Today's Recap

Today is just one of those scratch your head days. We again couldn't break resistance and I would think it would set up fairly bullish the next couple of days. The dollar is basically overbought and due for a pullback. Europe is oversold and due for a rebound. Commodities are oversold and due for a rebound. All this occurred while the U.S. stock market indexes barely went down. The guess is when these things correct the market will go up so a move to the upper end of the trading range seems likely at this point. The destruction in Europe has been pretty widespread. Greece stock market is down 16% in a week and 30% since its tops in October. Autria is down 6% in the last two days. Dubai has given all of its gains up for 2009. And yet the U.S. stock market remained gridlocked in its trading range. In the short term fairly bullish. In the slightly longer term probably bearish as things have shifted. I would be surprised to see a new low in the dollar for quite awhile. Their is simply to much stress on the Euro. A correction of the fairly violent move the last few days is definitely possibel though.

This one has to go in the stupid pile. Not only is Dubai in huge financial troubles for its ridiculous ideas on how to spend wealth, but one of the most audacious, the The Palm Jumeirah man made island is sinking.

From CNBC

One of the crown jewels of its real estate empire, The Palm Jumeirah, is literally sinking into the ocean, one scientist told the Wall Street Journal.

The man-made island, which was dredged from seabed and shaped into a palm for luxury housing, is sinking by an average of 5 millimeters a year, an executive at leading European ground survey company Fugro NPA told the paper.

One of the crown jewels of its real estate empire, The Palm Jumeirah, is literally sinking into the ocean, one scientist told the Wall Street Journal.

and

The man-made island, which was dredged from seabed and shaped into a palm for luxury housing, is sinking by an average of 5 millimeters a year, an executive at leading European ground survey company Fugro NPA told the paper.

News was bad bad bad today. But one bullish article caught my eye. I try to read all sides and it is hard to go against John Paulson.

From the Financial Times:

John Paulson, the hedge fund manager whose bearish positions in the mortgage market three years ago were among the most lucrative trades, has changed his views dramatically.

"Our net longs are the highest ever," Mr Paulson said in a speech in New York yesterday. "There are lots more long opportunities than short opportunities in the market. Zero interest rates are a huge tonic."

Personally I think his view is close to Buffett and it is more of a massive inflation view. The key to this is further down in the article.

"The amount of quantitative easing has stimulated financial markets and will start to appear in the real sector," he said.

Sounds like John Paulson has been hanging out with Jim Grant to much. I would agree that the only position that isn't defensible is a muddled economy. I think there are only two positions and that is either insanely bullish or insanely bearish. A muddled economy over another twelve to twenty four months will make the solvency issues that much more pronounced causing bigger and bigger imbalances. So far that I give Paulson kudos.

To the bad news of the day, there was alot of it.

1)Bad Treasury auction.

2)ABC Consumer Confidence dropped from -45 to -47. The reason this is interesting is this is the first confidence number measured since the BLS BS jobs numbers were released last week,

3) The one time 50% tax by Great Britain on bonuses over 40k. This could be replicated in the U.S. just like the shelling ban. If nothing else it will be very expensive for some US banks. A Goldman banker working in London will suddenly be faced with a much higher marginal tax rate that his associate in New York. If the IRS doesn't do something similar Goldman will have to make up the difference for their bankers in London or expect revolt.

4) Spain revised from stable to negative watch by S&P.

5) Census Bureau update today not pretty. State governments took in nearly $1.7 trillion in total revenues in fiscal year 2008, a 15.8 percent decrease from 2007, according to new data on state government finances released by the U.S. Census Bureau.

This matches the tax withholding information from a couple of days ago. And the S&P has gone up how much and the corporate withholdings are down how much?

6) NFIB (national federation of independent business) (index of small business) dropped from 89.1 in October to 88.3 in November. A 4 month low.

7) Redbook sales running at 1.2% yoy versus expected 2.1%. Redbook said "retailers described the week as a lull." New Gallup survey found the average spending per shopper is down 21% from a year ago.

8) New IBD/TIPP economic optimism x dropped to 46.8 in December from 47.9 in November. A five month low.

9) The JOLTS survey showed that job openings fell by 80k in October and new hires plunged 95k. (another data point that doesn't jive with the BLS)

10) Finally - NFIB job openings just hit a series low.