Annual Blog Poll

I'm a little late in posting this, but each year I ask all of the folks I know in this business to put together a forecast for the market.  Last year the average forecast for the S&P 500 for the year was for a gain of 8.5%.  As it turned out, the market rose 13.4% for the year.  So our group was a little cautious.

The closest guess came from Scott Lytle (Janus) who predicted the S&P 500 would finish the year at 1420 (only 6 points off).  Congrats to Scott, who will claim his valuable prize when I see him next week.

I am still tallying the forecasts for this year, but I will put together a post when I have all the predictions in so we can see if the group has become more bullish or not for 2013.

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Monday Morning Musings

The market is lower in early trade after reaching 5-year highs last week.  Some of the selling is probably profit taking amid lackluster overseas trading as well as lingering concerns about debt ceiling debates, fiscal cliff issues, and upcoming earnings season.

Over the weekend, the CBO said that the fiscal cliff will add bout $600 billion to deficits in future years due to increased debt servicing costs.  It's hard to see how this won't lead to higher interest rates and slower growth in the future.  As for the fiscal cliff negotiations, Senator McConnell said in an interview that "the tax issue is finished" and spending needs to be addressed next.

Financials got a brief boost this morning after global regulators announced that Basel III rules will not be as stringent as originally proposed.

Asian markets were mixed overnight. Japan finished -0.8% lower despite the new PM saying  that his govt's top priority will be to pull the country out of its economic malaise.  China was up 0.4%.

European markets are also modestly lower.  Germany's Minister of the Economy said he expects robust growth in 2013.  This view is at odds with the head of the Bundesbank who said he expects lackluster growth in 2013.

In other commentary, the London Bullion Association said that they think the bull market in gold is over.  For reference point, gold is trading near $1650 currently.  With all of the money printing going on around the globe, it would seem gold has another leg higher in it.  But time will tell.

The 10-year yield is down a bit to 1.89% after briefly topping 1.95% on Friday. 

And the VIX is up 2.5% back above the 14 level to 14.15. I said recently that I thought the 15 level would act as a floor, but we have already moved below that level.

Trading comment: For all the talk in the media about "5-yr highs", the S&P 500 needs to surpass 1475 to get above levels it reached in September.  And the Nasdaq needs to get to 3197, which is still a ways away from current levels of 3090.  So some of this enthusiasm seems premature.  I'm not saying we won't get there, but I think the market is likely to see some consolidation first.  The market had a big first week of trading for 2013, and is currently short-term overbought.  So it would not be surprising to see some pullbacks and consolidation before making another attempt at higher levels.  Of course, the SPX needs to get all the way back to 1576 to reach its all-time high from 2007.  Some strategists think we could see that level bested later this year. 

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Devoid Of Sound And Fury, Signifying Everything.

Renowned London department store Selfridges is soon to open a Quiet Room featuring a number of special versions of well-known products from which "all brand-noise is removed".

Except they seem to have forgotten to remove all but the slightest amount of the "brand noise" from every example I've seen. Which, of course, is the point.

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One-on-One with Senator Ted Cruz

Last week on "The Kudlow Report", I asked Republican Senator Ted Cruz if he'd go with a government shutdown if it came to it on the debt-ceiling debate.  His answer: "I think we have to be prepared to go so far as to shut the government down -- if we don't get some serious policies to stop the out-of-control spending, to tackle the debt, and to get economic growth."

It was a bold statement.  Watch the full video here:

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Scheduling Conflict

Mammoth has been hit with 6 feet of snow in the last couple weeks, so In The Money is taking a couple of much needed days or R&R and hitting the slopes.  Please check back on Monday for our regular updates.

Thanks and Happy New Year to everyone--

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Stocks Cheer Fiscal Cliff Deal

The markets are nicely higher this morning, as were markets around the globe after Congress voted to approve a deal to avoid the fiscal cliff.  The bill maintains tax rates for the middle class, while raising rates on households making over $450k.  It also delays the sequester for two months.  But it did not include anything regarding the debt ceiling, so we still need to deal with that.

In economic news, the December ISM manuf. index came in at 50.7, which is above the key 50 level and also up from last month's reading of 49.5.

Asian markets were higher once the news came out.  Hong Kong soared +2.9% to new 52-week highs.  Japan and China were closed for holidays.  The PBOC said that the country is likely to maintain its current policy course.

European markets are also higher across the board, with gains of more than 2%.  The UK's PMI came in above expectations at 51.4, while Germany was below estimates at 46.0.

Commodities are also higher this morning.  Gold prices are near $1691 and trying to get back to the $1700 level.  Oil prices are rallying to $93.31.  Silver and copper prices are both higher by more than 2%.

The 10-year yield also got a boost and is trading higher to 1.84%.

As for the VIX, it has plunged this morning back below the 16 level and has been down more than 12%.  I suspect with the issues still in front of the market, as well as earnings season around the corner that the 15 level in the VIX could act as a floor this time around.

Trading corner: Even though we have been moving to a more conservative posture in our accounts recently, we said that when deal gets done the market will likely rally.  The question is does this rally have legs? Remember that taxes still went up on higher income households, and they went up on the middle class as well.  Today's deal doesn't really highlight the increase in payroll taxes as well as the Obamacare taxes that are coming.  Those will not be pro-growth measures.  I want to see if the market can build on this rally, or if it will prove to be a short burst of enthusiasm with little follow through.

KAM Advisors has short positions in the VIX

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Cumulative Marketing Strengthens Experiential Ties.

On Christmas Day, some Swiss friends tweeted that they were exploring the temple of Angkor Wat in Cambodia. I duly Googled and vicariously experienced their day, albeit without the tropical heat.

Obviously, it wasn't the same experience. But, in time, it won't be too different because memories fade and need to be renewed by discussion and prompted by examination of mementoes and photography. Without that, our experiences might well converge.

I've been to great gigs and notable theatriccal events, some of which are mentioned in hallowed terms online. But I don't rreally emember them. Neither the details of the Hollywood A-listers' rare live appearance, nor the detail of the performance that led me to correctly tell the members of the uncredited support act that they would be huge as they handed out flyers outside the venue.

Experience is cumulative - an accumulation of weak ties strengthened by frequent revisiting and re-imagining. Even in the case of the big events. Marketers should remember that.

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