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Welcome to the "Wolf Creek Pass" School of Monetary Policy

I don’t know if you folks remember that hit ditty: a humorous tune about two truckers attempting to manhandle an out-of-control 1948 Peterbilt down the “other side” of Wolf Creek Pass – a death-taunting section of U.S. Highway 160 where the elevation drops a hefty 5,000 feet in a relatively short distance.

The song’s two characters – a truck driver named Earl and his brother, who’s his partner as well as the song’s narrator – are taking a flatbed load of chickens on a speedy trip down this winding, two-lane Colorado highway. After the narrator gives Earl the above-mentioned warning, the ancient semi’s brakes fail.

From there on down, the narrator tells us that the brothers’ trip “just wasn’t real pretty.” The truck careened around hairpins and switchbacks, and then raced at an uncontrolled 110 mph toward a tunnel with “clearance to the 12-foot line” – with chicken crates sadly “stacked to 13-9.”

The drivers and the runaway Peterbilt “went down and around and around and down ’til we run outta ground at the edge of town… and bashed into the side of the feed store – in downtown Pagosa Springs.”

Believe it or not, I started thinking about this funny old country tune the other night – right after I’d read a piece about QE3 and the U.S. Federal Reserve.

As zany as it first sounds, the parallels are striking.

  • Stock Market

  • Will the Year of the Snake Bring Another Stock Market Crash? False Water Cobra The Chinese New Year officially began Feb. 10, starting what some investors consider a very bad zodiac year. Not only does the year of the snake havethe worst stock market returns, but some of the darkest moments in U.S. history. Take a look. Read More...
  • As Insiders Head For the Exits, Do They Know Something "We" Don't Know? According to the latest Vickers Weekly Insider Report, in the past week, there have been nine insider sales for every one buyer among NYSE stocks.
    The last time insiders sold this aggressively was in early 2012 - right before the S&P 500 took a 10% header.
    Does that mean there’s a correction in the works?
    There are all kinds of legitimate reasons insiders sell their shares. But what concerns me is that insiders, particularly when you're talking about senior management types, typically know a lot more than the average investor. Further, they tend to have a consistent view of very specific longer term market conditions and, more importantly, its earnings potential.
    Here’s what insiders know that you probably don’t Read More...
  • Stock Market Today: Will the Dow Keep Going Above 14,000?

    The stock market today (Friday) hit a high not seen in more than five years when the Dow Jones Industrial Average crossed 14,000 for the first time since October 2007.

    Less than an hour into trading the Dow spiked 140 points, or 1%, to hit 14,000.97. In mid-afternoon trading, the Dow rallied further, tacking on 150 points. The move leaves the Dow around 200 points, or 2%, from its all-time high of 14,198.10.

    Friday's strong showing came on the heels of the Dow's strongest January (up 5.8%) since 1994.

    The Standard & Poor's 500 Index, which logged its best January since 1997, added 15 points, or just shy of 1%. The Nasdaq advanced 40.

    The robust rally followed a lackluster report on the job market which gave "strength to the argument that the Fed will continue its bond buying program and keep rates low, which is also a positive for the stock market," Tom Schrader, managing director at Stifel Nicolaus told CNN Money.

    That sentiment also gave bonds and precious metals a boost. Gold prices moved up $7 to $1,670. Silver added 37 cents to $31.94

    A bevy of reports helped buoy markets Friday.

    A Census Bureau report showed construction rose 0.9% in December, well above forecasts. The Institute for Supply Management's monthly manufacturing index rose to 53.1 in January, ahead of the expected 50.5 read, and the University of Michigan's sentiment index climbed to 73.8 last month, better than the expected 71.4.

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  • Is the Obama Stock Market Rally the Real Deal? Chart up exponential

    At first glance, there can be no doubt that U.S. President Barack Obama has been good for the stock market.

    The Standard & Poor's 500 Index has rallied by nearly 700 points - just shy of 86% - since the president's first Inauguration on Jan. 20, 2009.

    This is the best stock market performance for a presidential first term since World War II, even beating the 79.2% rally during President Bill Clinton's first term in the White House, from January 1993 to January 1997.

    In fact, the only time stocks rallied more during a presidential first term was during Franklin Roosevelt's first term from March 4, 1933, to Jan. 20, 1937, when the Dow Jones Industrial Average rose 245% off of Depression-era lows.

    In a very broad sense, the condition of the stock market at the start of President Obama's first term in 2009 can be compared to the stock market in 1933. In both cases, stock prices had collapsed and were trading at generational lows when both presidents took office. In both cases, share prices rallied substantially off of the bottom as economic conditions improved.

    But all this really proves is that the first leg of any rally is usually the strongest and most profitable.

    As the S&P 500 is at a five-year high and is zeroing in on the 1,500 level for the third time in its history, one has to wonder if the Obama Rally is sustainable or are we just reverting to the mean?

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  • Stock Market Today: Builders, Banks, Boeing in Focus

    The stock market today rose right out of the gate Thursday on improved economic data, with the Dow Jones Industrial Average up 70 points just before noon, and the Standard & Poor's 500 Index up 7.

    Giving equities a lift was a pair of reports that showed the U.S. economy continues on the path to recovery.

    The Department of Commerce reported Thursday morning that construction for new U.S. homes leapt in December to the highest rate in more than four years. Gains were logged all across the nation, as well as in buildings and single family homes.

    The 12.1% jump in housing starts in December was the best reading since June 2008.

    "Overall, this report reinforces the current narrative of a positive growth momentum in the housing sector," Millan Mulraine, a macro strategist at TD Securities told Market Watch.

    A measure of homebuilders on the S&P 500 jumped 2.1%, poised for the highest closing level since 2007.

    The second report that juiced markets was data from the Labor Department. A report revealed the number of Americans filing first-time claims for unemployment benefits fell more than expected in the latest week to the lowest level in five years.

    In the week ending Jan. 12, applications for jobless benefits fell by 37,000 to 335,000, marking the lowest level since Jan. 19, 2008, and well below estimates of 369,000.

    "The labor market is certainly getting better," Brian Jones, senior U.S. economist at Societe General in New York, told Bloomberg News.

    Even with typical seasonal adjustment, Jones added, "this is still a good report. Chances are claims remain at a fairly low level."

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  • Stock Market Today: Can S&P Nudge Closer to its All-Time High? Chart up

    The stock market today (Friday) will try to continue its impressive rally after the Standard & Poor's 500 Index closed at a five-year high Thursday.

    The S&P 500 closed at 1,472.12, about 93 points away from its all-time high of 1,565 hit in October 2007 and its highest close since December of that year.

    By 1 p.m., the S&P 500 was down just over 2 points, and the Dow was up 4 points, or 0.04%.

    While the stock market today fights for a continued climb, here are companies investors should be eyeing.

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  • Is Harry Dent's Stock Market Crash Prediction as Crazy as it Seems? Declining Business Economic forecaster Harry Dent just made another dire prediction, and investors should hope he's wrong.

    Dent, bestselling author and financial newsletter writer, told CNBC Tuesday that he sees a stock market crash in the United States starting in the third quarter of 2013 and continuing for a year and a half.

    Dent said real estate prices and stocks would plummet more than 60% by the end of 2014, or sooner, meaning the Dow Jones Industrial Average would fall below 6,000. He also said the United States would be close to bankruptcy by then.

    Dent cited U.S. demographic shifts and the nation's debt crisis as the main drivers of a crash. He said had it not been for the U.S. Federal Reserve's recent moves to stimulate the economy, the stock market would already have collapsed.

    "We call this the economy in a coma," he said. "Basically, without these trillions of dollars of stimulus, we would be in a downturn, in a depression, because we also have $42 trillion in private debt, the greatest debt bubble in history, and that needs to unwind."

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  • Five Stock Market Charts Bears Have Been Waiting For Bear market edit As the bull market tries to enter its fifth year, many are wondering if it still has legs - but a handful of stock market charts warn there's high risk of a coming sell off.

    In fact, a recent report from Credit Suisse Group AG (NYSE ADR: CS) outlined 10 technical factors that show the market is at its most risk-on level since just before the stock market crash that began in 2007's third quarter.

    "Many of our tactical indicators point to a consolidation phase in the equity markets, in the near-term," Credit Suisse Global Equity Strategist Andrew Garthwaite said in a note to clients.

    For a closer look at this bearish forecast, check out these five stock market charts pointing to a pullback.

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  • Nine Lessons From The Greatest Trader Who Ever Lived Chess battle The stock market has certainly produced its share of heroes and villains over the years. And while villains have been many, the heroes have been few.

    One of the good guys (for me, at least) has always been Jesse L. Livermore. He's considered by many of today's top Wall Street traders to be the greatest trader who ever lived.

    Leaving home at age 14 with no more than five bucks in his pocket, Livermore went on to earn millions on Wall Street back in the days when they still literally read the tape.

    Long or short, it didn't matter to Jesse.

    Instead, he was happy to take whatever the markets gave him because he knew what every good trader knows: Markets never go straight up or straight down.

    In one of Livermore's more famous moves, he made a massive fortune betting against the markets in 1929, earning $100 million in short-selling profits during the crash. In today's dollars, that would be a cool $12.6 billion.

    That's part of the reason why an earlier biography of his life, entitled Reminiscences of a Stock Operator, has been a must-read for experienced traders and beginners alike.

    A gambler and speculator to the core, his insights into human nature and the markets have been widely quoted ever since.

    Here are just a few of his market beating lessons:

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  • The Best and Worst Stocks of 2012 As we prepare to invest in the New Year, we can learn from the five best and worst performing stocks of 2012 in the Standard & Poor's 500 Index.

    While any investor would have loved to know this list a year ago, it's a good guide for 2013. Several of the factors that drove these share prices up and down in 2012 haven't changed.

    The best stocks were led by signs of a recovery in housing, a slight return of consumer confidence, and the U.S. Federal Reserve's unprecedented monetary easing measures.

    "The sector leaders are what one would expect with the [Fed] policy and with continued monetary injections into the economy this year through bond purchases," Peter Jankovskis, co-chief investment officer at Oakbrook Investments LLC, told The Wall Street Journal. "By pumping money into the economy the Fed boosts consumer confidence-and spending-which one would expect to boost consumer and financial shares."

    While the leaders' success was tied to central bank actions, the biggest losers simply stumbled from their lack of innovation, inept management, and failed business models.

    Best Stocks of 2012

    Here are the best performing stocks in the S&P 500 for 2012:

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  • Three Stocks to Buy in Next Year's Most Promising Sectors Whatever 2013 brings for the markets, there will be plenty of quality stocks to buy - if you know where to look.

    Overall, the markets are expected to have another positive year.

    A survey of 10 top financial strategists by Barron's projects the Standard & Poor's 500 will close at 1,562 in 2013, a 10% gain from current levels. (By the way, last year's picks outpaced the broader index by 6%.)

    That would follow modest gains in 2012 of 13.5% for the S&P 500 and 8% for the Dow Jones Industrial Average.

    For next year, Wall Street's top guns predict certain sectors of the market - technology, industrials, and energy - will lead the charge higher. Companies in more defensive sectors like consumer staples, telecoms, and utilities, will be laggards.

    So let's take a closer look at three stocks to buy from among these favored sectors that should be an excellent place for your money in 2013.

    Stocks to Buy in 2013: Cheap Tech

    Tech stocks are hugely profitable and as a group currently carry a forward P/E ratio of about 11.

    That's cheap versus historical levels.

    Tech is also a bellwether for when companies start to invest capital.

    "When we get an upturn in capital expenditures, it will show up in tech first," Barclays' Barry Knapp told Barron's.

    One stock to buy that has a rock solid balance sheet and a mountain of cash is Cisco Systems Inc. (Nasdaq: CSCO).

    Once the world's most valuable company with a market cap of $500 billion, Cisco's shares sank sharply when the tech bubble burst in 2000.

    And the stock is still dirt cheap, trading around $20 a share, roughly 10 times next year's earnings. Plus, the company is sitting on more than $48 billion in cash, worth about $9 a share.

    With a dominant market share of 60%, CSCO is the de facto choice in the switching market.

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  • ICE-NYSE Deal Signals Major Change in Future of Trading Intercontinental Exchange (NYSE: ICE) announced Thursday it will acquire NYSE Euronext (NYSE: NYX) for $8.2 billion in cash and shares. What does it mean?
    Keith Fitz-Gerald weighed in. Read More...
  • Stock Market Today: Biggest Winners and Losers The stock market today rallied for a second session on hopes lawmakers in Washington will ink a fiscal cliff deal before year's end.

    In afternoon trading Tuesday all three major index were sharply higher. The Dow Jones Industrial Average soared some 90 points by 2:30 p.m., the Standard & Poor's 500 Index climbed 11, and the Nasdaq jumped 33. That followed Monday's gains of 100.38 points, 16.78 points and 39.27 points, respectively.

    With few economic releases scheduled for Tuesday, investors' focus was pinned on Washington. House Speaker John Boehner, R-OH, and U.S. President Barack Obama continued to haggle over a fiscal cliff deal, with the president making a counter offer late Monday.

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  • Stock Market Today: U.S. Markets Flat; Focus Shifts to Europe The stock market today opened quietly in the United States as investors prepared for a very busy week ahead.

    Just after the opening bell on Wall Street, all three major indexes were flat.

    As Barron's noted, the average daily volume on the NYSE last week fell to 3.3 billion shares, compared with 5.5 billion that changed hands during the same period in 2009, when we were slowly emerging from the Great Recession.

    The "fiscal cliff," which could drain $607 billion from the U.S. economy through tax increases and spending cuts, dominated U.S. news and moved markets.

    But the fiscal cliff, along with the $16.4 trillion national debt and the growing federal deficit, took a back seat Monday as the focus shifted to Europe.

    Anxious market participants kept a wary eye on Italy after Prime Minister Mario Monti announced he is resigning, citing a loss of support in Parliament. Italian bonds plummeted with the yield on the 10-year rising the most since August.

    French, Belgian and Austrian 10-years dropped to euro-era lows, and Spain's debt also declined.

    Bucking the trend was Greece, where bonds gained after the ailing country pushed further out the deadline for buying back some of its mountainous debt.

    Elwin de Groot, a senior economist at Rabobank Nederland in Utrecht, Netherlands, told Bloomberg News: "We are seeing a selloff but I wouldn't call it a panic yet. The auction this week could be an interesting litmus test for investors. This has also created uncertainty for
    Europe-wide policymaking."

    Italy's deep-rooted economic troubles and political drift have been taken too lightly, a bevy of analysts warned.

    As Nomura Securities' Silvio Peruzzo wrote in a note to clients, "Markets have grown too complacent about Italy, in our view."

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  • Stock Market Today: Gauging the Fiscal Cliff Effect U.S. markets were mixed and relatively quiet Monday as investors digested the weekend news that fiscal cliff talks had failed to lead to a deal - possibly even derailing earlier progress.

    Just before 2 p.m. on Wall Street, the Dow Jones Industrial Average was down 26 points, and the Standard & Poor's 500 Index and Nasdaq were both treading slightly lower.

    On the economic calendar to kick-off the busy week were reports on October construction spending, November manufacturing and auto sales.

    What's Moving the Stock Market Today

    • Manufacturing Data
    Data released Monday from the Institute for Supply Management revealed the U.S. manufacturing sector dipped back into contraction in November. Businesses reined in spending and curbed expansion projects while they anxiously await the looming blows from the fiscal cliff.

    The ISM's manufacturing purchasers' index fell unexpectedly last month to 49.5 from 51.7 in October, marking the lowest reading since July 2009. Forecasts were for a reading of 51.5. A reading above 50 suggests expanding activity. Monday's reports gave no such hints.

    According to economists surveyed by Dow Jones Newswire, demand has slowed in the second half of 2012. The culprit is the imminent fiscal cliff.

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