Monday's Musings

1. Currency trading was moving toward the US dollar again on Friday.  Did you realize there has not been a down day in US currency in Feb.?  The Euro continued to give back some of the January gains, due to "lip flapping" by Mario Draghi.  Watch out for the US dollar at this point.  The fund (large traders) were selling all last week according to the commitment of traders.
2. Janet Yellen is Vice Chairman of the Federal Reserve next to Bernanke.  She is extremely dovish, and her speech today is expected to provide the viewpoint that more stimulus is needed.  By the way, the odds are for  her to become the next president of the Federal Reserve to replace Bernanke.
3. The crises in Europe is just simmering.  Spanish bond yields are moving higher after reports of corruption in the ruling party.  Cyprus (the European side vs the Turkish side) will need a bailout according to the Financial Times in London.  They will need an aid package to match their economy (about 18 billion Euros). Will Cyprus default?  They may if Mr. Draghi cannot concoct a bailout plan. If they default, then the worry is that will create more pressure on Greece, Spain, Portugal and Italy.
4. Nordic countries are doing very well thank you.  Norway is signaling they will raise rates to combat a new wave of inflation if it becomes a problem.  They have stated March to raise rates if inflation increased in January.  Norway's oil exports provide solid footing, and a raise in interest rates would be positive for the Norwegian Krone. There is a good article about Sweden in the Economist.  A very good article.
5. The UK's pound sterling weakened after UK employment confidence declined in January.  The pound has been weakening against the Euro giving up nearly 4.8% of its value against the Euro.  On the other hand, the trend is up against the $$$, and it gives the bulls in the US / pound a slight edge.  
6. The US trade deficit narrowed for December.  It narrowed to $38.5 billion which was much narrower than expected.  January's figure was unchanged.  This is almost assuredly due to the weaker dollar.
7. Bloomberg reported today that China has surpassed the US to become the world's largest trading nation in 2012.   Interestingly, Chinese consumers have emerged, and the import rate is growing much faster than the export rate.  Other articles related to the Bloomberg article suggests that Germany will export more to China by 2020 than to France.  Slowly, the Chinese Renminbi will overtake the US dollar, and probably replace the US$ as the reserve currency of the world.  As far as the common man can observe, this does not concern the Federal Reserve or the Obama administration.
8. There are several interesting articles in the news about how the US citizen is becoming a socialists.  http://www.nytimes.com/2013/02/11/us/politics/in-montana-young-liberal-and-open-to-big-government.html?nl=todaysheadlines&emc=edit_th_20130211&_r=0  Within that context, Venezuela is an interesting case study as their budget deficits tripled last year as the Chavez administration went on a spending spree.  Sound familiar US? The day's of freedom are past as the Federal Government takes over and the young people back a socialist regime.  What is not clear is how the Federal Government expects to pay for this?  The Republicans are useless in combating the problem, and the Tea Party has been isolated by the good 'ole boys in the Republican party.  
9. In the stock market, the commercial category from the commitment of traders indicates commericial's are buying.  Large fund traders are trend followers, and will jump on board here until commercials reverse their position and start to liquidate for profits.  There is critical resistance at 1600 on futures as price approach the all time highs.  This is a precarious market for being long for the investor.  See post below...