*U.S. Nove. S&P Case/Schiller Home Pricses Fall 3.7% vs Year Ago – all 20 cities down!

*Stocks Rise as Euor Strengthens on Gerek Debt Talks, Commodities Advance

*Europe Moves Toward Greek Rescue Confrontation as Leaders Seal Fiscal Pact

*Denmark’s Bank Crisis Is Worsening as More Failures Loom, FSA Head Warns

*Apple Names Dixons CEO Browett as Retail Head in Cook’s First Outside Pick

*UPS Profit Forecast for Year Tops Estimates as Shipping Demand Increases

*Exxon Drops After Fourth-Quarter Sales are Lower Than Analysts Estimated

*Honda Leads Japan’s Manufacturers in Cutting Outlook as Yen Erodes Exports

*Tourism Seen Adding $850 Billion With Obama New Immigration Visas

*Tesco Market Share in U.K. Drops Below 30% for the First Time Since 2005

*China-Based Hackers Target Law Firms as Bacvk Doors in Search for Deal Data

*Wells Fargo Investment Bankers Bring Buffett-Assisted Revenue Once Shunned

*Syrian Troops Push Deeper into Damascus Suburbs Before UN Resolution Talks

*Florida’s 680-Mile Campaign Trail Diverted by Angst Over housing Distress

Volume plunged to a way below average 3.62B shares from an average 4B shares in a losing session that managed to extricate itself from the opening plunge slowly and never saw the light of day…this was the third straight down day for the Dow. Biggest loser was NYSE Financials which fell 1.2%. NYSE stocks executed on the Big Board also declined to 744M shares from 850M shares, now about 300 million short of the twelve month average. 51 of the last 54 sessions have been less than 1B! Advance/Declines were negative:-1.8:1 vs +1.9:1 vs  -1.1:1 vs +3.3:1 vs +1.2:1 on NYSE and -2:1 vs +1.9:1 vs -1.2:1 vs +2:1 vs +1.5:1 on Nasdaq. Breadth was similar: -2.4x vs +1.1x vs  -2x vs +3.4x vs +1.2x on NYSE and -1.3x vs +1.3x vs -2x vs +2.8x vs +1.2x on Nasdaq. New 52 week highs slipped to 266 from 285 while new lows rose to 29 vs 19. The ratio dropped to 9x positive. The S&P VIX rose to 19.40 +.87, highest since 1/19!

Here are the results of the past five sessions: Dow -0.1% vs -0.6% vs -0.2% vs +0.6% vs -0.3%; Transports -0.4% vs +0.8% vs +0.4% vs +1.5%v vs -0.7%; Dow Utilities -0.3% vs -1.3% vs +0.1% vs +1.6% vs -0.8%; S&P 500 -0.3% vs -0.2% vs -0.6% vs +0.9% vs -0.1%; Nasdaq Composite -0.2% vs +0.4% vs -0.5% vs +1.1% vs +0.1%; Nasdaq 100 +0.1% vs +0.3% vs -0.5% vs +1.3% vs -0.1% vs flat; Russell 2000 -0.8%!!! vs +0.8% vs -0.3% vs +0.9% vs +0.7%; NYSE Financials -1.2% vs +0.3% vs -0.4% vs +0.5% vs -0.4%. NYSE Leaders: BAC -3%!!! vs -0.1% vs -0.7% vs +0.8 vs +0.6%; PFE-+0.5% vs -0.7% vs -0.4%; F+0.7% vs -4.2% vs -1.1% vs -0.9% vs +1.3%; NOK -0.7% vs -6%.

Global equity markets stronger: FTSE +0.7% vs -0.8% vs -0.5% vs +1.2% vs -0.7%%; CAC 40 +1.5% vs -1.1% vs -0.5% vs +1.2% vs -0.9%; DAX +1% vs -0.8% vs +0.2% vs +1.5%; Nikkei +0.1% vs -0.5% vs -0.4% vs +1.1% vs +0.2%; Hang Seng +1.1% vs -1.7%! vs +0.3% vs +1.6%; Korean KOSPI +0.8% vs -1.2%! vs +0.4% vs +0.3%; Indian Sensex +2% vs -2.2%!!! vs +0.9% vs closed vs +0.5%. U.S. Futures stronger, but off session highs: DOW +55; SPX +6; NDQ +10. Bonds little changed: 10’s still well below 2%, 30’s at 3%! 10 yr 1.85% -1/16. RECORD low 9/23 of 1.6855%; 30 yr 3.00% flat; Long TIP 0.65% +3/16; 0.57% at high. The 5 yr TIP yields MINUS 1.29% vs -1.31%; 10 yr -0.29%. 3 mo. Libor 0.54%, and 0.78%, starting to slip again! Bills 0.04% 1 month; 0.05% 3 months, 6 months 0.08%. Reverse Repo 0.16%, steady.

Gold closed slightly lower at $1734.40 -$1 with an intraday high just shy of Friday’s $1743, the highest since 12/6! It is well above the 200 day ($1649), and has been above $1600 for 14 straight sessions. It is now $1743.50 +$9.10. The record high is $1923.70, a buying climax on 9/6. Sup is $1667, the 50 day, further support $1653, the 40 day m/a. Res is $1770, the 12/2 high! Crude lower again, closing at $98.78 -.78. It is now $99.08 +$1.20, and weak with res at $100 and support at the 40 day (99.42), the 50 day (99.27), and $95.19, the 200 day.

…yesterday, TB went to see The Iron Lady, a great movie not just for the acting of Meryl Streep, but the directing and more importantly, the discourse (discord?) of 30 years ago which sounded like Congress today. Of course, the British Parliament is all about provoking discussion and while heated is otherwise civil. One thing TB loves about it is rather than a SOTU speech the PM has to go before Parliament four times a year and be subjected to strong criticism which is always responded to vigorously and with great wit. We would do well to learn from them…as Thatcher suggested to them they could do by following the Americans by looking to the future and not focusing on the past. Of course, we are long past that point now with the gloom and doom that says we will never grow revenues (the thing that got us in the mess that was capped off by the financial bailout). A must see…see more below.

How did the markets recovered most of the early session plunge which took the Dow down more than 100 points…but how did it do it? On low volume…even on the ETN’s while NYSE traded stocks had volume 300 million shares below average…from 200 million recently.

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

If you see The Iron Lady you may have one of two views: if you are conservative, especially a Tea Party type, you will love it and think how much we need her now; if liberal you will think this film was planted to show just how right the GOP is in trying to balance the budget at all costs. Even  the phrase “if not now, when?” is not new but came from this era. TB however is more pragmatic and sees it as a historical perspective.

Remember that this was thirty years ago…unlike the U.S. labor unions, mostly government, in what was really a socialized country, they routinely went on strike, paralyzing the nation. The last we had was in this era when the air traffic controllers struck and Reagan replaced them.

The Gipper gets much of the credit here when the leader was clearly Thatcher, but they had a great friendship which the movie barely touches on. But the question we should be asking ourselves is whether her strategy of a flat tax makes sense now.

Thirty years ago, neither country had a wealth gap problem…CEO’s made 10-15 times the salary of the average employee…a far cry from the 400-800 times we see today. Also, they had no golden parachutes making them accountable for their long-term planning, not just the near-term, which has now come to mean, quarter to quarter.

Thirty years ago, $100,000 put you in the top 10% of all workers….today it is only modestly higher and adjusted for inflation, significantly lower! There were few billionaires and far fewer millionaires. Thus the idea of a flat tax, or abolishing the income tax in favor of a national sales tax is ludicrous. First, the tax accountants and lawyers would never allow it due to their loss of revenue. Second, a consumption tax is the most regressive tax there is. Thatcher said all people should pay some tax…in this country they do…be it sales tax or property tax and indirectly product costs reflect tax costs.

But we need to eliminate preference items first…we need to eliminate generation skipping, which only promotes the idea of future generations of idle rich…the carried interest exclusion which converts ordinary income to capital gains…which it most certainly is not.

Also, we need to stop thinking that because a person is wealthy and investing in stocks that that is true capital gains…especially dividend income…thus a low or possibly zero capital gains rate for the first five years of a business is a sensible idea.

Finally, we now know beyond a certainty that ‘trickle down’ supply-side economics does not work, despite the pleadings of Arthur Laffer (now being sued for his firm steering clients to what turned out to be a Ponzi scheme for a $3.1 million kickback). It was unquestionably supply-side economics that created the wealth gap…and as TB said, we aren’t talking from the top to the bottom but from even the top 1% to the top 10%! The ownership of assets is even worse as the middle class has been eroded yet some stalwartly hold that money is being put into the economy in the form of new businesses, which are the only true creator of jobs…most are not.

So TB heartily recommends The Iron Lady, but only if you remember that this was thirty years, and two massive Bush tax cuts ago.

Have a great day!

TB

Bloomberg Top Stories:

*Greek Debt Talks Risk Deflecting EU Summit Focus From Crisis-Fighting Plan

*Stocks Drop as Euro Weakens on Greece Debt Concern; Italian Bonds Decline

*RBS Ch8ief Hester Waives $1.5 Million Bonus, Bowing to Political Pressure – finally!

*Sarkozy to Levy Transition Tax Opposed by Finance Industry, Central Bank

*Loonie Poised for U.S. Parity as Aussie 46% Overvalued in China Slowdown – oh oh!

*Longest S&P 500 Valuation Slump since Nixon Discounting Record U.S. Profit – and it should!

*Morgan Stanley, Credit Suisse Lead Retreat on Investment Bank Compensation

*Homebuilder Puts Hit Highest Since 2006 on Hedge Before Earnings – they were right then!

*Construction Rises as Architect Billings Show U.S. NON-Residential Rebound

*Jobs Returning to U.S. Midwest as Applesauce Joins Cars in Buoying Obama

*Apple Juggernaut Fuels Silicon Valley Hiring Amid Bubble 2.0 Concern

*Goldman Sachs Among Banks Lobbying to Exempt Half of Swaps Books – overseas swaps!

*Don’t Be ‘Fooled’ by ‘Attractive’ Financial Valuations – so says Brian Belski and TB

*U.S. Gap Between Public-Private Union Membership Widens –yep, private is back!

*Bank of Canada’s Carney Says Volcker Rule Could Damage World Bond Markets – and…

*Canada Seen Risking Subprime Crisis With American-Styled Loans – even they caved?

*Gingrich Blasts Romney as ‘Wall Street Elite’ as Florida Prepares to Vote

*Afghanistan War Allies Fracture Over Timetable for Troop Withdrawals – get out now!

*Costa Concordia Wreck May Take as Long as 10 Months to Remove From Ocean – swell!

Volume fell back to an above average 4B shares from 4.5B shares in a second straight MIXED session where only Dow Transports (+0.8% and leader two days straight!), the Nasdaq indices and Russell 2000 rose, but not much. Biggest loser Dow Utilities which fell 1.3%.was NYSE stocks executed on the Big Board slipped to 850M shares from 866M shares, still about 200 million short of the twelve month average. 50 of the last 53 sessions have been less than 1B! Advance/Declines were positive:+1.9:1 vs  -1.1:1 vs +3.3:1 vs +1.2:1 vs +1.4:1 on NYSE and +1.9:1 vs -1.2:1 vs +2:1 vs +1.5:1 vs -1.2:1 on Nasdaq. Breadth was not so much: +1.1x vs  -2x vs +3.4x vs +1.2x vs +1.4x on NYSE and +1.3x vs -2x vs +2.8x vs +1.2x vs -1.1x on Nasdaq. New 52 week fell to 285 from 370 while new lows were steady at 19. The ratio dropped to 14x positive. The S&P VIX barely declined to 18.53 -.04. Investors still unwilling to put their money where their mouth is except day and high frequency.

Here are the results of the past five sessions: Dow -0.6% vs -0.2% vs +0.6% vs -0.3% vs -0.1%; Transports +0.8% vs +0.4% vs +1.5%v vs -0.7% vs -0.8%; Dow Utilities -1.3%!!! vs +0.1% vs +1.6% vs -0.8% vs +0.3%; S&P 500 -0.2% vs -0.6% vs +0.9% vs -0.1% vs +0.1%; Nasdaq Composite +0.4% vs -0.5% vs +1.1% vs +0.1% vs -0.1%; Nasdaq 100 +0.3% vs -0.5% vs +1.3% vs -0.1% vs flat; Russell 2000 +0.8% vs -0.3% vs +0.9% vs +0.7% vs -0.2%; NYSE Financials +0.3% vs -0.4% vs +0.5% vs -0.4% vs +0.6%. NYSE Leaders: BAC -0.1% vs -0.7% vs +0.8 vs +0.6% vs +2.6% vs +1.6% vs +2.4%; PFE-0.7% vs -0.4%; F-4.2% vs -1.1% vs -0.9% vs +1.3%; NOK -6%.

Global equity markets weaker: FTSE -0.8% vs -0.5% vs +1.2% vs -0.7% vs -0.8%; CAC 40 -1.1% vs -0.5% vs +1.2% vs -0.9% vs -1.1%; DAX -0.8% vs +0.2% vs +1.5%; Nikkei -0.5% vs -0.4% vs +1.1% vs +0.2% vs -0.5%; Hang Seng -1.7%! vs +0.3% vs +1.6%; Korean KOSPI -1.2%! vs +0.4% vs +0.3% vs +0.1%; Indian Sensex -2.2%!!! vs +0.9% vs closed vs +0.5% vs +1.5%. U.S. Futures weaker, but off session lows: DOW -76; SPX -9; NDQ -16! Bonds in rally mode: 10’s well below 2%, and now 30’s broke 3%! 10 yr 1.84% +1/2. RECORD low 9/23 of 1.6855%; 30 yr 2.98% +1-1/2; Long TIP 0.64% up1-3/8; 0.57% at high. The 5 yr TIP yields MINUS 1.31% vs -1.21%!!!; 10 yr -0.28% vs -0.22% 3 mo. Libor 0.55%, and 0.78%, starting to slip again! Bills 0.04% 1 month; 0.05% 3 months, 6 months 0.07%. Reverse Repo 0.17%, steady.

Gold rallied again Friday by $5.50 to close at $1735.40 with an intraday high of $1743 for the highest close since 12/6! It is well above the 200 day ($1647), and has been above $1600 for 13 straight sessions. It is now $1728.20 -$7.20. The record high is $1923.70, a buying climax on 9/6. Sup is $1668, the 50 day, further support $1653, the 40 day m/a. Res is $1770, the 12/2 high! Crude failed to rally again, closing at $99.56 -.14. It is now $99.03 -.53, and weak with resistance/support at $100 and further support at the 40 day (99.49), the 50 day (99.27), and $95.20, the 200 day.

…old-timers like TB recall that line from The Graduate…but the industry was plastics. A year ago the knowledgeable analysts all said it would be financials which were far and away the worst performer…taking away more than all other indices combined! This year, we hear it again, despite Basel III, the Greek/Euro crisis, and more.

But strategist Brian Belski said today not to trust valuations or at least don’t use them for your guide…TB would toss in book value per share which is absolutely meaningless in any financial institution as the assets are the people…note that Morgan Stanley and Credit Suisse are leading the way curbing payouts to investment bankers…and Goldman paid out way less.

This dovetails into TB’s theme that we are driving while looking through the rear-view mirror on earnings, they can be fleeting, especially in a slow-growth (no-growth?) economy. GDP in Q4 rose at a below-estimates 2.8% vs 3% yet it was misunderstood…especially since only 0.9% of that was due to growth while the bulk of it was inventory rebuilding from very low levels and which may turn out to be ‘involuntary.’ So far, if TB’s memory serves, about 50% of companies are hitting their marks, with 12% above and 38% missing estimates. Does that sound sustainable?

One other problem is that since Reagan, private sector union membership has been in decline, with the growth in public unions which is what has hurt governments so much. But it is now growing again and can you blame them? Not when CEO’s are grossly overpaid by any standards (for the major companies, not smaller ones), and the employees pay increases have not even kept pace with inflation…not to mention an increased share of benefits costs.

TB just read where Angeion, a med-tech firm went through THREE CEO’s last year at a cost of $1.35 million! The company lost $200,000 on revenue of $29.1 million but the board chairman says they are now on the right track. All that keeps them afloat is a cushion of over $9 million in cash, which has to also be a drain on earnings. This is the worst case of CEO abuse TB has seen but is it atypical of companies which lose, or make little money for shareholders while enriching the CEO? Think financial companies…mainly still run by the same players as before the crisis.

Going back three years or more, TB recalls interviews with people working for Best Buy, who were induced to come into middle-management, only to be forced into 10-12 hour days, and criticized for taking time off. Unions aren’t inherently bad…they serve to keep things in balance, but can they this time? The difference is American workers have little or no bargaining power as companies will merely outsource…and that spells trouble for economic growth. Most of our growth if you recall comes from consumption…how do you suggest we increase it?

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

The GOP continues to try to hand Obama a second term. They talk of Obama promoting ‘class warfare’ yet that is coming from within their own party as they try to appease the Tea Party by cutting the deficit while refusing to do anything about inequalities in the tax code…promising to do it once they are ‘in.’ Hogwash! They are owned by the groups who benefit most by the current tax code so any changes will be minimal…and non-existent in this election year.

Tom Brokaw had it right, the ‘greatest generation’ succumbed to the baby boomers, whose parents wanted them to not suffer as they did…and that has been passed on for three generations and now we wonder why the standard of living is declining for the first time in our nation’s history.

Thanks to an explosion of credit, we, like the proverbial frog in the pan of water, failed to see the temperature rising. Now we are paying for it.

But it goes farther than that…the main impact of the Viet Nam war was a lack of a desire to pay back…no draft…no obligation…and thus it became ‘all about us.’ What happened to JFK’s ‘ask not what your country can do for you,’ it couldn’t be summed up more than by George W. Bush in the wake of 9/11 telling us to go shopping…no plea for service. Instead, only a few…and virtually none from the families of the members of Congress, decided on their own to do something. What did they get for it? Read the book on Pat Tillman to see…he went over to fight and the only time he saw combat was the day he was killed. We went to Afghanistan to get Bin Laden, bungled it politically, and while staying there, diverted to Iraq, where we made a mess of the country politically, and all we had to show was getting rid of an impotent Saddam Hussein.

Yet the GOP continues to try to find more areas to invade…and if the Dems back off they get criticized as weak…despite global polls…by investors too…showing we are doing it right. They have trumped up the failures of Obama…and believe TB there were many, into the $5 trillion increase in the debt being his fault, even the price of gas and college educations…they have misled us on healthcare by refusing to acknowledge the costs of uninsured flooding our emergency rooms and thus driving up health costs.

Now they leave us in a quandary, who should be president? In TB’s opinion, certainly not the two leading candidates, and that at a time when we need a leader…yet the closest thing to a leader is Obama…who is a great speaker, but not a great leader. Yesterday, Boehner was asked about the do-nothing Congress…he railed pointing to the number of bills passed in the House but DOA at the Senate…blaming it on Harry Reid…yet he made no effort to get the GOP members to support the bills…why not pass them if you know they won’t go anywhere? Is that leaderhip? You decide.

Hope you have a wonderful week!

TB

The U.S. economy grew 2.8% in Q4 missing estimates. Backing out Inventories which added 1.9%, it grew at just 0.8%. For the entire year the economy expanded at just 1.7% vs 3% in 2010. Meanwhile the Core Price Index rose just 1.1%, least in a year and Real Disposable Income rose at just 0.8% on Q4. Consumer Spending in Q4 grew at just 2%, also less than forecast. Spending on Equipment and Software rose at just 5.2%. Government Spending in U.S. fell 2.1% for the entire year, the most since 1971…tea party: is this a good thing? Meanwhile even the Savings Rate fell to 3.7%, lowest since Q4 2007!

Market Reaction: Stock futures lower: Dow -52; SPX -6.50; NDQ -5.50. Bonds stronger with 30’s now 3.08%. In this environment the big winners are TIPS: 30 yr is up 1-3/16 to 0.56% while the 5 year yields 1.33% LESS than the inflation rate! There is a big bet!!! 10 year is now -0.24%! Little change in dollar or commodities, except Crude which is back below $100.  

If we try to balance the budget, fail to revise the tax code (which cannot and will not happen in an election year especially considering where the money is coming from for the hopefuls), we are dooming ourselves to slow growth and without higher wages and more jobs it will be impossible to raise the savings rate…ask yourself: is this a good thing?

Bloomberg Top Stories:

*Greek Debt Dispute May Trigger Default Swaps as EU Sees Deal – isn’t that special???

*Lagarde Keeps Pressure on Greek Creditors for Better Offer as Talks Resume

*Euro Strengthens After Italy Bill Sale; Treasuries Drop Before GDP Report

*Fighting Bernanke Hazardous in Gundlach View of Housing Market

*P&G Cuts Full-Year Profit Forecast on Unfavorable Currency Exchange Rates – oh, oh!

*Ford Falls Short of Estimates While Reporting Biggest Profit Since ‘08

*Legg Mason Net Income Tumbles 54% as Managing Fees Decline on Lower Assets

(poor performance and the loss of the legendary Bill Miller running flagship fund!)   

*Lehman Investors Traded $32 Billion of Bankrupt Company’s Debt Last Year

*Record Pace of Bond Sales Cools as IMF Downgrades Economy – where is safe harbor?

*Most Profitable Carry Trade Spurred by Colombia’s Interest-Rate Increases

*Eastman Will Buy Solutia for $4.7 Billion to Expand in Specialty Plastics

*Canadian Province Sales Reach Record as Fed Pledge Spurs Yield Grab

*Insuring Organic Crops is Money Loser for U.S. Taxpayers

*Ackermann Era Ending in Davos as Deutsche Bank Chief Poised to Cede Power

*Incredible Shrinking Bankers at Davos See Humbler Future as Austerity Hits – hmmm?

*Romney Run Seen Costing Private Equity as Public Pensions Warn of Backlash

*Romney Assails Gingrich on Campaign Tactics, Policy Push for Apology

*Monti Takes on Italian Bureaucracy in Latest Effort to Rejuvenate Economy     

Volume climbed even higher to an above average 4.5B shares from 4.39B shares in a MIXED session where the Dow struggled to stay positive but closed off 22 points Only Dow Transports and Utilities were up, but not much. NYSE stocks executed on the Big Board rose to 866M shares from 830M shares, still about 200 million short of the twelve month average. 49 of the last 52 sessions have been less than 1B! Advance/Declines were slightly negative: -1.1:1 vs +3.3:1 vs +1.2:1 vs +1.4:1 vs +1.4:1on NYSE and -1.2:1 vs +2:1 vs +1.5:1 vs -1.2:1 vs +1.5;1 on Nasdaq. Breadth was similar: -2x vs +3.4x vs +1.2x vs +1.4x vs +1.2x on NYSE and -2x vs +2.8x vs +1.2x vs -1.1x vs +1.4x on Nasdaq. New 52 week highs soared to 370 from 276 while new lows were slightly lower at 20 vs 23. The ratio jumped to 19x positive! The S&P VIX rose to  18.57 +.26. Investors still unwilling to put their money where their mouth is except day and high frequency.

Here are the results of the past five sessions: Dow -0.2% vs +0.6% vs -0.3% vs -0.1% vs +0.8%; Transports +0.4% vs +1.5%v vs -0.7% vs -0.8% vs -0.4%; Dow Utilities +0.1% vs +1.6% vs -0.8% vs +0.3% vs +0.3%; S&P 500 -0.6% vs +0.9% vs -0.1% vs +0.1% vs +0.1%; Nasdaq Composite -0.5% vs +1.1% vs +0.1% vs -0.1% vs -0.1%; Nasdaq 100 -0.5% vs +1.3% vs -0.1% vs flat vs -0.2%; Russell 2000 -0.3% vs +0.9% vs +0.7% vs -0.2% vs +0.3%; NYSE Financials -0.4% vs +0.5% vs -0.4% vs +0.6% vs +1%. NYSE Leaders: BAC -0.7% vs +0.8 vs +0.6% vs +2.6% vs +1.6% vs +2.4%; PFE-0.4%; F-1.1% vs -0.9% vs +1.3%; T -2.5%; WFC -3.8%..

European equity markets weaker, Asia better except Japan: FTSE -0.5% vs +1.2% vs -0.7% vs -0.8% vs -0.1%; CAC 40 -0.5% vs +1.2% vs -0.9% vs -1.1% vs -0.5%; DAX +0.2% vs +1.5%; Nikkei -0.4% vs +1.1% vs +0.2% vs -0.5% vs +1.5%; Hang Seng +0.3% vs +1.6%; Korean KOSPI +0.4% vs +0.3% vs +0.1%; Indian Sensex +0.9% vs closed vs +0.5% vs +1.5% vs +0.4% vs +0.6%. U.S. Futures slightly weaker, but coming back from session lows: DOW -21; SPX -2; NDQ +0.50. Bonds weaker again: 10’s still below 2%, 30’s still above 3%. 10 yr 1.94% -1/16. RECORD low 9/23 of 1.6855%; 30 yr 3.11% -7/16; Long TIP 0.70% UP 3/8; 0.57% at high. The 5 yr TIP yields MINUS 1.21% vs -1.24%!!!; 10 yr -0.22%. 3 mo. Libor 0.55%, and 0.79%, steady. Bills 0.04% 1 month; 0.05% 3 months, 6 months 0.07%. Reverse Repo 0.16%, steady.

Gold had another stellar session roaring $26.90 to close at $1728.80 with an intraday high of $1731.50 for the highest close since 12/6! It is well above the 200 day ($1647), and has been above $1600 for 12 straight sessions. It is now $1725.80 -$4.10. The record high is $1923.70, a buying climax on 9/6. Sup is $1667, the 50 day, further support $1653, the 40 day m/a. Res is $1770, the 12/2 high! Crude did not participate in the metals rally, closing at $99.70 +.30. It is now $100.21 +.51, and weak with resistance/support at $100 and further support at the 40 day (99.50), the 50 day (99.28), and $95.20, the 200 day.

…”my sister…my mother, my sister…my mother.” Remember that Faye Dunaway quote from Chinatown and the admonition to not go there? With stocks the bet is whether growth or income being the place to be in 2012. TB thinks it is income again, meaning solid dividend payers, good preferreds, and mortgage REITS (only with govt. guaranteed mortgages!). That is not to say that both classes may underperform but despite the Fed’s outlook of slow growth out to 2014 at least (a mid-term election year by the way), how much is left in bonds? Well, at least more than the room for money market yields to decline. The question is: is the Fed trying to dissuade savings? Consumption is key to our economy but so is rebuilding solid balance sheet for the populace. It will serve nothing to force growth when debt levels remain high, jobs remain scarce and pay raises…except for CEO’s and friends…can’t even keep pace with the low inflation rate.

Remember the best performing sector last year in stocks? Dow Jones Utilities! They were UP 19.7% (with reinvested dividends) for the entire year and aside from three blips had pretty steady growth. That gain has shrunk to 16.9% though since yearend. Just like the Dow, which was the best performing pure stock index, which rose 8.4% the key was DIVIDENDS! But unlike Utilitites, the gains have continued so far and it is now up 13.1% for the extended period. Note however that the dividend YIELD has shrunk dramatically for both over this time period and since Utilities depend much more on the dividend they are underperforming so far this year. The dividend yield on the Dow is down to 2.5% while Utilities yield 4.04% down from a healthier 5%(?). Look before you leap into anything these days…it’s a jungle out there!

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

Another mea culpa: TB hates that but in talking about unemployment he slipped saying ‘inflation’ which gave it an entirely different meaning. What he meant was that we will not see the ‘headline’ unemployment rate below 7%…6.7% until 2014. They should be careful saying even that as look how the GOP has called Obama a liar for promising lower unemployment while fighting the GOP and as local governments continue with layoffs due to their own budget problems…not a good thing. TB also pointed out the REAL unemployment rate including discouraged workers and part-timers who want an need full-time jobs is stuck at 16%…last night Gingrich said it is 18% in Florida. Thanks to those of you who commented as it is hell being the ‘all-night DJ’ and not knowing if anyone is really out there.

TB is a masochist…this can be confirmed by the fact that he has listened to nearly every GOP debate hoping for some words of wisdom but instead only hearing how to blast your opponents without expletives. The only ‘pearl’ last night was Rick Santorum, who stands no chance of getting the nod, saying while they are trashing one another, they are handing the election to Obama. Anyone but Obama, anyone?

Now for a prediction…one that TB can’t take credit for as it was espoused by none other than Robert Reich: Hillary will be the VP on the ticket. No sooner had Reich written that then it was labeled preposterous by the pundits. But the announcement of her resignation to go home and be a good wifey and rest up, is even more preposterous. She is the consummate politician and if ‘drafted’ by Obama would certainly run with him. That would set her up for the presidential run she so desired/desires. TB heard that she has been the most admired woman for the past TEN years…imagine what has gone on over that time frame, much of it including her. Place your bets, boys and girls…

As for Obama, he would be wise to choose her over Biden who always looks bored at the SOTU speech and who Reich says wants to be Secretary of State. The GOP has made it so easy for him…he doesn’t have to pay to create ads, just reproduce the ones the GOP candidates have done blasting whoever becomes the eventual candidate. The wheels have come off the GOP and the Tea Party isn’t going to like it. All Obama has to do is look…well…presidential.

Have a great weekend, this week really flew!

TB

*U.S. Weekly Jobless Claims rose 21k to 377k…seasonal adjustments are very volatile!

*Caterpillar Earnings, Forecast Beat Estimates on Increased Mining Demand

*AT&T Earnings Forecast Falls Shore as IPhone Demand Boosts Subsidy Costs

*Nokia Reports Smartphone Sales That Beat Analysts’ Estimates – off 8% Tuesday!

*Greek Debt Talks Resume in Athens as Policy Makers Squabble Over Haircut

*Bernanke Achieves Milestone in Fed Transparency Drive With Inflation Goal

*Palladium Shortage Looms as Russian Stockpile Sales Dwindle

*U.S. Short of Contract Goal for Disabled Vets as Wars End – very tragic

*Amazon Push Into Publishing Sets Off Brawl Casting Kirshbaum as Turncoat

*Subprime Debt Insured by FHA Climbs in Bet on housing Recovery – a bad bet to TB

*Obama Wins Second Term in Global Poll showing Investors Resisting Gingrich – duh!!!

*Romney Tax Break Rejected as Welfare for the Rich in Global Investor Poll

*Nigerian Police Arrest 160 Chad Nationals After Bombings That Killed 256

*Gingrich Company Helped Clients Attend Bill Signing of Favored Legislation

*Obama’s Forecast of 600,000 Fracking Jobs Includes Drillers and Realtors

*’Stop-Newt’ Republicans Confronting Party Base Unwilling to Take Orders

Volume soared to an above average 4.39B shares from 3.66B shares on a session that only got ‘legs’ following the FOMC statement…but absent retail participation…this was just positioning by speculators! All indices were up solidly. NYSE stocks executed on the Big Board however, only rose to 830M shares from 743M shares, from near the lowest since 1/9 and still about 200 million short of the twelve month average. 48 of the last 51 sessions have been less than 1B! Advance/Declines were positive: +3.3:1 vs +1.2:1 vs +1.4:1 vs +1.4:1 vs +1.9:1 on NYSE and +2:1 vs +1.5:1 vs -1.2:1 vs +1.5;1 vs +1.4:1 on Nasdaq. Breadth was similar: +3.4x vs +1.2x vs +1.4x vs +1.2x vs +2.2x vs on NYSE and +2.8x vs +1.2x vs -1.1x vs +1.4x vs +1.8x on Nasdaq. New 52 week highs rose to 276 from 161 while new lows were steady at 23. The ratio is about 13x positive! The S&P VIX decline modestly, despite the magnitude of the rally to 18.31 -.60. People still not willing to put their money where their mouth is except day and high frequency.

Here are the results of the past five sessions: Dow +0.6% vs -0.3% vs -0.1% vs +0.8% vs +0.4%; Transports +1.5%v vs -0.7% vs -0.8% vs -0.4% vs +1.6%; Dow Utilities +1.6% vs -0.8% vs +0.3% vs +0.3% vs -1%; S&P 500 +0.9% vs -0.1% vs +0.1% vs +0.1% vs +0.5%; Nasdaq Composite +1.1% vs +0.1% vs -0.1% vs -0.1% vs +0.7%; Nasdaq 100 +1.3% vs -0.1% vs flat vs -0.2% +0.7%; Russell 2000 +0.9% vs +0.7% vs -0.2% vs +0.3% vs +0.4%; NYSE Financials +0.5% vs -0.4% vs +0.6% vs +1% vs +1.7%, seems to have gotten ahead of itself? NYSE Leaders:  BAC +0.8 vs +0.6% vs +2.6% vs +1.6% vs +2.4% vs +4.9%; GLW -10.7%; XRX -9.9%; F +0.9% vs +1.3%; GE +1.5%. Note Corning and Xerox…trashed and normally not high volume stocks.

Global equity markets strong, except Japan, India closed: FTSE +1.2% vs -0.7% vs -0.8% vs -0.1% vs +0.6%; CAC 40 +1.2% vs -0.9% vs -1.1% vs -0.5% vs +1.7%; DZC +1.5%; Nikkei -0.4% vs +1.1% vs +0.2% vs -0.5% vs +1.5%; Hang Seng finally open +1.6%; Korean KOSPI +0.3% vs +0.1%; Indian Sensex closed vs +0.5% vs +1.5% vs +0.4% vs +0.6%. U.S. Futures up modestly: DOW +51; SPX +5; NDQ +5. Bonds continuing to rally, 30’s lagging: 10’s below 2%, 30’s still above 3%. 10 yr 1.96% +3/8. RECORD low 9/23 of 1.6855%; 30 yr 3.11% +11/16; Long TIP 0.69% vs 0.79% +1-11/16; 0.57% at high. The 5 yr TIP yields MINUS 1.24% vs -1.05%!!!; 10 yr -0.18%. 3 mo. Libor 0.55%, and 0.79%, steady. Bills 0.02% 1 month; 0.04% 3 months, 6 months 0.06%. Reverse Repo 0.16%, steady.

Gold opened weaker but roared after the FOMC statement and is well above the 200 day ($1645). It has been above $1600 for 11 straight sessions. It closed at $1703.00 +$36.60, with a high of $1716, highest since 12/8 and is now $1719.60 +$16.60. The record high is $1923.70, a buying climax on 9/6. Sup is $1668, the 50 day, further support $1653, the 40 day m/a. Res is now $1770, the 12/2 high! Crude was lower all morning but rallied modestly on the FOMC, closing at $99.40 +.45. It is now $100.70 +$1.29 SUP is again $100 and the 40 day (99.73), the 50 day (99.46), and $96.50, the 200 day.

…gosh the price of a rally is cheap these days…the Fed says the economy is going nowhere for at least the next two years and they run stocks…more accurately they got ‘legs.’  The Fed essentially said that inflation, and with it solid growth (needed to make a significant dent in unemployment), is way off…as far as the eye can see. In the past, whenever someone says this we find out they are very nearsighted or short-sighted…but it seems appropriate now. In fact, the Fed doesn’t see inflation above 2% or unemployment below 7% until 2014 and then only to 6.7% which is nothing to be proud of…especially if you are one of those unemployed…remember too that this is the headline number, meaning REAL unemployment would still remain at double digit levels!

Nevertheless, stocks rallied…with a big surge in volume but NOT on the NYSE which has had just 3 days with 1B plus share volume in the past 51 sessions…and yesterday was not exception! In fact December 16^th was the last big volume day (1.79B) and only one above 1B shares. The market is being driven by algorithms and speculators not retail who is just along for the ride, and that can be very uncomfortable when you car is careering (not careening as usually misstated), around those sharp hairpin turns…screech!

But what is the Fed really saying? That there are serious significant problems with the economy, both domestic and global and even if we get our act together the rest of the world’s weakness will preclude growth from being strong. Therefore, Obama’s proposals for job creation make sense, but have scant chance of passage as the all-encompassing interest inside the Beltway is in getting re-elected. We might not recognize the next Congress but if Newt gets the nomination, Obama will surely remain in the Oval Office…so much for anyone but Obama…a pity! Doesn’t America…and Americans…deserve more…like a choice??? The GOP will rue that motto and we will all be worse off for it. Four more years? …then what???

Note also that not only did stocks rally yesterday, so did commodities…both gold and crude bouncing off from big overnight lows…bonds too rallied…the 30 year, target of operation twist, however did little, but the 10 year is back below 2%! So it was an UP day…across the board! Gold could easily hit $1800 here and if so make a run at the $1925 high from September 6^th.

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

Mea culpa: yesterday, TB attributed the GOP rebuttal, Mitch McConnell when he meant to say Mitch Daniels, the Indiana governor…one reader reported it so either the rest of you missed it, ignored it, or TB is sorely lacking in readers.

So much for the most ‘divisive’ campaign ever being heralded for Obama…no, that title goes to the GOP and its beloved SuperPACs. Of course the Dems have them too but not with the amount of lies and rhetoric that the GOP has shown thus far. Also, like in South Carolina, Florida airtime…all that is available has been bought by Gingrich’s SuperPAC. And its prime benefactor, Sheldon Adelson and his Israeli-born wife, claims he wants nothing for it, but the main reason he is backing Gingrich is his support of Israel and loathing of Palestinians…he even called them a bunch of nomads that were ‘created.’ But wait…wasn’t Israel created too? Yes, by Europeans and the UN, and anti-semitism was rampant there even after Hitler’s demise. We might not have the mess we are in if the Israeli government hadn’t supported the squatters who under false pretenses rented from Palestinians then refused to leave. TB supports Israel but the government there has not acted responsibly allowing the rift to widen. Consider that Tom Friedman, who is Jewish, wrote of this problem in From Beirut to Jerusalem which was published just before the first Gulf War began! Too bad we didn’t heed his warnings, after all he was objective.

Bloomberg has been conducting a series of global investor polls which are overwhelmingly supportive of Obama and critical of the GOP, especially Gingrich. So before one says ‘anyone but Obama,’ think twice. Just a suggestion.

Have a great day.

TB

 *ECB Said to Oppose Losses on Its Greek Debt as Lagarde Presses Governments

*U.K. Teeters on Brink of Recession as King Signals More Stimulus – it can’t happen here!?!

*Business Confidence in German Rises More Than Forecast to Five-Month High

*Merkel Becomes Master of Markets With Euro Austerity Mollifying Investors

*Stocks Drop in Europe as Ericsson Profit Disappoints; Nasdaq Futures Rise

*Boeing Forecasts Full-Year EPS as High as $4.25, Below Analysts Estimates

*Fed Likely to Focus on Housing-Debt Purchases in Any Move to Spur Economy

*Gold Proving Safest Commodity as Goldman Forecasts Record

*General Dynamics Profit Falls 17^ on Charges for Jet Unit

*United Technologies Net Rises as Aerospace Drives Demand for Pratt Engines

*Business Confidence in German Rises More Than Forecast to Five-Month High

*Merkel Becomes Master of Markets With Euro Austerity Mollifying Investors

*Gross Counters Gundlach Pushing U.S. Bank Bonds DoublLine Shuns as Risky

*Largest U.S. Banks Beating Basel III Deadline on Equity

*Billionaires Occupying Davos as Richest 0.01% Bemoan Inequality of Incomes

*Capitalism Seen in Crisis by Global Investors Citing Widening Inequalities

*Somalia Hostages Freed by U.S. Special Forces in Pre-Dawn Helicopter Raid

Volume dropped slightly again to a below average 3.66B shares from 3.75B shares on a negative session. Dow Transports and Utilities were the big losers, while the Russell 2000 rose 0.7%, again the two Nasdaq indices were listless. NYSE stocks executed on the Big Board rose slightly to 743M shares from 723M shares, still near lowest since 1/9 and about 300 million short of the twelve month average. 47 of the last 50 sessions have been less than 1B! Advance/Declines were slightly positive: +1.2:1 vs +1.4:1 vs +1.4:1 vs +1.9:1 vs +3.9:1 on NYSE and +1.5:1 vs -1.2:1 vs +1.5;1 vs +1.4:1 vs +3.3:1 on Nasdaq. Breadth was similar: +1.2x vs +1.4x vs +1.2x vs +2.2x vs +6.9x on NYSE and +1.2x vs -1.1x vs +1.4x vs +1.8x vs +4.5x on Nasdaq. New 52 week highs plunged to 161 from 224 while new lows rose to 24 vs 14. The ratio is about 11x positive! The S&P VIX rose slightly to 18.91 +.24, backing away from the lowest reading since 7/22…just before the selloff began still complacent!!!

Here are the results of the past five sessions: Dow -0.3% vs -0.1% vs +0.8% vs +0.4% vs +0.8%; Transports -0.7% vs -0.8% vs -0.4% vs +1.6% vs +1%; Dow Utilities -0.8% vs +0.3% vs +0.3% vs -1% vs flat vs +0.2%; S&P 500 -0.1% vs +0.1% vs +0.1% vs +0.5% vs +1.1%; Nasdaq Composite +0.1% vs -0.1% vs -0.1% vs +0.7% vs +1.5x vs +0.6%; Nasdaq 100 -0.1% vs flat vs -0.2% +0.7% vs +1.4%; Russell 2000 UP 0.7% vs -0.2% vs +0.3% vs +0.4% vs +1.8%%; NYSE Financials -0.4% vs +0.6% vs +1% vs +1.7% vs +1.6% +0.1%. NYSE Leaders:  BAC +0.6% vs +2.6% vs +1.6% vs +2.4% vs +4.9%; NOK -8%!!!; EMC +7.3%!!! S -3.6%; F +1.3%.

European equity markets weaker, Japan and India up, Hong Kong still  closed for Chinese New Year, gung hay fat choy!: FTSE -0.7% vs -0.8% vs -0.1% vs +0.6% vs -0.1%; CAC 40 -0.9% vs -1.1% vs -0.5% vs +1.7% vs -0.2%; DAX -0.6% vs -1.1% vs -0.3% vs +0.8% vs +0.2%; Nikkei +1.1% vs +0.2% vs -0.5% vs +1.5% vs +1%; Hang Seng still closed; Korean KOSPI +0.1%; Indian Sensex +0.5% vs +1.5% vs +0.4% vs +0.6% vs +1.2%. U.S. Futures weaker EXCEPT Nasdaq: DOW -54; SPX -5; NDQ +13??? Bonds doing better: 10’s and 30’s still above 2% and 3% respectively. 10 yr 2.04% +3/16. RECORD low 9/23 of 1.6855%; 30 yr 3.13% +3/8; Long TIP 0.79% +5/8; 0.57% at high. The 5 yr TIP yields MINUS 1.05%; 10 yr -0.04%. 3 mo. Libor 0.56%, and 0.79%, steady. Bills 0.02% 1 month; 0.04% 3 months, 6 months 0.07%. Reverse Repo 0.16% vs 0.18%.

Gold closed weaker but still well above the 200 day ($1642). It has been above $1600 for 10 straight sessions. It closed at $1664.50 -$13.80, with a high of $1681, highest since 12/11 and is now $1653.90 -$10.+0. The record high is $1923.70, a buying climax on 9/6. Res/Sup is $1666, the 50 day, further support $1649, the 40 day m/a. Crude closed lower at $98.95 -.63, still near lowest close since 12/21. It is now $97.92 -$1.03!!! RES is again $100, and the 40 day (99.42), the 50 day (99.20), and $95.28, the 200 day.

…still a lack of direction to the markets and Obama’s SOTU speech hasn’t had much impact on the markets so far…most important today is the FOMC meeting. In the last 50 sessions, stocks have had just THREE average volume sessions, the highest being an options expiration on Dec. 16, the last of the year. There have been no other 1B share days on the NYSE (not to be confused with NYSE stocks traded on ETN’s primarily by high frequency traders).

Remember the old adage: sell in May and go away? It was true last year and might be true again this year as the presidential race heats up. Ah, but what about that monumental rally in Q4? It didn’t quite offset the plunge in Q3 and you would have done as well to be in cash from May 3!!!

Meanwhile, with little or no selling resistance, the market has continued to eke out higher highs, the one on Monday barely beating the double top from July, just before the plunge (12720 vs 12751 and 12752), before closing yesterday at 12675. Earnings reports have been erratic and not instilling confidence in getting into the market. Will we get the dreaded selloff this month or early February? Time will tell…always does…

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

Remember when Dubya was president and every time he gave his SOTU the media would say he has to give the speech of his life. Miraculously, he did it to their chagrin.

Last night was such a time for Obama and he pulled it out sounding not like the socialist he is billed as but a populist…TB along with most others could find little to fault except perhaps his 30% tax on millionaires which hopefully doesn’t mean another minimum tax like the AMT.

Many times TB has said that Obama has enough faults to go after and failures as a president, but to blame HIM for the $4 trillion deficit is simply wrong. True, it began to rise sharply in 2009 after all those TARP bills shoved in at the end of the Bush administration…and all bipartisan…something we haven’t seen since. Thankfully, they happened but sadly, the politicos and lobbyists have succeeded in killing meaningful financial reform and the same players are, for the most part, running the show and reaping humongous bonuses…bankers thru recapture of loan loss reserves that were built up due to their own stupidity and short-term vision. Who can forget Chuck Prince’s “while the music is playing you have to keep dancing.” Too bad he didn’t sit down!

As for the GOP rebuttal, Mitch McConnell did a good job and illustrates why he might have made a better candidate than either Romney or Gingrich.

Regarding Romney, we shouldn’t blame him for his low tax rate but a poorly designed tax code…except for those who put in the rules, but for him to consider $350,000 for speaking as small change, is an insult to the rest of us.

Gingrich is hedging. While technically not a lobbyist, he came as close as possible and didn’t have to file those reports. This is typical of the power in the GOP who blasted FNMA and FHLMC yet took their donations…sticks and stones.

Don’t forget also that despite their continual blasting of Obamacare, both at times supported similar proposals. The point is: don’t believe everything you read…even here!…especially here???

Have a great day.

TB

Bloomberg Top Stories:

 *EU Calls for More Bondholder Concessions as Greece Seen Going ‘Off Track’ – hmmmm

*Stocks in Europe Drop on Greek Debt-Talk Stalemate; Natural Gas Advances

*Bernanke Transparency Drive Poses Risk Rate Forecast to Be Viewed as Vow

*Pandit Pariah No More as U.S. Bankers Hunting Deals in Ascendance at Davos

*McDonald’s Fourth-Quarter Profit of $1.33 a Share Tops Analysts’ Forecast – $1.30

*Travelers Profit Misses Estimates as Investment Income, Reserves Decline

*Hungary Unexpectedly Holds EU’s Highest Benchmark Rate as Forint Recovers

*NYSE-Deutsche Boerse Said to Lack Support to Overturn EU’s Takeover Veto

*U.K. Regulators May Set Specific Bonus Rule for Hedge Funds, Private Equity

*Oil-Embargo Rally Muted by Saudi Pledge, Libyan Recovery

*Ford Expects Fusion to Grab Profits Even Without Camry’s Sales Crown

*Six-Month Junk-Issuance Drought Ending as JBS Taps Market in Brazil

*Super-Rich Playing Snow Polo as Davos Igloo Agitators Vie With Duran Duran

*Romney’s Tax Returns Show 13.9% Rate on Income of $21.6 Million for 2010

(Yep he’s the man to fix the taxing problem…13.9%…wouldn’t you kill for that? Meanwhile, Gingrich only released the 2006 Freddie Mac contract…what a pair to draw to)

Volume dropped slightly to a below average 3.75B shares from 3.9B shares on a mixed session. Dow Transports were the big loser, -0.8% while NYSE Financials rose 0.6% (it has been up for five straight sessions now), while the two Nasdaq indices and Russell 2000 were listless. NYSE stocks executed on the Big Board plunged to 723M shares from 927M shares, lowest since 1/9 and now about 300 million short of the twelve month average. 46 of the last 49 sessions have been less than 1B! Advance/Declines were mixed: +1.4:1 vs +1.4:1 vs +1.9:1 vs +3.9:1 vs +1.5:1 on NYSE and MINUS 1.2:1 vs +1.5;1 vs +1.4:1 vs +3.3:1 vs +3.3:1 on Nasdaq. Breadth was also mixed: +1.4x vs +1.2x vs +2.2x vs +6.9x vs +1.1x on NYSE and MINUS 1.1x vs +1.4x vs +1.8x vs +4.5x vs +1.4x on Nasdaq. New 52 week highs rose to 224 from 199 while new lows were halved to 14 vs 27. The ratio is about 15x positive! The S&P VIX rose slightly to 18.67 +.39, following the lowest reading since 7/22…just before the selloff began AND far too complacent!!!

Here are the results of the past five sessions: Dow -0.1% vs +0.8% vs +0.4% vs +0.8% vs +0.5%; Transports DOWN 0.8% vs -0.4% vs +1.6% vs +1% vs -0.1%; Dow Utilities +0.3% vs +0.3% vs -1% vs flat vs +0.2% vs -0.1%; S&P 500 +0.1% vs +0.1% vs +0.5% vs +1.1% vs +0.4%; Nasdaq Composite -0.1% vs -0.1% vs +0.7% vs +1.5x vs +0.6% vs -0.5%; Nasdaq 100 FLAT vs -0.2% +0.7% vs +1.4% vs +0.9%; Russell 2000 -0.2% vs +0.3% vs +0.4% vs +1.8% vs +0.2%; NYSE Financials +0.6% vs +1% vs +1.7% vs +1.6% +0.1%. NYSE Leaders:  BAC +2.6% vs +1.6% vs +2.4% vs +4.9% vs -2.1% vs -2.7% vs -1.2% vs +3.6% vs +5.7%; C +0.7% vs +1.1% vs +1% vs +2.9% vs -8.3%!!!; GE -1.1% vs flat vs +0..7% vs +1.5% vs -0.7%; WFC +1.2%.

European equity markets weaker, Japan and India up, Hong Kong and Korea closed for Chinese New Year, gung hay fat choy!: FTSE -0.8% vs -0.1% vs +0.6% vs -0.1% vs +0.9%; CAC 40 -1.1% vs -0.5% vs +1.7% vs -0.2% vs +1.6%; DAX -1.1% vs -0.3% vs +0.8% vs +0.2% vs +1.9%; Nikkei +0.2% vs -0.5% vs +1.5% vs +1% vs +1% vs +1.1% vs +1.4%; Hang Seng closed; Korean KOSPI closed; Indian Sensex +1.5% vs +0.4% vs +0.6% vs +1.2% vs -0.1% vs +1.7% vs +0.7% vs -0.9%. U.S. Futures weaker: DOW -46; SPX -7; NDQ -10. Bonds slightly better: 10’s and 30’s still above 2% and 3% respectively. 10 yr 2.05% +1/32. RECORD low 9/23 of 1.6855%; 30 yr 3.12% +3/32; Long TIP 0.80% +5/16; 0.57% at high. The 5 yr TIP yields MINUS 1.00%; 10 yr -0.01%. 3 mo. Libor 0.56%, and 0.79%, steady. Bills 0.01% 1 month; 0.04% 3 months, 6 months 0.07%. Reverse Repo 0.18% vs 0.20%

Gold closed higher and well above the 200 day ($1641). It has been above $1600 for 9 straight sessions. It closed at $1678.30 +$14.30, with a high of $1681.80, highest since 12/11 but is now $1666.50 -$11.80. The record high is $1923.70, a buying climax on 9/6. Res/Sup is $1668, the 50 day, further support $1650, the 40 day m/a. Crude closed higher at $99.58 +$1.12, following lowest close since 12/21. It is now $99.25 -.33. RES is again $100, support the 40 day (99.40) and the 50 day (99.20), major support at $95.35, the 200 day.

…borrowing the famous quote from Admiral Stockdale when he was blindsided into a vice-presidential debate by his ‘friend’ Ross Perot, and made to look like a fool, the markets have no clear trend and are suffering again from declining volume when ‘average’ was a good thing.

Quarterly earnings reports are mixed at best so there is nothing to trade off, since we have lost interest in the Greco/European crisis…something we will pay dearly for at some point. Not much else worthy of mention except to say that the Nasdaq seems to have lost its luster along with Transports while Financials are beginning to surge…for the wrong reasons as TB sees it.

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

Thanks to The Baseline Scenario, for another great article, this time on the argument against the Volcker Rule attached to Dodd-Frank. They warn to not trust the just released report commissioned by the Securities Industry and Financial Markets Association (SIFMA),

whose mission statement is: “On behalf of our members, SIFMA is engaged in conversations throughout the country and across international borders with legislators, regulators, media and industry participants.” Thus this was not an objective report and designed to thwart any and all changes to financial regulations…the Volcker Rule being to specifically exclude proprietary trading from federal bailouts…aka ‘too big to fail.’

Thus this report is about as useful as any from a right or left wing think tank that skews the findings to match their goals. In this instance, as the writer points out there is no indication that the authors of the study were influenced…they just knew what the sponsors wanted and gave it to them. Simple economics…or freakonmics…where if you determine the ‘incentive’ you can forecast the conclusion. Of course the study makes it sound like all banks will be penalized when it is only the big banks and their risky practices that are affected. Isn’t that how we got in this mess?

As for the argument that we need to encourage this in order to compete with other big banks…didn’t we learn anything…aren’t the foreign banks in even worse shape than ours…yet, they want to be able to compete with that? Again, look at the incentives: short term profits for senior management and traders at the expense of long-term shareholders and taxpayers.

No bank should be too big to fail and bondholders should not be protected. Furthermore, TB believes that in the event of a bailout all CD rates from the failed institution should revert to the comparable U.S. treasury rate. This would eliminate the incentive to put your money with a failing institution and thus cause them to fail before the losses magnify. This was made very clear during the S&L crisis of the 1980’s when institutions like American Savings were writing CD’s at the highest rates to attract despositors and more importantly to hold on to ones who were considering withdrawing funds.

When TB was a salesman, he sold a five year Continental Illinois CD to a credit union. The rate was 15%! When the bank, the first to come under the Reagan imposed ‘too big to fail’ rule, the CD and all others became government obligations and paid that 15% for more than four years! That is criminal! All that was needed was a clause that provided that exemption. The FDIC exists to protect depositors, not enrich them for their stupidity!

Isn’t it interesting as the pressure mounts to release financial information that both Romney and Gingrich are doing so selectively? Romney by only providing two years and yet what we found was that even then he paid a 13.9%, not that it is illegal just points to the unfairness of the tax code…after all that was on $21.6 million!!! As for Gingrich, he only provided his 2006 Freddie Mac contract…why just that one. TB accepts that he was not a lobbyists…or at least a ‘registered’ one…but what he did looks, talks, and walks like a lobbyist…QUACK!!! Yet these two men are going to fix things for us??? Not that Obama will do any better…let’s see what he has to say in his SOTU speech tonight (with special attention paid to the reactions on the right side of the aisle…will they once again disrespect his office?

As today’s definition says…we are suffering from Electile Dysfunction…no cure for it, at least not for four more years! Ugh!

Hope you have a great day!

TB

This week’s economic calendar is back-loaded. The highlight of the week will be the advance report on Q1 GDP (Friday). We will also get December Pending Home Sales (Wednesday), December Durable Goods Orders, December New Home Sales, and December Leading Indicators (Thursday), and mid-January Consumer Sentiment (Friday). In addition, the FOMC will hold a 2-day meeting (Tuesday and Wednesday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA

Bloomberg Top Stories:

 *Finance Ministers Meet on EU Crisis Solution as Greek Debt Swap Unresolved – yawn!

*Stocks Rise in Europe Before EU Meeting; Euro Strengthens as Gas Plunges

*Greece’s Creditors Have Made ‘Maximum’ Debt-Swap Offer, IIF’s Dallara Says

*Gorman’s Pay Said to Be Cut 25% as Dimon’s $23 Million Held Flat for 2011 – what a guy!

*Halliburton Fourth-Quarter Net Climbs as U.S. Hydraulic Fracturing Surges

*Speculators Raise Wagers on Higher Metals by Most Since July – hence this:

*Pan American to Acquire Minefinders in Deal Valued at About $1.49 Billion!!!

*Europe Giving Euro Doomsayers Pause as Investors Avoid Sanatorium at Davos

*Europe Will Ban Iran Oil Starting July 1 to Boost Pressure on Nuclear Plan

*Gingrich Pressed to Release Freddie Mac Contracts as Race Moves to Florida

Volume dropped surprising to a slightly below average 3.9B shares from 4.43B shares…surprisingly because it was options expiration. Only the Dow and NYSE Financials had strong gains, while both Nasdaq indices and Transports were slightly negative? S%P 500 barely positive on a parallel day to Thursday? NYSE stocks executed on the Big Board rose to 927M shares from 806M shares, still about 100 million short of the twelve month average – and an hour before the close that stood at just 600 million shares…the rally in the Dow began 15 minutes before the close adding 25 points for the 96 point gain…after the surge on the open it languished at up about 70 most of the session. 45 of the last 48 sessions have been less than 1B! Advance/Declines were positive: +1.4:1 vs +1.9:1 vs +3.9:1 vs +1.5:1 vs -1.9:1 on NYSE and +1.5;1 vs +1.4:1 vs +3.3:1 vs +3.3:1 vs +1.2:1 on Nasdaq. Breadth was less so: +1.2x vs +2.2x vs +6.9x vs +1.1x vs -3.2x on NYSE and +1.4x vs +1.8x vs +4.5x vs +1.4x vs -1.8x on Nasdaq. New 52 week highs plunged to 199 from 287 while new lows dipped to 27 vs 33. The ratio is still about 6x positive. The S&P VIX plunged again to 18.28 -1.59, the lowest reading since 7/22…just before the selloff began AND far too complacent!!!

Here are the results of the past five sessions: Dow +0.8% vs +0.4% vs +0.8% vs +0.5% vs -0.4%; Transports DOWN 0.4% vs +1.6% vs +1% vs -0.1% vs -0.6%; Dow Utilities +0.3% vs -1% vs flat vs +0.2% vs -0.1% vs flat; S&P 500 +0.1% vs +0.5% vs +1.1% vs +0.4% vs -0.5%; Nasdaq Composite DOWN 0.1% vs +0.7% vs +1.5x vs +0.6% vs -0.5% vs +0.5%; Nasdaq 100 DOWN 0.2%+0.7% vs +1.4% vs +0.9% vs -0.4%; Russell 2000 +0.3% vs +0.4% vs +1.8% vs +0.2% vs -0.8%; NYSE Financials +!%??? vs +1.7% vs +1.6% vs +0.1% vs -0.8%. NYSE Leaders:  BAC +1.6% vs +2.4% vs +4.9% vs -2.1% vs -2.7% vs -1.2% vs +3.6% vs +5.7%!!! vs 1.5% vs -2.1% vs +8.6%; C +1.1% vs +1% vs +2.9% vs -8.3%!!! vs -2.7% vs +1.1% vs +4.2%; GE FLAT vs +0..7% vs +1.5% vs -0.7%.

Global equity markets stronger, except Japan, Hong Kong and Korea closed for Chinese New Year, gung hay fat choy!: FTSE -0.1% vs +0.6% vs -0.1% vs +0.9% vs -0.3%; CAC40 -0.5% vs +1.7% vs -0.2% vs +1.6% vs +0.8%; DAX -0.3% vs +0.8% vs +0.2% vs +1.9% vs +0.1%; Nikkei DOWN 0.5% vs +1.5% vs +1% vs +1% vs +1.1% vs +1.4%; Hang Seng closed vs +0.8% vs +1.3% vs +0.3% vs +3.2%!!! vs +0.6%; Korean KOSPI closed vs +1.8% vs +1.2% vs flat vs +1.8% vs +0.6%; Indian Sensex +0.4% vs +0.6% vs +1.2% vs -0.1% vs +1.7% vs +0.7% vs -0.9%. U.S. Futures modestly higher: DOW +12; SPX flat ; NDQ +2. Bonds slightly weaker: 10’s and 30’s both above 2% and 3% respectively. 10 yr 2.04% -3/16. RECORD low 9/23 of 1.6855%; 30 yr 3.13% -1/2; Long TIP 0.79% -7/16; 0.57% at high. The 5 yr TIP yields MINUS 0.99%; 10 yr 0.00%. 3 mo. Libor 0.56%, and 0.79%, steady. Bills 0.03% 1 month; 0.04% 3 months, 6 months 0.07%. Reverse Repo 0.20% vs 0.24%

Gold higher and well above the 200 day ($1640). It has been above $1600 for 8 straight sessions. It closed at $1664.00 +$9.50. The overnight high is $1677.90, highest since 12/11 and it is now $1675.50 +$11.50. The record high is $1923.70, a buying climax on 9/6. Support is $1671, the 50 day, $1650, the 40 day m/a, all declining. Crude closed very weak at $98.46 -$1.93!!!, lowest since 12/21. It is now $99.40 +$1.07. RES is again $100, support the 40 day (99.32) and the 50 day (99.13), major support at $95.41, the 200 day.

…can the GOP sort out the mess they have gotten themselves into with all those negative ads? It is good news however for America and Americans as rather than the race being decided by three insignificant states, two far to the right of right, perhaps the rest of us might get a say, or is that too much to ask? See comments on SuperPACs in next session.

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

So Gingrich won by a landside and is already saying he is the candidate and the only one who can beat Obama by a ‘landslide.’ It is that very arrogance that disturbs TB and it should you in how he might handle foreign policy as he is a bigger gunslinger than Dubya was.

What happened to Romney’s $350 million SuperPAC? For weeks before the vote, the SuperPACs had bought all the available air time in South Carolina drowning out any candidate who wanted to get his point across…is this America? In the end, unbelievably, in this bible belt state, Gingrich won by a landslide, and all because of his dressing down of a questioner, questionably in the debate. How is it in a state that values the family, a serial cheater wins by so much…put your values aside Christians TB guesses.

Thanks to The Baseline Scenario, and The Atlantic Monthly, we are now aware of a study of SuperPACs by a Harvard professor (oops, that discredits him right?), that found that SuperPACs rather than helping the interests of their corporations…and presumably shareholders…found that they instead promote the interests of the CEO, personally and sometimes his political aspirations. Hey, it’s your money people…but if as a friend says: “so what they all lie,” appeals to you, then go with it but the problem with them is they aren’t telling you anything that helps you decide how to vote, instead they are merely confusing the voters and making them NOT care about voting. Wait for the race once the GOP has chosen a candidate…it will get much worse…from both sides.

Don’t believe TB about SuperPACs…Sandra Day O’Connor said Citizens United was one of the worst decisions ever. From the beginning of PAC’s TB felt they didn’t serve the interests of the shareholders or the employees (so what, they’re union, right?), and look how both union and non-union middle management and below have fared for the past three decades…not well. Nor have shareholders been served well…but top management…huge pay and bonus increases, more lowered bar stock options, and of course those golden parachutes that reward CEO’s when they fail…while the wealthy scream taxpayers have to have ‘skin in the game,’ but CEO’s???

The study of SuperPACs follows prior studies of corporate stock buybacks which are done at the wrong time…usually when stock prices are HIGH, and largely to offset expiration of employee stock options…in other words confuse and obfuscate. The studies show that buybacks produce short-term results thus favoring short-term investors at the expense of long-term investors…read: mom and pop.

So if you want to believe that politics is just about lying, that is your prerogative but you reap what you sow…and so does the country and your kids.

TB is a bit sick of the term ‘socialist’ being applied to Obama…after all both Romney AND Gingrich supported national healthcare initiatives similar to Obamacare. As Bob Sheiffer said, and did, on Face the Nation, look up the terms ‘liberal’ and ‘conservative’ in the dictionary…they have been modified by the opposite sides to mean ‘radical’ and ‘reactionary.’  No wonder there is no compromise in American politics and thus nothing being done when lots should be done.

How about the GOP coming clean and not blaming Obama for the biggest deficits in history and Gingrich’s new one: more people on food stamps than ever before in history…yep Newt, that is a fact and so is the REAL unemployment rate…don’t they go hand in hand or is it just bad politics to say so? Blame Obama? Blame Bush and the GOP with the help of the Democrats!

Not much to look forward to for TB on SuperBowl Sunday as his beloved 49’er’s stumbled last night…just couldn’t carry it to the end…Patriots are now favored by four…

Have a great week!

TB

 *EU Sets Stricter Fiscal Limits in Bowing to Some ECB Requests, Draft Shows – but if they couldn’t meet the old ones how can they meet the new ones? Just asking…

*Stocks in Europe Drop From Five-Month High as Euro Slips; S&P Futures Fall

*GE Falls as Weaker Growth in Europe Weighs on Sales, Finance Revenue Drops

*Greek Creditors Struggle for Third Day to Reach Agreement on Bond Losses

*Banks Move Choose to Spurn State Bailouts to Meet EU Capital Requirements

*Novartis Multiple Sclerosis Drug Reviewed by EU After 11 Patients’ Deaths

*Technology’s Stalwarts Exceed Analysts’ Estimates While Google Disappoints

*Sales of Existing U.S. Homes Probably Rose to Highest Level Since 1987

*Bond Spreads Show Crisis May Return After ECB Program Expires – oh joy!

*Copper Bears Retreating as Prices Rebound the Most Since 1987

*German Automakers Miss U.S. Fuel Goals as Toyota Excels

*Credit Suisse Toxic Bonuses Trounce Stock to Rival Gold With 75% Returns

*U.S. Holds Military Talks With Israel on Iran as EU Readies Asset Freeze

*Romney Tough Talk on China May Fall Flat in Trade-Friendly South Carolina

*Snow Hits Chicago Today as Winter Storm Is Projected for New York Tomorrow     

Volume rose to an average 4.43B shares from 4.07B on another strong session except Utilities which were off 1% and unchanged Wednesday. Today is options expiry! NYSE stocks executed on the Big Board rose slightly to 806M shares from 798M shares, still about 200 million short of the twelve month average – if this is real, why the lack of solid buyers…especially in January? 44 of the last 47 sessions have been less than 1B! Advance/Declines were positive: +1.9:1 vs +3.9:1 vs +1.5:1 vs -1.9:1 vs +1.7:1 on NYSE and +1.4:1 vs +3.3:1 vs+3.3:1 vs +1.2:1 vs -2.1:1 on Nasdaq. Breadth was similar: +2.2x vs +6.9x vs +1.1x vs -3.2x vs +1.4x on NYSE and +1.8x vs +4.5x vs +1.4x vs -1.8x vs +2.1x on Nasdaq. New 52 week highs surged to 287 from 225 while new lows dipped to 33 vs 35. The ratio is now about 9x positive. The S&P VIX declined again to 19.87 -1.02, the lowest reading since 7/25…just when the selloff began!!!

Here are the results of the past five sessions: Dow +0.4% vs +0.8% vs +0.5% vs -0.4% vs +0.2%; Transports +1.6% vs +1% vs -0.1% vs -0.6% vs +0.3%; Dow Utilities DOWN 1% vs flat vs +0.2% vs -0.1% vs flat; S&P 500 +0.5% vs +1.1% vs +0.4% vs -0.5% vs +0.2%; Nasdaq Composite +0.7% vs +1.5x vs +0.6% vs -0.5% vs +0.5%; Nasdaq 100 +0.7% vs +1.4% vs +0.9% vs -0.4% vs +0.4%; Russell 2000 +0.4% vs +1.8% vs +0.2% vs -0.8% vs +0.4%; NYSE Financials +1.7% vs +1.6% vs +0.1% vs -0.8% vs +0.6%. NYSE Leaders:  BAC +2.4% vs +4.9% vs -2.1% vs -2.7% vs -1.2% vs +3.6% vs +5.7%!!! vs 1.5% vs -2.1% vs +8.6%; C +1% vs +2.9% vs -8.3%!!! vs -2.7% vs +1.1% vs +4.2%; GE +0..7% vs +1.5% vs -0.7%; MS +5.4%.

European equity markets weaker, Asia stronger: FTSE -0.1% vs +0.6% vs -0.1% vs +0.9% vs -0.3%; CAC40 -0.5% vs +1.7% vs -0.2% vs +1.6% vs +0.8%; DAX -0.3% vs +0.8% vs +0.2% vs +1.9% vs +0.1%; Nikkei +1.5% vs +1% vs +1% vs +1.1% vs +1.4%; Hang Seng +0.8% vs +1.3% vs +0.3% vs +3.2%!!! vs +0.6%; Korean KOSPI +1.8% vs +1.2% vs flat vs +1.8% vs +0.6%; Indian Sensex +0.6% vs +1.2% vs -0.1% vs +1.7% vs +0.7% vs -0.9%. U.S. Futures modestly weaker: DOW -19; SPX -4 ; NDQ -1. Bonds weaker: 10’s just below 3%, 30’s back above 3%. 10 yr 1.99% -3/32. RECORD low 9/23 of 1.6855%; 30 yr 3.05% -3/16; Long TIP 0.73% -1/8; 0.57% at high. The 5 yr TIP yields MINUS 1.04%; 10 yr -0.05% from -0.17%! 3 mo. Libor 0.56%, and 0.79%, steady. Bills 0.03% 1 month; 0.04% 3 months, 6 months 0.07%. Reverse Repo 0.24%

Gold closed slightly lower but still above the 200 day ($1639). It has been above $1600 for 7 straight sessions. It closed at $1654.50 -$5.40. The high was $1670, highest since 12/13 and it is now $1649.20 -$5.30. The record high is $1923.70, a buying climax on 9/6. RES is $1673, the 50 day, support $1651, the 40 day m/a, all rolling over. Crude closed little changed at $100.39 -.20. It is now $99.62 -.77. RES is again $100, support the 40 day (99.31) and the 50 day (99.10), major support.

…today is options expiry…the first of 2012…could be an interesting day. Was the rally inspired by this? How come income stocks and bonds are suffering? Is growth back? Hard to discern that from the data which is at best indicative of modest growth, certainly not enough to get one all fired up about growth stocks…but then retail investors haven’t been players fro at least the last two months, which encompasses the decline in stocks, following that sharp rally from the Oct.4 lows and allowed us to have a strong quarter and offset the losses of August for the most part.

Note though that the Dow Industrials closed at 12623, yesterday, highest since7/26…just before that major selloff occurred. That leaves as MAJOR resistance a double top (12753 and 12751) from 7/7 and 7/21, and just above that the 2011 high at 12876 from May 2! The S&P 500 encounters similar so watch 1350. Meanwhile, the Nasdaq 100 which hit a new 12 month high yesterday of 2445 and closed at 2441, after gapping up on the open, is in its own world. Is growth back? Can it continue? You decide.

Everyone is all aflutter about bank stocks again…even though they have problems meeting the Basel II capital requirements and the prices of the most active ones, BofA and Citi, are so low that they can easily be manipulated…which is where they are thanks to those high frequency traders who love a cheap stock that is highly liquid. But with the lone exception of Wells Fargo, they have a series of lower highs and are just nearing them…yesterday JPMorgan closed just off the 200 day moving average, something that hasn’t occurred since July 21, just when the selloff began.

All that glitters…

Speaking of which, gold has had a nice rally and is now bound between the 40/50/200 day moving averages…can it keep going? Is the Euro crisis, particularly Greece, really over?

Then of course there is crude…oscillating around $100 despite huge inventories…apparently due to Iran but economic growth? Please!  Speaking of oscillating, how about the 10 and 30 year treasuries around 2% and 3% respectively? Just when you think it is safe…

Let’s see how stocks close after today’s options expiration.

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

Wow! What is happening to the GOP? Final Iowa count gives it to Santorum, by less than they had Romney…did that affect New Hampshire’s vote? Perry pulled out and threw his support to Gingrich, who once again is back to scandals…saying he had permission from his second wife to have an affair which she vehemently denied…and don’t forget his blast at Clinton while he was having an affair with his own intern, Callista…forget moral character…doesn’t count, ask Newt.

James Kwak of The Baseline Scenario has a piece out this morning:

The Times has a story out today: Surprise, all the Republican candidates’ tax plans increase the national deficit! The numbers (reduction in 2015 tax revenues, from the Tax Policy Center):

• Romney: $600 billion
• Gingrich: $1.3 trillion
• (Late lamented) Perry: $1.0 trillion
• Santorum: $1.3 trillion

I guess that makes Romney the “fiscally responsible” choice, at least among the Republicans. But President Obama’s tax proposals would only reduce 2015 tax revenues by $222 billion. (That’s $385 billion in Table S-4 less $163 billion in Table S-3.)

So let me get this straight…the GOP is hell-bent on reducing the budget DEFICIT, but without offsetting increases of any kind to revenues…and apparently all of their plans will reduce the burden on the wealthy even more while letting the rest of us suffer. Is that right? Is that what ‘fiscal conservative’ means? You decide, TB already has…B.S. is B.S.

Enjoy your weekend, but try to think past the soundbites, will ya?

TB

Bloomberg Top Stories:

*Morgan Stanley Reports Smaller-than-Expected Loss on Trading; Shares Rise

*Morgan Stanley Raises Investment Bank Compensation Pool 3% to $7.2 Billion

*Bank of America Swings to Fourth-Quarter Profit as Lender Rebuilds Capital

*U.S. Index Futures Rise on Banking Profits as European Stocks , Euro Gain

*Dimon Joins Blankfein Predicting Markets to Rebound as Rivals Pull Back – right or wrong?

*S&P 500 Climbs Most Since ’87 as Bernanke Economy Weathers Europe Concern

*Treasury Repo Rates Surge Amid Increase in Debt Supply – can Fed reign it in?

*Banks Flush With $623 Billion ECB Cash Beating Sovereigns – that is risk averse!!!

*BlackRock Fourth-Quarter Net Income Falls 16% as Markets Drive Fees Lower

*RBS Says Former Trader in Singapore Sought to Manipulate Libor for Profits – swell!!!

*Kodak Files for bankruptcy as Shift to Digital Undermines Pioner of Film

*Nike Gets Prime Central Athens Shop Space for 43% Less Than Former Tenant! Deflation?

*Builder Confidence, Shares Bolster Case for U.S. Housing – if only people could afford it!

*Phoenix Housing Prices Rise as Canadian Buyers Seek 55% Discount in the Desert

*Santorum Won 34 Votes More Than Romney in Iowa, Des Moines Register Says

*Obama’s Rejection of Keystone Pipeline Permit Sets Up Election-Year Battle

*Freshman Applications at Top U.S. Universities Fall Amid ‘Impossible’ Odds  

Volume rose to an average 4.07B shares from 3.56B on a strong session except Utilities which were unchanged. Tomorrow is options expiry! NYSE stocks executed on the Big Board slipped further to 798M shares from 811M shares, still about 200 million short of the twelve month average and raising questions of whether yesterday’s rally was options expiration driven. 432 of the last 46 sessions have been less than 1B! Advance/Declines were very positive: +3.9:1 vs +1.5:1 vs -1.9:1 vs +1.7:1 vs +1.2:1 vs +3.3:1 on NYSE and +3.3:1 vs+3.3 vs +1.2:1 vs -2.1:1 vs +1.5:1 vs +1.5:1 on Nasdaq. Breadth was similar: +6.9x vs +1.1x vs -3.2x vs +1.4x vs +2.1x vs +4.2x on NYSE and +4.5x vs +1.4x vs -1.8x vs +2.1x vs +1.4x on Nasdaq. New 52 week highs were slightly lower at 225 from 242 while new lows dipped to 35 vs 47. The ratio is now about 7x positive. The S&P VIX reversed Tuesday’s rise closing 20.89 -1.31.

Here are the results of the past five sessions: Dow +0.8% vs +0.5% vs -0.4% vs +0.2% vs -0.1%; Transports +1% vs -0.1% vs -0.6% vs +0.3% vs +0.5%; Dow Utilities FLAT vs +0.2% vs -0.1% vs flat vs -0.4%; S&P 500 +1.1% vs +0.4% vs -0.5% vs +0.2% vs flat; Nasdaq Composite +1.5x vs +0.6% vs -0.5% vs +0.5% vs +0.3%; Nasdaq 100 +1.4% vs +0.9% vs -0.4% vs +0.4% vs +0.2%; Russell 2000 +1.8% vs +0.2% vs -0.8% vs +0.4% vs +0.3% vs +1.5%%; NYSE Financials +1.6% vs +0.1% vs -0.8% vs +0.6% vs +0.6%. NYSE Leaders:  BAC +4.9% vs -2.1% vs -2.7% vs -1.2% vs +3.6% vs +5.7%!!! vs 1.5% vs -2.1% vs +8.6%; C +2.9% vs -8.3%!!! vs -2.7% vs +1.1% vs +4.2%; JPM +4.7% vs +-2.9% vs -0.8%; GE +1.5% vs -0.7% and yes it is really a financial stock!

Global equity markets stronger: FTSE +0.6% vs -0.1% vs +0.9% vs -0.3% vs +0.2%; CAC40 +1.7% vs -0.2% vs +1.6% vs +0.8% vs +1%; DAX +0.8% vs +0.2% vs +1.9% vs +0.1% vs +1.2%; Nikkei +1% vs +1% vs +1.1% vs +1.4% vs -0.7%; Hang Seng +1.3% vs +0.3% vs +3.2%!!! vs +0.6% vs -0.3%; Korean KOSPI +1.2% vs flat vs +1.8% vs +0.6% vs +1%; Indian Sensex +1.2% vs -0.1% vs +1.7% vs +0.7% vs -0.9%. U.S. Futures modestly higher: DOW +40; SPX +5 ; NDQ +10. Bonds weaker and falling: 10’s and 30’s still well below 2% and 3% respectively. 10 yr 1.94% -5/16. RECORD low 9/23 of 1.6855%; 30 yr 3.00% -7/8; Long TIP 0.74 -1-1/2!!! 0.57% at high. The 5 yr TIP yields MINUS 1.01%; 10 yr -0.17%. 3 mo. Libor 0.56%, and 0.79%, steady. Bills 0.02% 1 month; 0.03% 3 months, 6 months 0.06%. Reverse Repo 0/25%

Gold closed higher again, well above the 200 day ($1638) and has been above $1600 for SIX straight sessions. It closed at $1659.90 +$4.30. The high was $1670, highest since 12/13 and it is now $1662.40 +$2.50. The record high is $1923.70, a buying climax on 9/6. RES is $1678, the 50 day, support $1652, the 40 day m/a, all rolling over. Crude closed slightly lower at $100.59 -.12. It is now $101.90 +$1.31. Support is $100, then the 40 day (99.29) and the 50 day (99.05), major support.

…just when you thought Romney had things sewn up, the social conservatives of S.C. threw a monkey wrench into the works…time to head for Florida. Two out of three are now effectively ‘dead heats.’ Florida should go to Romney…or will it?

Since sadly the GOP believes that having wealth is indicative of building the economy, and places little value on earned income, perhaps it is time for the to reevaluate capital gains as they wage their war towards achieving the Capitol. Not only is that battle in serious doubt, due to their own blunders, so is their control of the House, or at least that is what the polls indicate…and remember redistricting takes effect, which will give both parties pause.

Capital gains need to be redefined…especially the ‘carried interest’ exemption which flies in the face of the rest of the tax code: it is ordinary income not capital gains and should be taxed accordingly…this represents billion of lost income as hedge fund operators benefit from this farce. By the way that is not just TB’s opinion, but tax experts he has contacted.

Put no tax on capital gains on new businesses for the first five years that do two things: produce something, and create jobs! At the end of five years the adjusted value of the business would become the tax basis of the company.

Next comes the dividend tax treatment…this one is more complex, and TB concurs with the late Franco Modigliani, Nobel laureate, who had more sense than most other economists combined. Tax dividends as ordinary income…after all they are strictly PASSIVE income, BUT eliminate corporate taxes…a hard sell but most don’t pay any anyway. This would do to things: eliminate the double taxation of dividends and force companies to examine expenses, like that corporate jet that is the toy of CEO, while keeping the ones that get high use.

Larry Kudlow did us a disservice (as has Arthur Laffer), in misrepresenting to Congress that millions of Americans own stocks that pay dividends…true…but with the exception of the wealthiest, most of it is in IRA’s and 401(k)s which will eventually be taxed as ORDINARY income, thus benefitting the wealthy in what is clearly passive income.

Eliminate the farm subsidy and especially ethanol while eliminating the tax on imported ethanol from Brazil which is produced efficiently and at the same time adopt a new energy policy, something every president over the past fifty or more years has failed to do, due to oil interests, which have made us dependent on imported oil. At the same, time, natural gas is about as cheap as it has ever been, it is cleaner and more efficient and we have huge supplies with it. That and our shale oil, could make a huge dent in the balance of payments.

A second part of this would be a program to build natural gas pumps at stations across the country which would create massive jobs and be an infrastructure investment. We need loads of that…not bridges to nowhere, but improved highways and of course the energy grid. Why isn’t this being done?…these are things that would increase jobs and create positive tax flows.

Perhaps you have some ideas…these are just a few of TB’s favorite things…

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

TB has said several times that it is disgusting to blame Obama for things beyond his control when there are enough things he has done wrong that they don’t have to make them up.

The most disgusting is the GOP’s continual blaming of the deficit on him when in fact it was created by George W. Bush and the GOP controlled Congress for eight years. How many times have you heard an interviewer ask a GOP ‘leader’ to correct this and they refuse? Second, is their willful destruction of any form of universal health care despite the fact that Obamacare isn’t that far away from many of the prior GOP proposals. No, it has been their insistence that the private sector does it better and that the states are better suited to do it that is misleading. First, if free market capitalism truly existed…the key difference is in looking at long term effects on companies and not profiting from short-term ill-designed ventures at the expensed of long-term shareholders: the principal recipients being the management which only serves for a few years, has NO skin in the game, and is rewarded generously for failure. Instead, we have crony capitalism where they have bought the government and thus it does nothing to impede greed.

To TB, who voted for him, Obama stopped being a changer, on Inauguration Day, has failed to try to gain the support of  the GOP, ( if that was ever possible once the Tea Party emerged), and thus failed to be a leader at a time we desperately need a leader. Sadly, TB can’t point to one true leader out there…Jon Huntsman might have been that man but now we will never know…or at least not for four more years. Preservation of the status quo is a goal that will result in its demise…you can’t change perception from reality…far too many people are suffering.

Have a great day!

TB

*U.S. Industrial Production Rises 0.4%; Capacity at 78.1% from 77.8% – estimate + 0.5%

*Goldman Sachs Profit Drops 58%. Beats Analysts Estimates on Cost Reductions – oh joy!

*IMF Said to Seek $500 Billion Boost to Insulate Economies From Euro Crisis

*U.S. Stock Futures Advance Before Earnings as Euro, Commodities Strengthen

*Goldman Sachs Employee Compensation Cost Drops 21% Amid Job Reductions

*Global Demand for U.S. Financial Assets Rises More Than Forecast in Europe

*Bank of New York Mellon Quarterly Profit Fails to Meet Analysts’ Estimates

*Carlyle Seeks to Limit Shareholder Legal Rights as It Woes IPO Investors

*Irish Occupation of Empty Offices Escalates Fight Over Boom-to-bust Legacy

*Bullish Bets on Chinese Banks Increase to Record on Policy Easing

*Oil Inventory Climb Longest Streak Since April in Survey – then why is it above $100???

*Bank of America Shrinking Assets Puts $2.8 Billion Hole in Moynihan Target

*Two Hedge Fund Employees Said in Custody in Federal Insider Investigation

*Iraq to Use Its Role as OPEC Head to Seek Iran’s Assurance on Oil Shipping

Volume rose slightly to 3.89B shares from 3.65B on a generally positive session except Transports and some financial components. The big banks were hit hard, except Wells which rallied despite beating estimates by just a penny…which should always raise questions. Remembr Friday is options expiry! NYSE stocks executed on the Big Board slipped to 811M shares from 828M shares, still about 200 million short of the twelve month average and indicative of a lack of retail participation. 42 of the last 45 sessions have been less than 1B! Advance/Declines were modestly positive: +1.5:1 vs-1.9:1 vs +1.7:1 vs +1.2:1 vs +3.3:1 vs +1.8:1 on NYSE and +1.2:1 vs -2.1:1 vs +1.5:1 vs +1.5:1 vs +3.6:1 vs +1.3:1 on Nasdaq. Breadth was similar: +1.1x vs -3.2x vs +1.4x vs +2.1x vs +4.2x vs +2.1x vs on NYSE and +1.4x vs -1.8x vs +2.1x vs +1.4x vs +2.7x vs +1.9x vs on Nasdaq. New 52 week highs however jumped to 242 from 165 while new lows were off slightly to 47 vs 53. The ratio is now about 5x positive. The S&P VIX climbed to 22.23 +1.32 further confusing players…could have been roll to next months options.

Here are the results of the past five sessions: Dow +0.5% vs -0.4% vs +0.2% vs -0.1% vs +0.6%; Transports -0.1% vs -0.6% vs +0.3% vs +0.5% vs +1.4%; Dow Utilities +0.2% vs -0.1% vs flat vs -0.4% vs +0.1%; S&P 500 +0.4% vs -0.5% vs +0.2% vs flat vs +0.9%; Nasdaq Composite +0.6% vs -0.5% vs +0.5% vs +0.3% vs +1%; Nasdaq 100 +0.9% vs -0.4% vs +0.4% vs +0.2% vs +0.7%; Russell 2000 +0.2% vs -0.8% vs +0.4% vs +0.3% vs +1.5%! vs +0.5%; NYSE Financials +0.1% vs -0.8% vs +0.6% vs +0.6% vs +2%!!! vs -0.6% vs -0.9%. All the leading traders were financials and look how bad BofA and Citi got hit! BAC -2.1% vs -2.7% vs -1.2% vs +3.6% vs +5.7%!!! vs 1.5% vs -2.1% vs +8.6%; C -8.3%!!! vs -2.7% vs +1.1% vs +4.2%; JPM -2.9% vs -0.8%; WFC +0.7% vs flat; GE -0.7% and yes it is really a financial stock!

European equity markets weaker, Asia positive: FTSE -0.1% vs +0.9% vs -0.3% vs +0.2% vs -0.7% vs +1.3%; CAC40 -0.2% vs +1.6% vs +0.8% vs +1% vs -0.4% vs +2.5%; DAX +0.2% vs +1.9% vs +0.1% vs +1.2% vs -0.4% vs +2.7%; Nikkei +1% vs +1.1% vs +1.4% vs -0.7% vs +0.3% vs +0.4%; Hang Seng +0.3% vs +3.2%!!! vs +0.6% vs -0.3% vs +0.8% vs +0.7%; Korean KOSPI FLAT vs +1.8% vs +0.6% vs +1% vs -0.4% vs +1.5%; Indian Sensex -0.1% vs +1.7% vs +0.7% vs -0.9% vs +0.1% vs +2.2%. U.S. Futures little changed: DOW +16; SPX +2 ; NDQ +8. Bonds rallying again…yesterday they were up along with stocks? 10’s and 30’s still well below 2% and 3% respectively. 10 yr 1.84% +1/8. RECORD low 9/23 of 1.6855%; 30 yr 2.89% +1/4; Long TIP 0.65 +1/2. 0.57% at high. The 5 yr TIP yields MINUS 1.06%; 10 yr -0.24%. 3 mo. Libor 0.56%, and 0.79%, steady. Bills 0.01% 1 month; 0.03% 3 months, 6 months 0.06%.

Gold surged and closed well above the 200 day ($1637) and has been above $1600 for five straight sessions. It closed at $1655.60 +$24.80. The high was $1668! highest since 12/13 and it is now $1652.60 -$3.50. 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 higher after two weak sessions at $100.71 +$2.01! It is now $101.08 +.37. Support is $100, then the 40 day (99.12) and the 50 day (98.76), major support.

…the ‘gap’ of course is not the clothing store but the wealth gap. It is atrocious. Of course, free market capitalists say so what…Herman Cain blames laziness…but it is a fact and one that we should heed. The wealth gap in this country between the top 1% and bottom 1% has never been this wide…indeed TB would argue between the top 10%, or at least 5%, and the other end of the scale. Socialist! Redistribution of wealth…no a simple statement that has been used by forecasters for decades to determine where political instability will arise next. Back in the 1980’s TB was watching one of the Sunday Morning talk shows…probably Meet the Press…where they interviewed a consultant to the CIA who said that they used this measure to predict the next ‘hot spot.’ Indeed, it would have been apparent in Egypt, where one of the candidates criticized us for not supporting our ally…that is clearly 60’s thinking…and is how the problems with Iran began.

But the problem in the U.S. is much more daunting. The backers of the SuperPAC’s seem unaware that this is a democracy…one they can only manipulate to their advantage for so long before an uprising begins…not a violent one…our Constitution provides for it with our election system. Again, Cain said if you don’t like it vote them out…how do you beat a SuperPAC with $350 million or more? You don’t…until a breaking point is reached. TB believes we are near that point…not for this election but probably in four more years especially if some economists like Lacy Hunt and Van Hoisington are right. So before you declare TB to be a socialist or worse, his concern is that the backlash will not be good for the majority of Americans…or at least the top 20%. This is not the America we grew up with, or our grandparents who lived thru the Great Depression and understood compassion. Nor is it a government that prosecutes those who have committed crimes. Consider that since the crisis began not one CEO has been brought to trial under Sarbanes-Oxley. That includes Angelo Mozillo who at the least was guilty of insider trading, and instead fined civilly by the SEC, rather than prosecuted…or Vikram Pandit who clearly knew the financials were not stated correctly…if not them, who? No, instead we are going after a few hedge funds…and Martha Stewart for insider trading while members of Congress continue to do so without consequence. In December 6, the House Financial Services Committee held a one day hearing on insider trading by members of Congress chaired by Spencer Bacchus who spends his time day trading and sees nothing wrong with it…is this America?

So is it any wonder Americans besides believing by 84% that Congress is not representing them, are shunning the stock market and fleeing mutual funds in droves? Why pay a manager when you can do as well as they can, right? Think about it.

In yesterday’s trading, note that while NYSE Financials rose 0.1%, following a 0.8% decline, the highest volume stocks where all financials…if you add in GE which derives at least 50% of its income from financial activities and who by acquiring WMC Financial, a subprime lender, added to the crisis and despite whistleblowers warnings, conducted faux inquiries while bad loans continued to be generated. This on the watch of Jeffrey Immelt, who Obama felt should chair a committee on small business…despite the damage his own company was doing and that GE is as far removed from small business as is possible. Free market capitalism is a myth, we are living in crony capitalism and need to stop it…now!

. . .   – - -  . . . note that the same old SOS applies…perhaps more so!

TB heard yesterday that social conservatives do have compassion for the unfortunate but feel that churches and other charities should provide it…they can’t! TB hears over and over from charities that they are not only overwhelmed but that that former donors are now in line for help.

This is similar to the argument that the states no better their needs…on some things yes, but as South Carolina illustrates, their education is near the bottom of the ladder. Other states, due to cronyism allow few health insurers in and due to insurance laws that differ by state, few choices are available. This is why the federal government should control insurance…at least health insurance.

TB had to have a stress test the other day…$5,500 was billed. The insurance companies paid about $2,200 and he only paid $156. But if he wasn’t insured and couldn’t pay they would file a claim for the entire amount. TB has long said that hospitals and health insurers (both of whom should never have been allowed to become for-profit), have no idea how much services should cost. Also, those who argue against mandatory health insurance ignore the costs of not having it, such as emergency room treatments which is what the indigent use most. Medicare is failing because of a failure to be ‘allowed’ to control costs; Part D, prohibited Medicare from negotiating prescription drug costs, enriching the Senator who wrote it…actually the lobbyist did it for him…and making him head of the lobby. That is why we can’t control the costs!

As for social security it was purposely written to not include means testing so as not to be criticized as being for the poor only…that and inflation adjustments need to be modified.

Unfortunately, in this presidential year, even more so than the last, gridlock will prevail, the deficits will get worse and we will have at best a stagnant economy…or worse a double-dip.

God bless the United States of America…nobody else will.

TB