Merry Christmas!

QUIET WEEK FOR THE MARKETS

Stocks slipped last week; the rest of the markets traded sideways. The Dow lost 102 to close at 12343. The 10-year yield was up 3bp at 4.624%; the dollar sttod at 1.3141 against the euro and 118.81 against the yen. Oil closed at $62.41 and gold at $619.10. On HedgeStreet, trading was dominated by the euro, crude and silver.

ECONOMIC RELEASES THIS WEEK

Wednesday: New home sales at 1.015m, a slight rebound from October.
Thursday: Initial claims at 320K. Consumer confidence slightly down at 102.0 on waning business confidence. Existing home sales slightly down at 6.15m.
Friday: Chicago PMI at 51.0 on weak capital investment and barely above the neutral 50.

HAPPY HOLIDAYS

Donald Trump gave the philandering Miss USA a second chance. Because he is such an angel himself … Speaking of angels, happy holidays to everyone.

Here Comes Santa!

STOCKS RALLY, DOLLAR RECOVERS

Stocks extended their rally last week even as oil price rose 2.26% to $63.43. The Dow gained 138 to close at 12445. The dollar rose 1% closing at $1.3083/€ and ¥118.06/$. Oil, EUR, JPY and GBP dominated trading on HedgeStreet. Paulson and Bernanke went to China to beg for a yuan appreciation. Paulson thinks his Goldman credentials give him the right to preach, but how embarassing for Bernanke. Russia kicked Shell Oil out of a Far East energy project. Stock markets in Asia and Australia reached new highs. Euronext shareholders vote on a merger with NYSE on Wednesday. 

ECONOMIC RELEASES THIS WEEK:

Tuesday: Housing starts 1.55m, permits 1.535m, up from October, but trend still falling. PPI +0.7%, core +0.2%, a slight bounce considering October’s plunge.
Thursday: Final Q3 GDP at 2.2%, deflator 1.8%. Initial claims expected back at 315K.
Friday: Durable orders 1.1%; the trend is close to -1% year on year as the economy slows. Personal income 0.4%, spending 0.4%, core PCE expected at 0.1%. A 6% year on year trend in wage and salary growth helps spending which accounts for 70% of GDP.

GOLDMAN’S $16BN … KERRY’S EMPTY BERET … FRENCH VALOR … OBAMA WHO?

Goldman Sachs’ bonus pool this year is $16.1 bn, or >600K per employee. Next welfare reform, instead of handouts, the feds should offer job placement at Goldman … John Kerry went to Syria to try diplomacy on his own. Assad reminded him that he was the enemy. Kerry wanted to go to Iran, too, but Ahmadinejad already had KKK’s David Duke for the anti-Holocaust shindig. Maybe next time … France is pulling its 200 troops from Jalalabad, Afghanistan. Local Taliban militias were getting stronger, and there was a real possibility of combat. Scram … The media seem to be ethralled with Barrack Obama. He speaks smoothly and has two years of experience in the Senate. That is, he knows as little as Bush, but can speak better. Great.

The Fed Heading for A Soft Landing

NO HIKE THIS TIME AS ECONOMY GROWS AND INFLATION SLOWS 

It is beginning to look like the Fed might actually succeed in engineering a soft landing for the U.S. economy. Last week’s employment data points out that despite a recession in housing and automobiles, the rest of the economy is experiencing solid growth. Inflation remains a worry, but core pressures should abate over time form the current high 2.7% p.a.This week’s CPI data will show lower gas prices, but continuing stickiness in housing, health and tuition. The dollar recovered a bit after the ECB hike, closing at $1.3204/€ and ¥116.35/$. The ECB signalled more hikes to come. The 10-year yield rose 12bp to 4.559%; the yield curve is still heavily inverted which normally signals a recession. Oil and gold eased off by more than 2%. On HedgeStreet, oil dominated trading throughout the week, except for Friday when gold accounted for 31% of the volume. Last day of trading for CPI contracts is Thursday.

ECONOMIC RELEASES THIS WEEK

Tuesday:Trade balance at -$63.0 bn. Treasury budget at -$74.0 bn. FOMC rate decision at 2:15pm.

Wednesday: Retail sales at 0.3%, ex-auto 0.4%. This is an important read on the economy.

Thursday: Import and export prices, and initial claims released.

Friday: CPI at 0.2%, core at 0.2%, with shelter, medical and tuition running at 4-6%. Capacity flat at 82.2%, industrial production flat at +0.2%.

TRANS FATS … LARGE MODELS HAPPY … BUSH NOT WORST … TACO HELL

In the 1970s, margarine caused cancer, so butter beat oleo. In the 1980s, saturated fats killed,  trans fats were good. Today, NYC bans trans fats. Next, California bans animal protein and carbohydrates. In China, the government tells people what to read or watch. In the U.S., it dictates what to eat …  Copying Spain, Italy plans to ban super-skinny models with body mass index under 18.5 from fashion catwalks. This year, the U.N. has made 6 emergency drop-offs of humanitarian aid on Bangladesh, and 23 on Milan, Paris and Monte Carlo… Hugo Chavez got reelected in Venezuela. So you see, Bush is only the second-dumbest president in the world. We still have the dumbest electorate … After testing 150 samples for E. coli, Taco Bell reassured the public that its food is safe. As biodiesel, just not to eat.