Another Manic Monday

January 30, 2012

“The percentage of Americans with a job is at the lowest in decades. One in five men of prime working age, and nearly half of all persons under 30, did not go to work today.”-- Governor Mitch Daniels

Equity markets are weak this morning once again on Greek debt concerns. As discussions continue, it appears that the latest offer from Greece is around $.30 on the dollar, and even the ECB may have to take losses on their holdings. Additionally, Wolfgang Schauble, Germany's finance minister, warned that unless Greece gets its economy in order, there might not be additional bailout funds coming their way.

It appears the EU is considering a permanent bailout fund as they anticipate that currency block members will continue to have problems due to the mispricing that occurs with a common currency. Reportedly they are looking at legislation requiring members to adopt a balanced budget.

Beef futures spiked to a record $1.26 per pound after the Department of Agriculture reported a decline in the heard. The number of live cattle in the US is at its smallest level since 1952.

Personal income rose 0.5% in December vs. expectations of a 0.4% increase. Personal spending was flat vs. an expected 0.1% increase. The PCE deflator rose by 2.4% vs. expectations of 2.3%.

Not surprisingly, investigators are concluding that the missing $1.2 billion at MF Global is just gone. Officials have speculated that the money "vaporized" during the panicked trading that took place during the firm's final days.

Supporting Governor Daniels’ comment above, the chart below shows the percentage of the working age population actually working over the past 60+ years.




The market is close to the famous Golden Cross, where the 50 DMA crosses above the 200 DMA (see chart below, where purple line approaches yellow line). Although the indicator has a somewhat mixed result, it has typically been a positive confirmation of market action. The last time we had a Golden Cross, October 2010, the market continued its surge by rising roughly 18% over the subsequent six months.



Earnings continue this week. Last week I showed some numbers suggesting earnings results have been weaker than expected. Bespoke Investment Group produced the chart below showing the net percentage of companies lowering guidance vs. raising guidance. After an extended number of quarters with positive earnings guidance, the past two have been weak.



The Orange County Register reported last week that Orange County remains one of the 10 most expensive places to live in the US. Home prices, whose median value peaked around $600K and eventually dropped to $370K, now sit at $400K, slightly down from $425K two quarters ago. The study did show that office and industrial vacancy rates have been declining over the past two quarters.

This weekend the Giants and the Patriots will meet in Indianapolis to mark the official end to the football season.

Have a great day

Ned