Wednesday, December 19, 2012

Lower markets on budget deadlocked talks

Dow fell 98 closing at the lows, advancers marginally ahead of decliners & NAZ was off 10.  The Financial Index pulled back 1 to the 221s, call that profit taking.  It's 7 above last week's lows.  The MLP index leaped another 4 (8+ in 2 days) to the 388s & the REIT index was flat at 265.  Junk bond funds were higher & Treasuries also rose after recent selling.  Oil went up, nearing $90, & gold shot up $56, far beyond $1700, related to the growing fiscal mess in DC.

AMJ (Alerian MLP Index tracking fund)

stock chart

CLF13.NYM...Crude Oil Jan 13....89.42 ...Up 1.49 (1.7%)

Live 24 hours gold chart [Kitco Inc.]

Photo:   Yahoo

John Boehner pressed his backup tax plan despite a White House veto threat, saying it will be approved tomorrow by the GOP-controlled House.  "Then the president will have a decision to make," he  said.  "He can call on the Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history."  Earlier Obama threatened to veto Boehner's "Plan B," pressing instead for a deal to avert the "fiscal cliff."  He said the 2 sides were only a few hundred $B apart, & he hoped to get the job done before Christmas.  "Plan B" calls for extending tax cuts for people making up to $1M.  The administration immediately rejected it, saying it was unbalanced & didn't go far enough on seeking more revenue from the wealthy.  Obama said he would continue to work with Boehner & was prepared to do "tough things."  But he said he would not compromise on his demand that he be given authority to raise the debt ceiling without Congress' approval.  "What separates us is probably a few hundred billion dollars," Obama said.  "The idea that we would put our economy at risk because you can't bridge that gap doesn't make a lot of sense."  "We should be able to get this done," Obama said.  "Let's get this done. We don't have a lot of time."  Obama spoke as rhetoric over the GOP backup plan on taxes escalated, with the White House promising a veto & Boehner's office calling that threat "bizarre."  When I was a kid this was called getting nowhere fast!

Boehner Challenges Obama With 'Plan B' Showdown  CNBC

Spain $185 Billion Refinancing Tests Rajoy’s Bank Cleanup Effort

Photo:   Bloomberg

Spanish banks have restructured about €140B ($185B) of loans outside the country’s crippled real estate industry, according to the consulting firm that did a stress test of Spanish lenders.  Bad loans surged to a record 11.2% of total lending, the Bank of Spain said yesterday.  “We are working with factories, restaurants, any kind of business,” Agusti Bou, who works on restructuring credit at Jausas, a Barcelona-based law firm said.  “There’s going to be a growing default problem because the huge issue in Spain is not the public debt, it’s the private.”  Spain has ordered banks to recognize €84B of losses to purge their balance sheets of real estate as Rajoy recapitalizes at least 4 failed lenders with about €40B of European bailout funds.  But the strategy focuses on soured property assets & may neglect impending losses on loans to firms and homeowners as the economy shrinks.  While small & medium-sized businesses have restructured, total non-performing loans in the country grew €7.8B to €190B in Oct, the Bank of Spain said.  The nation’s bad-loan ratio could jump to 14.5% of all lending, assuming that 30% of refinanced credit turns sour within a year.  All is not well in Spain.

Spain’s $185 Billion Restructuring Test for Rajoy Cleanup

Internet advertising hit a new high in Q3 as marketers continued to shift money from print & broadcasting.  The $9.3B spent on internet ads is an 18% increase from $7.8B in Q3 2011, according to PricewaterhouseCoopers & the Internet Advertising Bureau.  The Q3 total marks the highest ad volume for any qtr since 1995, when online marketing first began to move to the internet.  Another record is expected in Q4.  Internet advertising more than doubles the amount in US newspapers' print advertising, which totaled $4.5B.  The upheaval has been driven by the growing number of people who rely on computers & mobile devices to get information on the internet.  The increasing number of internet ads helps subsidize many free online services, including search, email & social networking.  Google (GOOG), the search leader, has been the biggest beneficiary of the online ad boom.

Internet ad revenue rises 18 pct to $9.3B in 3Q AP

Somebody finally noticed that budget talks are getting nowhere with both sides digging in their heels.  Talks have been deadlocked for some time, but nobody cared.  Vague talk about being "close" is just that, VAGUE.  Keep in mind that the budget mess started LAST YEAR when they came up with the brilliant solution to fix raising the debt ceiling.  The pres has been busy for over a year, campaigning so he would have a job for the next 4 years.  Meanwhile unemployment is about 8%, those campers aren't happy.  Reps also voted to postpone the budget mess & this is what we got!!  There will be a lot more hot air coming out of DC this week & next with NOTHING accomplished.  But Dow is indifferent, only about 400 below its yearly highs.  Not sure what's going on with MLPs but it looks like they had a scare about their tax advantage status causing the sell-off & then 2 days ago were reassured not to worry. 

Dow Jones Industrials

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