“If something anticipated arrives too late it finds us numb, wrung out from waiting, and we feel – nothing at all. The best things arrive on time.” – Dorothy Gilman

1. Senate backs online sales tax measure — the Senate has voted 75-24 to allow states to collect sales taxes from online retailers with $1M+ in annual revenues and no presence within a given state’s borders. While the vote was non-binding, the margin of victory suggests a filibuster shouldn’t be a problem when a binding vote is held. Amazon (AMZN) and eBay (EBAY) have already begun collecting in a number of large states, and many investors assume that collections will expand in time.
2. S&P500 Comparison between 2012 versus 2013 — courtesy of BIG, below is a chart showing the performance of the S&P 500 in 2013 overlaid on a chart of its performance in 2012 through the end of July. As shown, while the S&P 500 was up slightly more in the first quarter of 2012, the index has tracked its 2012 pattern pretty closely in the first quarter of this year.

3. Cyprus works to avert run on banks — Cyprus prepared capital controls to prevent a run on the banks after being closed for almost two weeks. Russia has warned Cyprus not to make the controls too onerous. Uninsured depositors at Laiki bank, which is being shut down, will probably lose 80% of their cash, the rest of which could take years to return, while those at Bank of Cyprus could take a haircut of up to 40%.
4. JPMorgan Chase Faces Full-Court Press of Federal Investigations — from DealBook, Federal prosecutors are reportedly investigating whether JPMorgan (JPM) breached the law by not fully alerting authorities about suspicions related to Bernard Madoff. The probe adds to several others JPMorgan is facing. At least eight federal agencies are investigating the bank, including the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission and the Securities and Exchange Commission. Federal prosecutors and the F.B.I. in New York are also examining potential wrongdoing at JPMorgan.
5. Government funded until September — President Barack Obama yesterday signed the FY 2013 funding bill into law, one day before the previous financing measure was due to expire. The package includes the $85B of sequestration and ensures that the government will be financed until the end of the fiscal year in September, with spending projected at $984B.

The week ahead — Economic data from Econoday.com:

1. Creditors and Large Depositors to take Large Loss in Cyprus Rescue from the EU — hours before a possible financial meltdown in Cyprus, the eurozone agreed to a €10B bailout in which the country’s second-largest bank, Laiki, will be closed and its operations folded into Bank of Cyprus. Deposits of over €100,000 will be hit with a large tax, perhaps 30% or more, while those below that level will be left untouched. Laiki’s senior bondholders will be wiped out, while Bank of Cyprus’s creditors will also be affected.
2. Fears Arise that Farming is Heading for a Bust — NYTimes, Rising crop prices, particularly corn, have sent the cost of farmland soaring, with prices in Iowa, for example, doubling to an average of $8,296 an acre since 2009. The trend has prompted farmers to expand and has attracted investment companies, but with data about rural debt incomplete, economists fear that the boom will at some point turn into a bust, leaving a trail of bankruptcies and out-of-pocket creditors.
3. Freddie Mac sues 15 banks over Libor Rigging Scandal — Freddie Mac (FMCC.OB) has sued Bank of America (BAC), JPMorgan (JPM), Citigroup (C) and 12 other banks for losses caused by the manipulation of the Libor rate. Freddie, which invested in mortgage bonds and swaps tied to U.S. dollar Libor, is seeking a whole gamut of damages. The FHFA has already calculated that Freddie and Fannie Mae (FNMA.OB) lost a combined $3B because of the Libor manipulation.
4. Bank of England (BOE) voted 6-3 to reject more Quantitative Easing (QE)– The Bank of England’s monetary policy committee voted unanimously to keep interest rates on hold at a meeting earlier this month and 6-3 against more quantitative easing. As in February, Governor Mervyn King was among those wanting the bank to increase the program by another £25B to £400B.
5. FOMC Maintains Its Current Policy of Bond Buy — the Federal Reserve has left its $85B-a-month QE program in place, saying that the economy has returned to moderate growth even as fiscal policy has become more restrictive. Notable among the revised economic projections was an expected improvement in the unemployment rate.
6. Household net worth drops 36% in six years — WSJ, the median net worth of American households dropped to $69,000 in 2011 from $82,000 in 2000 and $107,000 in 2005, a census report shows. Meanwhile, debt in households headed by older people more than doubled during the decade to a median $26,000 from $12,000, largely because of mortgage loans. The trend increases worries about the financial well-being of older Americans, whose retirement funds have been hit by the recession and rock-bottom interest rates.

The week ahead — Economic data from Econoday.com:

“I always keep these seasonal patterns in the back of my mind. My antennae start to purr at certain times of the year” — Kenneth Ward

1. UK manufacturing slump raises risk of triple-dip — per theguardian, U.K. manufacturing and industrial production unexpectedly fell in January, renewing fears that Britain will enter a triple-dip recession. Manufacturing output dropped 1.5% on month and industrial production 1.2%, with the latter hurt by the suspension of a North Sea oil platform.
2. U.S. retail sales climb 1.1% in February — U.S. consumers boosted purchases at retail stores in February. Excluding autos and gas, sales rose a smaller 0.4% while other sectors did not fare as well. Sales dropped 1.6% at home-furnishing stores, 1.0% at department stores, 0.9% at sporting goods and hobby stores, and 0.7% at bars and restaurants.
3. China’s Stocks Slump to Two-Month Low on Property Curbs Concern — Bloomberg, Chinese stocks fell, dragging the benchmark index to a two-month low, as real estate and construction companies tumbled on concern policy makers will step up property curbs. Zhou Xiaochuan, the Governor of the People’s Bank of China, has said the country should be on “high alert” over inflation after February’s price increases topped expectations. Monetary-policy is “no longer relaxed” and is “neutral,” he said. Zhou’s remarks add to signs that China is tightening policy even as its recovery may be hitting a bump, including the city of Shenzen banning property developers from raising home prices.
4. S&P eyes record high — the S&P 500 up to make a fresh challenge on its all-time high after it closed just 11 points shy of the mark last Friday, and the Dow Jones to continue its record run. Below is a repost of the S&P500 chart of all time high.

5. CFTC looks at possible gold and silver manipulation6. Fed OKs 16 bank capital-return programs but rejects two — The Federal Reserve has approved the capital return plans of 14 banks and rejected two – those of Ally and BB&T (BBT). Goldman Sachs (GS) and JPMorgan (JPM) received conditional approval and were asked to resubmit their programs by the end of Q3 to “address weaknesses in their capital planning processes.” JPM wants to raise its dividend to $0.38 from $0.30 and repurchase $6B in shares.
7. China appoints Li Keqiang as Premier — China’s National People’s Congress has appointed Li Keqiang as the country’s first ever premier with a doctorate in economics. The selection of Li, who replaces Wen Jiabao, follows the election of Xi Jinping as President. The legislature will complete China’s once-a-decade transfer of power tomorrow with ministerial and other appointments.

The week ahead — Economic data from Econoday.com:

“He who fights and runs away, lives to fight another day” — Unknown

1. Chinese shares tumbled on government property action — Chinese shares closed sharply lower, led by real-estate developers, after Beijing intensified its three-year campaign to curb rising property prices by ordering larger deposits and a stricter enforcement of sales taxes.
2. China passes U.S. as world’s top oil importer — China has tentatively passed the U.S. as the biggest importer of oil in the world, with EIA data showing that China’s incoming shipments hit 6.12M bpd in December and those of the U.S. fell to 5.98M bpd, the lowest since February 1992. It’s worth pointing out that tax maneuvering may have distorted December data, while U.S. imports tend to recover in January.
3. China Puts Focus on Consumers to Drive Growth — China has given itself a GDP growth target of 7.5% for 2013, which would be below last year’s 7.8%. At the opening of the annual National People’s Congress, the finance ministry said it plans to increase the country’s budget deficit to 1.2T yuan ($192.8B), or about 2% of GDP from 1.6% in 2012. Much of the increased spending will go on social programs as China looks to shift the focus of its economy towards the consumer and away from exports and infrastructure.
4. Shell plans LNG plants in Louisiana and Canada — Shell (RDS.A) announced plan to construct facilities in Louisiana and Canada that will produce LNG for heavy trucks and large ships, with the idea being to increase the demand for the glut of natural gas in North America. A Great Lakes cargo-ship operator has already pledged itself as a customer, while Shell plans to run three vessels in the Gulf of Mexico on natural gas.
5. Euro Zone to Bail Out Cyprus, No Details Available — per CNBC, Eurozone finance ministers intend to agree on a bailout for Cyprus – which is seen as systemically important to the eurozone despite its small size – by the end of the month, although it’s not clear how the rescue would be financed. Cyprus needs up to €17B, an amount that would lift its debt-GDP ratio to 145%.
6. Time Warner to spin off magazine operations — Time Warner (TWX) plans to spin off Time Inc. into a publicly-traded company, with the goal being to complete the transaction by the year-end. Division CEO Laura Lang will leave after the process is completed. Time Inc. publishes the namesake magazine, Sports Illustrated, Fortune, and dozens of other titles, along with related web sites and mobile apps.
7. Fed Stress Tests for Banks — eighteen major banks have passed the Fed’s stress tests, showing they’d have a Tier 1 Common Ratio of over 5% in the central bank’s “severely adverse” economic scenario. That includes GDP slumping 5%, unemployment of 12%, a 50% fall in stocks and recessions overseas. Only Ally Financial failed, while Citigroup (C) came out as the most overcapitalized of the largest banks with an 8.3% common ratio.

The week ahead — Economic data from Econoday.com:

DJIA Set New Record Highs Since 2007 — the Dow Jones closed +0.83% at a record high of 14246 and surpassed 2007. Below are the charts of the DJIA (past 25 years) and the S&P500 (last 20 years).

“In investing, the return you want should depend on whether you want to eat well or sleep well.” — J. Kenfield Morley

1. Italy Bond yields rise to 4-month high as it sells 6-month debt — the results of the Italian election have immediately hit the government where it hurts, with yields jumping to 1.24% in an auction of €8.75B in 6-month sovereign bonds from 0.73% in a sale in January. The bid-to-cover ratio fell to 1.44 from 1.65.
2. 4Q GDP Revised up — per Marketwatch, the nation’s entire output of goods and services, known as gross domestic product, expanded at an annual 0.1% pace in the fourth quarter, the Commerce Department reported. Initially the government said last month that the economy contracted by 0.1%, which would have marked the first decline since the second quarter of 2009. The revised GDP report showed that construction spending rose faster than previously estimated while exports fell less than the government thought. That nudged GDP into positive territory.
3. Sequester cuts set to kick-in as Senate bills fail — Automatic federal budget cuts of $85 billion looked certain to kick in Friday after a pair of bills to replace them failed in the Senate. The budget cuts for fiscal 2013 would not take effect all at once on Friday. Instead, they would go into effect gradually through the end of the fiscal year on Sept. 30. In total, the sequester would cut about $1 trillion over nine years.
4. Chinese manufacturing slows in February — China’s factory activity weakened last month as the official PMI, which focuses on larger state-owned companies, unexpectedly fell to 50.1 from 50.4 in January. HSBC’s PMI, which concentrates on smaller private firms, dropped to 50.4 from 52.3. The timing of the Chinese New Year may have affected the figures.
5. Default worries send Argentine markets into turmoil — fears that Argentina will default hit the country’s markets yesterday, with the Merval stock index tumbling 3.5% and the cost to insure $10M of its debt for one year rising to a whopping $6.6M. The turmoil came after a lawyer representing Argentina’s government told a U.S. court on Wednesday that it would choose to default rather than pay bondholders who won’t accept restructured debt that was issued following the 2001 crisis.
6. AAII Plummeted — according to the weekly sentiment survey from the American Association of Individual Investors (AAII), chart courtesy from the Bespoke Investment Group, bullish sentiment plummeted from 41.79 down to 28.39. This was the largest weekly decline since November 2010, and it was the lowest weekly reading since last July.

The week ahead — Economic data from Econoday.com:

‘If you are going to be wrong, be wrong quickly with a de minimis loss of capital’.” — unknown

1. Chinese Army Unit Is Seen as Tied to Hacking Against U.S. — according to NYT , Chinese army unit 61398, also known as “Comment Crew,” has been identified as most probably responsible for numerous cyberattacks on U.S. targets, security company Mandiant has alleged in a report. While Mandiant didn’t name specific targets, victims include Coca Cola (KO) and VMware’s (VMW) RSA, as well as a firm with access to over 60% of oil and gas pipelines in North America.
2. NY Fed wants to let BofA off over AIG assets — the NY Fed is apparently trying to let Bank of America (BAC) off the hook for possible sizable legal claims related to former AIG (AIG) mortgage securities held by Maiden Lane II following the insurer’s bailout in 2008. AIG has sued BofA to recover some of the $18B losses it suffered on the assets, but the bank argues that AIG gave its right to sue to the NY Fed when it sold the assets.
3. Bank of England chief wanting more asset buying — Bank of England Governor Mervyn King and two other officials voted to restart government-bond buying earlier this month, showing the bank closer than expected to taking more action to lift economic growth.
4. Japan’s trade deficit hits fresh record — Japan’s trade deficit increased to a record ¥1.63T ($17.4B) in January from ¥641.5B in December, due to the sharply weaker yen and higher energy imports. However, exports climbed for the first time in eight months, growing 6.4% on year to ¥4.8T, with sales to China increasing for the first time since May. Exports to the U.S. were +10.9% but to the EU -4.5%. Imports rose 7.3% to ¥6.43T.
5. Euro-zone Feb. PMI signals steeper downturn — the euro-zone downturn appeared to steepen in February, with the preliminary composite purchasing-managers’ index, or PMI, for the region slumping to a two-month low of 47.3 from a January reading of 48.6, according to Markit. A reading of less than 50 indicates a contraction in activity.
6. Moody’s Investors Service cut the U.K.’s AAA credit rating — the pound fell to its weakest level in almost 16 months as Moody’s cited weakness in the nation’s growth outlook and challenges to the government’s fiscal consolidation program.
7. S&P500 Trend Lines Support — below is the chart of the trend lines support for the S&P500 (SPX)after last week losses in the major indexes .

The week ahead — Economic data from Econoday.com:

“There were times when my plans went wrong and my stocks did not run true to form, but did the opposite of what they should have done if they had kept regard for precedent.” — Jesse Livermore

1. Pope Benedict XVI resigns — Pope Benedict XVI has become the first Roman Pontiff since Pope Gregory XII in 1415 to resign, saying he will leave office on February 28 due to his failing health.
2. Eurozone recession deepened at end of 2012 — the economy of the 17 nations in the euro shrank by 0.6% in the fourth quarter, which was worse than forecast. It is the sharpest contraction since the beginning of 2009 and marks the first time the region failed to grow in any quarter during a calendar year.
It followed news that the economies of Germany, France and Italy had all shrunk by more than expected.
3. Fracking in New York could be held up for months — New York state’s decision to lift its ban on fracking faces further delays after officials conducting a key health impact study asked for more time. The move will push back the publication of the state’s environmental report, which in turn will delay the drafting of Governor Andrew Cuomo’s drilling regulations, possibly forcing a re-start of the regulatory process.
4. Bank of Japan keeps policy unchanged as recession continues — the Bank of Japan has maintained the size of its asset purchase program at ¥101T ($1T) and its benchmark interest rate at 0%-0.1%. The BOJ’s decision followed news that Japan’s economy had contracted for a third quarter in Q4 as GDP shrank 0.1% Q/Q vs consensus of +0.1%, with declining exports and a drop in business investment offsetting improved consumption.
5. G-20 Meeting Interests Converged on Infrastructure — The G-20 meeting brings into focus poorer countries’ difficulties in paying for the construction of roads and bridges and other basic infrastructure essential for development. Currency movements was discussed but Japan was not singled out.
6. Momentum for Internet sales tax strengthens –Legislators introduced the Marketplace Fairness Act in the Senate, which would enable states to collect sales taxes for online transactions carried out in their jurisdictions.

The week ahead — Economic data from Econoday.com:

“A loss never bothers me after I take it. I forgot it overnight. But being wrong — not taking the loss — that is what does damage to the pocketbook and to the soul.” — Jesse Livermore

1. Political uncertainty in Spain and Italy spooks markets — Spanish PM Mariano Rajoy tried to fight off allegations that he and other leaders in his party took bribes, while in Italy, Silvio Berlusconi’s party is surging in the polls ahead of upcoming elections as he promises to tear up “German-imposed” austerity policies and cancel a despised property tax.
2. Oil firms, environmentalists jockey for position over California shale — Oil companies such as Occidental Petroleum (OXY), Venoco (VQ) and Hess (HES) are looking to exploit California’s Monterey Shale, whose untapped deposits are estimated at 15.4B barrels, or over four times the reserves in the Bakken Shale. However, the industry is facing stiff opposition from the state’s environmental lobby, which is concerned about the substances used in fracking and the potential for setting off earthquakes.
3. Justice Department Filed Suit Against Standard & Poor’s, a unit of McGraw Hill Cos. (NYSE:MHP) — The DOJ’s lawsuit, joined by several states, seeks $5 billion in damages for losses to pension funds, banks and other financial institutions the government alleges were caused by the way S&P rated structured investments such as collateralized debt obligations in 2007.
4. BOE leaves policy unchanged — the Bank of England (BOE) has again left its monetary policy unchanged, with its benchmark rate staying at 0.5% and its QE program dormant.
5. Ireland’s hopes rise for debt refinancing — a reluctant ECB is close to agreeing to a refinancing of Ireland’s debt after the country’s parliament authorized emergency legislation to dissolve the former Anglo Irish and Irish Nationwide banks, now merged into IBRC, and sell their remaining assets of up to €14B to a bad bank.
6. Indian Economy to Grow at Weakest Pace in a Decade — per WSJ, India’s growth will decelerate this FY to 5% from 6.2% last year, the statistics ministry has said in a forecast that is lower than a recent finance ministry outlook of +5.8%. The slowdown is due to continued weakness in manufacturing and farm output, with the economy being hampered by a lack of reform, wide fiscal and current account deficits, and high inflation.
7. Consumer Sentiments Bullish — chart below shows Newsletters are the most bullish since 2010.

The week ahead — Economic data from Econoday.com:

“The four most dangerous words of all time, “It’s Different This Time!” — unknown

1. Cosco, China’s largest shipping company by fleet size Expects Large 2012 Loss — WSJ, Chinese shipping giant Cosco has warned it expects to report a large loss for 2012 due to the combination of weak demand in the dry bulk shipping market and escalated fuel costs.
2. Japan forecasts 2.5% growth — the government in Japan estimates GDP will increase 2.5% for the fiscal year which begins in April, higher than its previous outlook for 1.8% growth. Strong export outflows and higher capital spending from the government are both expected to provide boosts.
3. Shanghai Composite Enters Bull Market on Economic Growth — The Shanghai Composite Index (SHCOMP) climbed 0.5 percent to 2,358.98 at the close, extending its advance since Dec. 3 to 20 percent, a threshold signaling a bull market to some investors. The Shanghai Composite exited its longest-ever bear market. A 756-day stretch without a 20 percent gain from Nov. 8, 2010, through Dec. 3 is the longest on record, according to data compiled by Bloomberg and Birinyi Associates Inc. The gauge fell 38 percent during the period.
4. U.S. economy shrinks 0.1% in fourth quarter — MarketWatch, government data showed the U.S. economy shrank in the fourth quarter for the first time since the recession, but the nation appeared to still be on a mild growth path if unusual factors are stripped out. The fourth-quarter retreat mostly stemmed from lower inventories and a plunge in military spending. Spikes in those two categories had given growth for the third quarter an exaggerated pop, and economists expected them to be reversed.
5. S&P500 (SPX) Shows Triple Tops (Bearish) OR Inverse Head-n-Shoulder Pattern (Bullish)? — below is a chart of the SPX from 1993 to Present.

6. Japanese industrial output points to recovering economy — Japan’s industrial production recovered to rise 2.5% on month in December vs -1.4% in November, although the growth was below consensus of +4.1%. With the companies surveyed for the report expecting more gains in January and February, the data adds to other metrics which indicate that the economy could be rebounding from its recent slump.

The week ahead — Economic data from Econoday.com: