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| 2012-01-24 01:43 |
EQUITIES FAIL TO BREACH RESISTANCE
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By Carlos Guillen
Equity markets are slowly beginning to retreat. After hitting resistance, the Dow Jones
Industrial Average has failed to sustain upward momentum and is now inching its way lower, down approximately 0.3 percent from yesterday's level. News
from Europe is a bit mixed, with the Greek debt still unsolved but with euro-zone services and manufacturing output unexpectedly favorable.
The
good news is that it is apparent that markets are becoming much less sensitive about negative actions in the euro-zone. Finance ministers in Europe
failed to put up more cash for Greece, calling on bondholders to provide greater debt relief in order to save Greece. This news should have sent
markets much lower, but equities are hanging on. While the details are not all that clear, it is apparent that the struggle to reach an agreement
between Greece and its private-sector creditors will continue, but this cannot continue much further, something has to give. Greece must reach a deal
on writing down its debt in order to qualify for the next installment of bailout aid and to avoid a default that could destabilize the euro-zone.
Given how the S&P is already considering Greece as in default status, Greece needs to get a deal large enough to ensure that it can reduce its huge
debt levels but without harming the banks by frightening investors.
On the positive side of the news coming from Europe, the combined measure
of euro-area services and manufacturing output unexpectedly expanded in January, led by Germany, the region's largest economy. The composite index of
purchasing managers jumped to 50.4, a five-month high, from 48.3 in December, higher than the Street's estimate of 48.5 and landing in what is
considered expansion territory.
Although already hinted and expected, but nonetheless still discouraging, the International Monetary Fund (IMF)
cut its growth forecasts for the global economy to 3.25 percent from its prior forecast of 4.0 percent. The IMF also cut its growth forecast for the
U.K. to 2.0 percent from 2.4 percent.
Clearly, the overall news is to the negative side and is reflected in equity markets being down in the
red today but, again, given how investors reacted to negative news flow not so long ago, today's market action is not bad at
all.
Buffet: 1 Obama: 0?
By David Urani
So with the State of the Union coming up, the big issue in the spotlight is
taxes; and as Mitt Romney gives out his tax info, we are getting reports that Warren Buffet's secretary Debbie Bosanek will be making a high profile
appearance in Michelle Obama's box seats. As we know, the so-called Buffet tax is a central part of the President's tax overhaul proposals (and his
entire campaign), with Mr. Buffet himself providing plenty of input on potential tax policies. The funny thing is that as much as a potential tax hike
on Mr. Buffet might hurt his wallet, it just happens to turn out that another major recent decision by the President looks to have greatly benefitted
Mr. Buffet.
I am not claiming any kind of conspiracy or insinuating that Mr. Buffet had anything to do with it, but the decision to axe the
Keystone pipeline will directly add to the Oracle's bank account. Without the pipeline to transport oil from the Bakken oil field in North Dakota,
rails will be the next best option. It just so happens that Berkshire Hathaway's Burlington Northern Santa Fe railroad is set up to ship as much as
730,000 barrels per day from the oilfield, making it able to handle the brunt of the field's expected production. A Burlington Nothern spokeswoman
noted that the company ships approximately 25% of the oil from Bakken.
I find it interesting that Mr. Buffet has and will likely continue to
be cast as the friendly billionaire, offering away large sums of his personal fortune over to the taxpayers. And in turn Mr. Obama gets to look like
Robin Hood. Yet, in the background I have to wonder if Mr. Buffet's windfall from Mr. Obama's Keystone decision will offset Mr. Buffet's proposed
personal income tax increases. In other words, whether he knows it or not, I wonder if the President just put money in Mr. Buffet's pocket rather than
taking it out.
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Disclaimer: Securities Operations Forum is providing this research to assist investors in determining when to buy and when to sell. All investment decisions are yours and as a result you could make or lose money. Securities Operations Forum, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed, but not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Securities Operations Forum sit on the Board of Directors of any covered company. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security. |
