January 9, 2013 Update

DJIA:13,328 NASDAQ:3,091 10-YR TRS: 10/32 yield 1.871% Oil:$93.15 EURO:$1.3081 YEN:87.04

Micro

• Earnings: Constellation Brands (NYSE: STZ) Q3 EPS forecast at $0.55 per share, Ruby Tuesday (NYSE: RT) Q2 EPS forecast a loss of $0.06 per share, Texas Instruments Inc. (NYSE:TXI) Q2 EPS forecast a loss of $0.26 per share. 
• Apple (NASDAQ: AAPL) is working on a more affordable version of the iPhone, replacing the glass screen with plastic. The cheap model may come out as early as this year. 
• UnitedHealth Group (NYSE: UNH) believes the US government could save over $500B in Medicare and Medicaid costs within the next decade by better organizing medical care. 
• Boeing’s (NYSE: BA) 787 is suffering brake issues, which has caused All Nippon Airways to cancel an internal Dreamliner flight in Japan. BA is down 4.6% this week alone. 
• Alcoa Inc. (NYSE: AA) met analyst expectations and has forecast international aluminum demand to rise 7% in 2013. Stock is trading up 2% premarket.
• Crude oil for February deliveries rose $0.09 to $93.23 a barrel in early trading. Heating oil for February deliveries is hovering at $3.06 a barrel. 
• Gold is flat as the dollar moves higher. 

Macro

• SPZ: moving upwards ever so slightly from a boost from global markets and from Alcoa Inc.’s upbeat results and outlook.  
• Asian Markets: the majority of Asian stocks were in the green, lifted by optimistic regarding the US earning season. 
• European Markets: trading higher, elevated by banks and mining companies after an upbeat outlook from Alcoa Inc. 
• China is starting a trial program in which it will allow companies to offer mobile telephone services, but will not yet permit privatized networks. The telecom sector is currently dominated by the Chinese government. 
• The Bank of Japan is considering doubling its inflation target to 2% and adding ¥101T ($1.2T) to its asset-buying and lending program. The BOJ is trying to lower the economy’s dangerous debt levels while under extreme political pressure. 

Yesterday’s Notable Winners

• Perion Network (NASDAQ: PERI) +20.11% (+$1.90) to $11.35 from company announcement that revenue will come in better-than-expected. 
• Signet Jewlers (NYSE: SIG) +9.05% (+$4.87) to $58.70 after raising Q4 and full-year profit forecasts.
• Celgene Corp. (NASDAQ: CELG) +6.63% (+$5.68) to $91.41 due to Piper Jaffray’s upgrade to “overweight” from “neutral.”

Yesterday’s Notable Losers

• Game Stop (NYSE: GME) -6.3% (-$1.56) to $23.19 after lowering outlook on holiday sales.
• Yum! Brands (NYSE: YUM) -4.2% (-$2.85) to $65.04 from company announcement of worse than expected decline in same-store sales in China. 
• Boeing (NYSE: BA) -2.63% (-$2.00) to $74.13 after fuel leak, fire, and cancellation of Japanese Dreamliner. 

Sing it, Mick Jagger!

Low interest rates after the bust of the internet bubble and post September 11th created a system awash with cheap credit. The low cost of capital decreased consumer exposure to interest rate risk, incentivizing borrowing. As a result of this, the country was caught in a frenzy of spending more than they had because at the time it seemed affordable to do so. However, Americans from all different social classes forgot Mick Jagger’s golden rule that “you can’t always get what you want!” Investment banks attempted to reach for yields using the originate-to-distribute model to price risk, which significantly lowered credit standards which rewarded unqualified candidates with subprime mortgages. Consumers took out mortgages for mega mansions they knew they could not afford simply because they wanted them. Rating agencies wanted to increase revenues, so they awarded risky loans with investment grade ratings to attract more business. And then... BOOM! The credit crisis of 2008 exploded, leaving the global economy and financial markets extremely toxic. All of these desires motivated humans to act irrationally to get what they thought they had wanted, which ultimately led to market failure. If the element of human greed had not clouded judgement and risk management, consumers and investors alike would have been able to get what they had wanted without torturing Mr. Market. If there is anything to learn from the 2008 credit crisis, just remember what Mick Jagger says, “You can’t always get what you want, but if you try sometimes you just might find you get what you need.”