Tebow Sighting in Westwood

February 17, 2012

There has been a slew of economic data the past couple of days. In general things have improved from the past three years. The key factor is that private sector job growth is occurring, offsetting government layoffs. This happens when companies are more bullish about their prospects, and translates into better consumer confidence and spending.

	Actual	Estimate	Prior
PPI	4.1%	4.1%	4.8%
Core PPI	3.0%	2.7%	3.0%
Initial Jobless Claims	348K	365K	361K
Housing Starts	699K	675K	689K
Building Permits	66K	680K	671K
Mortgage Delinquencies		7.6%	8.0%
Philly Fed	10.2	9.0	7.3
CPI	2.9%	2.8%	3.0%
Core CPI	2.3%	2.2%	2.2%
Leading Indicators	0.4%	0.5%	0.4%

Despite the positive data points, the Fed is still talking about adding stimulus if things teeter. Fed officials are worried the data improvement is temporary, as we have seen the past couple of years. I think this economic surge we are enjoying has caught the backward looking Fed by surprise.

A Greek deal is expected this weekend (as usual), while US markets will be closed for a three day weekend. Volumes, which have been exceptionally light all year, should tail off by mid-day as traders exit for the weekend. Adding to the uncertainty for Tuesday is the options expiration today. Watch for low volume, volatile days today and Tuesday.

I believe we have been in a secular bear market since the tech bubble burst in 2000. One contrarian indicator of the end of the cycle is interest amongst graduates entering the market and entry level pay. We must be getting close to market lows given new graduates entering investment banking are now making less than those entering law. We haven’t seen this pay gap since the early 1980’s, right before the equity markets entered an 18 year bull market.

While most countries have a comprehensive policies about wireless spectrum (the airways that TV, radio, and other wireless communications traverse), the US has a hodge podge of policies. The FCC has inconsistent policies for allocating spectrum amongst users. Think free for broadcast television, but extremely expensive auctions for others such as wireless carriers. One of the reasons AT&T (T) attempted to acquire T-Mobile was to acquire sufficient spectrum to compete with Verizon (VZ). Now Congress is stepping into the fray, moving a bill through that would auction off the old analog TV spectrum to wireless carriers for internet service. The plan is to use the proceeds to fund the 10 month payroll tax cut extension. This policy helps explain why the US lags other countries in wireless broadband deployment.

Oil has hit its highest level since May 2011 on concerns about Middle East stability and an improving outlook for the US economy. Economists and market analysts have been concerned about the impact of rising oil prices on the US recovery. Historically gasoline prices of $4 per gallon have been the tipping point for consumers, and we are approaching that level now.

The Fed has been tasked with the dual mandate of maintaining employment while limiting inflation. The table below, from The Washington Blog, shows how the purchasing power of the dollar has declined since the formation of the Fed.

The US Consumer Financial Protection Bureau (that’s a mouthful) has proposed adding to its rapidly growing mandate by requesting oversight of debt collectors and credit reporters. “Debt collectors and credit-reporting agencies have gone unsupervised by the federal government for too long,” said Director Richard Cordray. I’d say this serves as fair warning for Dog the Bounty Hunter (I know, he’s a bail guy, but come on, it makes sense).

Kimble Charting Solutions does a great job providing technical analysis to various trading situations. They put out a chart this morning suggesting the Dow is bumping up against some REAAALLLLY long resistance-70 years!

Rumors have been swirling (and confirmed) that Tim Tebow has been working out this week at UCLA with new offensive coordinator Noel Mazzone. Since I am going through football withdrawals, I went over there last night to see if I could meet Tim. While I didn’t see Tebow, I did see Phillip Rivers and draft eligible former ASU quarterback Brock Osweiler. These guys can throw the pigskin.

Have a great weekend

Ned