Market Talk

Stocks drift slightly higher, but finish weakly, at session lows, as bids seemed to disappear in the closing minutes. It’s been a strong month for equities, so no surprise to see a little money come off the table near the close.

Sleepy trading overall, with markets seemingly on autopilot as 2010′s conclusion draws near. Financials, utilities, industrials and consumer staples all pull back; energy, materials lead advancing sectors. USD gets hit pretty hard, and Treasurys produce a nice rally following yesterday’s sell-off, 10-yr yield back down to 3.34% after ending yesterday near 3.49%.

DJIA rises 9.84 to 11585.38, closing at its highest level since late August 2008. The average is up more than 5% in December and 11% for the year. Nasdaq Comp adds 4.05 to 2666.93. S&P 500 ends 1.27 higher at 1259.78. The index is up 6.7% this month and nearly 13% for the year.

Weekly jobless claims, December Chicago ISM (formerly PMI) and November pending home sales all due tomorrow. Data hasn’t had a great influence on stocks lately, though, and not much reason for it to draw much reaction tomorrow, either.

Let’s talk Treasury auctions (the seven-year auction consequently went well,) stock gains and retail sales in the wake of Snowmageddon.

Apologies for the light, well, non-existent is more like it, posting today. Between the holidays (literally between the holidays, as a point in time), people taking off for vacations, and the storm, we’ve been short-handed around the office. Also, I started working up a post that used this post from David Cay Johnston as a starting point, but it’s morphed into something larger and more philosophical, and will take more mulling, ruminating and editing to hammer into shape.

But, I came across this post from Peter Atwater over at Minyanville, and it jibes with something I’ve long thought: that if we had made the hard choices at the beginning of the crisis, if we hadn’t bailed out everybody (except Dick Fuld and Lehman), if we had owned up to the bad decisions we made, we would already be on a real road to recovery, not this ginned-up Potemkin Village the Fed and federal government have concocted.

Denial ain’t just a river in Egypt, as they say. From Atwater:

To these eyes in all segments of the economy, we have traded hard “choices” for denial. But I can’t help but wonder if the ultimate consequences from our Years of Magical Thinking will be far greater than had we made the tough choices beginning in 2007, particularly as governments (at all levels here at home and in Europe) have leaned heavily on “financially engineered” solutions. Maybe it’s just me, but QE2, the second round of fiscal stimulus, the securitization of tobacco settlements, the ESFS, and so forth, all resemble variations on the same “off-balance sheet” liability theme which began this crisis.

As I look at the world, wherever possible, elected officials have traded more contingent liabilities for time.

But beyond the financial implications of this trade, there have also been immense social consequences. As I offered earlier this month in Our Increasingly Dangerous Asymmetric Economy, I am very concerned that our Years of Magical Thinking have widened an already tenuous divide between “The Haves” and “The Have-Nots.” And not just here at home, but in Europe as well.