Merry Christmas!

“But I heard him exclaim, ‘ere he drove out of sight, Happy Christmas to all, and to all a good night!”
– Clement Clarke Moore, The Night Before Christmas

by M. Kevin Flynn, CFA

(with apologies to Clement Clarke Moore)

‘Twas the month of December,
And all through the rally,
Not a doubt would be heeded,
While we counted the tally.

The traders were nestled all snug in their charts,
While visions of break-outs all pranced in their hearts.
One with the Russell, and another the Dow,
Had just drawn more lines to show us all how.

When out on the floor there arose such a clatter,
We sprang up to see if profits could grow fatter.
All through the islands the orders did flash,
Dump all your puts and get out of your cash.

Now Goldman, now Morgan, now Jamie the Diamond,
On Citi, on Wells, why even Brian Moynihan!
To the top of the double top, to the 52-week high,
Now break ‘em out, break ‘em out, ‘til the shorts they all cry!

And then in a twinkling, I saw in the pits,
The traders all bow, in the midst of their blitz!
As I gazed at my trend line through the Vanity Fair,
Down through the Bloombergs strode St. Ben the Fed chair.

The FOMC he held tight in his teeth,
With yields of the Treasuries ‘round his head like a wreath.
He had a shiny round pate, and a wise little beard,
The cloak of a banker, though not one so feared.

He was wary yet bold, with bags full of money,
That spoke of a bonus from the pool of plenty.
A flourish of his checkbook with inflation near dead,
Gave the traders to know they had nothing to dread.

No Trichet nor Merkel nor Silas Marner was he,
Not with a Congress so cowed by the Party of Tea.
So laying his finger aside of his nose,
He gave us a nod, and the prices they rose!

They leapt up in equities, in oil, gold and in silver,
Far away they all flew, like the geese in the winter.
Yet I heard him reproach, as copper rose through the clouds,
“Try not to blow it this time, for crying out loud!”

The Economic Beat (in quick time)

Housing is still dragging along the bottom, despite some attempts by the press to put a happy face on some of the latest twitches in the data. There’s nothing going on there.

We compared the latest week of unemployment claims to the last twenty years of data for the period. It was the highest level of claims and highest insured unemployment rate of all such weeks not officially coming during a recession.

The latest read on GDP was 2.6%, a tenth of a point better than the previous read and something of a disappointment. But without another downward revision to the deflator, real GDP would have been revised down. Final sales turned out to be weaker, though they appear to be better this quarter.

Personal income and spending rose by decent amounts in November. Durable goods orders were down, but rose excluding transportation. Business capital goods spending rebounded. Consumer sentiment rose slightly.

Next week will have some more home price data (Tuesday) along with the bigger Consumer Confidence report and pending home sales Thursday (the lesser-known Richmond Fed survey is Tuesday). No early close or New Year’s holiday this year: with the arcane rules of the exchange keeping the floor open on Friday the 31st. Bond markets will close early on New Year’s Eve.