The Big Picture

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• ‘Tis two days yet to New Year
• A (Somewhat) Bursting Bond Bubble
• 10 Monday AM Reads
• Sarkar’s Week in Preview
• 5 Richest Cities in the U.S.

‘Tis two days yet to New Year Posted: 30 Dec 2013 11:30 AM PST From the inimitable Art Cashin of UBS: ‘Tis two days yet to New Year but despite what you're hopin' The folks in the Board Room say "the full Eve we’ll stay open" So we’ll buy and we’ll sell as the tape crawls along And though “Bubbly’s” verboten we may still sing a song Two Thousand Thirteen had some spots of high hopes They may get fumbled away by those Washington dopes A brief government shutdown pushed sides further apart Let's all hope things improve as the New Year we start “If you like it you can keep it” we heard the President quip When that didn't work out in the polls he did slip We lost special people as we seem to each year It just makes us treasure each one that's still here Mandela and Thatcher they reshaped their times They'll now regale the angels backed by heavenly chimes And Peter O'Toole with his steely blue eyes Joined the great Joan Fontaine in God's still bluer skies Jean Stapleton's "Edith" has joined Archie on high And author Tom Clancy chose October to die Ed Koch now asks angels his set quote, "How'm I doin" Gone is Hugo Chavez who brought his nation to ruin Helen Thomas asks questions of St. Peter these days Also Frank Lautenberg left his senator's ways Jim Hall, jazz guitarist, played his final great note Richie Havens, quite different is now in the same boat Ray Harryhausen, who created creatures unreal Joined Jonathan Winters every scene he would steal Van Cliburn's piano angels hear without faults As Patti Page sings them the old Tennessee Waltz And Frost re-met Nixon midst the clouds they'll debate While Tony Soprano while in Rome met his fate Scott Carpenter and angels now together will sup Roger Ebert gave the harp a quite hearty thumbs up Esther Williams swam off Eydie Gorme took a bow And Annette Funicello has joined them both now And Doctor Joyce Brothers bid her clients goodbye While "Dear Abby" Van Buren gives advice from on high In Boston, two brothers put some bombs in a crowd Although hundreds were injured that great town stayed unbowed Wild fires aplenty burned in state after state Elsewhere came tornadoes seems Mother Nature's irate The Philippines saw a cyclone winds of 200 miles Caused immense devastation to those once lovely isles A Bangladesh building did collapse in the spring Though a thousand folks died few reforms did it bring In Syria, chemicals wiped out a whole town In a mall in Nairobi scores of folks were mowed down FOMO is a slogan it's "fear of missing out" Now we're all self-absorbed that's what that's all about Wall Street saw stocks soar but Main Street stayed slow As the Fed starts to taper we'll see just how things go Jeff Bezos announced a new delivery drone Edward Snowden revealed that we'd tapped Merkel's phone Prince George did arrive of pictures there was no lack and sweet tooths were quite pleased to see Twinkies come back Paula Deen fell from grace for some things she once said The Duck Dynasty guy made some people turn red Former Hannah Montana shocked some fans with a twerk In Toronto the mayor some folks called a jerk Let not this year’s memories of sadness or sleaze Disturb you this day just give your heart ease Have faith that this New Year will bring a new sign And believe in yourself it will all work out fine Just lift up your spirits and some fruit of the vine And kiss ye a loved one and sing Auld Lange Syne And late Tuesday evening as you watch the ball fall Wish yourself all the best Happy New Year to All!!

A (Somewhat) Bursting Bond Bubble Posted: 30 Dec 2013 08:30 AM PST Another holiday present from Goldman Sachs: Source: Goldman Sachs, “Top of Mind”, December 18, 2013.

10 Monday AM Reads Posted: 30 Dec 2013 06:30 AM PST Welcome to the last week of 2013. Here’s what I’m reading: • 13 data milestones for 2013 (Pew Research) • Best review I’ve read yet:  'Wolf of Wall Street' (Reformed Broker) see also Meet The Real ‘Wolf Of Wall Street’ in the original 1991 Takedown Of Jordan Belfort (Forbes) • Trickle Down Thievery and Hoarding (or Banks versus Tech) (Howard Lindzon) • The Best Financial Advice I Ever Got (or Gave) (WSJ) • Unemployment and Profits: A dirty little secret (Calculated Risk) see also Dems Turn to Minimum Wage as 2014 Strategy (NY Times) • Insurers may be at the centre of the next big crisis (FT) • The Strange Case of Dr. Hayek and Mr. Hayek (Academia.edu) • The Year Megaplatforms Ruled The Internet (BuzzFeed) but see U.S. Struggles to Keep Pace in Delivering Broadband Service (NY Times) • NASA: 2012 Was 9th Warmest Year on Record. The 9 Warmest Years Have All Occurred Since 1998. (Dan’s Wild Wild Science Journal) • Interview with Calvin & Hobbes creator Bill Watterson (Mental Floss) What are you reading?   Rising Rates Favor Shorter Junk Bonds Source: WSJ

Sarkar’s Week in Preview Posted: 30 Dec 2013 04:00 AM PST US GDP was revised higher to an annualised rate of +4.1% (from +3.6% previously) in Q3, with consumer spending, a key driver of the economy increasing by +2.0% on an annualised basis, higher than the +1.4% previously estimated. Analysts have increased their annualised growth forecasts for the 2nd half of the year to around 3.0%, well above the +1.8% rate in the 1st half. The improvement in US GDP supports the FED's decision to reduce its asset purchase programme. Estimates for Q4 GDP have been revised higher to around +2.5%, though is likely to come in better. Personal incomes rose by +0.2% in November, following a decline of -0.1% in October. Spending rose by +0.5%, mainly due to higher auto sales and increased expenditure on utilities due to the cold weather. Durable goods orders were up +3.5% in November. Excluding transportation, which tends to be volatile, orders rose by +1.2%. Jobless claims were also better than expected. Generally, US economic data is coming in better than expected. Japan announced its budget for their fiscal year starting 1st April 2014. The budget which amounts to approximately Yen 96bn, is a record and the finance minister announced that they will need to issue Yen 41.25tr of bonds to finance the spending, around 43% of the total. In addition, the finance minister states that Japan could increase spending even further to stimulate growth !!!!. Inflation is rising. Prices, excluding fresh food, increased by +1.2% Y/Y, higher than the rise of +1.1% expected, mainly due to the weaker Yen. CPI was even higher, coming in at +1.5%, the highest since late 2008. However industrial output rose by a lower than expected +0.1% in November M/M, though retail sales were higher than forecast. To date, Japanese businesses have not raised wages. The annual wage round, which occurs shortly, should indicate whether businesses do indeed raise wages. Prime Minister Abe is urging businesses to increase wages. One of the largest business federations have urged their members to raise wages, though the expected increases (around 0.5%) will be much lower than prevailing inflation, with CPI predicted to increase to 3.0%. The real decline in earnings will clearly impact domestic consumption, reducing growth. I remain deeply sceptical of Abenomics and the Bank of Japan's policy. Japanese bond yields have been rising, with the 10 year at 0.74%, though have much further to rise in my view. Japanese investors are beginning to buy foreign bonds. The Chinese Central Bank, the PBoC announced that it had injected further funds into the financial system to avoid a liquidity crunch. The measures seem to have worked with short term rates declining by over 250 bps over 7 days, the most since 2011. The Yuan rose to its highest level in 20 years, trading around 6.07 to the US$. Chinese local government debt has risen to Yuan 17.9tr (US$ 3.0tr), as at June, according to the National Audit Office. The Office promised to keep a close watch on spending by local governments. Overview US data has come in better than expected. As a result, bond markets have declined, with the 10 year Treasury yield rising to around 3.0%. Yields look as they will rise to 3.25%+. The higher US yields could well impact emerging markets. US markets continue to set record highs, though on light volume due to the holidays. The better data also helped Japanese markets which have risen by over 50% in local currency terms this year. The DAX in Europe is also trading at record levels. Markets look as if they will continue to rise into the New Year. The Yen continues to decline to 5 year lows against both the US$ and the Euro. The weakness of the Yen is causing concern for countries in the region, in particular exporting countries such as China, South Korea and Taiwan. With the current policies in place, I believe that the Yen will decline further. Sterling has been strong, following a string of better economic data, approaching US$1.65. The Euro remains resilient, though has backed off its recent highs of over US$1.38. I must admit, I have been surprised by the resilience of the Euro, though continue to believe that it will decline against the US$ next year. May I just take this opportunity of wishing you a very happy New Year. Kiron Sarkar 30th December 2013

5 Richest Cities in the U.S. Posted: 30 Dec 2013 03:00 AM PST Based on data from the U.S. Census Bureau, 24/7 Wall Street identified the U.S. metropolitan statistical areas with the highest median household incomes. Douglas McIntyre, 24/7 Wall Street editor-in-chief and CEO, joins Lunch Break.

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