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1/10/12

Stocks are off to a rally this morning.  Why?  Does anybody know?  Just go along for the ride.  Yesterday we were reminded of the continuing soap opera of Merkel and Sarkozy as they advance their prescription to solve the euro’s problems.  The value of the euro fell.

Fitch called Italy the biggest risk to the euro this morning, and warned of a possible downgrade within the next three weeks.  Italy is weighed down by high interest rates on a large (and ever growing) debt.  The BBC reports Fitch’s David Riley told a conference in London “Italy is the front line of this crisis.  The future of the euro will be decided at the gates of Rome.”  A Fitch spokesman said he did not see a downgrade of France’s credit rating in 2012.

Since the market closed yesterday Alcoa (AA) turned in results for the fourth quarter.  The company lost 18 cents a share as aluminum is selling below cost.  Siemens (SI) said their full year guidance was “very ambitious” and warned of a possible earnings miss, Phillips (PHG) reported they will take a fourth quarter charge on weakness in Europe, Juniper (JNPR) warned fourth quarter guidance may be too high.

News hit the market this morning that Ford’s (F) CFO said the company would turn in a loss when they reported earnings because of Thailand floods. Nine minutes later the company released a statement that they “had not changed guidance.”  The earlier report was incorrect.  Two minutes later the company released a statement they “Expect Asia-Pacific Region to Post Loss for Full Year.”  The stock lost 3.6% in fifteen minutes but has recovered some of the losses.

When you think you are “plugged in” and on top of the market, don’t be too sure of yourself.  Interestingly, the stock started selling off 10-minutes before the headline time-stamp.  Hum…how did they know?

Turbo Tim Geither, U.S. Treasury Secretary, is in China today and tomorrow.  He will meet with the country’s leaders.  On his agenda are discussions on Yuan valuation and Chinese support for American sanctions against Iran.  We told you Friday that China is one of Iran’s largest customers.  They cut January imports in half, but are using the sanctions to negotiate for lower prices on Iranian oil.

Bloomberg quotes Geithner upon meeting Vice Premier Wang Qishan, “I am here of course because we value our relationship with China so much.  We are always looking for ways to expand trade and investment with China to strengthen our economic ties and we’re looking for ways to build on the progress our two presidents have achieved over the last three years.”  Editor’s comment: Makes me want to puke.

The U.S. Information Agency pegs China’s imports at 22% of Iranian crude, Japan buys 14%, and countries in the European Union buy 18%.  The Treasury Department’s report on Global Currencies was released on Dec. 27.  The report stated the ‘Yuan is substantially undervalued.’  It stated the U.S. will “press for policy changes that yield greater exchange-rate flexibility.”  President Obama is going to form a “task force.”

MF Global went bankrupt on Oct. 31, 2011.  The New York Times reports that Jon Corzine nor his deputy Bradley Agelow have even been interviewed at this point.  Louis Freeh, former head of the FBI, has been appointed as the trustee overseeing the bankruptcy.  Edith O’Brien was the treasurer of MF Global in Chicago.  Investigators have found an email instructing her to transfer $200 million dollars to JP Morgan Chase to cover an overdraft.

Investigators are ‘not sure’ who sent the email.  Publicly they are not asserting she knowingly used customer money to cover the overdraft.  Jon Corzine told a congressional panel last month that Ms. O’Brien had assured him on Oct. 28 that customer money was not ‘misused’ in the transfer to JPM.

Ms. O’Brien’s attorney has asked federal prosecutors for immunity from criminal charges before she is interviewed.  In a bit of irony, Ms. O’Brien had testified before the Commodities Futures & Trading Commission (CFTC) numerous times as an expert witness on the protection of customer money at futures trading firms (like MF Global).

The market is trading at highs not seen since August 1st, when we were sliding lower.  Hold on.  Investors must decide if the bull is alive and put money to work or the market is going to slide back into a trading range.

Mailbag:
What is your take on M F Global/Jon Corzine mess?   I cannot find out anything on news...I did not have anything in this, but a friend lost everything...Thanks---subscriber C.R.

John’s reply:  Good question, hopefully today’s article will help.  Amazing how this story has faded from news coverage.  It is a big deal and has damaged the commodity market’s credibility.  Makes you kind of wonder…

May be the people using Pay Day lenders should choose to live within their means so they don't have to borrow at such exorbitant rates.  Or maybe if they would work at jobs, declare a social security number or id so that taxes could be taken out, and a regular check cut, the person could open a regular bank account and not be ripped off quite so bad.---subscriber T.M.

John’s comment: Good points.  So…who are the victims?  The borrowers or our society because they chose to live under the radar (illegally) and not pay any taxes only to claim government benefits when they are broke?

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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