Monday, January 31, 2011


Gold had a broad range today. At one point, it lost $18 an ounce, or nearly all of its Friday gain. It closed down $11 an ounce, and, technically, the commodity continues to look so yesterday.

I still look for further price breaks and more volatility in the precious metal.

I don't trade commodities, but it is interesting to note that oil has been a far better play on the Egyptian crisis than gold recently. Indeed, the price of crude has risen by $6 to $7 per barrel, or by 8%, since Thursday.

At the same time, the price of gold has been virtually flat.

Meanwhile, back in the stock market, YHOO owners got a nice kiss from a PacCrest upgrade, and Mr. Market was, according to many (though a tad ragged in the late afternoon), surprisingly resilient after some more positive economic news and in the absence of escalating riots over there.

The economic indicators today were consistent with the other recent surveys and releases and indicative of a gradually improving domestic economy. (I still question its durability and ability to sustain itself as the secular headwinds' strengthen as the year advances.)

Loan Demand Ticks Higher

The Fed Senior Loan Officer Survey revealed a steady strengthening in loan demand and some easing of lending standards.

All in all, not market-moving, though.

Pacific Crest raises YHOO to outperform with a $21 target. The upgrade is based on a sum-of-parts valuation story that "is gaining urgency."

Pac Crest sees a Yahoo! Japan monetization shortly with Taobao following with an IPO within the next year.

The company has more than $2.20 a share in cash and is adding $0.50 a year ... etc., etc.

Run, don't walk, to read "The Fed in La-La Land, Again" on Jeff Matthews Is Not Making This Up.

Brent crude futures trade over $100 a barrel.

Economic Releases Accentuate the Positive

Let's summarize this morning's upbeat economic releases:

* Personal income was up 0.4%. Real disposable incomes continue to rise, as the savings rate drops modestly. Most importantly, balance sheets continue to improve, with debt service as a percentage of income at a 10-year low while liabilities drop relative to assets.

* Consumer spending was vibrant, rising by 0.7% (well above the 0.5% consensus). Real consumption was indicative of a near-4% rise in real first-quarter 2011 spending.

* Monthly core PCE was flat, with a cumulative rise of 0.7% for the full year (at a five-year low). This is a key number and remains well below the Fed's intended target of around 2.0% PCE, indicative that the federal funds rate will likely stay close to zero for some time to come.

Intel Chips Away at Guidance

INTC reports that there is a design error in its new generation of chips. As a result, it's lowering its profit margin guidance and profits. This is company-specific and shouldn't hurt the indices.

Continued Strength in Chicago PMI

Continued strength in economy and in prices was printed in today's Chicago Purchasing Managers Survey. This is consistent with previous reports.

The concept of screwflation of the middle class (which clearly undermines the foundation of domestic economic growth) is clearly becoming an international phenomenon. Indirectly, food inflation is the source of many riots around the world and is a byproduct and unintended consequence of the U.S. policy of easy money.

Finally, in theory, the situation in Egypt and other powder kegs could result in a continued disintermediation of investment funds out of emerging markets and into the U.S. stock market, serving to make domestic equities the "best house in a bad neighborhood" -- a positive for stocks.

long YHOO

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