“I made my money by selling too soon.” – Bernard Baruch

1. German economy shrank in Q4 as crisis weighs — according to Reuter, Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.
2. Saudis may not be able to counter effect of Iran sanctions — Saudi Arabia is reportedly nearing its oil output capacity limit and may have little room to respond to potential shortages caused by sanctions on Iran. Currently pumping just under a record 10M bpd, the country has an on-paper capacity of up to 12.5M bpd.
3. Romney gains momentum with New Hampshire win — Mitt Romney has taken another important step in gaining the GOP nomination for the presidency, comfortably winning the New Hampshire primary ahead of a crucial test in South Carolina next week.
4. S&P500 Approaching Technical Resistance — view the chart listed below

5. Sears loses source of ready cash flow — Sears (SHLD) has taken another hit after CIT Group said it will stop factoring accounts payable for it – cutting off a source of ready cash flow for the embattled retailer.
6. Yields fall sharply at Spanish, Italian debt sales — according to Reuter, The Spanish Treasury raised 10 billion euros ($12.7 billion) from the auction of three bonds, doubling its target of up to five billion, and yields dropped by about 1 percentage point. Italy also fared well, paying less than half what it did a month ago to sell one-year bills at its first auction of the year. A major reason for the success was that local banks used the ECB’s ultra-cheap lending to support the sale.
7. European Central Bank holds rates steady — The ECB Governing Council left its key lending rate at 1%, matching its historic low. The central bank also left the interest rate on its marginal lending facility unchanged at 1.75% and maintained the interest rate on its overnight deposit facility at 0.25%.
8. Hedge funds hunker down for Greek debt — according to Reuter, The deal asks creditors to voluntarily write down 50 percent of the notional value of their bond holdings. Hedge funds may opt out. The stakes for Greece are high. Without the deal, the international lenders will not bail Athens out a second time, which means it will likely default around March 20, when a 14.5 billion euro (12.1 billion pounds) bond falls due.
9. S&P hits euro zone with downgrades — late Friday (1/13/2012), Ratings agency Standard & Poor’s (S&P) cut France, Austria, Malta, Slovakia and Slovenia by one notch, stripping France and Austria of rare triple-A ratings that were key to their ability to support efforts to rescue struggling euro zone members. The ratings agency also downgraded by two notches Italy, Spain, Portugal and Cyprus. Portugal and Cyprus were cut to junk status.

The week ahead — Economic data from Econoday.com:

HAPPY NEW YEAR!!

1. Greece must clinch bailout deal or face euro exit-spokesman — Greece faces an exit from Europe’s common currency bloc unless it clinches a deal on a second, 130 billion euro bailout with its international lenders. EU, IMF and ECB inspectors are expected in Athens mid-January to flesh out the new bailout plan agreed in principle by EU leaders in October.
2. Tensions rise in Persian Gulf — Iran threatened Tuesday to take action if the U.S. Navy moves an aircraft carrier into the Gulf, Tehran’s most aggressive statement yet after weeks of saber-rattling as new U.S. and EU financial sanctions take a toll on its economy.
3. World’s Biggest Economies Face $7.6T Debt — Governments of the world’s leading economies have more than $7.6 trillion of debt maturing this year, with most facing a rise in borrowing costs. Japan leads the way with $3T, followed by the U.S. with $2.8T. Crucially, Italy will need to raise $428B and pay another $70B in interest.
4. Romney Wins Iowa — Romney edged out Rick Santorum, a conservative former Pennsylvania senator, by only eight votes in Iowa’s caucuses, the first presidential nominating contest of 2012, as each received about 25 percent of the vote.
5. France sells 8B euros of debt, 10-year yield rises — Marketwatch, The French government sold 8 billion euros ($10.3 billion) of various government bonds, including 4.02 billion euros of 10-year bonds. France’s debt agency said the 10-year auction attracted 6.61 billion euros of bids, producing a yield of 3.29%. That’s up from 3.18% in a December sale. Bids exceeded the amount sold 1.6 times, down from a bid-to-cover ratio of 3.1 in December.
6. Kodak faces Chapter 11 — Eastman Kodak (EK) plans to file for bankruptcy protection if efforts in the next few weeks to sell a horde of digital patents fall flat, The Wall Street Journal reports.
7. German industrial orders plummet — German new industrial orders for November have indicated more woe for the eurozone’s economic engine with a monthly fall of 4.8%, well below a rise of 5% in October and a forecast of -1.7%.
8. Iran to hold new naval exercises — Iran’s Revolutionary Guards will hold new naval exercises in the strategic Strait of Hormuz in February, the semiofficial Fars news agency reported.

The week ahead — Economic data from Econoday.com:

“There are two kinds of people who lose money: those who know nothing and those who know everything” — Henry Kaufman

1. Europe OKs $112.53 billion Ireland bailout — European financial leaders on Sunday approved an 85-billion-euro, or $112.53 billion, aid package for debt-crisis-stricken Ireland.
2. Euro Crisis Spreads To Spain, Portugal, Italy As Yields Swell — The euro zone’s debt crisis worsened Tuesday, as yield spreads for Portugal, Spain, Italy and even Belgium widened amid mounting fears of defaults or even a breakup of the single-currency area. The euro hit a 10-week low, falling 1.43 cents to $1.2978. It tumbled nearly 10 cents in November. Shares of European banks, the biggest holders of euro zone debt, continued to sell off.
3. ECB extends liquidity, bond buys ‘ongoing’ — The European Central Bank will continue to provide as much short-term liquidity as euro-zone banks demand through at least the first quarter of next year, but ECB President Jean-Claude Trichet offered no hint Thursday on the size of additional purchases of troubled European sovereign bonds.
4. China Announces Shift to ‘Prudent’ Monetary Policy — China will switch to a prudent monetary policy from a moderately loose stance, the Communist Party’s top leaders decided on Friday, a change that could pave the way for more interest rate increases and lending controls, the state Xinhua news agency reported on Friday.
5. White House Offers $150 Billion Deal To Extend Tax Cuts — The White House has signaled its price for yielding to GOP demands to extend upper-income tax cuts: $150 billion to pay for a year of emergency jobless benefits and a batch of expiring tax credits.
6. Bullish Sentiment Rises, Still Below 50% — The latest poll from the American Association of Individual Investors (AAII) was released this morning and showed that bullish sentiment increased modestly to 49.66% from 47.4% last week. While a bullish sentiment level of 49.66% is on the high side, it’s still well off the multi-year high we saw in early November when the S&P 500 was trading at bull market highs.

The week ahead — Economic data from Econoday.com:

“It is not how right or how wrong you are that matters, but how much money you make when right and how much you do not lose when wrong” — George Soros

1. GDP rate revised to 2.5% — the economy grew at a 2.5% annualized pace in the quarter, revised up from the initial estimate of 2.0%, the government said in its second estimate of quarterly gross domestic product. Growth in gross domestic product was 1.7% during the second quarter.
2. North Korea fires rockets at South Korea — North Korea fired artillery rockets at the South Korean island of Yeonpyeong, killing two soldiers, and wounding 16 soldiers and three civilians.
3. Irish PM to dissolve government — Irish Prime Minister Brian Cowen said he would dissolve the government after the country passes its crucial 2011 budget in early December, paving the way for new elections that will almost certainly see Cowen voted out. The announcement came just a day after Ireland agreed to seek an estimated €80B ($110M) bailout from the EU and IMF, and adds the threat of political instability to the eurozone’s financial crisis.
4. S&P cuts Ireland’s sovereign credit rating — Standard & Poor’s Ratings Services late Tuesday cut its long-term sovereign credit rating on Ireland to A from AA-, and its short-term rating to A-1 from A-1+. The new ratings reflect the agency’s view that the Irish government appears likely to borrow “over and above” the agency’s previous projections to fund further bank capital injections into Ireland’s banking system.
5. Portugal passes budget, denies bailout talk — Portugal’s parliament passed its 2011 budget plan, as expected, adding to controversial austerity measures. The epicenter of Europe’s sovereign-debt crisis shifted from Ireland to the Iberian peninsula on Friday, with European Union, Portuguese and Spanish officials scrambling to head off speculation that Lisbon or Madrid could soon be forced to seek help to meet their borrowing needs.

The week ahead — Economic data from Econoday.com:

1. GM sees high demand in IPO — General Motors (GM) priced its initial public offering at $33 and sold around 478M common shares as well as $4.35B in preferred shares; if underwriters exercise options to cover overallotment, GM’s IPO could reach $18.1B, the second-largest in U.S. history.
2. Irish bail-out talks begin — talks between the Irish government and EU and IMF officials are set to begin today over Ireland’s troubled banks and the possible need for an aid package.
3. Fed orders new stress tests — the Federal Reserve plans to do another round of stress tests on top U.S. banks, and requested the top 19 banks submit capital plans by early next year showing their ability to withstand losses under ‘adverse’ circumstances.
4. China lifts banks’ reserve requirements 0.5% — The People’s Bank of China announced late Friday it will raise the reserve requirement ratio for banks by 0.5%, as the nation steps up efforts to combat inflationary pressures. The move marks the third such liquidity-draining hike since September.
5. Bullish Sentiment Sees Largest Drop in Nearly Two Years — weekly survey of bullish sentiment from the American Association of Individual Investors (AAII) at its lowest point since early September when the S&P 500 was struggling to get over 1,100. This is a drastic change from last week ‘shigh of 57.6% .
—

The week ahead — Economic data from Econoday.com:

Doug Kass calls the market bottom on CNBC on July 7th, 2009.

Mr. Kass is a noted short-seller from SeaBreeze Partners and correctly called the market bottom on March 2009. However, he called the market top too soon (Sept 2009) as the market continued to move up to Feb 2009.

Here is the link to Yahoo – Interview with Doug Kass.
Yahoo – Doug Kass Interview

Here is the video of Mr. Kass courtesy from CNBC.
Doug Kass calls market bottom (7/7/2010)

“A Bull Market tends to bail you out of all your mistakes. Conversely, Bear Markets make you PAY for your mistakes. ” — Richard Russell

As expected, the major indices bounced up 2% for the week and re-took the 200SMA. Below are the major events which occurred this past week.
1. IBIS — reported French & German banks hold approximately $958 Bil. in debt from Spain, Portugal, Greece & Ireland;
2. Spain Debt Sale — sold $3.8 bil 10-year bonds at 223 bps higher than the German’s bond on 6/16/2010. Spain’s bond spread is the highest since 1999.
3. Congress mulls extending off-shore drilling ban (from 6-month hold).
4. BP — as expected, BP suspended dividends and set aside $20 billion for damages.
5. UK moved forward with bank bonus tax.
6. China ‘s Central Bank moved to make its exchange rate more flexible –this move could eventually boost the spending power of the country’s consumers, lift its investors’ expectations for global growth.
7. TED Spread — creeps higher as the TED spread (the difference between the interest rates on interbank loans and short-term US government T-Bill.

The week ahead:
1. G-20 Meeting — 6/25 & 6/26 in Canada;
2. Tues 6/22 — Existing Home Sales; 2Q earnings -> ADBE, CCL, WAG
3. Wed 6/23 — New Home Sales; FOMC Mtg; 2Q earnings ->RAD, NKE, BBBY
4. Thurs 6/24 — Initial Unemployment Claims; Durable Goods Orders; ORCL, PALM, RIMM, LEN

TED Spread Chart

Based on the latest update as of March 31st, 2010 of Berkshire Hathaway, below lists his top holdings and the most recent update on his positions:

These positions may represent a buying opportunity as this market correction has made these stocks substantially cheaper. The research and blessing of Berkshire Hathaway takes away the majority of the risk.

TOP 15 HOLDINGS — As of Mar 31st, 2010 ($50.9 Billions)

Company Name Symbol Percent Comments
Coca Cola KO 21.6 No Change
Wells Fargo WFC 19.56 No Change
American Express AXP 12.28 No Change
Proctor & Gamble PG 9.83 Sold 8,406,627 shares during first quarter, reducing stake by 9.6 percent.  Berkshire had sold 8,812,599 shares (-9.1%) during the fourth quarter
Kraft food KFT 6.34 Reduced by 22.8%
Wesco Financial WSC 4.32
Walmart WMT 4.26 No Change
US Bankcorp USB 3.51 No Change
Conoco Phillips COP 3.43 Sold 3,532,081 shares during first quarter, reducing stake by 9.4 percent.  Berkshire had cut its holdings by 19.7 million shares (-34.3%) during the fourth quarter.
Johnson & Johnson JNJ 3.06 Sold 3,241,019 shares during first quarter, reducing stake by 11.9 percent.  Berkshire had cut its holdings by 9,782,166 shares (-26.5%) during the fourth quarter
Moody MCO 1.8 Sold 1,030,734 shares during first quarter, reducing stake by 3.2 percent, as previously reported.  Berkshire had cut its stake by 7,404,702 shares (-18.9%) during the fourth quarter
Washington Post WPO 1.51 No Change
Nike NKE 1.1 No Change
M&T Bank MTB 0.87 Sold 1,151,779 shares during first quarter, reducing stake by 17.2 percent.  No sales during fourth quarter
Republic Services RSG 0.62 Bought 2,537,200 shares during first quarter, increasing stake by 30.6 percent.  Berkshire had bought 4,665,500 shares (+128.7%) during the fourth quarter

Positions Berkshire Has Sold Out of Completely – Positions to avoid
SunTrust Bank STI
Travelers TRV
UnitedHealth UNH
Wellpoint WLP

Reduced Positions
Gannett GCI Reduced by 20.98%
Costco COST Reduced by 17.5%
CarMax KMX Reduced by 3.43%
Moody’s (MCO): Reduced by 3% (we detailed these sales back when they occurred)

Other Positions With No Change
Bank of America BAC
Comcast CMCSA
Comdisco Holdings CDCO.OB
Exxon Mobil XOM
General Electric GE
GlaxoSmithKline GSK
Home Depot HD
Ingersoll-Rand IR
Lowe’s LOW
Nalco Holding NLC
Nestle NSRGY.PK
Sanofi Aventis SNY
Tiffany & Co TIF
Torchmark TMK
USG USG
United Parcel Service UPS

The Fed announced “no change” to the current interest rate outlook; However, the Fed quietly stopped buying Mortgage Securities and the home buyer’s tax credit also will expire by April 30, 2010. Since the housing recovery is important to the economic recovery, this will pose a threat.

The problem with the PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) worsened. As of 4/25/10, the S&P downgraded Portugal 2 notches and today (4/28/10) downgraded Spain. Greece is currently waiting for a rescue from Germany/IMF.

Based on the last 4 crisis from the past 20 years, the market was up 15% higher one year later. Will this time be any different? Below are the past 4 crisises:
1. Mexico Peso — Dec 1994
2. Asian “Contagion”; led to Thai Baht currency crash — July 1997
3. Russian Rubble Devaluation; led to LTCM bail-out — Aug 1998
4. Argentine Gov’t Default — Nov/Dec 2007

From a technical perspective, the major indices also ran into the 200-sma resistance; Below are the weekly charts of the 200-SMA since the 1900’s and foreign markets.

DJIA 1900 to Present(Weekly)

The market continues to move up on lower volume based on blow-out earnings from AAPL, GS, BAC, WDC….

We remain cautious for a number of reasons:
1. Nearly 40% of companies reported earnings; Most companies beat last year ‘s comparisons;
2. ObamaCare stocks continue to sell-off; Notably HMOs, Insurance Cos, and Biotechs; (i.e. WLP, HUM, AET, etc..)
3. Major indices (RUSSELL 2000, SPX, DJIA) are hitting 200-sma and are nearing Aug 2008 high
4. Greece is ready to tap the IMF for emergency loan of $18 bil due May 18;
5. Portugal CDS exploded higher; this implies that the Euro will weaken against the USD; Commodities move in the inverse direction of the USD;
6. GS in the government’s cross-hairs; The Obama Admin. is pushing for financial regulations and is using GS as a target;

Below are a number of charts to consider:
1. SPX — (S&P500)

2. DJIA — (Dow Jones 30)

3. WLP — (Wealthpoint Health)

4. GS

5. US Dollar