Thoughts

Rare-Earth Metals Could See a Pause

Japanese researchers' development of a nano-processing technology could lead to the capability of producing artificial rare metals; the story is now circulating trading desks and could cause a hiatus in the strength in the rare-metal arena over the very short term.

ISM prices paid were hotter.

ISM manufacturing was in line.

Run, don't walk, to read the New York Times' You're The Boss: The Art of Running a Small Business blog.

I continue to see risk in the unresolved tension between the short-term tailwinds of monetary stimulation and the longer-term headwinds of fiscal imbalances (local, state, federal and non-U.S.), a reluctance to move on the domestic deficit, the inevitability of higher marginal taxes, the screwflation of the middle class and other nontraditional factors. More immediate, a still-moribund housing market, vulnerable corporate profit margins, and rising food, energy and interest rate costs are causes for concern.

An unusual impediment to smooth and self-sustaining recovery is a relatively anemic trajectory of expansion -- "it's different this time" - which exposes the slope of the recovery to policy mistakes, the long tail of the last credit cycle and other unexpected and exogenous events. This should limit valuations and most likely result in a contraction in P/E multiples during this year.

GS starts GM with a buy.