Overall, Not a Bad Week at All

The final numbers on U.S. third-quarter GDP showed growth was slower than
originally estimated. But with fourth quarter almost over and signs that
economic activity has picked up over the past few months, investors are looking
past that data. Now, theyre focused on another positive jobs report showing new
claims for unemployment falling yet again . And who can forget Tuesdays rally?
That 335-point surge on the Dow was borne on the backs of two distinctly
different, yet encouraging reports. First, Spain was able to once again sell
bonds at a very attractive rate (for it), essentially completing its needed
refinancings for the year. The beleaguered country was able to sell three-month
bills at 1.74%, compared to 5.11% just a month ago, and six-month bills at
2.44%, rather than the 5.227% offered in the last auction. Not to throw cold
water on this, but let's not forget these bonds extend out for only three and
six months. This isn't a long-term fix, though it does give Spain a bit of
breathing room. Second, U.S. housing starts numbers jumped to a 19-month high in
November. Issuance of permits also rose sharply. It's been said that for every
100,000 new units of housing, 250,000 jobs are created. That would be a welcome
gain for workers here. The overall housing market remains deeply troubled, which
is evident due to the revisions to home sales data since 2007 showing the crunch
was even worse than originally reported. Inventories are down, which augurs
higher prices as demand picks up. But a big backlog of yet-to-be-foreclosed
properties and those which sellers have been reluctant to list is hanging over
the market. Still, on the bright side, the housing market is in recovery mode,
however slow. With the Dow jumping 2.9% on Tuesday, and following through with a
tiny gain Wednesday and Thursday, and solid bounce (though on thin volume) on
Friday. The Dow and S&P 500 both ended the week 3.6% higher. The Dow is once
again above its 200-day moving average. Many technicians look at the 200-day
average as a signpost, and the Dow was solidly above this marker for a year
until dipping in early August. Since then it's made brief appearances above
water. The pundits are out in force, as you might expect given its the end of
the year. So, along with everyone else with an opinion, I thought you might be
amused by this little "find" of mine concerning inflation: Investors have
been asking, Will we see global inflation in 2012 or massive deflation?
Barron's , in back-to-back stories this week, has "experts" in one story
claiming we'll see "face-ripping" inflation in 2012 as government printing
presses begin operating overtime, while another duo predicts global deflation on
the backs of loan defaults, asset write-downs and a huge contraction in spending
by consumers, businesses and governments. Remember this: They can't both be
right but they could both be wrong. Heading into Decembers close, we're
getting the typical year-end slump in trading volumes, and while no one is
willing to predict a Santa Claus Rally this year, the low volumes and decent
economic news could indeed push prices at least a bit higher in the closing
trading days after Christmas.