Market Talk

- An increase in temp hiring is usually an early sign of recovery, but that trend hasn’t lived up to expectations, so far, in this purported recovery, Financial Armageddon blogger Michael Panzner says.

- EU appears to have a financing package in the works for Greece, but the “main goal seems to be to buy time — hoping for better global outcomes — rather than dealing with the issues at any more fundamental level,” Peter Boone and Simon Johnson write.

- Even as Google (GOOG) continues to grow and faces further antitrust scrutiny, it in no way deserves an Italian court conviction of three executives for privacy violations, Kara Swisher notes. Lesson: don’t get into any legal tangles in Italy.

- Asset allocation looking trickier ahead. “This isn’t a shock, but more of it is probably coming, meaning that a new set of challenges await for managing asset allocation relative to the trend for much of the past 12 months,” James Picerno says.

- “The Republican base is fired up. The Dem base is packing up,” says Robert Reich, former labor secretary in the Clinton administration.

- Apple’s (AAPL) iPad availability may be limited for its expected launch later this month as production delays could lead to tighter inventories, Digital Daily blogger John Paczkowski says.

- Credit default swaps are more toxic than most realize, Yves Smith writes at naked capitalism. “The more we can to contain this product the better, but I am afraid it will take another meltdown to teach us the lesson we should have learned from the last one.”

- “Is it any wonder that Republicans have suggested the bailout of Fannie and its sibling Freddie Mac ‘will almost certainly be the most expensive of the financial crisis’”? FT’s Alphaville says. “And given that the other contenders to that dubious crown include AIG and the US car makers, that’s saying something.”

- AOL continues its radical remake, selling Buy.at – an affiliate marketing company it bought two years ago – to Digital Window. “Another marker in [CEO] Tim Armstrong’s campaign to undo just about every part of the old regime at AOL,” Peter Kafka writes.

- Corporate insiders are sending fairly positive signals about the market, NYT says.

- The best journalism in 2009.

Yves Smith over at naked capitalism points out one more failure of the financial-reform movement: the failure to address in any capacity the uses of credit default swaps. “Credit default swaps played a much more central role in the financial crisis than is widely understood, and they continue to get a free pass in financial reform proposals that they do not deserve,” she writes today.

Unlike real derivatives, CDS are subject to massive price moves (”jump to default’) when a reference entity (the entity on which the CDS is written) defaults or goes into bankruptcy. That large price movement, means that the margin already posted will be insufficient, and there is no guarantee that the counterparty will be able to pony up the amount now due. But perhaps more important, the idea that CDS have legitimate uses is questionable.

If there’s been three words uttered on this subject in Congress, I’ve missed them. Just think about the whole range of subjects that need to be address regarding the financial markets, and then think about this consumer protection agency, which is what Congress is offering as its solution. And they can’t even agree on that.

Why don’t they just outsource the work to Consumer Reports, and let Congress get on to things they can handle, like kissing babies or counting campaign contributions. This crew isn’t really cut out for anything more complicated.

- Believe it or not, orders for durable goods are on the rise. “Yes, the overall durable goods trend is encouraging,” James Picerno says. “But even if we take this at face value, we can’t ignore that it’s a jobless recovery so far. As long as that qualification remains, the bullish aura surrounding leading indicators is suspect.”

- Financial Armageddon blogger Michael Panzner sifts through latest durable goods data and finds a growing trend throughout last few years: increasing impact of public spending on the overall total.

- Credit-default swaps didn’t destroy Lehman, Bear Stearns and almost topple AIG, Barry Ritholtz argues. Instead it was the “inordinate amount of highly leverage risk” that nearly crippled AIG, he says. Yet some people still don’t understand this concept. “The CDS argument is a variation of the ‘Shorts are killing our company’ nonsense that so many money-losing firms hide behind.”

- CBO insists stimulus has helped the economy, even if it isn’t obvious to the millions of unemployed Americans. “‘It could have been worse’ may not be the world’s catchiest slogan, but it’s the best selling point that stimulus supporters have,” NYT’s Economix blog says.

- Housing’s still the economy’s best leading indicator, Calculated Risk says.

- Paul Kedrosky isn’t pleased with all the media attention surrounding Intel (INTC) and 24 VC firms pledging to invest $3.5B in US companies throughout next two years. “Saying that you’ll heroically and patriotically do what you were likely going to do anyway shouldn’t get press.”

- Barbara Kiviat lists four smart things President Obama said about job creation.

- “Uncertainty remains the name of the game and uncertainty is rarely good for a market,” Pragmatic Capitalist says. “For now, the macro trends of global rate increases, weak jobs, sovereign debt, regulation and the death of the reflation trade (thanks to the Euro) will dominate any short-term moves.”

- Apple (AAPL) boasts about selling its 10 billionth song from iTunes only seven years after online store’s launch. It has also bragged that more than 3B apps have been downloaded. “But you won’t hear Apple boast about how much money it’s making from iTunes,” Peter Kafka says. “Because it’s not.”

- Denise E. O’Donnell, the official who supervises New York State Police, has resigned amid reports of intervention into a domestic-assault case against a senior aide to Governor Paterson, NYT reports.