December 31, 2012 Update

December 31, 2012

DJIA:12,938 NASDAQ:2,960 10-YR TRS: 12/32 yield 1.712% Oil:$90.80 EURO:$1.3218 YEN:85.97

Micro

• Earnings: Cal-Maine Foods (NASDAQ:CALM) Q2 EPS of $0.60 missing forecast by $0.37. 
• Duff & Phelps Corp. (NYSE:DUF) has been acquired for $665.5M ($15.55 per share, 19% premium to Friday’s close).
• ConArga (NYSE:CAG) downgraded by S&P to BBB- (the brink of junk) on the belief that the company will have trouble restoring credit measures after the expensive purchase of Ralcorp Holding.
• Yum! Brands (NYSE:YUM) and McDonald’s (NYSE:MCD) stopped purchasing meat from China’s largest meat seller after both fast food restaurants lost sales over concerns regarding antibiotics and hormones that are pumped into the animals before butchered into poor quality meat. 
• Opec’s oil revenues for this year are expected to rise 2.5% to a record of $1.05T, boosted by the raising price of Brent oil which is $111.50 a barrel! 
• A strike by dockworkers from Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) was avoided. A new contact is expected to be written by February 6, 2013. 
• Argus has placed a “buy” rating and a $105 price target on FedEx (NYSE:FDX) due to the belief that the company is still attractive. Better than expected holiday retail sales could boost Q4 earnings. 
• BMO has placed a “buy” rating on Facebook (NASDAQ:FB) upgrading the social network from “sell.” BMO has set a price target of $32 from its previous $15. Talk about bullish!

Macro

• SPZ: trading up as investors await details about fiscal cliff negotiations. 
• Asian Markets: closed lower on lack of a US fiscal cliff deal.
• European Markets: trading in a tight spread as investors worry about US budget negations. 
• Germany’s Angela Merkel said on record that Europe’s economic environment will only be harder to deal with in 2013 and that the sovereign debt crisis is “far from over.”
• Venezuela’s Hugo Chavez’s (58 years old) cancer battle is not going well. The vice president and chosen successor to remain in power until Chavez has fully recovered. Chavez has not been seen in public for twenty-one days. 
• According to Prime Minister Lee, Singapore’s economy grew 1.2% in 2012. 
• Hilary Clinton was admitted to a hospital Sunday evening due to blood clots. 

Political vs. Economic Progress

The European economy has since recovered from the devastations caused by World War II, yet Europe is not politically unified. The American Civil War integrated the US economy (the laborious South joining forces with production in the North), but our country remained politically divided. China’s robust economy does not compare to the ill political conditions in the Communist nation, but China’s economy is growing at an unprecedented rate. History has proven that economic progress advances at a faster rate than political progress. Because of this logic, investors should not be overwhelmed with concern regarding the fiscal cliff. Congress understands the implications of going over the cliff (lowering animal spirits and putting the country at risk for recession), regardless of how politically polarized congress is. Going over the cliff does not compare to World War II, the American Civil War, or Communist conflicts in China but the point is that each economy progressed without political unification. While investors fear that the fiscal cliff will remain unsolved, I think there is much more to worry about in the global economy as the worst is yet to come.