The Fed will make its policy announcement Wednesday and this should keep volume light and markets tense until then. They'll make their announcement, hold a press conference and then various Fed Governors will be out on the hustings to "sell it".
Apple's earnings are front and center after the bell and came in up 118% blowing away estimates. There must have been an iPhone, Macbook Pro and an iPad under many Christmas trees this year. The stock is up over 8% in late trading as this is written. McDonalds (MCD), and a heavy weight in the price-weighted DJIA, continued to produce good results ($1.33 vs $.30 expected) especially from overseas sales. Unless eaters get carried away you can buy enough food (50 piece Chicken MeNugget for $10) for the family for less than you can make yourself. With two income earners (at least when they're both employed) convenience has its importance. I'm still trying to imagine families eating their McNuggets in a designer kitchen.
An interesting story from
caught my attention today as they dissected and estimated the outcome of the current Iranian tension and stand-off. The line that caught my attention was this:
"Iran's ultimate interest is security against the United States and the ability to sell oil at a more substantial profit. (This would entail an easing of sanctions and a redefinition of how oil revenues in the region are distributed.) The United States' ultimate interest is access to oil and manageable prices that do not require American military intervention. On that basis, Iranian and American interests are not that far apart."
What's amazing about this is the U.S. refusal to have any coherent energy policy over the last few decades despite oil embargos and a new Department of Energy. Staffed with thousands of bureaucrats they still can't produce a kilowatt of any energy. Why is this? Because of intense partisanship, NIMBY concerns and unrealistic environmental rigidity. As a consequence we have outsourced our energy needs to unstable areas like the Gulf. Then because our presence upsets those there we are attacked, fight wars, spend trillions and most importantly lose thousands of American young men and women. Why can't any of the current candidates or administration connect the dots? Why are we so self-destructive? The answer is fairly simple: a lack of political courage to be straight with the American people.
And speaking of energy and perhaps more Crony Capitalism we learn today perhaps Obama's decision
not allowing the Keystone pipeline
project to move forward may have more to do with Warren Buffett than any environmental concerns. It took some time for someone to discover this as we all must be a little naïve.
Elsewhere Germany seems to have capitulated to more bailouts and a willingness for larger monetary expansion (um, money printing) noted here yesterday. The expansion will buy more time into 2013 for now. As J.P. Morgan CIO Michael Cembalest notes
The positive market reaction is understandable, given the reduction in Armageddon risk, and how cheap (and under-owned) European equities had become.
The latest steps give Europe more time to try and sort through all of its structural problems (e.g., why is the level of German manufacturers reporting labor shortages close to the highest on record while unemployment in Spain is 23%?). I am still a considerable skeptic on this front, for reasons we have written about often, and I would be surprised if Italy or Spain grew at all over the next couple of years. I'm also not sure how many obligations Germany and France can really take on, given sovereign debt ratios above 80%. And of course, if the current strategy doesn't work, the EU will simply have made the problem bigger for the ECB and EU banks."
So buying time until after elections everywhere remains job one. At some point as they say,
the jig is up
Gold prices retreated Tuesday as did crude oil and bonds. The dollar was relatively unchanged versus the euro.
Stock prices rallied off their lows as the euro recovered from early losses. This is the previous tango markets have been in--weak dollar, strong stocks. There are many reasons why this is bullish--better earnings for multinational companies and more, um, reflation.
Volume remains low ahead of the Fed report while breadth per the WSJ remained positive overall.
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