• Watch Channel 10’s new breakfast show
• It’s relentless
• Economic Surprise Index
• Spanish soccer players earning less and being forced to watch repeats.

A quick plug for my old flatmate and very good friend Kath Robinson who after quitting her Job in the corporate world ten years ago (FX Trader at Macquarie bank) to chase her dream in journalism, is now hosting the new Channel 10 morning breakfast show. Make sure you watch it.

Bull, Bear or just an innocent bystander watching these markets, one has to admit this relentless rise in the S&P500 without a pullback is quite incredible.

The chart below shows the S&P500 futures with its 10 day simple moving average, it has managed to close above it every day for the last 46 days apart from once. I have been expecting a pull back or perhaps a solid spike up and then a reversal to indicate this move is exhausted for now. Neither has happened. We wait.

Last night’s figures in the US were on balance a bit weak; Consumer Confidence was the major positive coming in at 70.8 when expectations were at 63. But Durable goods were very weak and the Case Shiller Housing data was all on the weaker side of the ledger.

Back in January I said the Citigroup Economic Surprise Index had topped and so far that has been correct. However we did get a huge spike in the Index on the better than expected Non- Farm Payrolls number and the ISM Non-Manufacturing Composite in early February.

The Citi Surprise Index measures the variations in the gap between the expectations and the real economic data. While the Index is in positive territory, last night was the lowest reading since November. If this Index continues down it might be an early clue that out friend Lakshman Achuthan at ECRI may be about to be proved right with his recession call.

As we wait for the market to melt up or break down let’s move on to Europe.

The ECB’s LTRO program has eased tensions in the money markets and swept a market meltdown under the carpet for now. As countries like Spain and Italy pushed ahead with their austerity programs, risk has been strapped on and the market hasn’t looked back.

But as the year rolls on, the effects of those austerity cuts are starting to bite. As this ARTICLE explains, Spain’s State broadcaster RTVE has to cut its budget this year by 200 million. “RTVE’s board says the cuts will have a “devastating impact” on its programming, predicting that its audience figures for its two channels La 1 and La 2, will drop by 8 percent.

These cuts leave us with very little room for manoeuvre, we will not be able to buy content and so we will be forced to fill the airwaves with repeats.”

Spanish soccer players are not being spared either as this ARTICLE explains how the increase in the maximum personal income tax rate (IRPF) by 7% to 52% for annual salaries over 300,000 is having an effect.

“The rise in the IRPF for 2012 has frightened the life out of the football clubs,” wrote Javier Hernández. “The budgets of the 20 teams in la Primera have been thrown out of sync and all clubs are urgently revising their accounts. Contract renewals are paralysed, salaries and transfers fees are being cut, hundreds of contracts must be revised. Clubs and players are going to have to tighten their belts.”

The fact that Spanish soccer players will earn less and are being forced to watch repeats on TV in their well- earned break is no real concern for the average punter. However these articles highlight the fact that the austerity measures that have been implemented are now starting to bite.

According to the World Bank figures supplied by Bloomberg, the Euro Areas GDP is 12 trillion. Europe’s ultimate survival is relying on German growth and political will. Germany’s GDP is 3.2 trillion, it’s an understatement to say that for Germany to keep propping up Europe is a huge task.

Politically it is becoming very unpopular as well, this from Bloomberg. “The mass-circulation Bild newspaper made its appeal to parliamentarians with the headline “Stop! Don’t go any further along this wrong path… A whopping 80 percent of Germans opposed another Greek bailout, according to a Bild survey published yesterday.”

Remember my note when is a default a default? Here is an extract “five major US banks control 97% of the credit default swap market. They are also highly represented and have major influence over ISDA. Right now we have a lot of hedge funds that have bought Greek debt which is supposed to pay them some huge yield; against that trade they have bought protection in the form of credit default swaps in the event that Greece defaults.

The people on the other side of that credit default swap are the major banks, and of course would have to pay out if ISDA decides that in fact a default (credit event) has occurred.”

I was just scrawling through the ft.com/alphaville blog site when I came across THIS ARTICLE which says the question of whether Greece has triggered a Restructuring Credit Event when a haircut of 53.5% was accepted by the private bondholders has been formally posed to ISDA.

ISDA has replied— In accordance with the Determinations Committee process, the EMEA Determinations Committee will decide whether to accept the question for deliberation or reject it and this decision will be made by 5PM GMT on Wednesday, February 29, 2012.

So there you have it, ISDA will consider whether they should even consider the question, let alone whether they should call a default a default.

For the gold bugs out there things are starting to look promising, but I want to see a close above 1800 to be really convinced that we are off to new highs.

My computer is off to the Dr today, hopefully I get it back in time for Friday’s note.

Have a great day

Tom Lovell

Disclaimer

Here’s the thing: this blog is free and the ideas and information contained in these reports come from me and me alone. I am a sophisticated investor. I am armed with a Bloomberg terminal and nearly 20 years experience of making and losing money in the markets. My risk tolerance and financial objectives will be very different from yours. The information in this blog was obtained from various sources; however I cannot guarantee accuracy or completeness. This blog is prepared for general information only. It does not have regard to a reader’s specific investment objectives, financial situation and/or his/her particular needs regarding the appropriateness of investing in any securities or investment strategies discussed or recommended herein. Readers should understand that statements regarding future returns may not be realised. So please do not act on any recommendations in this report without seeking advice from your financial planner, stockbroker, accountant and most importantly your partner. In 99% of cases your partner is far smarter than you.

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That ought to cover it; let’s go and make some money.