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The MO for this rally has been more pathetic than most MO and always a weak sister to the MO of breaks, which are always monsters. But regardless of just how pathetic the Fed subsidized lifting has been in the DJIA, SP500, and NQ100, lets take a look back at the last great End of MO event.

On November 20th 2008, the downside MO which started in October of 2007, ended. Lows for the markets would not come until March of 2009 but the speed of the break ended on November 20th with the Vix high of 81.48. It closed yesterday at 15.84, 80.5% off the November MO Event. The DJIA's low on 11/20/08 was 7552 with a high yesterday of 12188 or 62% higher. The S&P500 augured into a low that November day of 745 and punched a new high for the move yesterday at 1320, of 77% higher. The Nasdaq, where all dreams become poo, slammed into End of MO with a low 1031.25. Yesterday saw a high of 2360 or a 128% higher.

The nature of recent rallies has seen fish feeding at the top as retail and long only managers suck in equities faster than downtick. They along with the usual suspects will flail into a buying stutter step in the coming days as this rally decides to take some MO twists.

Value Plays

Dealing with complex organizational financial structures which are so intertwined in the economic operational functions of our daily lives is a major undertaking. So when the Fed and Treasury battled the early stages of economic crisis it was with a sense of intensity as one would fight a large fire. As things cooled however, the plan for tackling the lethargy left over from the economic backslide left no clear strategy as to how to move forward. More importantly, the Fed needed results. Whether or not those results were substantive did not matter as long as they were perceived as such. Bernanke was committed to the psychology of economics rather than the substantive repairs and major market players perceived this as early as the spring of 2008. The Fed had no choice but to pump in an ever growing evolution of gadgetry ways to under pin asset values. Banks and Investment firms received money for free and a guarantee no harm would reach them outside of whatever regulatory reforms were to come in the future. Of course, there have been few regulatory reforms and the rules under various legislative measures are still be watered down as of today.

The Fed now perceives itself fostering real economic growth which determines values by real demand encouraged by its own interventional demand determined by the values themselves. However, when you decide to promote notions of value, remember that game can be played to your detriment. The world we live in is one where corporate engines are able to adapt to stimulus and cost cutting but are not able nor willing to create jobs in the United States. Without significant job growth, value plays just play out and become a seller's market.

Bears Thank Fed For Running Them Over

Bears are pounding their fists on the table declaring outrage over the Fed's complicity in manipulating asset prices at the expense of, well, the Bears. Everyone knows that pandering to the upside is in the best interests of protecting the business process and free enterprise, you know, the thing that got us here. If all goes well, the inhabitants in the middle of the economy, now living in small huts, will have the same guaranteed opportunity not to participate in the guarantee from loss that the top gets. But at least it is a guarantee and it is only reasonable since it is at the heart of what the Fed and Treasury stand for, inequity.

As I wrote about back in the first week of December, Ben and others at the Fed and Treasury have entered what they hope will be an end game strategy which fits their temperament, being afraid of substantive reform. Why face a challenge. Besides, somethings just cannot be done. Like getting on the Supreme Court if your not a Harvard or Yale graduate. Or being a scholar on the Great Depression and learning more than that being poor in not good, and staying rich is. But that takes help from the Fed.

Banks Lose Pivotal Massachusetts Foreclosure Case

Bloomberg Article

U.S. Bancorp and Wells Fargo & Co., in a ruling that drove down bank stocks, lost a foreclosure case before Massachusetts’s highest court that will guide lower courts in that state and may influence others in bank disputes involving state real-estate law

Trophy Markets

Here we are. Markets are on there highs. Bears are more bearish than ever while the Bulls are looking down at some real damage. The Fed has reiterated its drive to leave no fall back room in asset price rallies, that is, if it can help it, or for that matter, if it can even understand what it is doing and the consequences for market action.

Free market economies, as they are called, have come under the collective interventionist theory that any natural market corrective tendencies are not to be trusted and only the subsidisation of banks and some sovereigns will properly place the world in its right place. Now that place always looks like the top 1% of the world's wealth but someone has to guaranteed happiness.

Bernanke has decided that all of the top should get a trophy just like they do today in our competitive sports environment for children. Every one gets a trophy, even if you stink. It is better to feel good about yourself than to face up the the fact you have absolutely no talent. But like the soccer mom he is, Bernanke insists we should be able to guarantee a financial system which isn't reflective of how talented banks and investment firms are, rather it should be a statement about how wonderful it can be. Wishing is so much fun. It makes us all feel better, now doesn't it baby.

Jobs

Where are the jobs? Overseas, of course

Article from Salon. Complete Article

Corporate profits are up. Stock prices are up. So why isn't anyone hiring?

Actually, many American companies are -- just maybe not in your town. They're hiring overseas, where sales are surging and the pipeline of orders is fat.

More than half of the 15,000 people that Caterpillar Inc. has hired this year were outside the U.S. UPS is also hiring at a faster clip overseas. For both companies, sales in international markets are growing at least twice as fast as domestically.

Buy vs. Rent: An Update

The health of the real estate market remains a disaster, but there remains some expensive deals depending on location, location, location. Here is a New York Times article on buy vs rent ratio.

Below is an updated list of rent ratios — the price of a typical home divided by the annual cost of renting that home — for 55 metropolitan areas across the country.

We last covered this subject about eight months ago, and you’ll notice that most ratios have not changed much since then. A good rule of thumb is that you should often buy when the ratio is below 15 and rent when the ratio is above 20. If it’s between 15 and 20, lean toward renting — unless you find a home you really like and expect to stay there for many years.

Metro area	Ratio
East Bay, Calif.	35.9
Honolulu	34.4
San Jose, Calif.	32.7
San Francisco	27.9
Seattle	27.3

more....

Bernanke Double Down

The market year of 2010 started in a edgy mode hoping to avoid complications over the uncertainty of whether the potential problems in banking and business might multiply. Because of the veiled intervention and ludicrous mark to mark values of an enormous amount of assets held on bank's balance sheets, no one knew what might happen if one great failures appeared. It became clear to the Fed there was virtually no hope in a normal recovery and that if fact the world banking system was at risk of another event which would possibly shut down normal lending functions again. Persistent high unemployment with no prospects for any recovery led the Fed to make a tactical decision to further facilitate a rise in the value of assets based on the performance of one of the few markets which were recovering appreciably, equities.

As of this post, the DJIA is 74% off its lows of March 2009 with the SP500 and NQ100, 88% and 119% respectively. Individual stocks such as AAPL are over 300% higher while Goldman Sachs has seen a gain of 385%. The Fed is not digging deep to scratch out a rally, it is hoping to further perpetuate a resilient asset class in the hopes that all will somehow benefit.

Bernanke is definitely playing poker and one might wonder why he wasted a lot money going to Harvard when anybody can learn the basics of double down on the streets. For all his great supposed knowledge of the Great Depression, endorsing social programs to build America are so yesterday. Why not take a shot and be somebody.

What Brand Is This?

The steepening yield curve is a bet by players that all forms of stimulus already implemented, along with those planned, will spark the top while providing enough anemic growth in the middle to grow the economy. The real estate market is a large unknown and so to is whether tickle down will increase borrowing at all levels. Profits for business and any spending by consumers have come so far from adjustments made by reducing expenditures in their overall operations. Not a growth dynamic. The Feds absolute belief in the inability to attain normal growth without massive subsidisation is clearly derived from a vision where once normal business opportunities are being cleavered by the hoarding of capital.

Stocks rallies to date have been a brand name affair which is not so much a vote of confidence in the economy as it is from a lack of perceived broad investment opportunities. Apple, IBM, and Ford are examples of where distorted premiums result from a reluctance to buy beaten brands as if the chosen live in a world outside of this one. So both the Fed's reasoning and brand name strategies have at their very nature an implied risk resulting from an extreme lack of confidence in future growth. Failure to develop a recovery would leave the Fed willing to target other ways to stimulate the economy and would leave favored brands as just a target.

Right Stuffing

President Obama, Mr. Cave-In? He may be right that the best thing for the economy or market psychology is to cut this particular deal. But many of his supporters across the nation who have seen their upside probably diminished forever could give a rat's ass about current practicality. Real negotiations would fight against the future implications of policies promoted by a Republican party which now and historically has had the interests of an elite business class as their narrow trickle down vision for America.