Birinyi thinks we all could be surprised and see 1700 on the S&P by year end…

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The news is very straightforward. China will cut its target for economic growth this year to 7.5% from the 8% goal that’s been in place since 2005, Premier Wen Jiabao told the annual meeting of the National People’s Congress today.

But what does it mean?

Financial markets have decided that a lower-growth target means China’s leadership is forecasting lower growth. That conclusion is one reason that stock markets were down around the world Monday — from a 1.4% drop in Hong Kong’s Hang Seng Index to a 0.8% decline in the German DAX to a 0.6% slide in the S&P 500 ($INX -0.39%) Monday afternoon. (China’s GDP climbed by 8.9% in the fourth quarter of 2011 and by 9.2% for the full year. That was down from the 10.4% growth in 2010.)

But I think the market’s conclusion doesn’t fit well with all the other policy statements that accompanied the setting of a lower growth target.

First, Wen did not change any of the previous language about economic and monetary policy. The government will maintain a “proactive” budget policy and a “prudent” monetary policy. Nothing there to indicate any change in course tied to the 7.5% target.

Second, the government’s announced growth policies were actually slightly less pro-growth than expected. The money supply target was set at 14% — slightly below the median forecast of 15% among economists surveyed by Bloomberg. The growth target for fixed-asset investment was set at 16%. That’s below the 18% forecast by economists. Coming in with targets for less stimulus than forecast certainly isn’t what you’d expect if China’s leaders were indeed worried about a hard landing for the country’s economy.

Third, the heads of China’s big state-controlled banks are still talking about growth in new loans similar for 2012 to that in 2011 and about further reductions in the bank reserve ratio by the People’s Bank. Here again this is business as usual.

Maybe the big banks haven’t read the memo sent down from Beijing.

Or maybe the change in the target doesn’t mean what the markets have decided it means.

I can think of two alternative explanations.

Alternative explanation #1: Cutting the growth target to 7.5% is an insurance policy for the new leaders that will start taking over the reins in October. Hey, if after setting the growth target at 7.5%, it comes in at 8% or 8.5%, then the new leadership takes office riding a wave of economic success. Think of the new target, then, as an attempt to lower expectations.

Alternative explanation #2: The lower target has nothing to do with any actual forecast for China’s economic growth in 2012. Instead it’s a sign to local leaders that they have more leeway to implement needed economic reforms without getting a black mark on their records if growth doesn’t meet the previous 8% target.

China’s leaders — or apparently a majority of the current nine-man Politburo at least — have spent the last year talking about the need to rebalance China’s economy. The goal would be an economy less dependent on exports and spending on fixed assets such as real estate and infrastructure and more dependent on growth in the consumer sector.

The big problem with that plan — especially if you’re a local leader accustomed to being graded on hitting Beijing’s growth target — is that implementing the new plan is risky. Local leaders know how to generate numbers under the current economic model that show 8% or better growth. But hit the target while shifting to model based on growth in consumer spending? Exactly how do you do that?

By lowering the goal to 7.5%, Beijing gives local leaders more room for error — and that should encourage them, the thinking in Beijing might go, to implement the new policies.

How do investors decide which of these three explanations is correct?

I think we’ll get a good indicator when China announces consumer price inflation for February. Along with cutting the growth target for 2012 to 7.5% from 8.0%, the government also kept its inflation target for 2012 set at 4%.

On the surface, keeping that target at 4% would seem to tie the hands of the People’s Bank on further reductions in the bank-reserve ratio and a first cut in its benchmark interest rate. After all, inflation climbed back to 4.5% in January, putting a halt to months of steady decline from the July peak at 6.5%. If inflation is headed back up, or even if it’s stuck at 4.5%, the central bank won’t be able to do very much to stimulate the economy. You’d think, then, that if China’s leaders were worried about economic growth in 2012 that they’d have cut the bank some slack by raising the inflation target.

But many economists have noted that the January inflation number was distorted by the early Lunar New Year holiday. They’re expecting that the official data to be released on Friday will show that inflation has dropped back in February to 3.4% or so. That would give the People’s Bank plenty of room to stimulate the economy even with a 4% inflation target.

Of course, Beijing’s leaders already know what Friday’s announcement will say. If the inflation number comes in significantly below January’s 4.5% — and especially if it comes in below 4% — I think that’s a sign that China’s leaders think they’ve got plenty of tools for making sure that growth doesn’t slow more than they desire. And that the 7.5% target isn’t a signal of a hard landing in China but of confidence that the country’s economy has enough momentum to tackle the rebalancing that it needs for the long run.

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“A surprisingly healthy jobs report for February could spark a longer-term rally in the stock market, as still-cautious investors would open up to the notion that the economy is finally on the mend, says Goldman Sachs Asset Management Chairman Jim O’Neill.

Unemployment figures have surprised on the upside for December and January.

“I think after the two past highly positive surprises, a third one coming up this Friday, I would have thought, would have made a lot of people start to rethink some of their cautiousness about the U.S.,” O’Neill tells CNBC.

“If we get another positive surprise, that raises the possibility of another material rally in the S&P before we get into some of the usual late spring, early summer issues.”

Oil prices will serve as the main headwinds battling markets, as the European debt crisis will work itself out, O’Neill adds.

Prices tend to spike in spring and early summer.

“Most of the other concerns people talk about, particularly the ones related to Greece, I find a bit tedious. Markets come through all those challenges pretty easily,” O’Neill says. …”

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“Federal Reserve Bank of Dallas President Richard Fisher said he opposes additional Fed purchases of securities and urged Wall Street to get ready to become less dependent on monetary easing.

“I would suggest to you that, if the data continue to improve, however gradually, the markets should begin preparing themselves for the good Dr. Fed to wean them from their dependency rather than administer further dosage,” Fisher said today in a speech in Dallas. Financial markets “have become hooked on the monetary morphine we provided” after the 2008 financial crisis, he said….”

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Deball currencies outright is my guess….

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“The Greek PSI will be resolved one way or the other this week. Early reports suggest a weak start and the triggering of collective action clauses and credit default swaps remain a distinct possibility. Portugal is next and, although the credit dynamics and implementation of reforms is superior to Greece, the risk remains high that it will need a second aid package and/or debt restructuring, as it is unlikely to be able to return to the capital markets in H2 2013. With 2 LTROs and collateral liberalization, the 10-year benchmark in Portugal is yielding more than 13%, compared with a bit more than 12% at the end of last year.

However, the devolution in Spain is particularly troubling. The new fiscal compact had just been signed last week, which includes somewhat more rigorous fiscal rule and enforcement, when Spain’s PM Rajoy revealed that this year’s deficit would come in around 5.8% of GDP rather the 4.4% target. This of course follows last year’s 8.5% overshoot of the 6% target.

The problem that for Spain is that the 4.4% target was based on forecasts for more than 2% growth this year. However, in late February, the EU cuts its forecast to a 1% contraction. This still seems optimistic. The IMF forecasts a 1.7% contraction, which the Spanish government now accepts.
This will be the third year in 5 that the Spanish economy contracts. Unemployment stands at an EU-high of 23.5% in February. The strong export growth seen in recent years, the best growth in the euro area, is stalling. Domestic demand has been hit by rising unemployment and government austerity. At the end of last year, the Rajoy government adopted a 15 bln euro package of spending cuts and tax increases.

Moody’s says that another 25 bln euros in savings is needed for Spain to reach its budget target. Fitch says this is unrealistic and that the overshoot not necessarily impact their credit worthiness.
Spain is already under the excessive deficit procedure (since April 2009), as are 23 of the EU 27 members. Rajoy’s revelations butt against the EU agreement that urged members to adhere to their fiscal commitments. Moreover, Rajoy struck a strident chord by saying he did not communicate this to the other heads of state because he did not have to and that Spain was sovereign….”

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“Corporate profits that doubled since 2009 have left the Standard & Poor’s 500 Index cheaperthan at all 34 peaks since 1989, even as options traders push the cost of protecting against losses to the highest in four years.

Companies in the benchmark gauge of U.S. stocks trade for 14.1 times earnings after advancing 102 percent since March 2009 to an almost four-year high last week, data compiled by Bloomberg show. Valuations are lower than at every 52-week peak since 1989. Traders have pushed the price of contracts that pay should the S&P 500 drop 20 percent to the most since 2007 compared with ones betting on a rally of the same size….”

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Usual stuff from the colorful Faber…..

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Bridgford Foods Corp. (BRID) : The Anaheim, California- based maker of sliced luncheon meats and cheeses said it had a quarterly loss of $278,000, according to the company’s annual report.

Citigroup Inc. (C) : Chairman Richard Parsons, who helped oversee the bank’s recovery after its near collapse in 2008, plans to step down after 16 years on the panel. Board member Michael O’Neill was named to succeed him.

Consol Energy Inc. (CNX) : The Canonsburg, Pennsylvania- based company is poised to rise if coal and natural-gas prices rebound and improve its profitability, Barron’s reported.

InfoSpace Inc. (INSP) : The Bellevue, Washington-based Internet search services company said director Lewis Taffer told the board that he would not stand for re-election at the annual meeting on May 31.

Pandora Media Inc. (P) (P US) rose 3.2 percent to $14.34. The online music service provider was upgraded to buy from hold at Stifel Nicolaus & Co., which cited the expansion of the company’s advertising sales staff.

Scorpio Tankers Inc. (STNG) : Scorpio Tankers is among shipping companies that look attractive as the industry shows early signals of recovery, Barron’s reported in its “The Trader” column, citing Edward Holl of MP Maritime in San Francisco. Teekay Tankers Ltd. (TNK) : The shipping company was also named by MP Maritime’s Holl as attractive, Barron’s reported.

Tiffany & Co. (TIF) : The New York-based jewelry retailer is poised to rise to the mid-$70s over the next year as consumers return to luxury items, boosting its sales and profit, Barron’s reported. Tiffany closed at $67.47 on March 2.

Verisk Analytics Inc. (VRSK) : The Jersey City, New Jersey-based information services company looks attractive for long-term investors as the property-casualty insurance data provider expands its health-care operation and boosts sales, Barron’s reported.

WPX Energy Inc. (WPX) (WPX US) gained 3.6 percent to $18.47. The Tulsa, Oklahoma-based company looks “significantly undervalued” as investors sold shares after natural-gas prices slumped to a decade low, Barron’s reported in its “The Trader” column, citing Craig Giventer of Financial Partners Capital Management.

Zynga Inc. (ZNGA) (ZNGA US) slipped 3.5 percent to $14.18. The biggest developer of games for social-networking sites was cut to neutral from overweight by JPMorgan Chase & Co., meaning the shares are expected to perform in line with the stocks the analyst covers over the next six-to-twelve months. JPMorgan cited Zynga’s rally since the end of January.

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Gapping up 

TSON +26.8%, ARCO +5.2%, CTIC +16.1%,  BPAX+5.3%, BP +1.1%, KERX +10.8%,  SLE +9.9%,  P +3.2%,  GWRE +0.7%,  BIG +0.7%

Gapping down 

DISH -3.4%, RIO -2.6%, MT -2.2%, ZNGA -2%, SLV -1.8%, GFI -1.7%, WAG -1.2%,  LEAP -5.2%, OSTK -15.9%, AGNC -3.8%,  POM -2.1%,  CF -1.5%,

SDRL -0.9%, NBG -2.8%, BBVA -2.2%, ING -2%, STD -2%, DB -1.8%, CS -1.3%, GDX -1.4%, BHP -1.3%, AU -1.3%,

BBL -1.2%, GLD -0.8%, SLW -0.6%,

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In Play

On the Wires 

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“In his latest note, John Hussman argues that it’s one of the worst times to invest. Period.

Based on his proprietary soup of risk indicators for the market, the current exuberant situation puts it on par with some of the great peaks, including 1998-2000.

Importantly, the market is again characterized by an extreme set of conditions that we’ve previously associated with a “Who’s Who of Awful Times to Invest.” The rare instances we’ve seen this syndrome historically are reviewed in that previous weekly comment. They include the 1972-73 and 1987 market peaks, and several instances since 1998. The more recent instances of this syndrome are shown by the blue bands on the chart below. Note that each of the separate instances in the 1999-2000 period were followed in short order by intermediate market declines of between 10-18%, and of course, ultimately by a plunge of more than 50% in 2000-2002. Likewise, the 2007 instance was followed in short order by a correction of nearly 10%, and a few months later by a plunge of more than 50% in 2007-2009. The more recent instances in 2010 and 2011 have also been followed by substantial market selloffs in each case, though with a longer lag in 2011 (due to ongoing QE2 operations). Aggressive monetary policy did not prevent the ultimate declines, though massive central bank interventions have undoubtedly helped to short-circuit the more violent follow-through that occurred in 1973-1974, 1987, 2000-2002, and 2007-2009, at least to-date.

 

 

A word of caution. While a few of the highlighted instances were followed by immediate weakness, it is more typical for these conditions to persist for several weeks and even longer in some cases (for example, the wide blue strip in late-2010 and early 2011). When we look at longer-term charts like the one above, it’s easy to see how fleeting the intervening gains turned out to be in hindsight. However, it’s easy to underestimate how utterly excruciating it is to remain hedged during these periods when you actually have to live through day-after-day of advances and small incremental new highs that are repeatedly greeted with enthusiastic headlines and arguments that “this time it’s different.” For us, it’s particularly uncomfortable on days when our stocks don’t perform in line with the overall market, or when the “implied volatility” declines on our option hedges.

Read the whole thing > ”

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[youtube:http://www.youtube.com/watch?v=xgfXgOcqlPo&feature=g-all&context=G267b44eFAAAAAHgAJAA 603 500]

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ATHENS (Reuters) – The chief negotiator for the body representing private sector holders of Greek bonds expressed confidence on Saturday that a bond swap deal which is a key part of Greece’s bailout program would be completed successfully next week.

“We can sense in our discussions with investors that momentum is building,” Charles Dallara, managing director of the International Institute of Finance (IIF), told Greece’s Antenna television in an interview.

“I’m quite optimistic that the participation levels will be quite high,” he said, but he declined to predict a figure.

Bondholders have until March 8 to sign up to the agreement under which they will exchange their existing Greek government bonds for new paper in a swap deal that will see the nominal value of their holdings cut by 53.5 percent.

Failure to secure a deal with private sector creditors would threaten the 130-billion-euro bailout package agreed last month with the European Central Bank, the European Union and the International Monetary Fund.

Greece has said it would not be obliged to go through with the arrangement unless it gets 90 percent participation. If participation is below 90 percent but above 75 percent, it would consult with its public sector creditors.

Assuming a sufficient number of investors accept the deal, European leaders should give final approval to the bailout in a teleconference on March 9.

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In the early going, Stephen A. Wynn, the Las Vegas magnate with a thousand-watt smile, was on the rebound after his casino and resorts empire, Mirage Resorts, fell prey to a hostile takeover in 2000.

To bankroll his comeback, he turned to a Japanese billionaire, Kazuo Okada, who had made much of his fortune manufacturing gaming machines for Japan’s notorious pachinko parlors — and who was adept at the wild ways of the mushrooming Asian gambling industry.

Together they formed Wynn Resorts, with Mr. Okada eventually becoming the company’s biggest shareholder.

“I love Kazuo Okada as much as any man that I’ve ever met in my life,” Mr. Wynn effused during an earnings conference call in May 2008.

The love affair is over. Mr. Wynn and Mr. Okada are now embroiled in a nasty corporate divorce, in one of the most rancorous public feuds the international gambling industry has ever seen.

With each side accusing the other of questionable payments to public officials in Asia, many gambling executives fear collateral damage. They worry that the accusations could prompt government investigations into any number of ethically questionable business practices in gambling, where Asian regulators have often looked the other way.

“It’s like two gunslingers shooting it out,” said a longtime industry official, who insisted on anonymity because he knew both men and wanted to protect the relationships. “And what I’m wondering is whether they’ll both kill each other.”

The fight is playing out in Las Vegas, where Wynn Resorts is based, and here in Macao, the former Portuguese seaport colony now controlled by China, where annual gambling revenue is four times that of the Las Vegas Strip. Macao (often spelled Macau) was the source of all of Wynn Resorts’ $613.4 million in profit last year — more than offsetting its money-losing properties in the moribund Nevada economy.

Despite the partners’ joint success in playing the gambling game by Macao’s lax house rules, Mr. Wynn’s allies on the company’s board are now accusing Mr. Okada of violating American foreign-corruption laws.

These allegations of missteps include giving a visiting Philippine gambling regulator and his entourage free use of the Wynn Macau casino-resort’s Villa 81 — a 7,000-square-foot pleasure palace that normally rents for $6,000 a night and has amenities including his-and-hers bathrooms with showers built to accommodate six people at a time.

Mr. Okada’s camp, in turn, is questioning the propriety of a $135 million donation that Wynn Resorts made last year to the University of Macau — its chancellor is also the head of Macao’s government, with ultimate oversight of gambling. Mr. Okada’s litigation has prompted an inquiry by the United States.

Both sides deny wrongdoing. Mr. Wynn and Mr. Okada declined to be interviewed.

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NEW YORK (Stockpickr) — At Stockpickr, we track the top holdings of a variety of high-profile investors, such as George Soros and Carl Icahn.

It should come as no surprise that the most popular of these portfolios is that of renowned investor Warren Buffett, CEO of Berkshire Hathaway(BRK.A_), (BRK.B_) and one of the richest people in the world.

In his annual letter to shareholders, Buffett revealed that he has selected selected his successor at Berkshire Hathaway, though he did not reveal the person’s identity.

Today we’re taking a closer look at 10 of Buffett’s top dividend stocks, based on Berkshire Hathaway’s most recent quarterly 13F filing with the SEC, which reflects holdings as of Dec. 31, 2011. These stocks each comprise at least 1% of Berkshire’s portfolio and yield at least 1.5%.

Read the rest here.

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A documentary of sorts. More like a collection of great statements from comedians, politicians, and ordinary folk. If you watch this in its entirety you may think you have automated responses to the philosophical questions asked about government, law, society, economics, and humanity; but you’ll find that perhaps there are many illusions affecting your belief structure.

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“All things are subject to interpretation; whichever interpretation prevails at a given time is a function of power and not truth.”

 –Friedrich Nietzsche

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“An attempt to give an alternate perspective than what has ever been shown on mainstream media, I hope it inspires you to ask questions.

███ ██ █ ████ everything ███ ███ is ████ ██ ████ fine ████ ████ love. █████ ███ █ ███ your ████ ███ government

Disclaimer: DO NOT WATCH IF YOU DO NOT LIKE TO THINK”

Cheers on your weekend!

[youtube://http://www.youtube.com/watch?v=-HFXMQ7Ot-k 450 300]

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“Submitted by Charles Hugh Smith from Of Two Minds

If This Is Such a Strong Economy, Why Does This Chart Look Recessionary?

Is the U.S. really a post-oil economy?

One way to gauge the real economy is to look at charts of the GDP, wages, household debt and the price of oil; another way is to correlate all of these on one chart. The following chart (courtesy of frequent contributor B.C.) plots these four metrics thusly: GDP/(wages/household debt)/price of oil.

What pops out of the chart is what happens when oil spikes higher or declines. In 1973, the first oil shock sent the economy off a cliff. Conversely, when oil fell to $12/barrel in the late 1990s while wages were rising strongly, the plotline peaked, reflecting a strong economy.

In 2008, oil spiked to $140/barrel in 2008, household debt reached record heights and wages began stagnating, and the economy fell into a sharp recession. When oil plummeted back to $40/barrel in early 2009, the plotline spiked up.

When oil prices and household debt are high while wages stagnate or decline, the economy sinks to recessionary levels.

Here are B.C.’s observations:

This chart utterly discredits the economics profession and those who claim that the post-industrial economy (“deindustrialization” and “financialization”) is not oil-constrained and the service economy is what the rest of the world should adopt as the normative standard at $100+/barrel oil.

The current plotline is hovering just above the recessionary levels of late 2008. Does this reflect a strong economy, or one that is weak? If oil keeps climbing, what will that do to a visibly weak economy?

The Bulls are convinced that the U.S. has decoupled from the rest of the world and from the price of oil. This chart makes the opposite case: the price of oil matters, especially when wages are declining and household debt is elevated.”

Meanwhile those on food stamps rose to a new record. Up 384k last month alone….

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Are markets headed below 2009 levels? “Conquer the Crash” author Robert Prechter on the state of the economy and why he has a bearish outlook for the markets.

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Alaska Communications Systems Group Inc. (ALSK) : The Anchorage, Alaska-based telephone company reported fourth- quarter earnings of 5 cents a share, beating the average analyst estimate of 4 cents.

Ascena Retail Group Inc. (ASNA) (ASNA US): The women’s apparel retailer forecast profit this year of at least $2.75 a share, above the average analyst estimate of $2.67.

Esterline Technologies Corp. (ESL) : The aerospace and defense parts supplier raised its forecast for 2012 earnings to between $5.10 and $5.40 a share, from $5 to $5.30 previously.

Flow International Corp. (FLOW) : The maker of industrial water jets used for cutting and cleaning reported third-quarter earnings of 7 cents a share, beating the 5-cent average of two analyst estimates.

Motricity Inc. (MOTR) tumbled 17 percent to $1.09. The provider of mobile-data services reported a loss of 14 cents a share in the fourth quarter, wider than the average analyst estimate of a loss of 10 cents.

Sara Lee Corp. (SLE) rose 6.4 percent to $21.70. The maker of Douwe Egberts and Senseo coffee said its international coffee company filed for a spinoff under the name DE International Holdings NV.

Satcon Technology Corp. (SATC) dropped 6 percent to 47 cents. The maker of inverters, which converts electricity from solar cells for use on electric grids, forecast first-quarter revenue of no more than $28 million, below the average analyst estimate of $38.1 million.

Shutterfly Inc. (SFLY) rallied 15 percent to $31. The company agreed to buy Kodak Gallery, an online photo service with more than 75 million users, for $23.8 million.

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