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Five Things You Need to Know: I'll Buy That!, No Losers, Geithner Tackles Vox Pop, Income Inequality,


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. I'll Buy That!

Buy what? Everything!

  • No matter how you slice it, Retail Sales were just fine in the fourth quarter.
  • We could gush that they were "great" but reality (in the form of downward revisions to November's projections) intervenes.
  • While Retail Sales in December rose 0.9%, larger than the 0.7% most economists expected, and the biggest increase since July, November's increase was nearly cut in half, from the 1% originally reported to 0.6%.
  • The downward revision stops the string of upward revisions that have averaged almost 0.2% going back six months.
  • Overall, look for additional upward pressure on GDP thanks to consumer spending, which may put additional pressure on the Fed to move further away from a rate cut due to... are you ready for this?... not the supposed "inflationary pressures," but economic growth.

2. No Losers

It's a "spectacular Bull Run," a "dream day for the bourses," and as incredible as this may sound, "there were no losers on the Sensex and Nifty indices" in India overnight.

  • Whew, I don't know about you, but I'm breathless!
  • On Friday India's Sensex Index scaled 14,000 once again, prompting the accolades being dished out above.
  • I don't want to be the one to burst somebody's bubble, but... OK!
  • I'm not a fan of the Sensex here based on a DeMark TD-Sequential sell signal (indicated on the chart by a blue 13) on the weekly chart of the Sensex that is virtually identical to the setup from last April.
  • The chart below shows the Sensex on a weekly basis going back a year.
  • Within two weeks of registering the first TD-Sequential sell signal on the week of April 28, the Sensex plunged from above 12,000 to below 10,000.
  • Note the TD-Sequential sell signal that registered for the Sensex last week. A decline of similar time and magnitude would send the Sensex below 12,000 over the course of the next six weeks.
  • Importantly though, it would take a much larger decline - below 9894 - to say the Sensex's long-term bull is broken.

3. Geithner Tackles Vox Pop

The widening gap between the rich and middle-class Americans is undermining political support for free trade in the U.S., Tim Geithner, president of the Federal Reserve Bank of New York, warned yesterday.

  • Geithner told the Council on Foreign Relations that the "political challenge" of sustaining support for a further continuation of globalization "may be the most important economic challenge of our time."
  • But Geithner said maintaining support for free trade would be made more difficult "because of what has happened to the distribution of income and economic insecurity."
  • That's why Geither warned that, "it is not enough to explain that globalization is inevitable and that policies that look politically attractive as a response to economic anxiety will only hurt the economy as a whole."
  • In other words, people just don't get it!
  • OK, what if somebody just explains that globalization is necessary to raise all average incomes in the long run?
  • Sorry. "Nor is it a politically effective strategy to state simply that economic integration is a necessary and powerful force in raising average incomes," Geithner said.
  • In other words: Baby needs shoes... today. And if baby don't get shoes, politician don't get votes.
  • Hmm, but what if someone just explains that it's not trade or immigration that is responsible for slower growth in wages, but a major, structural shift in the labor force due to technology?
  • Haha. Nice try. "Nor is it a politically effective strategy to state simply... that technological change may be more important than trade or immigration as an explanation for slower growth in real wages for many Americans," Geithner said.
  • Bottom Line: Be very, very careful, or Lou Dobbs will be our next president.

4. Income Inequality

Geithner isn't the only Fed head concerned with policy implications of rising income inequality. San Francisco Fed's Janet Yellen delivered a speech in early November on "Income Inequality in the United States."

  • Granted, you may be wondering why Yellen is discussing income inequality in the first place, and she admits, "Questions of income inequality, of course, are not part of the Federal Reserve's dual mandate from Congress, which is to foster price stability and to promote maximum sustainable employment."
  • Then why the interest? "Much of my interest in macro policy has been founded on the belief that it can and should improve the lives of the broad range of our nation's people." OK, fair enough.
  • Yellen's speech is actually a very good read and provides a nice, broad introduction to how globalization and technology have contributed to dramatic changes in the valuation of labor.
  • Back in November cynics were quick to note that Yellen served on President Clinton's Council of Economic Advisers, and quickly dismissed the speech in its entirety (I admit that, at the time, I caught the headline summary and passed on reading it myself).
  • Having revisited it in the wake of Geithner's remarks yesterday, however, such a dismissal is both unfair and premature.
  • Yellen makes a number of very important points, perhaps most important, that "some market-determined income differences are needed to create incentives to work, invest, and take risks."
  • Hey, she sounds like a capitalist!
  • Second, she warns that "there are signs that rising inequality is intensifying resistance to globalization, impairing social cohesion, and could, ultimately, undermine American democracy."
  • I believe this is absolutely correct. But it's correct both in terms of the inevitable policy options available if the problem is left unaddressed, and in the policy options most likely to be chosen to address the problem in the first place.
  • In other words, the disease of income inequality could kill us. But so could the cure.
  • Regarding policy options, Yellen concludes, "The possible responses to rising inequality do not boil down to "either/or" kinds of solutions. Rather, these responses range along a fairly wide continuum, reflecting the tradeoffs that policymakers face between efficiency and equity."
  • Yes, a reality-based approach. In the ivory tower of pure capitalism, markets theory and incentives, there appear clear-cut choices. In the real world, however, we are left with tradeoffs.


Last week saw the debut of a website called, a specialty search engine designed to please aging baby boomers by processing every request from the perspective of someone who is at least 50 years old!

  • According to the Associated Press, the baby boomer demographic often feels overwhelmed using high-powered search engines like Google and Yahoo because they spew out more results than older eyes care to see.
  • Launched earlier this week, is trying to simplify things by showing just four Web sites and making the listings more relevant to its target audience, the AP said.
  • "Our research found that people 50 and over are confused about searching on the Web," said Jeff Taylor, the Cranky founder and CEO of... uh... Cranky.
  • For nearly five consecutive years "Paris Hilton" has been among the top five most-searched Internet terms.
  • How will the search results for "Paris Hilton" differ from those of
  • Let's find out!

Yahoo Search Results

Cranky Search Results

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No positions in stocks mentioned.

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