1/2/13…fiscal ‘bluff’ redux

From The Friars Club Encyclopedia of Jokes: “He hasn’t an enemy in the world – but all his friends hate him.” – Eddie Cantor

Bloomberg Quote of the Day: “I am so clever that sometimes I don’t understand a single word of what I am saying.” – Oscar Wilde

This week’s holiday shortened economic calendar is packed with important indicators. The highlight of the week will be the December Employment Situation (Friday). We will also get the December ISM Manufacturing Survey and November Construction Spending (Wednesday), the December ADP National Employment Report and December Motor Vehicle Sales (Thursday), and the December ISM Non-Manufacturing Survey and November Factory Orders (Friday). In addition, the Federal Reserve will release the minutes to the December 13th – 14th FOMC meeting (Thursday). Courtesy of Steve Wood, Insight Economics, Walnut Creek, CA

Bloomberg Top Stories:

*Stocks Jump With U.S. Index Futures on Budget Deal as Commodities Advance – huh?

*Bond Tab for World’s Biggest Economies Seen Falling $220 Billion in 2013

*Buffett’s BofA Bet Helps Berkshire Beat S&P 500 Amid Acquistion Drought

*Manhattan Availability of Top Offices Reaches 19-Year High as Towers Built

*Merkel Election Year Starts With Warning on Economic Growth – that’s honesty!

*Manufacturing in U.K. Unexpectedly Revives as Euro Area Struggles – ?

*GM Puts Reach 13-Month High Amid hedging After Stock Advances 42%

*Senate Budget Accord Will Crimp U.S. Economic Growth Without Crushing It

*Billionaires Wort6h $11.9 Trillion Seen Prowling for 2013 Global Advantage

*House Passes Deal in Bipartisan (?) vote as fight Looms Over Debt Ceiling – bad news!

*Sandy Aid Vote Delay in House Draws Ire of Lawmakers From U.S. Northeast  

Monday was clearly yearend! Total NYSE volume rose to 3.16B shares on Friday vs 2.4B vs 2.83B vs Wednesday’s 2.27B shares. Contrast to 12/24’s shortened session which was a 12 month low at just 1.24B shares vs 4.74B on Friday’s quadruple witching – the 12 month high…back to back??? Trades executed on the floor of the NYSE also rose to a still weak 732M shares vs 535M vs 567M vs 476M from 286M shares (new 12 month low) vs 1.88B – also the 12-month HIGH. All indices were stronger by 1.3-2.1% in a march from the opening low, struggle with breakeven and then three waves of rallies into the close…all on the fiscal cliff news. Then we found out…after the close natch…that there still was no deal, but it served its purpose of having index funds buying at the highs of the session. Advance/declines and Breadth were very STRONG after three weak sessions by 6x/29.1x!!! on NYSE and 4.2x/11.2x!!! on Nasdaq. Now if there had just been solid volume!

Global stocks are strong with many indices up over 2%!!! U.S. futures are also very strong and near session highs! DOW +197!!!; SPX +24.50!; NDQ +58…euphoria???

The bond market is being slammed! The 10 yr note is 1.83%, and the 30 yr 3.03% – taking our the 3% high set on 12/18! TIPS are also weaker at 0.43% vs 0.35% – the 0.22% record low was set on 12/6! Libor is steady at 0.305%, 3 months, and 0.506% six months. Foreign bond rates mixed with Bunds weak at 1.42% +11bp’s, UK 1.95% +13, but the problem countries rallying: Italy 4.29% -19; Spain 5.05% -15; Portugal 6.50% -21; Greece at 11.37% -9. Whew!

Gold closed  strong on Monday at $1675.80 +$19.90, and is up another $12.10 overnight to $1687.90! It remains below the 40/50 day moving averages but took out the 200 day – $1667! Crude also rallied on Friday closing at $91.82 +$1.02 – the highest since 10/22 and well above the 40/50 day, with res at the 200 day: $91.98. Overnight it is strong at $93.58 +$1.76???

…what a way to end/start a year…the clowns of D.C. mucking it up and as James Kwak wrote…it is clear as mud that by ‘technically’ letting the Bush tax cuts laps then reactivating them for those earning more than $400k – that is taxable income after deductions by the way – they could call it a tax cut…in fact, despite the passage by 257/167 with just 85 GOP ayes. House Speaker Boehner made no comment before the vote and left the room after leaving it to Ways and Means Chairman Dave Camp to defend the vote as the “largest tax cut in American history.” Paul Ryan was for it but Majority Leader Eric Cantor condemned it setting the stage for another gruesome debt ceiling fight in February. Boys will be boys…so will a lot of middle-aged men!

Yet the market this morning is opening strong as if this vote accomplishes anything. Relief rally? It could be very short-lived and end abruptly.  All that was accomplished was saving us from a surefire recession…pity us.

Lots of talk these days about freeloaders including those claiming permanent disability and there is no real testing to validate the claims. It appears though that part of it is frustration with not being able to earn an honest living so take the easy way out. If you read Monday’s commentary and went to the link on education and wage statistics you will see how the middle class is becoming a myth…but if so why are both parties trying so hard to defend it? Would we even have a sizable middle class if it hadn’t been for 30 years of expansion of credit? Not likely given the savings rate.

Bill Gross was on Bloomberg saying that Americans need to save more…and they do…just how are they supposed to do it and what then happens to GDP growth in a consumption-based society? If you figure it out, let TB know…please!!! This is by no means over!

Hope you have a good rest of this holiday-shortened week!

TB

. . .  – – –  . . . (SOS!)  . . .   – – –  . . .  (SOS!) . . .   – – –  . . .  (SOS!)

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