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01/03/12

The markets are up sharply on a good ISM Manufacturing Index reading this morning.  We should have seen it coming.  The markets have acted better since Christmas because…the politicians are on vacation!

The Wall Street Journal has an article today about an election year rally.  Every year at this time somebody trots out a study about the first year, second year, third year, or election year of a presidential cycle and how it foretells a rally about to occur.

I am more inclined to believe a rally has a better chance when the politicians are on vacation.  When they are not running to get in front of a television camera crew we don’t get bad headlines.

They don’t even all have to be on holiday, just half.  It takes two to fight…so if half of them are gone to the hinterlands we stand a chance.  Right now, Obama is back in Washington and the congress doesn’t come back until Jan 17.  By my calendar that means we have two weeks to rally.  Then it is up to earnings to help us hold onto our gains.

That might be a tall order.  We need the urchins of Europe to keep their head down.  That may be asking too much.  Can Italy get by without borrowing money for two or three weeks?  Can Merkel and Sarkozy avoid a summit and the requisite news conference where they intone their latest efforts to save the euro?

I think it is asking too much.  It is a tall order to ask politicians not to try to save the world.  If everything is running along smoothly they might say, “By golly we need to create a crisis so the citizens will know how important we are.  After all who can fix problems other than us?”

The worst problem for a politician or bureaucrat is to be considered irrelevant.  Here is our problem for 2012, politicians that HAVE TO BE RELEVANT.

If there is no crisis, they will create one.  They believe any crisis must be met with strong government action.  The stronger the better.  It absolutely must touch a wide swath of the population.  They want us to know how important they are.  No easy solutions will be allowed this year!

This is what we face in 2012, government continuing their efforts to remedy all that is wrong with the world.  The more remedies they can effect, the more money they need to pay for task forces, and meetings, and summits, and blue-ribbon commissions, and lawyers, and experts, and hearings.  Then they have to pass laws that create new bureaucracies to administer the regulations that are required to fix the “problem.”

There is so much to do and so little time and money.  This is the challenge for the politicians.  They must stay relevant…on a budget.  There hardly seems to be time to run for re-election!

Reuters reports that Iran has warned the U.S. not to bring the USS John C Stennis aircraft carrier back into the Persian Gulf.  The Stennis left the Gulf last week to support operations in Afghanistan.  We think they also left to avoid a confrontation with the Iranians.  When half-wits are armed and swarming there is no reason to hit the hornet’s nest!

The U.S. Navy didn’t seem obsessed with Iran’s warning.  Commander Bill Speaks said “The U.S. Navy operates under international maritime conventions to maintain a constant state of high vigilance in order to ensure the continued, safe flow of maritime traffic in waterways critical to global commerce.  The deployment of U.S. military assets in the Persian Gulf region will continue as it has for decades.”

The Financial Times reports that eurozone banks continue to borrow emergency funds from the ECB at unprecedented levels.  Last Thursday night, banks borrowed $22.5 billion dollars.  This was the highest since June 2009.

We are enjoying the green on our screen this morning, but will continue to look over our shoulder.  Changing the calendar doesn’t warrant throwing caution to the wind.  Politicians are trolling; looking for the next injustice they can remedy!

Mailbag:
You preach disaster and how stupid the world is just to make us think we need you. Even if you are right I don’t need your premium subscriptions---subscriber B.B.

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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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