Tuesday, November 23, 2010


Beatles for Sale

EMI says that Apple has sold 450,000 Beatles albums since the company made the albums available online.

It's SAC's Turn

Not surprisingly, SAC has been requested to provide information to authorities.

Next Up, Janus

Next up on the insider trading probe: Janus was asked to provide information to the authorities.

Janus and Wellington join some hedge funds in the inquiry, but unlike some of the hedge funds, I don't expect Janus and Wellington to "lock down" trading.

So this won't impact the markets.

The five-year auction was on the weak side, but considering the sharp drop in yield over the last 10 days, it was not surprising.

The yield was printed at 1.411%, with a bid to cover at only 2.65 (had averaged about 2.85 in previous auctions). Indirect bidders were also weaker at 32% vs. 44% in the last five or six auctions.

The FBI has requested information from Wellington Management.

For some reason, the bullish cabal believes that the Korean geopolitical situation and the problems facing the multiple fiscally weak European countries are sideshows.

They are not sideshows; they are our reality. And they are valuation-deflating for risk assets.

Fiscal imbalances are resolved by austerity measures that slow growth, and military skirmishes underscore a degree of world instability.

As well, I remain concerned about the failing financials and the narrowness of the recent advance. Specifically, the strength in a narrow list of names -- many of which are Jim Cramer's favorites, such as CRM, FFIV, NFLX and AAPL -- is becoming reminiscent, though not as extreme, as in 1990-1991.

Finally, I can't fall in love with the macro news (especially with a still-tepid but upwardly revised 2.5% third-quarter 2010 GDP), which was artificially goosed by unprecedented fiscal and monetary catalysts -- the benefits of which will abate in 2011.

I remain less certain than most that the domestic economic recovery is headed on a smooth path toward profitable and self-sustaining growth -- conditions that seem to be needed in order to ratify the market's rally since late August.

The necessary ingredient to a continued market climb and to the restoration of self-sustaining growth lies in the hands of our fiscal authorities, not our monetary authorities.

Neither Republicans nor Democrats appear to be moving to the center, and gridlock is the likely outcome. Accordingly, we are not going to see the sort of intelligent, transformative and focused fiscal moves directed at job growth that are needed.

I'm expecting a series of populist initiatives by the current administration beginning by a frontal assault on mutual fund 12b-1 fees. The asset managers -- BEN, TROW and WDR -- are exposed.

I'm thinking the internet becomes the tactical nuke of the digital age. Cybercrime likely explodes exponentially as the Web is invaded by hackers. A specific target next year likely will be the NYSE.

Korea and Europe shouldn't be dismissed as inconsequential.

long NFLX

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