8.6%; C -2.7% vs +1.1% vs +4.2%; JPM -0.8%; WFC flat.
Global equity markets strong on China GDP: FTSE +0.9% vs -0.3% vs +0.2% vs -0.7% vs +1.3%; CAC40 +1.6% vs +0.8% vs +1% vs -0.4% vs +2.5%; DAX +1.9% vs +0.1% vs +1.2% vs -0.4% vs +2.7%; Nikkei +1.1% vs +1.4% vs -0.7% vs +0.3% vs +0.4%; Hang Seng +3.2%!!! vs +0.6% vs -0.3% vs +0.8% vs +0.7%; Korean KOSPI +1.8% vs +0.6% vs +1% vs -0.4% vs +1.5%; Indian Sensex +1.7% vs +0.7% vs -0.9% vs +0.1% vs +2.2%. U.S. Futures strong despite disappointing bank earnings: DOW +107; SPX +12 ; NDQ 24. Bonds weak but with 10’s and 30’s still well below 2% and 3% respectively. 10 yr 1.90% -3/8. RECORD low 9/23 of 1.6855%; 30 yr 2.95% -3/4; Long TIP 0.71 -13/16. 0.57% at high. The 5 yr TIP yields MINUS 1.01%; 10 yr -0.18%. 3 mo. Libor 0.56%, and 0.79%, slightly lower for a second session. Bills 0.02% out to 3 months, 6 months 0.05%.
Gold fell and closed just below the 200 day ($1636) but has been above $1600 for four straight sessions. It closed at $1630.80 -$16.90, Thursday’s close was highest since 12/13 and it is now $1663.30 +$32.50, even higher! The record high is $1923.70, a buying climax on 9/6. RES is $1665, the 40 day and $1680, the 50 day m/a. Crude closed SHARPLY lower for a second straight session at $98.70 -$1.40. Overnight it rose above par and is now $100.63 +$1.93. It is back above the 40 day (99.12) and the 50 day (98.76), major support. RES at $100. Follow closely!
…”dumbing down usually is what investment advisors are told so that their clients and prospects can understand their thinking. But in this case we are witnessing the dumbing down of America and the American voter at the hands of Super PAC’s…with the full blessing of the U.S. Supreme Court late last year in Citizens United vs Federal Election Commission, and its conservative makeup. Don’t trust TB, Sandra Day O’Conner says it is one of the worst decisions in history and asks where in the U.S. Constitution a corporation is describe as a person…no, that came about as a result of the 14th Amendment, specifically the ‘equal protection’ clause which some smart lawyer contended made a corporation a citizen and thus a person. By the way, it was also this amendment that makes any child born in this country, even if the parents are illegal aliens, U.S. citizens and is also used as support for anti-abortion legislation. (For the record, the five highest fines the FEC has handed down run from $100,000-$300,000…peanuts! TB)
Conservatives raved about the recent decision, thinking it would overpower the labor unions which it most certainly has, but it has also overpowered the American people in favor of corporations and thus the wealthy. Of course, you as a shareholder don’t benefit from this, only the insiders who are enriching themselves even after the biggest debacle in U.S. history which they caused.
Thankfully we have Stephen Colbert who is ‘investigating’ running for President of South Carolina. In a beautiful satire, he transferred his PAC which he created a few years ago, into a Super PAC by transferring control to Jon Stuart. If you think this is funny, or stupid, you are mistaken…he is the first to show us just how corrupt our political system is while making us laugh…hopefully not until we cry!
Want proof? Mitt Romney’s Super PAC is headed by his campaign chairman from his last run for president. Conservatively (no pun intended), they will raise $350 million – perhaps $400 million and it will all go for negative advertising. It is so bad that for weeks, the candidates could not buy air time to provide their views (assuming they really wanted to), and why this will be a very ugly election, especially once the conventions are over. Thank you, Chief Justice Roberts and the rest of your court who sided with you. By the way, every Super PAC is run by former campaign leaders for the candidates and funded by their closest supporters. But suppose you want to give money to YOUR candidate? Maximum $50,000. Oh, and the first reckoning of where the money is coming from will only be announced on the day of the Florida primary! This is not democracy in action but more representative of Iran’s leader who we so loathe.
TB has friends on the right (hopefully still), some of whom have branded him a socialist or worse, and one says that Obama will create the most “divisive” campaign in U.S. history. He is right that it will be the most divisive thanks to the Super PAC’s. Meanwhile, the GOP is now dominated by seniors who are the best off in the country, regardless of income level. A recent study showed that low primary turnout is due to the majority not having anyone they want to vote for…and meanwhile all seniors turn out and vote, so we end up with candidates nobody wants…for the record, TB is a senior but with NO party affiliation.
As for South Carolina, where unemployment is 9.9%, 6th worst in the U.S. 24% of GOP voters were 65+ and due to retirees moving to the state it will be much higher this year. The average expenditure there per child is $8,942 while seniors get $21,904 – 2.4x higher per a Bloomberg editorial this morning. 19.4% of the people have no health insurance…so call Obama a socialist if you like but something has to be done or all the incomes of the young will be needed to support the older…who, by the way are moving in with their kids in droves…contrast to the support they had been providing for the past several years. We are in a mess and it can only be cured by higher taxes by those who can well afford to pay it and were the recipients of all that growth from the Bush tax cuts…and budget cuts. Obama’s plan to combine government agencies has merit but is likely dead on arrival. We reap what we sow.
Meanwhile, the stock market loves it…or at least doesn’t hate it…we even believe the Europe crisis is over and despite the pleadings of Simon Johnson, Reinhart and Rogoff, and the latest, Lacy Hunt and Van Hoisington, economists turned money managers who are very intelligent! TB knows both and has high respect for them. Thanks to John Mauldin for including their 2012 forecast in his column.
Looking ahead, prepare to see the government held hostage once again to the debt-ceiling as Congress debates (sic) about paying for what it has already voted to spend. It won’t be pretty. Note that on Friday, S&P lowered the ratings of five Euro countries including Spain, Italy, and France for the same reason they downgraded the U.S.: too little action, too late. Yet because China GDP rose at 8.9% in Q4 vs consensus 8.6% but down from Q3’s 9.6% (?),
As for stocks…TB sees them as peaking and a big decline ahead…also, this year, relying on income to provide the returns may not work, not from the rally in dividend producing stocks, especially utilities which had a 19.75% return last year…more than the sum of the other major indices! Who is right? You decide…you are as smart as anyone here.
. . . – - - . . . note that the same old SOS applies…perhaps more so!
Yesterday we lost the one candidate who ‘might’ have provided change: Jon Huntsman. Not only that, the only one who has acted presidential and didn’t lower himself into the snake pit of accusations. He told us what he wanted to do, had the experience, comes from outside the beltway, but the financial community destroyed his chances…along with the media which paid scant attention to him since he provided no ‘dirt’…and dirt is money.
Last week, 60 Minutes reported on Groupon, commenting that Amazon, Google, or anyone could do what they are doing and undercut them due to huge margins…note that the company went public on 11/3, priced at $20, opened at $28 and hit $31.14 before closing at $26. It closed Friday at $19.15, recovering from a low of $14.87 on 11/28 – just three weeks after the IPO! Note that none of this was mentioned in the segment!
Then there is Facebook, which did a private placement through Goldman who was careful to say the might sell their position or even short it at any time…still hasn’t reported it financials, and may or may not be making a meaningful profit.
Then there is Zynga, which has not turned a profit…is selling at 63x ESTIMATED earnings, and 710x current earnings. The IPO was on 12/13 at $10 a share, it opened at $11, rose to just $11.50, dove to $9 and closed at $9.50 that day. It then struggled never touching $10 and closed Friday at $8.87. It is a virtual game that is FREE…except for 3-4% of the players who actually BUY virtual properties for the game….sound familiar? Think virtual pets…and then think stupid!
What do all these companies have in common? A few people become millionaires…billionaires even – on paper. None of them make anything, and worse everything they do can be replicated by another company. Think dotcom’s in 1998-2000, except perhaps less innovative and of even less value. We are about to see another bust here or has it already…investors don’t seem to be as stupid this time…or gullible.
Remember: pay estimated taxes today and that Friday is options expiry…goodbye and good luck!
TB
