The early look at His speech tonight is not promising
Steve Cook on Disciplined Investing

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Have You Seen This?


The Market
    
    Technical

    The indices (DJIA 11980. S&P 1290) advance seems relentless.  They remain within both their intermediate term up trend (11130-14675, 1163-1596) and short term trend (1160-12510, 1250-1355).  While the DJIA has negated the former 11811 resistance level, the S&P still has not attempted a challenge of its comparable level (1311).

    Volume declined (which gives traders a massive migraine as the Averages advance on low volume); breadth improved; the VIX fell and remains of little value in helping us anticipate Market direction.
 
    Bottom line: clearly, yesterday was another teeth grinding affair for yours truly.  My only solace is that several holdings will soon hit the lower boundary of their Sell Half Range.  In addition, there are a number of positions that are now significantly larger than their original portfolio allocation. While none have yet entered their Sell Half Range, they are also potential candidates to be scaled back.  At some point whether or not these stocks reach their Sell Half Range, our Portfolios will likely Sell sufficient shares to reduce their position to their designated allocation size.

    In the meantime, being out of sync with the Market isn’t getting any easier; though I remain unwilling to chase stocks higher from present levels.   As I have noted the resolution to this dilemma is for either prices to decline to bring more stocks on to our Buy Lists or for monetary/fiscal policies to improve enough to fuel economic growth higher than currently forecast.

    One more divergence about which to be concerned (short):
    http://www.ritholtz.com/blog/2011/01/the-divergence-to-keep-on-your-radar/

   Fundamental

     Headlines

    Yesterday got off to a good start with good earnings reports (INTC, MCD, HAL), a couple of merger announcements (Rock Tenn buying Smurfit Stone, Novartis buying Genoptic) and INTC raising its dividend and announcing a $10 billion stock buy back.  Investors never looked back.

    In addition, there was a lot of chatter about the upcoming State of the Union speech tonight, the regular Fed meeting which starts today and the initial fourth quarter GDP number due out on Friday. 

    The one thing worth noting in all of this is the likely content of Obama’s speech.  A conference call with supporters over the weekend suggests that His focus will be on ‘investing’ to create jobs.  In other words, more government spending on teacher salaries and other liberal constituencies.  If this proves the case, this is a serious deviation from His prior efforts at looking ‘moderate’. 

At the very least, it demonstrates His continuing inadequate grasp of basic economics; and at the worst, reflects the same cynical bulls**t line that He and His cohorts tried to foist on the taxpayers with Obamacare.  At some point, someone in Washington has to grasp the simple premise that ultimately even the mighty US can’t invest money that it doesn’t have--it has to save first, then invest the savings.  Lest you question the premise that the US doesn’t have the money, recall that we are bumping up against a $12 trillion debt ceiling

    Bottom line;  as it relates to the key assumption in our economic thesis (i.e. that for the economy to return to its long term secular growth rate, responsible fiscal and monetary policies are a necessity) this week could be a biggy, what with the His Speech tonight and the Fed meeting today and tomorrow.  Both entities have the potential to set a new course and make me look like a fool for not putting money to work when stocks broke above S&P 1220.   Nothing would make me happier; but I am still not betting money on it.

    The latest from John Mauldin (medium):
    http://advisorperspectives.com/commentaries/millenium_012211.php

Economics

   This Week’s Data

   Other

    A recent survey by the National Association of Business Economics is a positive for future hiring (short):
    http://mjperry.blogspot.com/2011/01/nabe-survey-economic-recovery-gaining.html

    A pick up in bank lending is a major positive for economic growth as well as precursor to rising inflationary pressures (short):
    http://scottgrannis.blogspot.com/2011/01/bank-lending-is-definitely-picking-up.html

    More on foreclosure-gate (both short):
    http://www.ritholtz.com/blog/2011/01/fcic-prosecute-wall-street/
    http://www.ritholtz.com/blog/2011/01/bear-stearns-cheat-clients-out-of-billions/

    Rebound in EU industrial production (short):
    http://econompicdata.blogspot.com/2011/01/europes-industrial-rebound-power-of.html

Politics

  Domestic

Your tax dollars at work (short):
http://www.ritholtz.com/blog/2011/01/gses-huge-taxpayer-funded-legal-bills/

  International

    This analyst is very worried about inflation in China (medium):
    http://www.investmentpostcards.com/2011/01/23/china-vs-inflation-a-love-30-match-so-far/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+wordpress%2FVYxj+%28Investment+Postcards+from+Cape+Town%29&utm_content=Yahoo!+Mail


    A sub chapter of the recent visit by Chinese President Hu (medium):
    http://www.powerlineblog.com/archives/2011/01/028201.php












Posted 01-25-2011 8:20 AM by Steve Cook