The Power of Conventional Wisdom

Thursday, December 31st, 2009

This article is a guest contribution by James Kwak, from Baseline Scenario.

The week between Christmas and New Year’s is probably a good time to throw out half-baked ideas on topics I don’t know much about.

First, there’s been a lot of talk about the “lost decade” for stocks. The S&P 500 is below where it was a decade ago. Dividend yields bring you back up to break-even (the Vanguard Total Stock Market Index Fund had average annual returns of 0.18% for the ten years through the end of November, and that’s after about 0.1% in expenses), but inflation sets you back a couple of percentage points per year. (Vanguard’s S&P 500 index fund, however, was negative over those ten years.) James Hamilton, drawing on data from Robert Shiller, has some thoughts on why the stock market did badly; the fundamentals were so-so, but the big factor was that valuations were at their historical peak at the beginning of the decade.

For me, the worrying thing about investing in stocks is not specifically the high price-earnings ratio. It’s the fact that in the 1990s, everyone started saying that stocks were the best long-term investment, because “over any thirty-year period ever stocks do better than any other asset class.” That’s not a direct quote, but I’m sure you can find hundreds that are virtually the same. There are two problems with this statement. The first is that it’s assuming the future will be like the past. But the bigger problem is this: if everyone thinks that X is the best long-term investment, then it probably isn’t, in part because enthusiasm about X will drive the price of it up. I believe people were saying roughly the opposite in the late 1970s, and look what happened in the next twenty years.

That said, I’m no investment genius, and I have a fair proportion of my money in equity index or near-index funds. But the general point is that when everyone agrees on an investment strategy, they are probably wrong.*

Second, there’s been a lot of China boosterism in the past year or so, as the Chinese economy has returned to growth and its stock market has soared. The Times had an article today on the topic. I’m far from an expert here, but wasn’t the government basically ordering state-owned banks to  lend money cheaply and without asking too many questions? Aren’t Chinese economic statistics so bad that economists use electricity consumption as a proxy for GDP? Haven’t we seen this movie before all over emerging markets around the world?

I think some of the U.S. press coverage of China reflects our pessimism about ourselves; in that sense, it reminds me of the idolization of Japan that took place in the 1980s. Of course, there are huge differences. The Chinese economy has nowhere to go but up, and with over 1.3 billion people its economy will surpass ours in gross output in my lifetime. (On a per capita basis, though, I don’t think that will happen in my daughter’s lifetime, even if there is a Chinese immersion charter school down the road here in Western Massachusetts.) But just as the United States is not on the brink of world-historical disaster, so everything is not perfect in China.

* What’s the right grammar here? I know “everyone” is singular, but are you really supposed to say “when everybody agrees on an investment strategy, he is probably wrong”?

James Kwak is a former McKinsey consultant, a co-founder of successful software company, and currently a student at the Yale Law School.  He is not, never has been, and never will be a member of the Yale Law Journal. However, on December 11, 2009, he was named Grand Heresiarch of the Ancient, Hermetic, and Occult Order of the Shrill by Brad DeLong. He is a co-founder of The Baseline Scenario.

Tags: asset class, Baseline Scenario, Bill Gross, China, Conventional Wisdom, Dividend Yields, Emerging Markets, Equity Index, Half Baked, Index Fund, Index Funds, Investing In Stocks, Investment Strategy, James Hamilton, Kwak, Long Term Investment, Next Twenty Years, Percentage Points, Price Earnings Ratio, Robert Shiller, Stock Market Index, Valuations, Worrying Thing
Posted in Canadian Market, China, Markets, US Stocks | Comments Off

Sprott: Is it all just a Ponzi Scheme?

Thursday, December 31st, 2009

Eric Sprott, CEO, and David Franklin, Managing Director, Sprott Asset Management discuss the U.S. Government debt program in their latest instalment of Market Commentary, “Is it just a Ponzi Scheme?.”

Sprott believes the market will overwhelm the Fed’s money printing program, striking at the credibility of the dollar, and this will send the S&P500 below its March 9, 2009 low.

Via Bloomberg:

• The Standard & Poor’s 500 Index will collapse below its March lows as an expected rebound in economic growth fails to materialize, according to hedge fund manager Eric Sprott.
• The Toronto-based money manager, whose Sprott Hedge Fund returned about 496 percent in the past nine years as the S&P 500 lost 32 percent in Canadian dollar terms, said the index’s 66 percent rally since March 9 reflects investors misinterpreting economic data. He’s predicting the gauge will fall 40 percent to below 676.53, the 12-year low reached on March 9.
• “We’re in a bear market that will last 15 or 20 years, and we’ve had nine of them,” Sprott, chief executive officer of Sprott Asset Management LP, which oversees C$4.3 billion ($4.09 billion), said in an interview Dec. 18.
• Sprott said the Federal Reserve has kept bond yields and interest rates artificially low through its program to buy agency debt and mortgage-backed securities. The central bank expects the securities purchase program to finish by the end of March. Expiration of the program would reduce demand for fixed- income securities, forcing up bond yields and interest rates and hurting economic growth, Sprott said. (seeing how that plays out in 2010 will definitely be one of the most interesting development’s of the year)

You can dowload the whole letter, “Is it just a Ponzi Scheme?,” here.

Tags: Bear Market, Bond Yields, Canadian Market, Chief Executive Officer, David Franklin, Debt Program, Dollar Terms, Economic Data, Eric Sprott, Government Debt, Income Securities, Instalment, Lows, Market Commentary, Money Manager, Money Printing, Mortgage Backed Securities, Ponzi Scheme, Printing Program, Sprott Asset Management, Sprott Hedge
Posted in Markets | 4 Comments »

In 2009, I learned that …

Thursday, December 31st, 2009

“If it’s true that we learn new things with every passing year then the year 2009 was like a crash course in fringe economics, lunatic civics and paranormal market activity all rolled up in one,” said Joshua Brown of The Reformed Broker.

Josh got a little help from his friends (including Investment Postcards) on this one, resulting in the wit and wisdom below.

In 2009 I learned that …

Phil Pearlman (StockTwits): sometimes folks clutch gloom the way toddlers clutch blanky.

Vince Veneziani (The Business Insider): Broadcom founder Henry T. Nicholas had a sex dungeon in his house. What I did not learn is the directions.

TPC (The Pragmatic Capitalist): Wall Streeters are like gold fish – they have very short memories, are practically useless and require a great deal of help from outside resources to survive.

Barry Ritholtz (The Big Picture): that human nature never changes.

The Fly (iBankCoin): the NY Mets were invented to punish me.

Lawrence McDonald (Author, A Colossal Failure of Common Sense): $10 trillion will always buy you 4000 DOW points.

Howard Lindzon (Elevator Inspector): the FED is running the best Ponzi scheme EVER.

Cody Willard (Fox Business Network’s Happy Hour): when the Republican/Democrat Regime in power redistributes trillions of dollars from the renters and savers to the bankers, most bank stocks will go up.  A lot.

Stacy-Marie Ishmael (Financial Times): no one is better at navel gazing than the media.

Noah Rosenblatt (UrbanDigs): the fed can really buy their way out of a depression.

Downtown Josh Brown (The Reformed Broker): the ink was all red, most Americans were blue, but stocks went bananas, bonds and commodities too!

Joe Donahue (Upside Trader): pundits and analysts continue to validate the theory that a broken clock is right twice a day and you don’t need a weatherman to know which way the wind blows.

Eric Jackson (Ironfire Capital): it’s always darkest before the Fed jumps in with backstops for any large institution that moves.

Michael Dawson (Trend Rida): HOT doesn’t just apply to the sights on the beaches in Brazil – everything there from broadband to beer is smoking.

Arthur Cutten (Jesse’s Cafe Americain): on certain occasions people, who ordinarily would barely lift a finger in an unselfish or idealistic act, will engage in the greatest effort to cast themselves and their children off a precipice for a profane delusion, in an act of petty willfulness, for a destructive compulsion which they are too proud to relinquish, even to the point of death. This is the madness of the mob, and in our day, the suicide of the west.

Justin Paterno (Zero Beta): celebrity death is great for the economy.

Francine McKenna (Re: The Auditors): there is no need for me to be afraid but every reason to be wary.

Trader Mark (Fund My Mutual Fund): Ben Bernanke can remain irrational far longer than I can remain solvent.

Steve Sears (Barron’s): nausea is the very best buy signal.

Joe Weisenthal (The Business Insider): I end up succumbing to conventional wisdom just like everyone else, see my gloomy thoughts in March.

Jason & Alyx (LOLFed): if you owe ten thousand, the government owns you, but if you owe ten billion, you own the government.

Charles Kirk (The Kirk Report): Livermore is right – it is never your thinking that makes the most amount of money but by sitting tight especially when you are right.

Tom Brakke (Research Puzzle): there’s a right size to everything (trade, project, business, economy, etc.) and that trying to stretch beyond that usually triggers mistakes.

Karen Glassman (Tirschwell & Loewy): Gordon Gekko has the same initials as Greed is Good, Government and Goldman … how ironic.

Trader Alamo (TraderAlamo.tv): any sign of a bearish technical pattern was actually uber-bullish, resulting in new-fangled patterns such as the now popular, “I shot my ear off”, paying homage to Van Gogh while simultaneously mocking perpetual buyers of FAZ.

StockJockey (1440 Wall Street): trend followers eventually take it in the rear.

Leigh Drogen (Surfview Capital): there is a real meaning to “don’t fight the fed”.

Prieur du Plessis (Investment Postcards): there is a lot of truth to the following quote from The Economist (1986): “The best investors are like socialites. They always know where the next party is going to be held. They arrive early and make sure that they depart well before the end, leaving the mob to swill the last tasteless dregs.”

Ben Shoval (Hedge Fund Comedian): doing God’s work pays better than I thought…also, too much credit is the problem… and the solution.

Stuart Varney (Fox Business Network): it is possible to borrow a trillion dollars, print a trillion dollars and nationalize a big chunk of the American economy, and still see the biggest nine month stock market rally in three generations!

OneTwo (1-2 Knockout): no one ever went broke underestimating the stupidity of government.

Adam Warner (Daily Options Report): I shouldn’t leave my cell phone and my golf clubs lying around near my car.

Damien Hoffman (Wall St Cheat Sheet): “Yes We Can” was truly a slogan to reignite the charge for Wall Street banks who needed taxpayers as a silver lining for a global scam-gone-wild.

Patty Edwards (CNBC Fast Money): money covers a multitude of sins, usually those of politicians and bureaucrats.

Tadas Viskanta (Abnormal Returns): Too big to fail = Too big to exist…also, it’s Goldman’s world, we are just living in it.

Jerry Harper (My Emerging Voice): that shorts in a bull market when succesful can be very profitable, also that my emerging markets telecoms stance has been a real winner.

Adrienne Gonzalez (Jr Deputy Accountant): if you put MS Paint hearts on pictures of Fedheads you can get them to pass your posts around the Bank … but shhhhh

Michael Panzner (Financial Armageddon): only three words matter when it comes to investing in today’s markets: ignorance is bliss.

CC (Charts and Coffee): the fear (or hope) of a one day market collapse is an erroneous psychological bias that many traders harness to their detriment.

The Anal_yst (The Atlantic): despite 10% (or 18%) unemployment, it totally makes sense that retail and consumer discretionary stocks are back up to 2007 levels.

Scott Bell (GDP Wealth): I am so happy to not be a Carnival Barker on a finance network.

Wade Slome (Sidoxia Capital): $14 trillion in debt, 10% unemployment, and approval of socialized healthcare can lead to an +80% move in the NASDAQ Composite over a 10 month period….also Tiger Woods prefers eating out at the buffet rather than at home, even though it’s cheaper to eat at home and having Swedish meatballs every night ain’t so bad.

Greg Battle (Leftover Takeout): dumb persistence trumps lazy genius more often than not…also, Danny Duberstein is good at two things.

Source: The Reformed Broker, December 30, 2009.

Tags: Bank stocks, Barry Ritholtz The Big Picture, Blanky, Brazil, Broken Clock, Business Insider, Colossal Failure, Commodities, Crash Course, Dow Points, Emerging Markets, Eric Jackson, Gold, Ironfire, Joe Donahue, Josh Brown, Joshua Brown, Ny Mets, Phil Pearlman, Ponzi Scheme, Sex Dungeon, Short Memories, Wall Streeters, Wit And Wisdom
Posted in Brazil, Markets, Silver | Comments Off

Marc Faber: Gloom, Doom & Chances of a Boom

Thursday, December 31st, 2009

Marc Faber, editor and publisher of the Gloom, Boom & Doom Report, shares his market outlook for 2010 with CNBC.

Click here for the article.

Source: CNBC, December 30, 2009.

Tags: Article Source, Boom, Cnbc, Editor And Publisher, Editor Publisher, Gloom Doom, Marc Faber Gloom, Market Outlook, Shares
Posted in Markets, Outlook | Comments Off

Todd Harrison talks about currencies and gold

Thursday, December 31st, 2009

Last week Jordan Roy-Byrne, owner of Trendsman Investment Research and editor of The Daily Gold, interviewed Todd Harrison, founder and CEO of Minyanville, on currencies (and specifically the US dollar) and gold bullion. They discussed the chances of a US$ rally and also of gold strengthening to $4,000/oz. The interview comes courtesy of Wall St Cheat Sheet.

Source: Wall St Cheat Sheet, December 28, 2009.

Tags: Ceo, Cheat Sheet, Currencies, December 28, Dollar, Gold, Gold Bullion, Investment Research, Jordan, Minyanville, Oz, Rally, Roy Byrne, Todd Harrison
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The World’s Biggest Bond Fund Is Moving Aggressively Into Corporate Holdings, Away From Government-Insured Risk

Tuesday, December 29th, 2009

This article is a guest contribution by by Tyler Durden of ZeroHedge.com.

As we pointed out two weeks ago, PIMCO has been preparing for 2010 by selling out its legacy “safe” MBS and Treasury holdings, and shifting largely to cash. Furthermore, the recent hirings of corporate and distressed asset managers indicates that the traditionally Treasury heavy asset manager is set to become the world’s biggest fixed income hedge fund, focusing on IG, high yield and distressed investments. As PIMCO is a critical manager in numerous government bailout programs, we can only hope that the firms’ Newport Beach Chinese Walls are better at keeping secrets than the characters in assorted O.C. legacy “reality” shows. The below presentation by PIMCO’s Mark Kiesel indicates why PIMCO will soon be one of the primary actors in future official creditor committees in the upcoming wave of corporate bankruptcies (yes, shockingly assets do have to create cashflows for companies to avoid bankruptcy).

US_Credit_Kiesel_Picking_Winners_January –

Tags: Asset Manager, Asset Managers, Bailout, Bond Fund, Cashflows, Chinese Walls, Committees, Corporate Bankruptcies, Creditor, Fixed Income, Hedge Fund, high yield, Ig, Keeping Secrets, Kiesel, Mbs, Newport Beach, PIMCO, Treasury, Tyler Durden
Posted in Markets | Comments Off

The Most Shorted Stocks: Past, Present and the Market Implications

Tuesday, December 29th, 2009

This is an interesting segment from Fox Business aired on Dec. 28, 2009 where John Tabacco from locatestock.com talked about the top five most shorted stocks.  The following is a summary of the interview along with some of my thoughts.

The Biggest Shorts – Past & Present

According to locatestock.com, the top short of the decade, and you guessed it, is Lehman Brothers.
But did you know…

• Other biggest shorts for the decade include TARP and bailout recipients: Fannie Mae (FNM), Freddie Mac (FRE) and CitiGroup Inc. (C).
• Overstock.com (OSTK), at number five, had 140% of its entire outstanding shares shorted at one point of time; giving rise to one very impassioned advocate against naked shorts - Patrick M. Byrne.
• Some big players base their short strategy on fundamentals, and sometimes will increase positions over time, or hold their short positions long (more than a year).

The new champion, according to Tabacco, is MSCI Emerging Markets Index Fund (EEM) - the most popular short by volume requested.

Dollar’s Gain Is Commodities Loss

The rising short interest in MSCI Emerging Markets Index Fund (EEM) suggests a continued flight into the perceived safer U.S. market. This trend could further prop up the Dollar, and will likely have a negative impact on commodities, with natural gas probably being the only exception, as the flaming fuel is generally non-dollar reactive.

Dollar & Stocks May Rally Together

However, equities might stand a better chance since the inverse correlation seen between the Dollar and stocks remains broken, as discussed in my article just before Christmas.  In fact, this view is reinforced by Dr. Marc Faber, who told Bloomberg yesterday:

Faber also said that Dollar may appreciate 5-10% against the euro in the “near term” as bearish betting on the greenback becomes too crowded while equities advance.

The Three Amigos?

Shares of Fannie Mae (FNM) and Freddie Mac (FRE) soared to their highest since October on Monday after the Treasury Dept. signed over the checkbook by removing caps on federal support.  Meanwhile, some analysts see Citigroup Inc. (C), with both explicit and implied government support, as ”The Can’t Lose Trade Of 2010.”

So, here is Question of the Day:

Video Source: YouTube

Tags: Bailout, Better Chance, Betti, Citigroup Inc, Commodities, Dr Marc Faber, Eem, Emerging Markets, Fannie Mae, Fnm, Freddie Mac, Gold, Index Fund, Inverse Correlation, Lehman Brothers, Market Implications, Msci Emerging Markets, Msci Emerging Markets Index, Natural Gas, Negative Impact, Outstanding Shares, Overstock Com Ostk, S Market, Short Interest
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Gold Is The Decade’s Best

Sunday, December 27th, 2009

By Frank Holmes
CEO and Chief Investment Officer

Happy holidays wishes to all, with a special season’s greetings to the permanent gold skeptics.

The decade that ends next Thursday is on track to be the worst in recorded history for the U.S. stock market—worse than all of the many boom-and-bust cycles of the 19th century, worse than the Great Depression-era 1930s, worse than the recession-plagued 1970s.

The S&P 500 opened the decade at 1,469.25 on January 3, 2000. When the market closed on Christmas Eve, the S&P 500 stood at 1,125.46—with four trading days left in the decade, the index’s annual performance over that span is negative 2.6 percent. The Dow Jones Industrials has lost about 1 percent per year over the same period, and the Nasdaq Composite is down a whopping 5.9 percent annually. When adjusted for inflation, the 10-year returns for these indices are even lower.

Meanwhile, what about gold?

The chart above from Bloomberg tells the story—a $100 investment in gold when the market opened on January 3, 2000, was worth about $380 as of this week (data through December 21)—that’s a total return of 280 percent and an annualized return of 14.3 percent. Gold stocks (as measured by the XAU Index) have also had a good decade, climbing 9.4 percent annually.

Commodities (as measured by the S&P GSCI Enhanced Total Return Index) posted average gains of 13.6 percent per year over the period, driven mostly by rapid economic growth in Asia and elsewhere in the developing world.

There are many commentators out there who see no value in gold and who denounce it as an investment at every opportunity. They are certainly entitled to their opinions, but it’s hard to argue with the numbers over the past 10 years—investors on average would have been better off with a gold allocation than having no exposure.

We consider gold a legitimate asset class, and for that reason, we consistently suggest that investors consider a maximum 10 percent allocation to gold-related assets—half in bullion or bullion ETFs and the other half in gold equities—and that they rebalance each year to capture the swings.

What the next decade will bring for gold? Who knows. But we do know one thing—those who held gold for the past 10 years will have a happier New Year than those who listened to the perma-skeptics.

Tags: Annualized Return, asset class, Boom And Bust, Bust Cycles, Chief Investment Officer, Christmas Eve, Commentators, Commodities, Developing World, Dow Jones, Dow Jones Industrials, ETF, ETFs, Frank Holmes, Gold, Gold Bullion, gold stocks, Great Depression, Gsci, Happy Holidays, Nasdaq Composite, Rapid Economic Growth, Skeptics, U S Stock Market, Xau Index
Posted in ETFs, Markets | Comments Off

Roundup: Index Summary and U.S. Equity Markets (12/24/2009)

Sunday, December 27th, 2009

Index Summary

• The major market indices were higher this week. The Dow Jones Industrial Index (1) rose 2.06 percent. The S&P 500 Stock Index (2) advanced 2.77 percent, while the Nasdaq Composite (3) finished 4.85 percent higher.
• Barra Growth (4) outperformed Barra Value (5) as Barra Value finished 2.22 percent higher while Barra Growth rose 3.31 percent. The Russell 2000 (6) closed the week with a gain of 4.94 percent.
• The Hang Seng Composite (7) finished higher by 0.54 percent; Taiwan (8) gained 2.86 percent, and the Kospi (9) advanced 2.09 percent.
• The 10-year Treasury bond yield closed at 3.80 percent, up 31 basis points for the week.

Domestic Equity Market

The figure above shows the performance of each sector in the S&P500 Index, for the four trading days through Thursday at 11:00 AM CT. All ten of the sectors had a positive return. The best-performing sector was materials, up 4.2 percent. Other top-performing sectors include technology and energy. Utilities, healthcare and industrials were the underperformers.

U.S. Steel Corp. was the best-performing stock within the materials sector, up 15 percent. Other outperformers in the sector were Titanium Metals Corp, Alcoa Inc, AK Steel, and Allegheny Technologies Inc.

Strength

• As of 11:00 AM CT Thursday the best performing group for the holiday-shortened week was the healthcare facilities group, up 12.6 percent, led by its single member, Tenet Healthcare Corp. The hospital industry is expected to benefit if healthcare reform passes and expands insurance coverage. Also, a brokerage firm upgraded Tenet stock, saying that the company should continue to improve its margins and increase its inpatient admissions.
• Five of the top-ten performing groups were in the materials sector (aluminum, steel, coal & consumable fuel, construction materials and diversified metals & mining). This strength appears to be due to increasing investor confidence that materials-related groups will benefit from the strengthening global economy. These four groups were up in a range of 7.3-11.9 percent.
• The electric manufacturing services group outperformed, rising 11 percent, led by Jabil Circuit Inc. The contract manufacturer of electronic products reported first fiscal quarter earnings above the consensus forecast and provided a solid forecast for its second fiscal quarter.

Weakness

• The diversified supply services group was the worst-performing group, down 4.7 percent. The group was led by Cintas Corp., a supplier of uniforms and other supplies to corporations reported second fiscal quarter earnings below the analyst consensus estimate. The company’s results have been impacted negatively by the job losses in the U.S. economy. The company also said its third quarter is traditionally its most challenging and it expects customer holiday closures will be longer and more widespread than they have been in recent years. For those reasons, the company believes current analyst expectations for Cintas revenue and earnings are too optimistic.
• The casino & gaming group was the second-worst performing group, losing 1.6 percent. The group was led by International Game Technology. A recent article on Barrons.com pointed out that the company’s chairman and chief executive officer had recently sold some of his stock in the company.

Opportunity

• There may be an opportunity for gain in mergers & acquisition (M&A) transactions in 2009 and 2010.
• The strength in the market since March could be an opportunity to eliminate weaker companies in the portfolio and upgrade to companies with better fundamental outlooks.

Threat

• Should investors’ expectations for an improving economy not come to fruition on a reasonable time frame, it could be a threat to stock prices.

Tags: 10 Year Treasury, Ak Steel, Alcoa Inc, Allegheny Technologies, Allegheny Technologies Inc, Aluminum Steel, Brokerage Firm, Dow Jones Industrial, Dow Jones Industrial Index, Facilities Group, Index Summary, Inpatient Admissions, Investor Confidence, Major Market Indices, Materials Sector, Nasdaq Composite, Tenet Healthcare Corp, Titanium Metals Corp, Treasury Bond Yield
Posted in Markets, Outlook, US Stocks | Comments Off

Roundup: Economy and Bond Market (12/24/2009)

Sunday, December 27th, 2009

The Economy and Bond Market

The yield on the 10-year Treasury note increased by 26 basis points during the holiday-shortened week, leaving the yield at 3.80 percent. The spread between the two-year note and the 10-year note reached a record 285 basis points during the week, likely reflecting investor concern about future inflation levels.

Current inflation, as measured by the Personal Consumption Expenditure Core Price Index (PCE Deflator) shown below on a year-over-year basis, remains relatively contained. The November data released this week showed a 1.4 percent year-over-year increase and was flat on a month-to-month basis.

Strength

• Sales of existing U.S. homes in November rose 7.4 percent to an annual rate of 6.54 million homes, greater than the forecasted rate of 6.25 million.
• Price inflation data this week slightly beat expectations. The Personal Consumption Expenditure (PCE) Price Index for November was up 1.5 percent year-over-year versus a 1.6 percent consensus.
• Personal income in November increased 0.4 percent from October, the fifth consecutive month-over-month increase and the biggest monthly increase since May, while personal spending increased 0.5 percent. The increases left the savings rate unchanged at 4.7 percent for November.
• Initial jobless claims last week declined to 452,000, down from 480,000 the previous week. This was the lowest level since September, 2008. The four-week average for claims, which smooths out fluctuations, fell to 465,250, its sixteenth-straight weekly decline.
• Orders for durable goods increased 0.2 percent in November. However, durable goods orders excluding transportation increased by 2.0 percent, almost twice the 1.1 percent forecast.

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Weakness

• Sales of new U.S. homes in November fell 11.3 percent to a seasonally adjusted annual rate of 355,000, below the expected rate of 438,000.
• Real U.S. gross domestic product (GDP) for the third quarter was revised downward to 2.2 percent from the previously reported 2.8 percent.
• The Richmond Federal Reserve Bank’s Manufacturing Sector Activity Index fell to minus four in December from a positive one in November and a positive seven in October. The consensus expected it to rebound to five.

Opportunity

• Expectations continue to build for growth in the U.S. in the current quarter, possibly as much as 4-5 percent. The global economic recovery appears to be taking hold.

Threat

• The Fed reiterated their monetary policy stance in the prior week and on the surface nothing really changed but they are incrementally moving to reduce the policy accommodation and often these things move quicker than many expect.

Tags: Admin Post, Avw, Basis Points, Bond Market, Cb, Ck, Consensus, D1, Decline, Deflator, Durable Goods Orders, Economy, Fluctuations, GDP, Gross Dom, Gross Domestic Product, Img Src, Inflation Data, Initial Jobless Claims, Investor Concern, Market Economy, Openx, Personal Consumption Expenditure, Personal Income, Price Index, Price Inflation, Random Number, Roundup, S Gross, Year Treasury Note
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