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

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 14^th 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%, 6^th 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

*JPMorgan Fourth-Quarter Net Declines on Weak Trading; Matching Estimates – not good!

*Index Futures in U.S. Drop on JPMorgan Earnings; Italian Bonds Pare Gains

*U.S. Trade Deficit Widens More Than Economists Forecast as Exports Decline – weak Euro?

*Hungarian Bonds Retreat as IMF Says More ‘Tangible Steps’ Needed on Policy

*Norway’s Haven Status Veils Dangerous Housing Bubble, Yale’s Schiller Says – he knows!

*Attorneys General Discuss Mortgage Probes as Bank Settlement Talks Drag On

*Fed Oversight Possible for 25 Non-Banks Under Dodd-Frank – but will they???

*Americans Proving Clueless Paying Wall Street $20 Billion for Broken Swaps

*Credit Score Zealouts Seeking Numbers higher Than 800 Pursue Fool’s Errand

*Obama Will Seek Authority to Merge Agencies in Effort to Shrink Government – but will it?

Volume was steady at 3.93B shares vs 3.96B, still close to ‘average’ volume for only the fourth time in weeks…months?  Next Friday is options expiry, be advised! It was an UP session with all indices up from 0.2%-0.6% except Dow Utilities which were FLAT. The S&P 400 has been essentially flat for the past two sessions and little changed for the past three sessions which provided a 3% kicker to start the year. NYSE stocks executed on the Big Board rose slightlyto 770M shares from 759M shares, about 250 million short of the twelve month average and still indicative of a lack of retail participation. 40 of the last 43 sessions have been less than 1B! Advance/Declines were positive: +1.7:1 vs +1.2:1 vs +3.3:1 vs +1.8:1 vs -1.1:1 on NYSE and +1.5:1 vs +1.5:1 vs +3.6:1 vs +1.3:1 vs -1.2:1 on Nasdaq. Breadth was similar: +1.4x vs +2.1x vs +4.2x vs +2.1x vs -1.9x on NYSE and +2.1x vs +1.4x vs +2.7x vs +1.9x vs +1.4x on Nasdaq. New 52 week highs rose to 182 from 135 while new lows were little changed at 43 vs 42. The ratio is now about 5x positive. The S&P VIX declined to 20.47 -.58 – lowest since 7/26!.

Here are the results of the past five sessions: Dow +0.2% vs -0.1% vs +0.6% vs +0.3% vs -0.6%; Transports +0.3% vs +0.5% vs +1.4% vs +0.6% vs flat; Dow Utilities FLAT vs -0.4% vs +0.1% vs +03% vs -0.6%; S&P 500 +0.2% vs flat vs +0.9% vs +0.2% vs -0.3%; Nasdaq Composite +0.5% vs +0.3% vs +1% vs +0.1% vs +0.2%; Nasdaq 100 +0.4% vs +0.2% vs +0.7% vs -0.2% vs +0.3%; Russell 2000 +0.4% vs +0.3% vs +1.5%! vs +0.5% vs -0.3%; NYSE Financials +0.6% vs +0.6% vs +2%!!! vs -0.6% vs -0.9%. Leaders: BAC DOWN 1.2% vs +3.6% vs +5.7%!!! vs 1.5% vs -2.1% vs +8.6%; C +1.1% vs +4.2%.

Global equity markets generally higher: FTSE -0.3% vs +0.2% vs -0.7% vs +1.3%; CAC40 +0.8% vs +1% vs -0.4% vs +2.5%; DAX +0.1% vs +1.2% vs -0.4% vs +2.7%; Nikkei +1.4% vs -0.7% vs +0.3% vs +0.4%; Hang Seng +0.6% vs -0.3% vs +0.8% vs +0.7%; Korean KOSPI +0.6% vs +1% vs -0.4% vs +1.5%; Indian Sensex +0.7% vs -0.9% vs +0.1% vs +2.2%. U.S. Futures weaker following JPM’s earnings: DOW -61; SPX -9 ; NDQ -9. Bonds modestly higher with 10’s and 30’s well below 2% and 3% respectively. 10 yr 1.88%!!! +7/16. RECORD low 9/23 of 1.6855%; 30 yr 2.92% +1-1/16; Long TIP 0.68%!!! +1-1/8. 0.57% at high. The 5 yr TIP yields MINUS 1.01%!!!; 10 yr -0.19%!!!. 3 mo. Libor 0.57%, and 0.79%, first drop in weeks!. Bills 0.02% out to 3 months, 6 months 0.05%.

Gold rose again and closed above the 200 day ($1633) for a third straight session. It closed at $1647.70 +$6.10, highest since 12/13 but is now $1638.80 -$8.90! The record high is $1923.70, a buying climax on 9/6. RES is $1658, the 40 day and $1682, the 50 day m/a. Crude closed SHARPLY lower at $99.10 -$1.77. It is continuing to fall and is now $98.28 -$.82. It is now BELOW both the 40 day (99.16) and the 50 day (98.59). RES at $100. Follow closely!

…are the banks too big? Not according to Mitt Romney and even Obama who continues to rail at them but doesn’t do anything. Simon Johnson, former chief economist at the World Bank, blasts both sides and says that the ‘left’ should get behind the ideas of Jon Huntsman, TB’s choice of the ‘right’ candidate for the GOP, and the country. Huntsman wants to limit the size of the banks, while Romney insists that they must be left alone.

The problem again comes back to Phil Gramm, Alan Greenspan and the lovable Robert Rubin who managed to destroy the one protection we had from the big banks: Glass-Steagall! Look what that brilliant idea reaped…along with the ill-designed Bush tax cuts, it allowed the financial sector to swell camouflaging the weakness in the overall economy and creating a massive bubble. In order to cure this, the banks must be returned to what they allegedly are: banks! Remove once again the investment banking operations and if they fail…well let them!

Johnson argues that the banks are over-regulated and that their best defenders are the people who regulate them. Many of whom will eventually go to work for them and thus have a vested interest in making them look good to enhance their job chances.

Of course Romney and the right would argue against this…why not? That is where their money is coming from…and a sizable portion of Obama’s no doubt…last time Goldman was the biggest contributor to his campaign…and very high on McCain’s list. How about the ability to compete with the big European banks…do you really want TB to answer that? Most of them have been bailed out or taken over. If a larger company has a failed business plan would any competent CEO of a competitor follow that model? Maybe, but it would ill-advised…except for the short-term gains he might receive, but certainly not in the long-term interests of the company.

Johnson knows of which he speaks: at the World Bank he saw that the number one problem of countries that needed bailouts was the financial sector getting too close to the government. Think about that…

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

With the Romney nomination about in the bag…certainly before any meaningful state in terms of electoral votes gets a say…we are assured that if he is elected the same problems will plague us and don’t believe his claim that only he knows how to create jobs. No, his forte is creating more wealth for Wall Street and the wealthiest Americans. Sadly, the one honest AND intelligent man with a plan is Jon Huntsman and all we can hope for is that his ideas on reforming the banking system (remember TB’s idea of Reform Wall Street rather than occupy it?). That is a slim hope but if he does well in South Carolina and Florida there is a chance the GOP will wake up and if they don’t the Democrats finally do!

The Supreme Courts decision that corporations are individuals and that neither should be subject to limitations on how much it spends to get someone elected…remember they already had their powerful lobbying interests…will go down as the worst decision of all time…and we will all pay dearly for it.

In South Carolina there is not one minute of air time available…the candidates have bought it all up and that has been the case for a couple of weeks. We are being destroyed by those wealthy enough to throw money at these candidates. Despite having a near zero chance, Gingrich received $1 million from an old friend because he supported his views on Israel. Romney’s buddies have contributed millions to his campaign…but a pittance compared to what Obama has already raised. TB would not object if the ads (or the debates for that matter) provided any insight to how these men might lead us but instead they only smear the opposition.

When Herman Cain accused all those without jobs of being lazy, he just didn’t get it. Arguably we are in a worse situation than during the Great Depression because then the only real debt was for homes and there was only one breadwinner. Today, we are buried in debt and trying to pay it down. If one person in a family loses their job, the risk of losing everything grows. Meanwhile, the Tea Party says the most important thing is to pay down the debt…but for god’s sake don’t raise taxes on those who benefitted the most…despite the fact that their effective tax rate is about 20%. Most of us would jump at that!

Despite this, Romney, Santorum and others say the American Dream is still alive…is it? Do you feel that you can buy a home and feel confident it will rise in value…even if inflation rises more, or do you worry about who will buy it if you need to sell it? Think about this, the stakes are high.

We repeat this cycle again and again…the wealthy never learning that all their money cannot buy them success forever. At some point the law of large numbers takes over…meaning the size of the electorate and if they get tired of hearing false promises…we are going to be in a heap of trouble… it happened here before with the robber barons and it happened in Czarist Russia, and Germany under the Kaiser…those are just a few…and the outcome does not appeal to TB.

Today is Friday the 13th…but this is no time to be superstitious…even if the Dow is off 100 points already.

Have a great weekend…a long one!

TB