“Bank of Canada Senior Deputy Governor Tiff Macklem, who may be promoted to lead the central bank later this year, said economic growth is slower than expected and will accelerate later this year.

There are early signs of a “gradual correction” of imbalances in household finances such as record debt loads while exports continue to have the slowest recovery since World War II, Macklem said yesterday in a lecture at Queen’s University, his alma mater, in Kingston, Ontario.

“Near-term momentum now appears to be slightly softer than previously anticipated,” Macklem, 51, said in the last scheduled public remarks from a Bank of Canada policy maker before a Jan. 23 interest rate decision. “We continue to expect economic activity to pick up through 2013.”

The central bank’s key interest rate has been at 1 percent since September 2010 with a strong currency and inconsistent global demand blunting exports, and policy makers have signaled since April they may raise borrowing costs as the economy moves to full output. Macklem’s household-finance comments suggest the language about interest rates will be retained this month to limit further growth in consumer debt, said Michael Gregory, senior economist at BMO Capital Markets in Toronto.

The wording “will be retained even though the Bank’s economic projection will be downgraded,” Gregory said. “More work is obviously needed” on consumer debt, he said.

Economists surveyed by Bloomberg News predict a rate increase in the fourth quarter of 2013, a time frame that may put the decision in Macklem’s hands with Governor Mark Carney leaving in June to lead the Bank of England…..”

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“As Congress and the President wallow in finger pointing and fiscal gridlock, Federal Reserve Chairman Ben Bernanke plows ahead with his plan to disguise the country’s economic ills by carpet-bombing us with freshly printed money. Aided and abetted by the gnomes in the Bureau of Labor Statistics — who are doing their best to convince us that inflation remains at historic lows — Ben has promised to conjure up $1 trillion a year out of thin air until unemployment returns to a politically acceptable 6.5 percent.

Where is all that new fiat currency going, and why haven’t we seen it show up in double digit inflation? The answer should frighten you.

The narrative being promoted in Washington is that Helicopter Ben’s money is being loaned to businesses so they can expand and hire more people. Oh yeah, and it’s also supposed to finance cut-rate mortgages to help stabilize the housing market. Achieving both of these goals will supposedly goose up “aggregate demand,” the magic elixir that purportedly makes economies grow. Mainstream journalists, who blithely call a reduction in the rate of growth of government spending a “budget cut,” dutifully parrot the party line.

It’s a great story except for one problem: There is no evidence it is true.

According to the astute number crunchers at Zero Hedge, total issuance of commercial loans since September of 2008 has gone down by $120 billion. Think about it — who wants to lend money when the government artificially sets inflation-adjusted interest rates below zero? Spend two minutes in the real world and you can see the consequences for yourself. At a recent meeting between a local banker and a client of mine the banker complained that, “There are now 10 pecker-checkers for every pecker in the loan department!” Compliance paperwork has become so burdensome, and risk aversion so high, that only corporations that don’t need loans can get them. As a result, small businesses, the classic engine for job growth, go begging while Fortune 500 companies park record levels of cash on the sidelines.

Yes, mortgage rates have hit rock bottom. But underwriting standards have gone through the roof. My wife and I — she’s a doctor; I’m a venture capitalist — recently refinanced the mortgage on our condo. It took three months to get approval, despite the fact that the loan amount was for less than 30 percent of the condo’s appraised value and we have perfect credit scores and no other debt — and this only after we provided every bit of documentation short of proctology exams. What chance does a first-time home buyer have in a market like this?

So, where is Ben’s money actually going? The data show that it is being stuffed onto the balance sheets of the Too-Big-To-Fail (TBTF) banks, some of which only became “banks” overnight when their brokerage businesses faced imminent collapse. Recapitalizing these “banks” after their housing market malinvestments and the crash of their derivatives casino — the inevitable outcome of Alan Greenspan’s money printing to fuel Fannie Mae’s doomsday machine — has been the principal goal of both the Bush and Obama administrations.

With the boundaries between Goldman Sachs, Treasury, the Fed and the administration virtually disappearing; the big banks’ Democratic and Republican handmaidens running interference; and the media distracted while pursuing pissant stories about debit card fees, consumer protection rules, and shareholder gadfly proxy access; all is hunky dory in TBTF land.

But what happens to all that freshly printed money after it gets parked on bank balance sheets if it’s not loaned to businesses and consumers? Perhaps we could sleep at night if it just sat there, as a cushion against the recession that lies ahead. But unfortunately, the “banks” appear to have flocked back to the derivatives casino, confident that as officially recognized TBTF institutions they are free to privatize gains, gorging on bonuses while the sun shines, knowing they can socialize their inevitable losses.

To see how much of your money they are playing with, take a look at the scariest economic chart of 2012.

“Banks” are supposed to be chartered to take in deposits and use them to make loans. Under the magic of fractional reserve banking, only a percentage of the deposited money needs to be retained as ready reserves, while the rest is put to work in the real economy. And yet here we have a “banking system” that for the first time in history has $2 trillion more in deposits than outstanding loans!…”

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[youtube://http://www.youtube.com/watch?v=PEPgA4ZQf0U 450 300]

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“It’s that time of the year again!

It was a tough task repeating the success of my surprise list for 2011 over the past year.

This is particularly true since my most important surprise (No. 4) in 2011 — namely, that the S&P 500 would end the year at exactly the same price that it started the year (1257) — was eerily prescient. As well, in 2011 I basically nailed that the trading range over the course of that year would be narrow (between 1150 and 1300).

As we entered 2012, most strategists expressed a relatively sanguine economic view of a self-sustaining domestic recovery and an upbeat corporate profits picture but shared the view that the S&P 500 would rise but only modestly.

By contrast, I called for a much better equity market — one capable, in the second half of the year, of piercing the 2000 high of 1527. As it turns out, the S&P 500 breached 1480 to the upside in the fall — or about only 3% less than the 2000 peak. (In October, I concluded that the S&P 500’s fair market value was 1415, and the S&P closed the year just 10 points higher than that figure.)

Before reviewing what else went right in my surprise list for 2012 (and what went wrong), I wanted to give some historical perspective on the lessons of the past, on the role of the consensus and what I am trying to bring to the table in the construction of the surprise list.

 

Lessons Learned Over the Years…”

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“This week at the Consumer Electronics Show in Las Vegas, some of the biggest companies in the world will debut the next generation of products and technology. The goods on display are the product of years of research and billions of dollars. And to protect their investments, companies file for patents on the next game changing device, software, or technology.

The U.S. Patent Office and Trademark Office awards hundreds of thousands of patents to companies each year. Today, IFI Claims Patent Services, a producer of patent databases, released its top 50 ranking of the companies awarded the most U.S. patents in 2012. Based on IFI’s list, 24/7 Wall St. reviewed the 10 most innovative companies in the world.

24/7 Wall St.’s review of the IFI list finds that producing the most patents does not ensure a successful business — frequently, it can mean the exact opposite. Some of the biggest patent recipients last year are barely profitable, or are losing money. These corporations may be ramping up research and development as their current brand falters. Sony’s patent awards are up substantially compared to 2011, but its shares are down by nearly 40% in the past 12 months, and the company lost more than $5 billion in the last fiscal year.

Meanwhile, several companies that didn’t make our list are among the most profitable companies in the world. Companies like Apple and Google saw major increases in patents awarded last year. Apple’s patents increased by 68% between 2011 and 2012. Google’s grew by an astounding 170%. These two companies remain well out of the top 10 for global patents awarded last year. Apple was 22nd, and Google was 21st….”

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“It is an understatement to say Michael Belkin is somewhat skeptical of all the bullish sentiment around these days — and in response to that, he put together a list of his favorite “reasons” to be bullish:

 

Top 10 Reasons to be Bullish in 2013

1) Congress and the Administration have spending, taxes and the budget deficit completely under control. Fiscal imbalances have been solved and won’t be a problem for the economy or markets anymore.

2) S&P500 earnings are declining and everyone knows stocks go up when earnings go down.

3) Hedge funds have their highest stock market exposure since just before the last time the S&P500 tumbled 50%. 10,000 hedge funds controlling $2 trillion can’t be wrong…”

 

Full list

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“The national flu outbreak is doing more than making people sick. It’s hurting worker productivity and businesses across the country are ailing from increased healthcare costs and widespread absenteeism, says John Challenger, CEO of Challenger, Gray & Christmas, an outplacement consulting firm.

Sick employees may be worried about job security or are eager to continue contributing to their workplace, but “presenteeism,” or when workers perform at reduced capacity, only makes matters worse by spreading illnesses, he advises.

“The economy is still on shaky ground and many workers continue to be worried about losing their jobs, despite the fact that annual layoffs are at the lowest level since the late 1990s,” Challenger says. “In this environment, workers are reluctant to call in sick or even use vacation days….”

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“While the world and their cat believes that Mario Draghi saved the world last year – and continues to do so with his open-ended promise to do “whatever it takes” whatever that means (and the market’s “positive contagion”). However, the reality, away from a sovereign-bond implied view of the world – with short-dated Spanish bonds now at 26-month low yields (whereby these bonds are sucked up wholesale by an ever more concentrated and self-satisfying group of European banks) is far different. As these two charts show, not only does Draghi’s decision not to lower rates (when inflation and unemployment – both more ‘real-world economy’-impacting items) indicate Taylor-Rule-esque that rates need cutting; but while banks get all they want (and more) from his over-flowing cup or collateralization and repo, credit extension in Europe continues to slide ever more negatively. Yes, Draghi saved the banks (for now) but, just as the scariest chart shows, Europe is very far from saved;….”

Full article and charts

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” The internet and retail analysts at Morgan Stanley recently published a massive report on how the retail industry was changing.

For the most part, the evolution involves a shift from brick-and-mortar retail to e-commerce, which they estimate will grow to $1 trillion by 2016…”

 

Full infograph and article

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“Frank Holmes, the Chief Investment Officer at U.S. Funds, just published his market outlook for 2013.

In his presentation titles More Sunshine, Less Storms, Holmes offers the key charts that underlie his bullish call on commodities, an asset class that underperformed in 2012.

In short, he argues that much of the uncertainty from last year will be washed away by two major themes: strengthening emerging markets and the rise of American energy production.

There are also some interesting correlations that have emerged between bond flows, equities and gold.

Check it out.

Thanks to US Funds for giving us permission to feature this presentation.

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NYSE

NASDAQ

AMEX

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In Play ,

On the Wires 

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“Deutsche Bank AG DBK.XE +2.10% made at least €500 million ($654 million) in profit in 2008 from trades pegged to the interest rates under investigation by regulators world-wide, internal bank documents show.

The German bank’s trading profits resulted from billions of euros in bets related to the London interbank offered rate, or Libor, and other global benchmark rates.

Regulators have been investigating allegations that more than a dozen banks, including Deutsche Bank, rigged Libor and other interest rates underpinning trillions of dollars in loans and other financial contracts. The probe has already produced settlements totaling nearly $2 billion with BarclaysBARC.LN +0.64% PLC and UBSUBSN.VX 0.00% AG.

The Deutsche Bank documents, handed to investigators by a former employee of the bank and reviewed by The Wall Street Journal, show for the first time the scope and manner in which a bank painstakingly constructed a string of trades in hopes of profiting from small changes in various rates…”

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Source

“U.S.-based stock-exchange operator BATS Global Markets said a system error led to hundreds of thousands of transactions being executed at prices that were not the best available.

The error dating back to 2008 caused some short-sale orders to be executed at prices that were equal to or less than the national best bid or offer price (NBBO), the company said in a statement on its website Wednesday.

Exchanges and broker dealers are required to execute transactions at the best price available, under the regulation also known as NBBO.

BATS said it was working to correct the error by Jan. 25.

Representatives from BATS and the U.S. Securities and Exchange Commission were not immediately available for comment.”

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” Jan. 10 (Bloomberg) — Warren Buffett, the billionaire investor who oversees stakes in some of the largest U.S. banks, said the nation’s lenders have rebuilt capital to the point where they no longer pose a threat to the economy.

“The banks will not get this country in trouble, I guarantee it,” Buffett, chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc., said in a phone interview last week. “The capital ratios are huge, the excesses on the asset side have been largely cleared out.”

Lenders including Bank of America Corp. and Citigroup Inc. have sold assets, cut jobs and bolstered balance sheets after repaying taxpayer bailouts from 2008, when the companies were overwhelmed by losses on securities tied to the housing market. Those actions helped boost financial stocks last year and increased the value of Berkshire’s holdings.

Buffett’s firm has investments in at least four of the seven biggest U.S. lenders by assets, including a stake of more than $14 billion in San Francisco-based Wells Fargo & Co., $5 billion in Bank of America and warrants that allow it to buy $5 billion of Goldman Sachs Group Inc. shares. Berkshire also has a holding in U.S. Bancorp.

“Our banking system is in the best shape in recent memory,” Buffett said….”

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lots of stock on the move….

Full look

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[youtube://http://www.youtube.com/watch?v=kH1WaHzvFkw 450 300]

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“We’ve been seeing a recurring theme in some of the recent market commentaries emanating from Wall Street.

It’s the second week of the new year, and there hasn’t been a whole lot of activity in the markets – which means everyone is still discussing 2013 outlooks, predictions, surprises, and so forth.

A comment from a recent client note authored by JPMorgan strategist Tom Lee – known as one of the more bullish voices on the Street – caught our interest.

Lee wrote:

Our baseline for 2013 remains that of a tricky 1H, with strength to start (and as we mentioned in earlier notes, we see a move toward 1500) but followed by a correction that sees 1350 before midyear. This is a contrarian view on timing—we are seeing a growing chorus of investors who see stocks strong throughout 2013. In fact, even notable bears have turned “bullish” on equities in 2013. We do not view this as a sign of “ringing the top”; rather, it is a reminder that investors need to be mindful of consensus and risks to the consensus view.

Today, another well-known Wall Street bull – BMO Capital strategist Brian Belski – wrote something very similar…”

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“This morning we learned that Dan Loeb is long nutritional supplement company Herbalife, and now we know why.

Loeb hashed out his thesis in his latest letter to investors — his hedge fund, Third Point is up 21.2 percent for 2012, and 9.2 percent for Q4, by the way — and said that fellow hedge fund manager Bill Ackman’s short against the company is “preposterous.”

After going over Herbalife’s awesome stats ($29.87 billion in sales with 20-50 percent growth each year since 2004). Loeb gets to the heart of why the company is not a pyramid scheme, as Ackman has said.

From the letter:

The pyramid scheme is a serious accusation that we have studied with our advisors. We don’t believe it has merit. The short thesis rests on the notion that the FTC has been asleep at the switch, missed a massive fraud for three decades and will shortly awaken (at the behest of a hedge fund short seller) to shut down the company. We find this to be preposterous.

He goes on to say that the FTC’s regulatory framework makes it possible for multi-level marketing companies to conduct business legally. Not only that, but he adds that while Ackman’s presentation was “lengthy” there was “little new ‘news’ in the presentation” or evidence to show that Herbalife had crossed into breaking the law….”

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“Faber is another one of those excellent macro thinkers who is not totally in paradigm with MR, but has a very good feel for the markets in general. He’s bearish on stocks in general, but says if you want to own stocks you need to be bullish on the names that have been beat down the most.

• He’s bullish on: Vietnamese, Japanese & Chinese equities.
• At this moment, he’s not particularly bullish about anything.
• He says he’s “deeply uncomfortable” about the current market environment and is concerned that the economic environment is extremely unstable throughout the globe.
• He says the US Dollar could rally here. He’s also bullish on gold (as expected).
• He views gold as an insurance policy.
• The Euro is not a desirable currency to own.
• The currency race to the bottom will continue….”

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“NEW YORK — Is the stock market’s “early warning system” sending an all-clear signal to investors?

Five trading days into 2013, the Standard & Poor’s 500-stock index is up 2.2%. And, if history is a reliable guide, that bodes well for investors.

The past 40 times since 1950 that U.S. stocks posted positive gains in the first five days of trading, full-year gains followed 34 times, or 85% of the time, with an average gain of nearly 14%, according to the Stock Trader’s Almanac, the bible of stock market seasonality trends. (The last time this indicator gave a super-faulty reading was during the bear market in 2002, when stocks fell 23.4% despite rising 1.1% in the year’s first five days.)…”

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