The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

If there ever was a day that encapsulates the new economic world we live in, it is today. The President in his State of the Union address will tell us how he plans to create jobs and the FOMC will tell us how they will craft the right policy to grow the economy. Also, Geithner testifies about the AIG bailout. Remember the days of focusing on P/E ratios, returns on equity and other fundamental research. We all have become political science majors, not because we want to but because we have to in order to better waddle thru the markets that have been driven more by DC policy than the industriousness of America’s private sector. Newsletter writers were very adept at getting extremely bullish right at the recent top and the pullback last week has greatly cooled the enthusiasm. II said Bulls fell 12 pts to 40 while Bears rose more than 4 to 23.3. Those that expect a correction (bulls who want to buy the pullback) rose to the highest since Nov ’86.

Greek bonds are getting slammed after the Greek finance minister denied an FT report that said “Greece is wooing China to buy up to 25bn euros of government bonds.” Their 10 yr yield is rising 23 bps to 6.47%, the highest since Feb ’00. Also weighing on European bonds was a comment from the always hawkish ECB member Weber after he said about monetary policy that as the economy gets better “not all measures are needed to the same degree, so I don’t rule out that we take additional steps (to withdraw) even before the 2nd half.” I know he’s stating the obvious but the timing is worth noting. A hawkish BoE member also expressed some modest concern with inflation and the pound is up in response. ABC confidence rose 1 pt to -48 and the MBA said refis fell 15.1% and purchases were down 3.3% even as the average 30 yr mortgage rate was steady at 5.02%. New Home Sales are out at 10am.