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Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Sunday, December 23, 2012

Final Week Of 2012

The US economy rebounded some in Nov. My weekly cyclical fundamental indicator is
up nicely here in December and the Fed stepped up with a large securities purchase this
past week. The table would appear set for continuation of rallies by riskier assets with
only a hint so far about concern for slipping over the fiscal cliff. The odds are low now
to avoid hopping over, but there is still a chance for a deal or a motion to move the cliff
further out in time. Weekly Markets Chart

10 Year Treasury (Top Panel)
The 10 year is up slightly in price for the YTD and should be trading down sharply now
on the basis of strengthening production and sensitive materials prices. So, as of tonight,
the bond guys are leaning toward a negative fiscal cliff outcome with taxes set to rise
enough to cut into economic growth next year.

SP 500 Index (2nd Panel)
Positive for the year, but the vast bulk of the gain came in the opening months. The market
suffered from an extended economic slowdown over much of 2012, but has rallied recently
on better economic news and the return of the Fed to QE. Stocks so far show no real anxiety
about the fiscal cliff. (Because it is so late in 2012, fund managers with a calendar year
performance bogey are loathe to sell lest a non-punitive fiscal deal is reached.) SPX still
yet to prove it can stay above 1400 resistance.

US Dollar (3rd Panel)
The USD started a downtrend right as Fed Chair Bernanke began to pound the table for more
QE around early Jun. Dollar bears are holding off now because a nasty fiscal cliff spill
could punish not only the US but the global economy as well.

Gold Price (Bottom Panel)
The gold price can be shaky around year - end, but I think the bugz do not like the inflation
control strings on the new QE program and have their positions under review. The sharp
drop in the gold price over the final months of the year does invite the question of whether
the bugz know something about the fiscal cliff that other markets do not.

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