Welcome to 2012.
I trust everyone had a memorable New Year’s Eve.
I myself spent the night with six children for an evening that culminated in watching the zombie Dick Clark count down as the ball dropped…
The kids honked horns, shot silly string, bickered, and ate.
In all, my demon offspring and their friends expended a lot of energy in a dedicated effort to engorge that throbbing vein in my right temple.
At times like these, the idea of sticking them with the future bill for current entitlements seems like a good plan. There is a certain need for revenge that is assuaged.
Oddities of Calendars
But this is a new year. We are renewed by an ancient circumstance of the Greco-Roman calendar.
There is optimism.
Today we awake and the Dow has the character of the two-faced Roman deity for which January is named: Janus, the god of transitions, doors and gates.
As ruler of Latium, Janus was said to have invented money and ruled over a golden age. He solved the problem with the Fed in a simple manner: His money wasn’t based on gold — nor was it based on the full faith and credit of Latium — but rather, money was gold.
Yesterday the Dow was up 222.21 points. Gold is up 2.49%. And oil, that salve of finance, is up 4.23% to $103 for West Texas crude.
Our god stock, Janus Capital Group (JNS), has fallen from $15 to $6.50 due to negative earnings growth (-15.70%) last year.
The retail investor, having grown tired of the rigged game on Wall Street, has cashed out and gone home. (Perhaps this is why you don’t see Janus advertising during football games anymore.)
The upside is that the mutual fund company now has a P/E of 6.95 and pays a 3.20% dividend. And at least one insider thinks it’s a bargain. Bruce Koepfgen, a company officer, bought $100,000 worth of shares on December 21st.
Taking this market situation to heart, Janus has launched a series of protected funds.
It uses cash, Treasuries, and U.S. large caps coupled with short index futures. It hopes this will appeal to those who want steady returns with a safety net.
The company says if the fund hits 80% of NAV, it would be liquidated — which, I suppose, is something. The company also launched an international dividend fund.
I don’t know if these are the products that will return mutual funds to their former glory, but I do like that chart… Check out the capitulation low when someone puked out 50 million shares in late November.
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The Past is Dead to Me
But the past is behind us.
Bullishness is everywhere. Reports are pointing to growth.
The Institute for Supply Management said the U.S. manufacturing sector expanded in December from November. The manufacturing report (the ISM PMI gauge) rose to 53.9 in December from 52.7 in November.
Construction spending rose 1.2% in November.
A gauge of Chinese manufacturing activity showed the world’s second-biggest economy began expanding in December after contracting the prior month.
And in Germany, unemployment fell 0.1% to 6.8% — a new record for unified Germany.
Manufacturing reports from Australia and India also came in strong.
In addition to this good news in the basic economy, the composition of the Federal Open Market Committee (FOMC) has changed dramatically with the New Year.
You’ll remember the FOMC as the unelected technocrats who decide how much money to create and who to give it to.
Zerohedge reports fiscal hawks “Fisher, Kocherlakota and Plosser now out of the voting rotation, and replacing them will be the gaggle of ferocious doves Pianalto, Lockhart and Williams. In fact the only hawk left in the Fed as of today through the end of the year is Richmond Fed’s Jeffrey Lacker who has shown substantial dovishness in the past. In other words, from a rotation of 7 and 3, the Fed is now uber-dovish by a 9 to 1 majority. So does this mean that printing is imminent?”
Look for the next FOMC statement to come out on January 25th.
Though bad for my offspring and their friends, more printing is good for stocks… in the short run, anyway.
Here’s to a profitable new year,
Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.