February 14, 2013 Update

DJIA:13,982 NASDAQ:3,196 10-YR TRS: 10/32, yield 2.017% Oil:$97.01 EURO:$1.3453 YEN:93.42

The Ultimate Market Wizard: A Boltzmann Brain

According to the theory of the Boltzmann Brain, you are more likely to have imagined an entire life than to have actually had the chance to live one yourself. Unless you are the Boltzmann Brain, then you are the only thing that’s real. The world operates on predictable patterns of controlled chaos; a business cycle, if you will. Ludwig Boltzmann believes that most “brains” are just random fluctuations within the universe that form the Boltzmann Brain’s reality. If this is true, then most of us are not living at all but are merely existing in the imagination of the single self-aware person. In the equity market, the Boltzmann Brain would be the ultimate Market Wizard. This anonymous trader would be the only brain that understands market behavior and has the ability to predict its next turn. Leaving the rest of us remaining market participants, non-Boltzmann Brains, to be imaginary particles existing as drivers in the inevitable controlled chaos of market fluctuations. Assuming the scientist is correct, who is the ultimate Market Wizard and whose behavior are we really herding? 

Domestic News

• Market Update. Futures are treading in a downward pattern ahead of this week’s jobless claims, which are expected to result in a slight fall.
• This week’s jobless claims data will be released at 8:30am and is expected to have fallen to 360,000 from 366,000 two weeks ago. 
• U.S. properties in the foreclosure process fell 28% in January, which is a six year low! This is no doubt another positive sign in a strengthening housing market. 

International Updates

Asia

• Market Update. Over all, equity markets are advancing. A positive economic outlook in Japan is boosting share prices, while the Hong Kong market rallies on the first day in operation after being closed for the holiday. 
• The Bank of Japan is keeping the size of its asset purchase program at its target of ¥101T ($1T)  and its benchmark interest rate between 0.0% and 0.1%. Inflation is hovering about 2%. 

Europe

• Market Update. Trading down as investors’ remain uncertain regarding the health of the Eurozone after data portrayed Q4 economic activity shrinking 0.6% (which is much worse than expectations).
• Italian Q4 GDP is -0.9% Q/Q, which is 0.3 below the forecast of -0.6%. Annually, GDP is -2.7% vs. expectation of -2.3%. 
• The Eurozone’s Q4 GDP fell -0.6% Q/Q compared to -0.1% in Q3 and the forecast of -0.4%. Over the past year, GDP -0.9% vs. last year’s -0.6% and the forecast of 0.7%.
• Portuguese Q4 GDO -1.8% Q/Q compared to -0.9% in Q3, which is worse than the expectation of -1%. Annually, GDP fell 3.8% this year and 3.5% this time last year, which is also worse than the forecast of -2.9%. 

Corporate

• Nestle’s (NSRGY.PK) net income is up 12% to 10.61B francs ($12B), which is higher than the expectation of 10.38B francs. EPS if +12.2% to 3.33 francs. Revenue up 10.2% to 92.2B francs. The company was able to grow organically at a 5.9% pace and expects 2013 to come with the similar challenges 2012 brought. 
• Apple’s (AAPL) request to register the iPhone trademark was denied yesterday by the Brazilian National Institute of Industrial Property. Apparently, the electronic maker IGB Eletronica already owns the rights to the name. This is unlikely to effect iPhone sales, but this is no doubt the beginning of a pricey and long legal battle. 
• J.D. Power’s 2013 vehicle dependability study favored Toyota (TM). The Lexus won as the most dependable, but GM (GM), Honda (HMC), and Mazda (MZDAY.PK, MZDAF.PK) followed behind in that order. Ford (F) and Volkswagen (VLKKAY.PK, VLKAF.PK) were not favored.